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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ 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)
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(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:
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2) Aggregate number of securities to which transaction applies:
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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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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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GENEREX BIOTECHNOLOGY CORPORATION
33 Harbour Square
Suite 202
Toronto, Ontario, Canada M5J 2G2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 18, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Generex Biotechnology Corporation ("Generex") that will be held on Monday,
March 18, 2002, 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 elect seven directors;
2. To approve the Generex 2001 Stock Option Plan;
3. To ratify the appointment of Deloitte & Touche, LLP as independent
public accountants for Generex for the fiscal year ending July 31,
2002; and
4. To transact such other business as may properly come before the
meeting and any adjournments or postponements thereof.
The Board of Directors has established the close of business on February 4,
2002 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the annual 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 annual 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
February 8, 2002
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 annual meeting of
stockholders of Generex to be held on Monday, March 18, 2002, 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 annual meeting. Proxies properly executed and
returned in a timely manner will be voted at the annual meeting in accordance
with the directions specified therein. If no direction is indicated, they will
be voted for the election of the nominees named herein as directors, for the
approval of the Generex 2001 Stock Option Plan, for the appointment of
Deloitte & Touche, LLP as Generex's independent public accountants and on
other matters presented for a vote, in accordance with the judgment of the
persons acting under the proxies. 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 annual meeting by delivering written notice to the Secretary
of Generex, by delivering a proxy bearing a later date or by attending the
annual 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 February 8, 2002.
Shares Outstanding, Voting Rights and Vote Required
Only stockholders of record at the close of business on February 4, 2002 are
entitled to vote at the annual meeting. The only voting stock of Generex
outstanding and entitled to vote at the annual meeting is its common stock,
$.001 par value per share (the "Common Stock"). As of the close of business on
January 15, 2002, 20,682,634 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 annual 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
annual meeting is necessary to constitute a quorum for the transaction of
business at the annual 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 annual meeting will be tabulated by the election
inspectors appointed for the meeting.
Directors will be elected by a plurality of the votes of the shares present
or represented by proxy at the annual meeting and entitled to vote on the
election of directors. The proposals to approve the Generex 2001 Stock Option
Plan and to ratify the appointment of Deloitte & Touche, LLP as Generex's
independent public accountants require the affirmative vote of a majority of
the votes of the shares present or represented by proxy at the annual meeting
and cast on such proposals. The Board of Directors recommends voting (1) FOR
the election of the nominees named herein for directors, (2) FOR the approval
of the Generex 2001 Stock Option Plan and (3) FOR the appointment of Deloitte
& Touche, LLP as Generex's independent public accountants for fiscal 2002.
ELECTION OF DIRECTORS
(Proposal 1)
Seven directors are to be elected at the annual meeting of stockholders. All
directors will be elected to hold office until the next annual meeting of
stockholders following election and until their successors are duly elected
and qualified.
The persons named below have been designated by the Board of Directors as
nominees for election as directors. All nominees currently serve as directors
of Generex. The individuals named in the enclosed proxy intend to vote all
proxies received by them for the nominees listed below unless otherwise
instructed. If you do not wish your shares to be voted for any of the
nominees, you may so indicate on the proxy. If, for any reason, any of the
nominees shall become unavailable for election, the individuals named in the
enclosed proxy may exercise their discretion to vote for any substitutes
proposed by the Board of Directors. At this time, the Board of Directors knows
of no reason why any of the nominees might be unavailable to serve.
Name Age Position Held with Generex
---- --- --------------------------
Anna E. Gluskin 50 President, Chief Executive Officer and Director
Michael Hawke, M.D. 60 Director
Ivan M. Lieberburg, Ph.D., M.D. 52 Director
Pankaj Modi, Ph.D. 47 Vice President, Research and Development and Director
E. Mark Perri 41 Chairman, Chief Financial Officer and Director
Rose C. Perri 34 Chief Operating Officer, Treasurer, Secretary and Director
Jan Michael Rosen 50 Director
Anna E. Gluskin -- Director since September 1997. Ms. Gluskin has served as
the President and Chief Executive Officer of Generex since October 1997. She
held comparable positions with Generex Pharmaceuticals, Inc. from its
formation in 1995 until its acquisition by Generex in October 1997.
Michael Hawke, M.D. -- Director since March 2000. Dr. Hawke presently is a
Professor in the Departments of Otolaryngology and Pathology at the University
of Toronto, and is on the staff of the Departments of Otolaryngology at St.
Joseph's Health Center, The Toronto Hospital and Mount Sinai Hospital, all
located in Toronto. He has held these positions for more than the previous
five years. Dr. Hawke has approximately thirty years experience as a medical
researcher, educator and practitioner.
Ivan M. Lieberburg Ph.D., M.D. -- Director since May 2001. Dr. Lieberburg
has been employed by Elan Corporation, plc (worldwide pharmaceutical and
biotechnology company) since 1987. Dr. Lieberburg served as Senior Vice
President of Research from 1994 to 1997 and as Executive Vice President and
Chief Scientific and Medical Officer for Elan from 1997 to the present. Prior
to joining Elan in 1987, Dr. Lieberburg held faculty positions at Albert
Einstein College of Medicine and Mt. Sinai School of Medicine in New York. He
currently holds an appointment as Clinical Professor of Medicine at the
University of California, San Francisco.
Pankaj Modi, Ph.D. -- Director since September 1997. Dr. Modi has served as
Vice President, Research and Development of Generex since October 1997. Prior
to that time, Dr. Modi was Director of Insulin Research for Generex
Pharmaceuticals, Inc., a position he assumed in October 1996. Prior to joining
Generex Pharmaceuticals, Dr. Modi was engaged in independent research and was
employed as a senior researcher at McMaster University in Hamilton, Ontario
from February 1994 through October 1996.
E. Mark Perri -- Director since September 1997. Mr. Perri has served as the
Chairman and Chief Financial Officer of Generex since October 1997. He held
comparable positions with Generex Pharmaceuticals, Inc. from its formation in
1995 until its acquisition by Generex in October 1997.
Rose C. Perri -- Director since September 1997. Ms. Perri has served as
Treasurer and Secretary of Generex since October 1997, and as Chief Operating
Officer since August 1998. She was an officer of Generex Pharmaceuticals, Inc.
from its formation in 1995 until its acquisition by Generex in October 1997.
Jan Michael Rosen -- Director since August 2000. Mr. Rosen has been a
principal in a number of related travel management and hotel marketing
businesses since 1978. The principal companies in this group, all of
2
which are headquartered in Ontario, are Uniworld Travel & Tours, Inc., Nevada
Vacations, Inc., Casino Vacations, Inc. and Casino Tours, Inc. Mr. Rosen
presently serves as the President or a Vice President, and the Chief Financial
Officer, of each of these companies. Mr. Rosen is an accountant by training,
and was engaged in the private practice of accounting prior to 1978.
Generex entered into a joint venture with Elan Corporation, plc ("Elan") and
certain affiliates of Elan in January 2001. Pursuant to a Securities Purchase
Agreement dated January 16, 2001 between Generex, Elan and Elan International
Services, Ltd. ("EIS"), a subsidiary of Elan, EIS has the right to nominate
one director to Generex's Board of Directors for so long as EIS or its
affiliates own at least 1.0% of the issued and outstanding shares of Common
Stock. Dr. Lieberburg is the nominee of EIS thereunder. Under the terms of the
Securities Purchase Agreement, the EIS-nominated director may not in any event
have more than 15% of the aggregate voting power of the Board of Directors as
a whole. See "Certain Relationships and Related Transactions" for a
description of the Generex securities owned by, or that may be acquired by,
Elan or its affiliates.
Dr. Modi holds the position of Vice President, Research and Development
pursuant to a consulting agreement that was originally entered into as of
October 1, 1996, that was amended and supplemented as of January 7, 1998 and
that was further amended and supplemented as of December 31, 2000. Under the
consulting agreement, Generex must use its best efforts to cause Dr. Modi to
be nominated for election and elected a director of Generex for as long as the
consulting agreement is in force. See "Director Compensation; Other
Compensation" for information relating to Dr. Modi's consulting agreement.
Mr. Perri and Ms. Perri are siblings. There are no other family
relationships among our officers and directors.
The Board of Directors Recommends a Vote FOR
the Election of the Above-Named Nominees
3
PROPOSAL TO APPROVE THE
GENEREX BIOTECHNOLOGY CORPORATION
2001 STOCK OPTION PLAN
(Proposal 2)
The Board of Directors has adopted, subject to stockholder approval, the
Generex Biotechnology Corporation 2001 Stock Option Plan (the "2001 Plan").
The Board of Directors believes that the 2001 Plan will 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 will encourage the recipients to contribute
materially to the growth of Generex and further align the interests of such
recipients with the interests of stockholders.
A copy of the 2001 Plan is attached to this proxy statement as Exhibit A. A
summary of the principal features of the 2001 Plan follows.
Summary Description of the 2001 Plan
The 2001 Plan will be administered by the Compensation Committee of the
Board of Directors (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.
Awards under the 2001 Plan may be in the form of incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and options that are not incentive stock
options ("Non-ISOs") (collectively, "Options").
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-eight
employees and non-employee directors were eligible to participate in the 2001
Plan as of January 15, 2002. A total of 4,000,000 shares of Common Stock are
available for issuance under the 2001 Plan. 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 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). However, 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
4
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
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 Internal Revenue 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
Subject to stockholder approval of the 2001 Plan, the Board of Directors has
granted options under the 2001 Plan as follows (through January 15, 2002) to
the named executives, all executives as a group, all non-executive
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directors as a group and all non-executive officer 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 $5.19
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 0
E. Mark Perri, Chairman and Chief
Financial Officer...................... 0 0
Rose C. Perri, Chief Operating Officer,
Treasurer and Secretary................ 0 0
Pankaj Modi, Ph.D., Vice President,
Research and Development............... 0 150,000
All executives, as a group (4 persons) .. 0 150,000
Non-executive directors, as a group
(3 persons)............................ 214,500 150,000
All non-executive officer employees,
As a group (21 persons)................ 1,592,000 800,000
---------------
(1) The dollar value is the closing price of the Common Stock at January 15,
2002 ($7.18) less the exercise price. For purposes of calculating the
dollar value, all of the options were assumed to be exercisable as of
January 15, 2002, notwithstanding the specific vesting schedule associated
with any of the grants.
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
150,000 options to Dr. Modi under the 2001 Plan with effect as of July 31,
2001, subject to stockholder approval of 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 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 Options remain available for issuance under the 2001 Plan. (For more
details concerning Dr. Modi's consulting agreement, see "Director
Compensation; Other Compensation".)
The Board of Directors Recommends a Vote FOR
the Proposal to Approve the 2001 Stock Option Plan
6
PROPOSAL TO RATIFY THE APPOINTMENT OF
DELOITTE & TOUCHE, LLP
AS GENEREX'S INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal 3)
The Board of Directors of Generex has selected Deloitte & Touche, LLP
("Deloitte & Touche") to serve as the independent public accountants to audit
the financial statements of Generex and its subsidiaries for the fiscal year
ending July 31, 2002. Deloitte & Touche served as Generex's independent public
accountants for the audit of Generex's financial statements for the fiscal
year ended July 31, 2001. Representatives of Deloitte & Touche will attend the
annual meeting and will be available to answer appropriate questions. They
will have the opportunity to make a statement at the annual meeting if they
desire.
The decision to appoint Deloitte & Touche as Generex's independent public
accountants beginning with the fiscal year ended July 31, 2001, replacing
WithumSmith+Brown, was approved by the Audit Committee of the Board of
Directors and ratified by the stockholders at last year's annual meeting.
WithumSmith+Brown did not decline to stand for re-election and
WithumSmith+Brown's reports on financial statements for the two fiscal years
preceding their replacement did not contain an adverse opinion, disclaimer of
opinion or qualification as to uncertainty, audit scope or accounting
principles. There had been no disagreements with WithumSmith+Brown in the two
fiscal years preceding their replacement on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
During the two fiscal years preceding their replacement, WithumSmith+Brown
did NOT advise Generex that:
o The internal controls necessary for Generex to develop reliable financial
statements did not exist;
o Information had come to their attention that led them to believe that they
could no longer rely on management's representations or that made them
unwilling to be associated with the financial statements prepared by
management;
o They needed to expand the scope of their audit or that information
existed, that had come to their attention during the last two fiscal
years, that if further investigated may (i) materially impact the fairness
or reliability of either a previously issued audit report or the
underlying financial statements, or the financial statements issued or to
be issued covering the fiscal period(s) subsequent to the date of the most
recent financial statements covered by an audit report (including
information that may prevent them from rendering any unqualified audit
report on those financial statements) or (ii) cause them to be unwilling
to rely on management's representations or be associated with our
financial statements; and that due to their replacement or for any other
reason, they did not so expand the scope of their audit or conduct further
investigation; or
o Information has come to their attention that they have concluded
materially impacts the fairness or reliability of either (i) a previously
issued audit report or the underlying financial statements, or (ii) the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by
an audit report (including information that, unless resolved to their
satisfaction, would prevent them from rendering an unqualified audit
report on those financial statements); and due to their replacement, or
for any other reason, the issue has not been resolved to their
satisfaction prior to their replacement.
If the stockholders do not ratify the appointment of Deloitte & Touche as
independent public accountants, the Audit Committee of the Board of Directors
will investigate the reasons for the rejection by the stockholders and the
Board of Directors will reconsider the appointment.
The Board of Directors Recommends a Vote FOR
the Appointment of Deloitte & Touche As Generex's
Independent Public Accountants for the Fiscal Year Ending July 31, 2002.
7
Fees Paid to Generex's Independent Public Accountants
The following table sets forth the aggregate fees paid by Generex for the
fiscal year ended July 31, 2001 to Deloitte & Touche:
Audit Fees(1) ....................................................... $68,695
Financial Information Systems Design
and Implementation Fees(2)......................................... $ 0
All Other Fees(3) ................................................... $ 0
---------------
(1) Includes the aggregate fees billed for professional services rendered by
Deloitte & Touche for the audit of Generex's annual financial statements
for the fiscal year ended July 31, 2001 and the reviews of financial
statements included in Generex's Quarterly Reports on Form 10-Q for the
2001 fiscal year. This amount is shown in U.S. dollars and was converted
from Canadian dollars to U.S. dollars based on the exchange rate on January
15, 2002.
(2) No amounts were billed by Deloitte & Touche in fiscal 2001 for financial
information systems design and implementation services.
(3) No amounts were billed by Deloitte & Touche in fiscal 2001 for any other
services.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business affairs of Generex are managed under the direction of the Board
of Directors. During the fiscal year ended July 31, 2001, Generex's Board of
Directors held 4 meetings. During the fiscal year ended July 31, 2001, all of
the directors attended all of the Board of Directors meetings that were held.
The Board of Directors has established two committees, the Audit Committee
and the Compensation Committee.
The Audit Committee was established on March 1, 2000, and met 3 times during
the fiscal year ended July 31, 2001. All of the members of the Audit Committee
attended all of the meetings that they were eligible to attend. The Audit
Committee is currently composed of Mr. Rosen, who is the Chairman of the
Committee, Dr. Lieberburg and Dr. Hawke. The Board of Directors has adopted an
Audit Committee charter that specifies the duties of the Audit Committee.
The Common Stock is listed on the Nasdaq National Market and, therefore,
Generex is governed by the applicable rules of the Nasdaq Stock Market. The
listing requirements for Nasdaq National Market issuers require that each
issuer's audit committee be comprised of at least two - and preferably three -
independent directors. Mr. Rosen and Dr. Hawke meet the definition of
independence under Rule 4200(a)(15) of the listing requirements. Dr.
Lieberburg does not currently meet the definition of independence due to the
fact that Generex (Bermuda) Ltd., the subsidiary of Generex that was formed to
conduct Generex's joint venture with Elan, was deemed to have paid an up-front
$15 million license fee to an affiliate of Elan in connection with the
formation of the joint venture in January 2001. Dr. Lieberburg is nevertheless
eligible pursuant to Rule 4350(d)(2) of the listing requirements to continue
to serve as a member of the Audit Committee because the Board of Directors has
determined that Dr. Lieberburg's membership on the Audit Committee is required
by the best interests of Generex and its stockholders. Dr. Lieberburg served
as Senior Vice President of Research for Elan from 1994 to 1997 and since 1997
has served as Executive Vice President and Chief Scientific and Medical
Officer of Elan. As a result, Dr. Lieberburg has acquired substantial
knowledge and understanding of the biotechnology industry and financial
operations of biotechnology companies as well as the accounting issues faced
by companies whose operations primarily involve research and development
activities.
Nevertheless, the Board of Directors intends to commence a search for one or
more additional directors who meet the definition of independence under the
Nasdaq Stock Market listing requirements and intends to add at least one such
additional director to the Board of Directors and the Audit Committee by the
next annual meeting of stockholders.
8
The Compensation Committee was formed on July 30, 2001 and met one time
during the fiscal year ended July 31, 2001. All of the members of the
Compensation Committee attended that meeting. The Compensation Committee is
currently composed of Dr. Hawke, who is the Chairman of the Committee, Dr.
Lieberburg and Mr. Rosen.
Report of the Audit Committee
The Audit Committee reviewed and discussed Generex's audited financial
statements for the fiscal year ended July 31, 2001 with management. The Audit
Committee discussed with Deloitte & Touche, LLP, Generex's independent public
accountants for the fiscal year ended July 31, 2001, the matters required to
be discussed by Statement on Auditing Standards No. 61. The Audit Committee
received the written disclosures and the letter from Deloitte & Touche, LLP
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and discussed with Deloitte & Touche, LLP
its independence. Based on the review and discussions described above, among
other things, the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in Generex's Annual Report on
Form 10-K for the fiscal year ended July 31, 2001.
Submitted by the Audit Committee
Jan Michael Rosen (Chairman)
Michael Hawke, M.D.
Ivan M. Lieberburg, Ph.D., M.D.
The foregoing Report of the Audit Committee shall not be deemed to be
soliciting material, to be filed with the Securities and Exchange Commission
(the "SEC") or to be incorporated by reference into any of Generex's previous
or future filings with the SEC, except as otherwise explicitly specified by
Generex in any such filing.
Report of the Board of Directors and the Compensation Committee on Executive
Compensation
During the majority of the fiscal year ended July 31, 2001, the Board of
Directors was responsible for overseeing the compensation to be paid to the
executive officers of Generex. Ms. Gluskin, Dr. Modi, Mr. Perri and Ms. Perri,
all of whom are both directors and executive officers of Generex, participated
in some of the discussions and decisions of the Board of Directors concerning
compensation to be paid to the executive officers of Generex. Effective July
30, 2001, all decisions regarding executive compensation are being made by the
Compensation Committee of the Board of Directors. Dr. Hawke is chairman of the
Compensation Committee and Dr. Lieberburg and Mr. Rosen are the other members
of the Compensation Committee.
Compensation Philosophy. The goals of Generex's compensation program are to
attract and retain talented executives, to motivate these executives to
achieve Generex's business goals, to align executive and stockholder interests
and to recognize individual contributions as well as overall business results.
The key elements of Generex's executive compensation are base salary, cash
bonuses and stock options. While the elements of compensation are considered
separately, the Compensation Committee ultimately looks to the value of the
total compensation package provided by Generex to the individual executive. At
the end of the fiscal year ended July 31, 2001, the Compensation Committee
conducted a review of Generex's executive compensation program. This review
included a comprehensive report from an independent executive compensation
consultant and compared Generex's total executive compensation, including base
salaries, cash bonuses and stock options, to a peer group of publicly traded
biotechnology companies. For the fiscal year ended July 31, 2001, the
Compensation Committee targeted total cash compensation for Generex executives
to the median of the peer group.
Base Salaries. Generex historically has paid very modest base salaries to
its executive officers, relying on option grants to supplement the low base
salaries. That practice continued for the fiscal year ended July 31, 2001, as
is evident from the base salaries set forth in the Compensation Table. The
Compensation Committee believes that the base salaries of Generex's executive
officers are low in comparison to base salaries for comparable positions at
other biotechnology companies and intends to implement increases for fiscal
2002 to bring the base salaries of Generex's executives in line with base
salaries of Generex's principal competitors.
9
Cash Bonuses. Cash bonuses were introduced for fiscal 2001 in order to
recognize and reward the executives of Generex for their strong performance
and for the accomplishments achieved by Generex during fiscal 2001. The
Compensation Committee determined the executive officer bonuses that were
awarded for the fiscal year ended July 31, 2001. Executive officer bonuses
were based on the individual's position within Generex as well as individual
contribution to Generex's accomplishments, and took into account the levels of
cash bonus and total cash compensation (base salary plus bonus) paid by the
median of the peer group of biotechnology companies. The Compensation
Committee judged that the executive officer bonus awards for fiscal 2001 were
consistent with each executive's level of accomplishment and appropriately
reflected Generex's overall performance.
Stock Options. The purpose of stock option grants is to provide an
additional incentive to Generex employees, including executive officers, to
contribute materially to the growth of Generex. Stock options are granted to
align the interests of the recipients with the interests of stockholders. The
Compensation Committee did not grant any options to executive officers during
the fiscal year ended July 31, 2001, other than the options that were required
to be granted to Dr. Modi under the terms of his consulting agreement. The
executives all own substantial numbers of shares of Common Stock and the
Compensation Committee does not intend to use option grants regularly to
compensate the current group of executives other than the grants required to
be made to Dr. Modi under the terms of his consulting agreement.
Chief Executive Officer Compensation. Ms. Gluskin's compensation for the
fiscal year ended July 31, 2001, was determined in accordance with the
compensation policies described above. Ms. Gluskin was paid a modest cash
salary of approximately $127,240 and was granted a bonus of $250,000. This
compensation package was considered fair and reasonable in view of Generex's
significant accomplishments during the fiscal year and Ms. Gluskin's
substantial contributions to those accomplishments. The compensation paid to
Ms. Gluskin for fiscal 2001 was considered to give appropriate incentives to
Ms. Gluskin to continue to promote the strategic objectives of Generex and to
enhance stockholder value.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
does not allow public companies to take a Federal income tax deduction for
compensation paid to certain executive officers, to the extent that
compensation exceeds $1 million for any such officer in any fiscal year. This
limitation does not apply to compensation that qualifies as "performance-based
compensation" under the Code. The Board of Directors believes that at the
present time it is quite unlikely that the compensation paid to any executive
officer will exceed $1 million in any fiscal year. Therefore, the Board of
Directors has not taken any measures to date specifically to qualify any of
the compensation paid to its executive officers as "performance-based
compensation" under the Code.
Submitted by the Board of Directors
and the Compensation Committee
Anna E. Gluskin
Michael Hawke, M.D.*
Ivan M. Lieberburg, Ph.D., M.D.**
Pankaj Modi, Ph.D.
E. Mark Perri
Rose C. Perri
Jan Michael Rosen**
* Chairman of Compensation Committee
** Member of Compensation Committee
The foregoing Report of the Board of Directors and the Compensation
Committee on Executive Compensation and the following Performance Graph shall
not be deemed to be soliciting material, to be filed with the SEC or to be
incorporated by reference into any of Generex's previous or future filings
with the SEC, except as otherwise explicitly specified by Generex in any such
filing.
10
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return on
Generex's Common Stock with cumulative total returns of the Nasdaq National
Market (U.S. Companies) and the Nasdaq Biotechnology Index for the period
commencing February 5, 1998 (the date Generex's Common Stock was first listed
for trading on the Nasdaq over-the-counter market) and ending on July 31,
2001. The graph assumes that $100 was invested on February 5, 1998, in
Generex's Common Stock, the stocks in the Nasdaq National Market (U.S.
Companies) and the stocks comprising the Nasdaq Biotechnology Index, and that
all dividends were reinvested. Generex's Common Stock has been trading on the
Nasdaq National Market since May 5, 2000.
[graphic]
February 5 July 31 July 31 July 31 July 31
1998 1998 1999 2000 2001
---------- ------- ------- ------- -------
Generex Biotechnology Corporation.......................................... $100 130.21 106.25 126.05 141.67
The Nasdaq National Market................................................. $100 111.27 157.00 226.46 121.55
Nasdaq Biotechnology Index................................................. $100 111.25 229.28 458.31 369.61
11
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires that Generex's directors and executive officers, and
any persons who own more than ten percent of the Common Stock, file with the SEC
initial reports of ownership and reports of changes in ownership of the Common
Stock and other equity securities of Generex. Such persons are required by SEC
regulations to furnish Generex with copies of all such reports that they file.
To the knowledge of Generex, based upon its review of these reports, all Section
16 reports required to be filed by our directors and executive officers during
the fiscal year ended July 31, 2001 were filed on a timely basis.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation of Executive Officers
The following table sets forth, for Generex's last three fiscal years, all
compensation awarded to, earned by or paid to the chief executive officer
("CEO") and the three most highly compensated executive officers of Generex
other than the CEO whose salary and bonus payments exceeded $100,000 for the
fiscal year ended July 31, 2001.
Summary Compensation Table
Long-Term Compensation
Annual -----------------------------------
Compensation Awards
----------------- ----------------------
Name and Year Salary Other
Principal Ended ($) Bonus Annual Options
Position July 31 (3) ($) Compensation (#)
--------- ------- ------- ------- ------------ ---------
Anna E. Gluskin (1), 2001 127,240 250,000 * 0
President and 2000 105,385 0 * 300,000
Chief Executive 1999 136,483 0 * 0
Officer
E. Mark Perri (1), 2001 95,081 180,000 * 0
Chairman and 2000 103,249 0 * 250,000
Chief Financial 1999 120,777 0 * 0
Officer
Rose C. Perri (1), 2001 81,068 100,000 * 0
Chief Operating, 2000 97,147 0 * 250,000
Officer, Treasurer 1999 120,777 0 * 0
and Secretary
Pankaj Modi (2), 2001 250,000 300,000 * 150,000(4)
Vice President, 2000 89,723 5,302 * 300,000
Research and 1999 87,472 4,374 * 0
Development
---------------
* Perquisites and other personal benefits, securities or other property
received by each executive officer did not exceed the lesser of $50,000 or
10% of such executive officer's salary and bonus.
(1) Portions of the cash compensation paid to Ms. Gluskin, Mr. Perri and Ms.
Perri are attributable to amounts paid indirectly through a management
services agreement with a corporation of which Ms. Gluskin, Mr. Perri and
Ms. Perri are equal owners.
(2) All of the cash compensation paid to Dr. Modi is paid indirectly to him
through a corporation owned 100% by him.
(3) Cash compensation is stated in the table in U.S. dollars. To the extent any
cash compensation was paid in Canadian dollars, it has been converted into
U.S. dollars based on the weighted average Canadian/U.S. dollar exchange
rate for the years ended July 31, 2001, 2000 and 1999, respectively.
12
(4) Granted on October 23, 2001 with effect as of July 31, 2001 pursuant to the
terms of Dr. Modi's consulting agreement. These options were granted under
the Generex 2001 Stock Option Plan, which is subject to stockholder
approval.
Option Grants during the 2001 Fiscal Year
The following tables set forth information related to options to purchase
Common Stock granted to the CEO and the named executive officers during the
fiscal year ended July 31, 2001.
Individual grants
--------------------------- Potential realizable value at
Percent of assumed annual rates of stock
Number of total options appreciation for option term
Securities granted ------------------------------------------
Underlying to employees Exercise
options in fiscal price Expiration
Name granted (#) year (%) ($/Sh) date 5% ($) 10%
---- ----------- ------------- -------- ---------- ------- -------
Anna E. Gluskin ...................................... 0 -- -- -- -- --
E. Mark Perri ........................................ 0 -- -- -- -- --
Rose C. Perri ........................................ 0 -- -- -- -- --
Pankaj Modi .......................................... 150,000(1) 11.5 8.70 9/24/06 360,000 796,500
---------------
(1) Granted on October 23, 2001 with effect as of July 31, 2001 pursuant to the
terms of Dr. Modi's consulting agreement. These options were granted under
the Generex 2001 Stock Option Plan, which is subject to stockholder
approval.
Fiscal Year End Option Values
No options were exercised by the CEO or the named executive officers during
the fiscal year ended July 31, 2001. The following table provides information
relating to the number and value of options held by the CEO and the named
executive officers at fiscal year end.
Number of securities
underlying exercised Value of unexercised
options at options at
July 31, 2001 January 15, 2002
Shares acquired Value (#) ($)
Name on exercise (#) realized ($) Exerciseable/Unexercisable Exerciseable(1)/Unexercisable
---- --------------- ------------ -------------------------- -----------------------------
Anna E. Gluskin ................... -0- -0- 300,000/0 218,000/0
E. Mark Perri ..................... -0- -0- 250,000/0 218,000/0
Rose C. Perri ..................... -0- -0- 250,000/0 218,000/0
Pankaj Modi ....................... -0- -0- 300,000/150,000 327,000/0
---------------
(1) Based on the closing price of Common Stock ($7.18) at January 15, 2002.
Other Benefit Plans
We have no long-term incentive plans or defined benefit or actuarial pension
plans, and have not repriced any options previously granted to the above named
officers.
Directors' Compensation; Other Compensation
None of our directors received any cash compensation for their services as
directors during the fiscal year ended July 31, 2001. Dr. Hawke was granted
options on May 18, 2001 under the Generex 2001 Stock Option Plan to purchase
20,000 shares of Common Stock in recognition of his service as a director. Mr.
Rosen was granted options on August 18, 2000 under the Generex 2000 Stock
Option Plan to purchase 20,000 shares of Common Stock and options on May 18,
2001 under the 2001 Plan to purchase 20,000 shares of Common Stock in
13
recognition of his service as a director. The options under the 2001 Plan were
granted subject to stockholder approval of the 2001 Plan.
Dr. Modi is compensated through a consulting agreement that was originally
entered into as of October 1, 1996, that was amended and supplemented as of
January 7, 1998, and that was further amended and supplemented as of December
31, 2000. The parties to the agreement are Dr. Modi, Generex and Generex
Pharmaceuticals, Inc., a wholly-owned subsidiary of Generex. All references to
the consulting agreement in the following discussion relate to the agreement,
as amended and supplemented.
Pursuant to the terms of the consulting agreement, Dr. Modi holds the
position of Vice President, Research and Development of Generex and Generex
Pharmaceuticals, and both Generex and Generex Pharmaceuticals are jointly and
severally responsible for the payment to Dr. Modi of all amounts due under the
agreement. The agreement provides for Dr. Modi's term of service to extend
through July 31, 2010, subject to termination without cause by Dr. Modi or
Generex at any time after January 1, 2003 upon 12 months' prior written
notice.
The consulting agreement provides for an annual base compensation of
$250,000 a year, effective as of August 1, 2000, subject to certain cost-of-
living increases. In addition, Dr. Modi is entitled to receive certain bonus
compensation during the term of the agreement. During the first calendar
quarter of 2001, a $300,000 bonus was paid to Dr. Modi in respect of Dr Modi's
services in securing the development and license agreement between Generex and
Eli Lilly and Company ("Lilly"). Dr. Modi will also receive certain additional
bonus payments based upon the Lilly agreement or any similar agreements
entered into by Generex for rights granted to third parties to develop,
manufacture and/or market products based upon ideas, improvements, designs or
discoveries made or conceived by Dr. Modi.
The consulting agreement provides for Dr. Modi to be granted options to
purchase 150,000 shares of Common Stock in each of the next ten fiscal years,
starting with the fiscal year ending July 31, 2001. The options may be granted
only under option plans of Generex that have been approved by the
stockholders.
In connection with amending and supplementing the consulting agreement in
January 1998, Generex issued 1,000 shares of Special Voting Rights Preferred
Stock ("Special Preferred Stock") to Dr. Modi, comprising all of the
outstanding shares of Special Preferred Stock. Special Preferred Stock does
not generally carry the right to vote, but does have the following special
voting rights:
o the holders of Special Preferred Stock have the right to elect a majority
of Generex's Board of Directors if a change of control occurs; and
o the holders of Special Preferred Stock have the right to approve any
transaction that would result in a change of control.
A "change of control" is deemed to occur if Generex's founders (namely, Ms.
Gluskin, Dr. Modi, Mr. Perri or Ms. 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 the founders. 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.
Compensation Committee Interlocks and Insider Participation
Ms. Gluskin, Dr. Modi, Mr. Perri and Ms. Perri, all of whom are both
directors and executive officers of Generex, participated during the fiscal
year ended July 31, 2001 in some discussions and decisions of the Board of
Directors concerning compensation to be paid to the executive officers of the
Company. Effective July 30, 2001, all decisions regarding executive
compensation are made by the Compensation Committee of the Board of Directors.
Dr. Hawke is chairman of the Compensation Committee and Dr. Lieberburg and Mr.
Rosen are the other members of the Compensation Committee.
No executive officer of Generex has served on the board of directors or
compensation committee of any other entity that has or has had one or more
executive officers serving as a director of Generex (excluding entities that
are wholly owned by one or more of the executive officers).
14
Security Ownership Of Certain Beneficial Owners And Management
The tables on the following pages sets 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 these tables is as of January 15, 2002. At that
date, Generex had 20,682,634 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, all of which
are presently held of record by an affiliate of Elan.
A person is deemed to be a beneficial owner of shares if he 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 Number of
Beneficial Owner Shares Percent of Class
---------------- ------ ----------------
(i) Directors and Executive Officers
Anna E. Gluskin .......................................................... 1,488,127(1) 7.2%
Michael Hawke, M.D. ...................................................... 71,000(2) *
Ivan M. Lieberburg, Ph.D., M.D. .......................................... 10,000(3) *
Pankaj Modi, Ph.D. ....................................................... 1,400,200(4) 6.8%
E. Mark Perri ............................................................ 4,542,792(5) 22.0%
Rose C. Perri ............................................................ 1,438,026(6) 7.0%
Jan Michael Rosen ........................................................ 98,730(7) *
Officers and directors as a group ........................................ 6,672,875(8) 32.3%
(ii) Other Beneficial Owners (and their addresses)
Protius Overseas Limited ................................................. 1,405,526(9) 6.8%
P.O. Box 17512-14
Finch Road Douglas
Isle of Man, IM99
Cranshire Capital, L.P. .................................................. (9) (9)
666 Dundee Road, Suite 1901
Northbrook, IL 60062
Downsview Capital, Inc. .................................................. (9) (9)
666 Dundee Road, Suite 1901
Northbrook, IL 60062
JMJ Capital, Inc. ........................................................ (9) (9)
666 Dundee Road, Suite 1901
Northbrook, IL 60062
EURAM Cap Strat. "A" Fund Limited ........................................ (9) (9)
666 Dundee Road, Suite 1901
Northbrook, IL 60062
Mitchell P. Kopin ........................................................ (9) (9)
666 Dundee Road, Suite 1901
Northbrook, IL 60062
EBI, Inc. In Trust ....................................................... 1,441,496(10) 7.0%
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260
Providencials
Turks and Caicos Islands
British West Indies
GHI, Inc. In Trust ....................................................... 2,500,050(11) 12.1%
c/o Miller & Simons
First Floor, Butterfield Square
P.O. Box 260
Providencials
Turks and Caicos Islands
British West Indies
Smallcap World Fund, Inc. ................................................ 1,243,467(12) 6.0%
c/o Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071
16
---------------
* Less than one percent.
(1) Includes 1,188,000 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") and 200,000 shares issuable upon the exercise of an option
granted under Generex's 2000 Stock Option Plan (the "2000 Plan").
(2) Includes 50,000 shares issuable upon the exercise of an option granted
under the 1998 Plan and 20,000 shares issuable upon the exercise of an
option granted under the 2000 Plan, but does not include 50,000 shares
issuable upon the exercise of options granted under the 2001 Plan (20,000
of which were granted during fiscal 2001 and 30,000 of which were granted
after fiscal 2001), which are not presently exercisable but will become
exercisable if the 2001 Plan is approved by the stockholders.
(3) Does not include 50,000 shares issuable upon the exercise of an option
granted under the 2001 Plan (after fiscal 2001), which is not presently
exercisable but will become exercisable if the 2001 Plan is approved by the
stockholders. Also does not include any shares that are owned by, or that
may be acquired by, Elan or its affiliates. See "Certain Relationships and
Related Transactions" for a description of the shares of Common Stock that
are owned by, or that may be acquired by, Elan or its affiliates.
(4) 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. Does not include 150,000 shares
issuable upon the exercise of an option granted under the 2001 Plan which
is not presently exercisable but will become exercisable if the 2001 Plan
is approved by the stockholders. The options granted under the 2001 Plan
were granted on October 23, 2001 with effect as of July 31, 2001 pursuant
to the terms of Dr. Modi's consulting agreement. Dr. Modi also owns all the
outstanding shares of Generex's Special Voting Rights Preferred Stock. This
stock is not convertible into Common Stock.
(5) Includes 45,914 shares owned of record by Mr. Perri, and a total of
1,529,382 shares beneficially owned by Mr. Perri but owned of record by
EBI, Inc. (1,100,000 shares), GHI, Inc. (124,050 shares) and Union
Securities Ltd. (305,332 shares). Also includes: (a) 100,000 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, (b) 2,376,000 shares owned of record by GHI, Inc., which Mr.
Perri may be deemed to beneficially own because of his power to vote the
shares but which are beneficially owned by Ms. Gluskin or Ms. Perri; and
(c) 341,496 shares owned of record by EBI, Inc., which Mr. Perri may be
deemed to beneficially own because of his power to vote the shares but
which are beneficially owned by other stockholders because they are
entitled to the economic benefits of the shares.
(6) Includes 1,188,000 shares owned of record by GHI, Inc. that are
beneficially owned by Ms. Perri, 100,000 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.
(7) Includes 20,000 shares issuable upon the exercise of an option granted
under the 2000 Plan, but does not include 50,000 shares issuable upon
exercise of options granted under the 2001 Plan (20,000 of which were
granted during fiscal 2001 and 30,000 of which were granted after fiscal
2001), which are not presently exercisable but will become exercisable if
the 2001 Plan is approved by the stockholders. 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.
(8) Includes 500,000 shares issuable upon the exercise of options granted under
the 1998 Plan, and 690,000 shares issuable upon the exercise of options
granted under the 2000 Plan. Does not include any shares issuable upon the
exercise of options granted under the 2001 Plan, all of which are subject
to stockholder approval of the 2001 Plan. Includes 1,441,496 shares owned
of record by EBI, Inc. but beneficially owned or deemed to be beneficially
owned by Mr. Perri. Includes 2,500,050 shares owned of record by GHI, Inc.
but beneficially owned by Ms. Gluskin, Mr. Perri or Ms. Perri (but
eliminates any doublecounting of shares that are beneficially owned by Ms.
Gluskin and Ms. Perri but also deemed to be beneficially owned by Mr.
Perri).
17
(9) Based solely on Schedule 13G filed with the SEC under the Exchange Act on
January 18, 2002. The Schedule 13G was filed for Protius Overseas Limited;
Cranshire Capital, L.P.; Downsview Capital, Inc.; JMJ Capital, Inc.; EURAM
Cap Strat. "A" Fund Limited; and Mitchell P. Kopin as a group. The members
of the group hold shared voting power and shared dispositive power with
respect to these shares. Does not include any warrants exercisable for
Common Stock that are held by any of the members of the group.
(10) All these shares also are deemed to be beneficially owned by Mr. Perri
because he has the sole power to vote the shares. With respect to
1,100,000 of the shares owned of record by EBI, Inc., Mr. Perri also has
investment power and otherwise is entitled to the economic benefits of
ownership.
(11) Mr. Perri beneficially owns 124,050 of the shares owned of record by GHI,
Inc. by reason of his ownership of investment power and other economic
benefits associated with such shares and his sole power to vote the
shares. Ms. Gluskin and Ms. Perri each own beneficially 1,188,000 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 and Ms. Perri also are deemed
to be beneficially owned by Mr. Perri because he has the sole power to
vote the shares.
(12) Includes warrants to purchase a total of 164,467 shares of the Common
Stock.
Certain Relationships and Related Transactions
Generex acquired Generex Pharmaceuticals, Inc. in October 1997. Prior to
Generex's acquisition of Generex Pharmaceuticals, it was a private Canadian
corporation majority-owned and controlled by Mr. Perri, Ms. Perri and Ms.
Gluskin. Unless otherwise indicated, the transactions described below occurred
prior to the acquisition of Generex Pharmaceuticals or pursuant to contractual
arrangements entered into prior to that time. Generex presently has a policy
requiring approval by stockholders or by a majority of disinterested directors
of transactions in which one of our directors has a material interest apart
from such director's interest in Generex.
Real Estate Financing Transactions: In May 1997, EBI, Inc., a company
controlled by Mr. Perri, acquired shares of common stock of Generex
Pharmaceuticals for $3 million (CAD) which, based on the exchange rate then in
effect, represented approximately $2.1 million (US). Generex Pharmaceutical's
use of those funds was restricted to acquiring an insulin research facility.
Subsequently this restriction was eased to permit use of the funds to acquire
properties used for manufacturing Generex's oral insulin product and other
proprietary drug delivery products, and related testing, laboratory and
administrative services. Under the terms of the investment, Generex
Pharmaceuticals was required to lend these funds back to EBI until they were
needed for the purposes specified. The entire amount was loaned back to EBI
and was outstanding at July 31, 1997. During the period ended July 31, 1998, a
total of $2,491,835 (CAD) was repaid by EBI. There were no repayments made in
the years ended July 31, 2001, 2000 and 1999. The balance due from EBI at July
31, 2001, was $508,165 (CAD) (approximately $332,289 (US) based on the
exchange rate then in effect). These funds are due on demand by Generex
Pharmaceuticals, provided they are used for the purchase and/or construction
or equipping of oral insulin manufacturing and testing facilities. The amounts
repaid by EBI were used primarily to purchase and improve certain of the real
estate and buildings owned by Generex.
Related Party Transactions: Between November 1995 and July 31, 1998,
companies owned and controlled by Mr. Perri, Ms. Perri and Ms. Gluskin
incurred a net indebtedness of $629,234 to Generex Pharmaceuticals, excluding
the indebtedness of EBI described in the preceding paragraph. This
indebtedness arose from cash advances and the payment by Generex
Pharmaceuticals of expenses incurred by these companies, net of repayments and
payment of expenses on behalf of Generex Pharmaceuticals. At July 31, 1999,
these companies' net indebtedness to Generex Pharmaceuticals, exclusive of the
EBI indebtedness described above, was $284,315. At July 31, 2000, this balance
had been reduced to zero. The transactions between Generex Pharmaceuticals and
entities owned and controlled by Mr. Perri, Ms. Perri and Ms. Gluskin were not
negotiated at arms-length, and were not on normal commercial terms. No
interest was charged on any of the advances, and the transactions were of far
greater financial benefit and convenience to Mr. Perri, Ms. Perri and Ms.
Gluskin than to Generex Pharmaceuticals. These transactions and financing
arrangements were mostly initiated prior to the transaction in which Generex
acquired Generex Pharmaceuticals, and no such transactions have taken place
since January 1,
18
1999. Generex presently has a policy requiring the approval of the Board of
Directors, including a majority of disinterested directors, for any
transactions in which a director has a material interest apart from such
director's interest in Generex.
Loans to Executive Officers: On May 3, 2001, Generex loaned $334,300 each
to Mr. Perri, Ms. Perri and Ms. Gluskin in exchange for promissory notes.
These notes bear interest at 8.5 percent per annum and are payable in full on
May 1, 2002. These notes are guaranteed by GHI, Inc., a related company owned
by these officers and are secured by a pledge of 2,500,000 shares of Common
Stock held of record by GHI, Inc. As of October 31, 2001, the balance
outstanding on these notes, including accrued interest, was $1,046,215. The
loans were approved by a majority of the disinterested directors.
Joint Venture with Elan: In January 2001, Generex established a joint
venture with Elan International Services, Ltd. ("EIS") and Elan Corporation,
plc ("Elan"). Pursuant to the Securities Purchase Agreement dated January 16,
2001, between Generex, Elan and EIS, EIS has the right to nominate one
director to Generex's Board of Directors for so long as EIS or its affiliates
own at least 1.0% of the issued and outstanding shares of Common Stock. Dr.
Lieberburg is the nominee of EIS thereunder. In connection with the
transaction, EIS purchased 344,116 shares of Common Stock for $5,000,000 and
was issued a warrant to acquire 75,000 shares of Common Stock at $25.15 per
share. If the joint venture achieves certain milestones, Generex may require
EIS to purchase an additional $1,000,000 of Common Stock at a 30% premium to
the then prevailing fair market value of shares of Common Stock. EIS also
purchased 1,000 shares of a new series of Generex preferred stock, designated
as Series A Preferred Stock, for $12,015,000. The proceeds from the sale of
the Series A Preferred Stock were applied by Generex to subscribe for an 80.1%
equity ownership interest in Generex (Bermuda) Ltd. EIS paid in capital of
$2,985,000 to subscribe for a 19.9% equity interest in Generex (Bermuda) Ltd.
While Generex initially owns 80.1% of the joint venture entity, EIS has the
right, subject to certain conditions, to increase its ownership up to 50% by
exchanging the Series A Preferred Stock for 30.1% of Generex's interest in the
joint venture entity. Alternatively, the Series A Preferred Stock may be
converted, under certain conditions, into shares of Common Stock at a
conversion price of $25.71 per share. The shares of Common Stock and shares of
Series A Preferred Stock presently are held of record by an affiliate of EIS.
OTHER INFORMATION
Annual Report
Generex has enclosed its Annual Report for the year ended July 31, 2001,
with this proxy statement, which includes Generex's Annual Report to the
Securities and Exchange Commission on Form 10-K for the fiscal year ended July
31, 2001, without exhibits. Stockholders are referred to the report for
financial and other information about Generex, but such report is not
incorporated in this proxy statement and is not a part of the proxy soliciting
material.
Stockholder Proposals for the Next Annual Meeting
Any proposals of stockholders intended to be presented at the annual meeting
of stockholders for the fiscal year ended July 31, 2002, must be received by
Generex at 33 Harbour Square, Suite 202, Toronto, Ontario, Canada M5J 2G2, no
later than September 1, 2002 in order to be included in the proxy materials
and form of proxy relating to such meeting. It is suggested that stockholders
submit any proposals by an internationally recognized overnight delivery
service to the Secretary of Generex. Such proposal must meet the requirements
set forth in the rules and regulations of the Securities and Exchange
Commission in order to be eligible for inclusion in the proxy materials for
such meeting. The annual meeting for the fiscal year ended July 31, 2002 is
scheduled to take place in February 2003.
For business to be properly brought before the annual meeting by a
stockholder in a form other than a stockholder proposal, any stockholder who
wishes to bring such business before the annual meeting of stockholders must
give notice of such business in writing to the Secretary of Generex not less
than 60 nor more than 90 days prior to the annual meeting. In the event that
less than 70 days notice or prior disclosure of the date of the meeting is
given or made to stockholders, notice of such business to be timely must be
received by the Secretary of Generex not later than the close of business on
the 10th day following the day on which such notice
19
of the date of the meeting was mailed or such public disclosure was made. The
stockholder's notice of such business must provide information about the
stockholder proposing such business and the nature the business, as required
by Generex's Amended and Restated Bylaws. A copy of these Bylaw requirements
will be provided upon request in writing to the Secretary at the principal
offices of Generex.
If there should be any change in the foregoing submission deadlines, Generex
intends to publicly disseminate information concerning the change.
Director Nominees
Any stockholder entitled to vote for the election of directors may nominate
a person for election to the Board of Directors at the annual meeting. Any
stockholder wishing to do so must submit a notice of such nomination in
writing to the Secretary of Generex at Generex's principal offices not less
than 60 nor more than 90 days prior to the annual meeting. In the event that
less than 70 days notice or prior disclosure of the date of the meeting is
given or made to stockholders, notice of nomination by a stockholder to be
timely must be received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made. The stockholder's notice of nomination
must provide information about both the nominee and the nominating
stockholder, as required by Generex's Amended and Restated Bylaws. A copy of
these Bylaw requirements will be provided upon request in writing to the
Secretary at the principal offices of Generex.
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 annual 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
Secretary
February 8, 2002
20
EXHIBIT A
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.
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 4,000,000 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
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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.
(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.
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(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.
(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
A-3
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.
(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.
(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.
A-4
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.
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
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(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).
(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
A-6
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 16, "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 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.
(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.
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(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.
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.
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GENEREX BIOTECHNOLOGY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MARCH 18, 2002
The undersigned stockholder of Generex Biotechnology Corporation (the
"Company") hereby appoints Anna E. Gluskin, E. Mark Perri 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 February 8, 2002, at the annual
meeting of stockholders of Generex to be held on March 18, 2002 (the "Annual
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 ANNUAL
MEETING OF STOCKHOLDERS RELATING TO THE ANNUAL MEETING.
Item 1. To elect as directors, to hold office until the next meeting of
stockholders and until their successors are elected, the seven (7) nominees
listed below:
NOMINEES: Anna E. Gluskin, Michael Hawke, M.D., Ivan M. Lieberburg, Ph.D, M.D.
Pankaj Modi, Ph.D., E. Mark Perri, Rose C. Perri and Jan Michael
Rosen.
o FOR ALL NOMINEES o WITHHOLD ALL NOMINEES o
--------------------
For all nominees
except as noted
above
Item 2. To approve the Generex 2001 Stock Option Plan.
o FOR o AGAINST o ABSTAIN
Item 3. To ratify the appointment of Deloitte & Touche, LLP as Generex's
independent public accountants for the fiscal year ending July 31, 2002.
o FOR o AGAINST o 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.
348513.3