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EX-32 - GENEREX BIOTECHNOLOGY CORP | v203807_ex32.htm |
EX-31.2 - GENEREX BIOTECHNOLOGY CORP | v203807_ex31-2.htm |
EX-31.1 - GENEREX BIOTECHNOLOGY CORP | v203807_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
(Mark
One)
¨ ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended July 31, 2010
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _______ to _______
Commission
file number 000-25169
GENEREX
BIOTECHNOLOGY CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
|
98-0178636
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
33 Harbour Square, Suite 202, Toronto,
Canada
|
M5J 2G2
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(416)
364-2551
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Securities
registered pursuant to Section 12(b) of the Act:
None
|
Not
applicable
|
|
(Title
of each class)
|
(Name
of each exchange on which
registered)
|
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, $.001 par value per share
|
(Title
of class)
|
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes o No
þ
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Exchange Act. Yes o No
þ
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
þ No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). .Yes o No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer o
|
Accelerated
filer þ
|
Non-accelerated
filer o
(Do not check
if a smaller reporting company)
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No þ
As of
January 31, 2010, the aggregate market value of the registrant’s common stock
held by non-affiliates of the registrant was $151,387,993 based on the closing
sale price as reported on the NASDAQ Capital Market. Generex Biotechnology
Corporation has no non-voting common equity.
At
November 23, 2010, there were 274,445,713 shares of common stock
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE: Annual Report on Form 10-K filed with the Securities
and Exchange Commission on October 14, 2010.
Generex
Biotechnology Corporation
Form
10-K/A
July
31, 2010
Page
|
||
Part III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
2
|
Item
11.
|
Executive
Compensation.
|
6
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
19
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
21
|
Item
14.
|
Principal
Accountant Fees and Services.
|
22
|
Part IV
|
||
Item
15.
|
Exhibits
and Financial Statement Schedules.
|
22
|
Signatures
|
23
|
As used
herein, the terms the “Company,” “Generex,” “we,” “us,” or “our” refer to
Generex Biotechnology Corporation, a Delaware corporation.
Explanatory
Note
This
Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended
July 31, 2010 (“Amendment”) is being filed to furnish the information required
by Part III (Items 10, 11, 12, 13 and 14). This Amendment is limited in scope to
the items identified above and should be read in conjunction with the original
Annual Report on Form 10-K for the year ended July 31, 2010 filed by the Company
on October 14, 2010 (the “Form 10-K”). The Amendment does not reflect events
occurring after the filing of the Form 10-K on October 14, 2010 and, other than
the furnishing of the information identified above, does not modify or update
the disclosure in the Form 10-K in any way.
1
Executive
Officers and Directors
Name
|
Age
|
Position Held with
Generex
|
||
Mark
Fletcher, Esquire
|
45
|
Interim
President/Chief Executive Officer, General Counsel and
Secretary
|
||
Rose
C. Perri
|
43
|
Chief
Operating Officer, Chief Financial Officer, Treasurer and
Director
|
||
Anna
E. Gluskin
|
59
|
Director
|
||
John
P. Barratt
|
66
|
Chairman
of the Board
|
||
Brian
T. McGee
|
50
|
Director
|
||
Nola
E. Masterson
|
63
|
Director
|
There are
no family relationships among the directors and executive
officers. All directors are elected to hold office until the next
annual meeting of stockholders following election and until their successors are
duly elected and qualified. Executive officers are appointed by the Board of
Directors and serve at the discretion of the Board.
Mark Fletcher,
Esq. Mr. Fletcher was appointed as Interim President/Chief Executive
Officer and Secretary in September 2010. Since April 2003, he has
served, and continues to serve as, Executive Vice President and General Counsel.
From October 2001 to March 2003, Mr. Fletcher was engaged in the private
practice of law as a partner at Goodman and Carr LLP, a leading Toronto law
firm. From March 1993 to September 2001, Mr. Fletcher was a partner at Brans,
Lehun, Baldwin LLP, a law firm in Toronto. Mr. Fletcher received his LL.B. from
the University of Western Ontario in 1989 and was admitted to the Ontario Bar in
1991. The Board believes that Mr. Fletcher’s wide-ranging legal
knowledge and extensive experience as a practicing lawyer, combined with his
managerial skills and business acumen and judgment, provide our Board with
valuable legal and operational expertise and leadership skills.
Rose C.
Perri. Director since September 1997. Ms. Perri has served as Treasurer
of Generex since October 1997 and as Chief Operating Officer since August 1998.
She served as Secretary from October 1977 to September 2010 and as Acting Chief
Financial Officer from November 2002 until April 2005 when she was appointed
Chief Financial Officer. She was an officer of Generex Pharmaceuticals Inc. from
its formation in 1995 until its acquisition by Generex in October 1997. Ms.
Perri is one of the founders of Generex. Ms. Perri holds a Bachelor
of Arts degree from the University of Toronto as well as a Bachelor of Business
Management from York University. The Board believes that Ms. Perri’s
business experience, including her experience as founder and an executive
officer of Generex, combined with her educational background and her business
judgment provide our Board with valuable operational expertise and leadership
skills.
John P.
Barratt. Independent Director since March 2003 and Chairman of the Board
since September 2010. Mr. Barratt is currently the Chairman of the
Generex Compensation Committee and a member of the Generex Audit Committee and
Corporate Governance and Nominating Committee. Mr. Barratt served as the Board
Liaison Officer of The Caldwell Partners International from July 2006 until May
2009. From April 2005 to July 2006, Mr. Barratt served as Chief Operating
Officer of The Caldwell Partners International. The Caldwell Partners
International is a Canadian-based human capital professional services company.
Mr. Barratt from January 2002 until February 2007 served as the court-appointed
Responsible Person and Liquidation Manager of Beyond.com Corporation,
Debtor-in-Possession, a U.S. Chapter 11 Bankruptcy case, in which capacity Mr.
Barratt reported to the bankruptcy court and to the U.S. Trustee’s Office. From
September 2000 to January 2002, Mr. Barratt acted in the capacity of Chief
Operating Officer of Beyond.com Corporation, an electronic fulfillment provider.
Between 1996 and 2000, Mr. Barratt was partner-in-residence with the Quorum
Group of Companies, an international investment partnership specializing in
providing debt and/or equity capital coupled with strategic direction to
emerging technology companies. Between 1988 and 1995, Mr. Barratt held a number
of positions with Coscan Development Corporation, a real estate development
company, the last position of which was Executive Vice-President and Chief
Operating Officer. Mr. Barratt currently serves on a number of Boards of
Directors, including Brookfield Investments Corporation and BAM Split
Corporation, and is a member of the Board of Directors and Chairman of the Risk
Policy Committee of the Bank of China (Canada). Mr. Barratt also serves as
Chairman of the Independent Review Committees of BAM Split Corp. and Brookfield
Soundvest Capital Management Ltd. Mr. Barratt is currently the Chief
Financial Officer and a member of the Advisory Board of Crystal Fountains Inc.
and also served as interim Chief Financial Officer of its subsidiary, Crystal
Fountains Inc. from September 2008 to May 2009. The Board believes
that Mr. Barratt’s wide-ranging business experience in various industries, his
extensive service as an executive officer and director in various companies, and
his knowledge of finance, combined with his leadership skills and business
judgment, provide our Board with valuable financial and operational expertise
and leadership skills.
2
Brian T.
McGee. Independent Director since March 2004. Mr. McGee is currently the
Chairman of the Generex Audit Committee and a member of the Generex Compensation
Committee and Corporate Governance and Nominating Committee. Mr. McGee has been
a partner of Zeifmans LLP ("Zeifmans") since 1995. Mr. McGee began working at
Zeifmans shortly after receiving a B.A. degree in Commerce from the University
of Toronto in 1985. Zeifmans is a Chartered Accounting firm based in Toronto,
Ontario. A significant element of Zeifmans’ business is public corporation
accounting and auditing. Mr. McGee is a Chartered Accountant. Throughout his
career, Mr. McGee has focused on, among other areas, public corporation
accounting and auditing. In 1992, Mr. McGee completed courses focused on
International Taxation and Corporation Reorganizations at the Canadian Institute
of Chartered Accountants and in 2003, Mr. McGee completed corporate governance
courses on compensation and audit committees at Harvard Business School. In
April 2004 Mr. McGee received his CPA designation from The American Institute of
Certified Public Accountants. Mr. McGee has received a certificate in
International Financial Reporting Standards issued by The Institute of Chartered
Accountants in England and Wales in 2010. The Board believes that Mr.
McGee’s knowledge and understanding of accounting and finance, his education and
training in accounting and corporate governance, and his extensive experience in
the accounting industry, combined with his business acumen and judgment, provide
our Board with valuable accounting and financial expertise.
Nola E.
Masterson. Independent Director since May 2007. Ms. Masterson is
currently the Chair of the Generex Corporate Governance and Nominating Committee
and a member of the Generex Audit Committee and Compensation Committee. Since
1982, she has been the chief executive officer of Science Futures Inc., an
investment and advisory firm. Ms. Masterson is currently Managing Member and
General Partner of Science Futures Management Co. LLC, which administers several
venture funds invested in life science fund of funds and life science companies.
She also serves as Chairwoman of the Board of Directors of Repros Therapeutics
Inc. and serves as Chair of the Compensation Committee and Nominating and
Corporate Governance Committee and is a member of the Audit
Committee. Repros is a development stage biopharmaceutical company
formerly known as Zonagen, Inc. (currently trading on The NASDAQ Global Market
under the symbol “RPRX”). Ms. Masterson was the first biotechnology analyst on
Wall Street, working with Drexel Burnham Lambert and Merrill Lynch, and is a
co-founder and first president of Sequenom, Inc., a genetic analysis company
located in San Diego and Hamburg, Germany. She also started the BioTech Meeting
in Laguna Nigel, CA, the annual Biopharmaceutical Conference in Europe, and was
nominated to the 100 Irish American Business List in 2003. Ms. Masterson began
her career at Ames Company, a division of Bayer, and spent eight years at
Millipore Corporation in sales and sales management. Ms. Masterson has 34 years
of experience in the life science industry. She received her Masters in
Biological Sciences from George Washington University, and continued Ph.D. work
at the University of Florida. The Board believes that Ms. Masterson’s extensive
experience in the life science industry and venture capital and investment
industry, her business experience, including her experience as an executive
officer of an investment advisory company and as a director of a publicly-traded
biopharmaceutical company, combined with her business judgment, provide our
Board with valuable scientific and operational expertise.
Anna E.
Gluskin: Director since September 1997. Ms. Gluskin served as the
President and Chief Executive Officer of Generex from October 1997 until
September 2010 and served as the Chairperson of the Generex Board of Directors
from November 2002 until September 2010. She held comparable
positions with Generex Pharmaceuticals Inc. from its formation in 1995 until its
acquisition by Generex in October 1997. Along with Ms. Perri, Ms.
Gluskin was one of the founders of Generex. Ms. Gluskin holds a
Masters degree in Microbiology and Genetics from Moscow State
University. Ms. Gluskin has been a member of the Board of Directors
of Protect Pharmaceutical Corp. (PRTT:OTC US) since March 2010. The
Board believes that Ms. Gluskin’s educational and business experience, including
her extensive experience as a founder, board member and executive officer of
Generex, combined with her business acumen and judgment provide our Board with
valuable scientific and operational expertise.
Other
Key Employees and Consultants
Stephen Fellows has served as
our Vice President, Finance since June 2009. From August 2005 to December 2008,
Mr. Fellows was employed by Sona Mobile Holdings Corporation, a publicly held
software company which developed software applications for mobile devices, where
he served as Chief Financial Officer. From September 1996 to August
2005, Mr. Fellows worked at 3Com Corporation, where he served in several
positions including as the Director of Finance of the corporate accounting group
in Marlborough, MA and Director of Finance & Operations of 3Com’s Canadian
subsidiary. From January 1992 to August 1996, Mr. Fellows worked at
Pennzoil Corporation where he spent time in the international mergers and
acquisitions group in Houston, Texas, as well as four years as Controller for
Pennzoil Canada. Mr. Fellows received a Bachelor of Business Administration
degree from Wilfrid Laurier University in 1988 and earned his Chartered
Accountants designation while articling with Arthur Andersen & Company in
Toronto in 1990.
Slava Jarnitskii has been our
Financial Controller since 1997. He began his employment with Generex
Pharmaceuticals in September 1996 and has been in the employment of Generex
since its acquisition of Generex Pharmaceuticals in October 1997. Before his
employment with Generex Pharmaceuticals, Mr. Jarnitskii received a Masters of
International Business Administration degree from Schulich School of Business in
September 1996.
3
Eric von Hofe, Ph.D., is
currently President of Antigen Express, Inc., a wholly-owned subsidiary of
Generex. He has extensive experience with technology development projects,
including his previous position at Millennium Pharmaceuticals as Director of
Programs & Operations, Discovery Research. Prior to that, Dr. von Hofe was
Director, New Targets at Hybridon, Inc., where he coordinated in-house and
collaborative research that critically validated gene targets for novel
antisense medicines. Dr. von Hofe also held the position of Assistant Professor
of Pharmacology at the University of Massachusetts Medical School, where he
received a National Cancer Institute Career Development Award for defining
mechanisms by which alkylating carcinogens create cancers. He received his Ph.D.
from the University of Southern California in Experimental Pathology and was a
postdoctoral fellow at both the University of Zurich and Harvard School of
Public Health. His work has been published in forty-three articles in
peer-reviewed journals, and he has been an inventor on four
patents.
Dr. Minzhen Xu is Vice
President - Biology of Antigen. Dr. Xu received an M.D. from Shanghai Medical
University in China and a Ph.D. in immunology from University of Massachusetts
Medical School. He has been with Antigen since its inception and is the
company’s chief experimentalist.
Gerald Bernstein, M.D. has
served as Vice President Medical Affairs of Generex since October 2001. He
served as a Director of Generex from October 2002 to May 2008. Dr. Bernstein
acts as a key liaison for Generex on medical and scientific affairs to the
medical, scientific and financial communities and consults with Generex under a
consulting agreement on research and medical affairs and on development
activities. Dr. Bernstein is an associate clinical professor at the Albert
Einstein College of Medicine in New York and an attending physician at Beth
Israel Medical Center, Lenox Hill Hospital and Montefore Medical Center, all in
New York. He was president of the American Diabetes Association from 1998 to
1999. Dr. Bernstein has written and lectured extensively on various
topics concerning diabetes. Dr. Bernstein holds a Bachelor of Arts
degree from Dartmouth College in Biology and a medical degree from Tufts
University School of Medicine. Dr. Bernstein has been a member of the
Board of Directors of Protect Pharmaceutical Corp. (PRTT:OTC US) since March
2010.
George Markus is Manager of
Regulatory Affairs. Mr. Markus holds a B.Sc. (Honours) in theoretical chemistry
from Dalhousie University and a M.Sc. in analytical chemistry from McGill
University. He is an instructor at the Academy of Applied Pharmaceutical
Sciences in Toronto, Canada. In his more than twenty years in the industry, he
has been President & Chief Executive Officer of Consolidated Clinical
Research of Canada Inc., a site management organization (SMO) that manages the
coordination of clinical research sites, and has worked in Quality Assurance /
Special Projects / Clinical Operations and as a Director, Regulatory Affairs for
Dimethaid Research Inc. Mr. Markus has also held regulatory affairs positions
with Pasteur Merieux Connaught, Biovail Corporation International, Sanofi
Winthrop, Genpharm Inc. Pharmaceuticals, and Sandoz Canada Inc.
Dr. Jaime Davidson, MD, FACP,
FACE was appointed a consultant Medical Director for Generex in July,
2006. Dr. Davidson is the President of Endocrine and Diabetes Associates of
Texas, based at the Medical City Dallas Hospital complex, and a Clinical
Associate Professor of Internal Medicine at University of Texas Southwestern
Medical Center in Dallas, Texas. Dr. Davidson chaired the Diabetes Consensus
Guidelines for the American College of Endocrinology and serves as Director of
the Annual Intensive Diabetes, Endocrinology and Metabolic Diseases Course for
the University of Southern California Keck School of Medicine. He serves as a
council member for the Texas Department of Health Services, appointed by Texas
Governor Rick Perry. In 2006 Dr. Davidson was distinguished by the American
Association of Clinical Endocrinologists with an award for his contributions to
the improvement of endocrine health for under-served populations, and by the
American Diabetes Association with the Harold Rifkin MD award for his
international contributions in the diabetes field. In the past, he has held
positions with the National Diabetes Advisory Board, the National Institutes of
Health, the Centers for Disease Control, the Institute of Medicine, and the
boards of directors of the American Diabetes Association, the American
Association of Clinical Endocrinologists, and the American College of
Endocrinology. He served in higher education for a six year term as a Regent of
Midwestern State University in Texas appointed by then Governor George W. Bush.
He has also served in the President's Council for Fitness and Sports, chaired
the Texas Diabetes Council of the Texas Department of Health for several years
where he instituted the Texas Diabetes Algorithm, and under his guidance the
Texas Diabetes Institute was established with the University of Texas Health
Science Center in San Antonio, Texas. Dr. Davidson's experience in clinical
pharmacology began with a Clinical Pharmacology Fellowship at Lilly Laboratories
for Clinical Research and it continued with multiple clinical trials. In
addition, he was an advisor to the Food and Drug Administration (FDA) on the
Endocrinology and Metabolism Advisory Board. Dr. Davidson's Internal Medicine
training was completed at Scott and White Hospital (now known as Texas A&M
University) and his Endocrinology training at University Of
Indiana.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires that Generex's directors and executive
officers, and any persons who own more than ten percent (10%) of Generex's
common stock, file with the Securities and Exchange Commission (the “SEC”)
initial reports of ownership and reports of changes in ownership of 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 its directors and
executive officers during the fiscal year ended July 31, 2010 were filed on a
timely basis, with the exception of the Statements of Changes in Beneficial
Ownership of Securities on Form 4 filed on March 10, 2010 on behalf of each of
the persons named below, which reports belatedly disclosed the Board of
Directors’ determination on October 20, 2009 to extend the term of
certain outstanding options through October 26, 2014 as
follows:
4
Name of
Executive Officer or
Director
|
No. of Shares of
Common Stock
Underlying Option
|
Exercise
Price per Share
|
Grant Date
|
Original Expiration
Date
|
Extended
Expiration Date
|
||||||||
Anna
Gluskin
|
250,000
|
$ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
|||||||
1,120,704
|
$ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
||||||||
Rose
Perri
|
250,000
|
$ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
|||||||
576,752
|
$ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
||||||||
Mark
Fletcher
|
250,000
|
$ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
|||||||
470,726
|
$ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
||||||||
John
P. Barratt
|
70,000
|
$ | 0.94 |
10/26/04
|
10/26/09
|
10/26/14
|
|||||||
35,714
|
$ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
||||||||
100,000
|
$ | 0.56 |
4/5/05
|
4/4/10
|
10/26/14
|
||||||||
Brian
T. McGee
|
70,000
|
$ | 0.94 |
10/26/04
|
10/26/09
|
10/26/14
|
|||||||
35,714
|
$ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
||||||||
100,000
|
$ | 0.56 |
4/5/05
|
4/4/10
|
10/26/14
|
Code
of Ethics
Generex
has adopted a code of ethics that applies to its directors and the following
executive officers: the President, Chief Executive Officer, Chief Financial
Officer (principal financial/accounting officer), Chief Operating Officer, any
Vice-President, Controller, Secretary, Treasurer and any other personnel
performing similar functions. We also expect any consultants or advisors whom we
retain to abide by this code of ethics. The Generex Code of Ethics has been
posted on Generex's Internet web site -
www.generex.com.
Corporate
Governance
Procedures
for Nomination of Directors by Security Holders
There
were no material changes to the procedures for nomination of directors by
Generex’s security holders during the year ended July 31, 2010.
Audit
Committee
Generex
has a separately-designated standing Audit Committee, which was established on
March 1, 2000 in accordance with Section 3(a)(58)(a) of the Exchange Act. Since
May 29, 2007, the members of the Audit Committee have included Mr. McGee, who
serves as chairman, Mr. Barratt and Ms. Masterson.
Audit
Committee Financial Expert
Our Board
of Directors has determined that at least one person serving on the Audit
Committee is an "audit committee financial expert" as defined under Item
407(d)(5)(ii) of Regulation S-K. Mr. McGee, a member of the Audit Committee and
its chairman, an “audit committee financial expert” and is “independent,” as
these terms are defined under applicable SEC and NASDAQ rules.
Compensation
Policies and Practices Related to Risk Management
Management
has conducted a risk assessment of Generex's compensation policies and practices
relating to executive and non-executive employees. Management has
concluded that Generex’s compensation policies and practices do not create risks
that are reasonably likely to have a material adverse effect on the company. The
Compensation Committee has reviewed and concurred with management's conclusion.
In assessing risk, management reviewed, among other things:
i) all
key incentive compensation plans to ensure that they are aligned with our
compensation philosophy which aims to:
a) motivate
executives and employees to achieve our business objectives,
b) align
employee and shareholder interests,
c) recognize
individual contributions and overall business success, and
d) ensure
that compensation policies include performance metrics that meet and support
corporate goals.
ii) the
overall compensation mix to ensure an appropriate balance between fixed and
variable pay components and between short-term and long-term
incentives.
5
The
objective of the process was to identify any compensation plans and practices
that may encourage employees to take unnecessary risk that could threaten the
company. Management identified no such plans or
practices.
Compensation,
Discussion & Analysis
Compensation
Philosophy
We are a
development stage company focused on research, development, and
commercialization of our proprietary drug delivery platform for administration
of large molecule drugs to the oral cavity through a hand-held aerosol spray
applicator. We are in the process of developing proprietary
formulations of drugs that can be delivered through an oral spray thereby
eliminating the need for injections and have focused on our Oral-lyn™ insulin
formation which is administered as a spray into the oral cavity. We
also have a subsidiary, Antigen Express, which focuses on developing proprietary
immunomedicines.
As a
development stage company, our future depends on the ability of our executives
to obtain necessary regulatory approvals to launch Oral-lyn™ in key markets such
as the United States, Canada, and Europe, as well as furthering the development
of other products in our pipeline through the clinical trial and regulatory
process. Attracting, retaining, and motivating key executives that
can lead Generex through this process is critical to our success. We
have a small executive team that works together closely. Our
executives perform multiple roles and need to be able to respond to changing
market dynamics quickly.
For these
reasons, we seek to ensure that our compensation programs are competitive with
similarly-sized companies with which we compete for executive
talent. The goals of our executive compensation program are to
attract and retain top executives, to motivate executives to achieve our
business objectives, to align executive and shareholder interests, and to
recognize individual contributions and overall business success.
During
the fiscal year ended July 31, 2010, the Compensation Committee of the Board of
Directors evaluated the types and amounts of compensation that it believed were
appropriate for our President and Chief Executive Officer, our Chief Operating
Officer, Chief Financial Officer, Treasurer and Secretary, and our Executive
Vice President and General Counsel, who are considered Generex’s policy making
executives and who are listed in the Summary Compensation Table on page 11. We
refer herein to these executives as the “named executives.” Prior to
her departure, Ms. Gluskin, who served as our President and Chief Executive
Officer, typically presented the Compensation Committee with her recommendations
regarding salaries, bonuses and long term incentives for members of the
executive management team and support for such recommendations, such as
milestones reached, company performance against both operating and financial
plans, and comparable compensation data of “peer” industry
companies.
In
addition to the compensation of our named executives, the Compensation Committee
also reviews and approves compensation of members of our senior management,
including our Vice President, Medical Affairs, our Vice President, Finance and
our Controller.
The Board
of Directors appointed the current members of the Compensation Committee on May
28, 2008 following the Annual Meeting of the Stockholders. All three
current members served throughout fiscal 2010. During fiscal 2010,
the Compensation Committee convened five times to evaluate and discuss
compensation for the named executives with respect to the fiscal years ended
July 31, 2010 and the calendar year ended December 31, 2010.
Historically,
the key components of our executive compensation have been base salary, cash
bonuses, and equity incentives, including stock bonuses, restricted stock, and
stock options awarded at the discretion of our Compensation Committee and Board
of Directors. As a development stage company, we have reviewed
compensation of our named executives from time to time and at the discretion of
the Compensation Committee when warranted by our financial condition and
achievement of our business goals. While the elements of compensation
are considered separately, the Compensation Committee ultimately considers the
value of the total compensation package provided to the individual named
executive.
The
Compensation Committee believes the company’s compensation program must take
into account the following factors:
• past
levels of compensation adjustments;
|
•
|
the
expected transition of the company from a development stage company to an
operating company;
|
|
•
|
the
nature of the regulatory approval process for the company’s products;
and
|
• the
potential for growth of the company in the event that regulatory approvals are
obtained.
In fiscal
2010, the Compensation Committee reviewed and implemented changes in base
salaries for certain of the named executives for the 2010 calendar year, awarded
certain of the named executives cash bonuses relating to fiscal 2009 based upon
a blend of the company’s and individual executive's performance and the
discretion of the Compensation Committee, and awarded equity incentive awards to
the named executives primarily for long-term retention purposes. The
Compensation Committee has not made any determinations as to bonuses or equity
awards for the named executives with respect to performance or contributions in
the fiscal year ended July 31, 2010, but the Compensation Committee expects to
consider the matter in the future.
6
In
administering the executive compensation program, our Compensation Committee has
relied upon market data provided on a periodic basis by external consultants, as
well as its own understanding and assessment of executive compensation
trends. In its consideration of compensation for the named
executives, the Compensation Committee has reviewed compensation data for
pharmaceutical and biotechnology companies, market data provided by external
compensation consultants, compensation data compiled by a third-party
compensation data firm and publicly available executive compensation data for
publicly traded companies.
Use
of Compensation Consultant and Benchmarking
In
November 2009, the Compensation Committee undertook a comprehensive review of
compensation for the named executives. As part of the review the
Compensation Committee engaged a compensation consultant, J. Thelander
Consulting. A significant portion of the consultant’s review
consisted of benchmarking Generex’s named executive compensation against similar
positions at public companies in the biotechnology and pharmaceutical
industry. The list of companies considered primarily had market
capitalizations between $80 and $160 million which was considered comparable to
Generex’s market capitalization. In addition, one other company was
considered which had a market capitalization in excess of $1 billion, as it had
been considered in past compensation studies and as its primary product is
somewhat similar to Generex’s Oral-lyn™, in that it is also a drug delivery
system for insulin. The companies considered in the consultant’s
report included the following:
Market capitalization
between $80 and $160 million
|
·
|
ArQule
(ARQL)
|
|
·
|
Progenix
Pharmaceuticals, Inc. (PGNX)
|
|
·
|
Idenix
Pharmaceuticals, Inc. (IDIX)
|
|
·
|
Discovery
Laboratories, Inc. (DSCO)
|
|
·
|
Ideera
Pharmaceuticals, Inc. (IDRA)
|
Market capitalization
greater than $1 billion
|
·
|
Mannkind
(MNKD)
|
The
consultant’s report concluded that base salaries for the named executives were
at or above average compared to the benchmarked companies, while bonus targets,
equity incentive compensation and overall total compensation (i.e. base salary,
bonuses and equity compensation combined) were below average. While
the Compensation Committee reviewed and considered the consultant’s report, the
Compensation Committee members exercised discretion and formulated their own
conclusions when the Committee determined the compensation components discussed
below.
Determination
of Compensation
The
Compensation Committee typically makes compensation determinations, including
any increases in base salary for the next calendar year and any bonuses in
respect of the prior fiscal year, before or during the first calendar quarter of
each year. The Compensation Committee follows such a schedule in
order to eliminate the need to award retroactive salary increases. In
addition, the Compensation Committee intends to review compensation arrangements
in the first calendar quarter to ensure that compensation levels are appropriate
in light of Generex’s financial position and performance at that
time.
In
considering bonuses in respect of fiscal year 2009 and base compensation for
calendar year 2010, in addition to the compensation consultant’s report, the
Compensation Committee reviewed publicly available executive compensation
information for Generex’s peer companies, executive compensation information as
reported in biotechnology and pharmaceutical industry publications, unique
aspects of each executive’s roles within Generex, including multiple roles
performed by each named executive, as well as contribution and performance of
individual named executives towards achievement of overall company performance,
and alignment with shareholder expectations.
Components
of Compensation
Base
Salary
Base
salary provides a fixed amount of compensation necessary to attract and retain
key executives. It is guaranteed compensation to the named executives for
performance of core duties. Base salaries for the named executives
may be adjusted upon recommendation by the Compensation Committee and
ratification by the Board of Directors. Historically, annual base
salaries for the named executives have been reviewed periodically relative to
the base pay levels for each executive’s position based on the peer
group. The Compensation Committee undertook such a review in November
2009. Levels of base salary are generally targeted at the market’s
second quartile (51% – 75%), but also reflect the compensation goals adopted by
the Compensation Committee, operational goals determined by management, the
named executive’s individual performance, contribution of the named executive to
overall corporate performance, and the level of responsibility of the named
executive with respect to his or her specific position. The level of
base salary also reflects multiple titles and additional responsibilities of the
named executives driven by the operational needs of the company.
7
In March
2010, the Compensation Committee recommended, and the Board of Directors
approved a base salary adjustment of 3.17% for our Executive Vice President and
General Counsel from $315,000 to $325,000 to be effective as of January 1,
2010. Based on the comparison to peer companies prepared by the
compensation consultant, the Compensation Committee found that Mr. Fletcher’s
previous base salary was appropriate, but considered this increase appropriate
relative to increases in the cost of living. The Compensation
Committee determined that no change in base salary for our President and Chief
Executive Officer and our Chief Operating Officer/Chief Financial
Officer/Treasurer and Secretary was warranted.
Salary
adjustments for all the named executives were last made to base salary
compensation in May 2008, which were made effective retroactive to January 1,
2008. No salary adjustments were made in calendar year
2009. In determining the levels of the base salary adjustments for
the named executives, if any, the Compensation Committee considered the
achievement of certain performance goals by the named executives, including
those considered in connection with the award of cash bonuses and enumerated
below.
Cash
Bonuses
Performance-based
compensation is a key component of our compensation
philosophy. Historically, cash bonuses have been provided to attract,
motivate, and retain highly qualified executives on a competitive basis and
provide financial incentives that promote company success. From time to time in
the past, the Compensation Committee has granted bonuses to reward achievement
relative to specific performance objectives. In awarding bonuses, the
Compensation Committee considers various factors, including the named
executive’s position within Generex, attainment of specific business objectives
and performance milestones, and the named executive’s individual contributions
thereto. The Committee exercises discretion with respect to the
weight that it gives to these and other factors in determining
bonuses. The Compensation Committee also retains discretion with
respect to whether any bonuses are paid to the named executives, the amounts of
any such bonuses, and the form of any such bonuses.
In March
2010, the Compensation Committee recommended, and the full Board approved, a
one-time cash bonus for our Executive Vice President and General Counsel based
on his individual performance and contributions during fiscal 2009 in the amount
of $225,000, which amount was payable on or before April 30, 2010. In
recommending this bonus, the Compensation Committee considered Mr. Fletcher’s
pivotal role with respect to negotiations with our convertible debenture holders
in restructuring and settling these debentures, as well as his role in our
subsequent equity financings following the retirement of the
debentures. The Compensation Committee determined that neither the
President and Chief Executive Officer nor the Chief Operating Officer/Chief
Financial Officer/Treasurer and Secretary were entitled to a bonus for fiscal
2009 in light of our financial condition and failure to achieve our business
goals for fiscal 2009.
Long-Term
Incentives and Equity Awards
Our
compensation program also includes long-term incentive compensation in the form
of equity grants subject to a vesting schedule. We believe such
incentive compensation further aligns the interests of management with those of
stockholders and enhances shareholder value. Currently, we do not
have any long-term cash incentive programs in place for the named
executives.
Long-term
equity incentive grants are discretionary. In determining whether
such grants are warranted, the Compensation Committee considers our compensation
strategy, market practice concerning long-term incentives provided to executives
at peer companies and within the broader market, and the named executive’s
specific roles within Generex. At the present, equity incentive
awards are subject to vesting over a period of time and are not tied to specific
performance measures.
Equity
grants have historically been made through stock options under our various
plans, including Generex’s 2000 Stock Option Plan, 2001 Stock Option Plan, as
amended, and Amended and Restated 2006 Stock Plan, which also allows grants of
restricted stock. We consider the costs to the company of granting
stock options under Statement of Financial Accounting Standard (SFAS) 123(R) as
compared to the costs to named executives of higher income tax liabilities
associated with the granting of restricted stock.
In March
2010, the Compensation Committed recommended, and the full Board of Directors
approved, the following discretionary awards of options to purchase shares of
our common stock:
Named Executive
|
No. of Shares Underlying
Options
|
|
Ms.
Gluskin
|
500,000
|
|
Ms.
Perri
|
400,000
|
|
Mr.
Fletcher
|
300,000
|
8
The
awards were made pursuant to the 2006 Stock Plan. The stock options
have an exercise price equal to the closing trading price of our common stock on
the NASDAQ Capital Market on the date of grant ($0.64 per share). The
options have a ten-year term, subject to truncation upon cessation of employment
as specified in the 2006 Stock Plan. The options becomes exercisable
in three installments, with the first installment exercisable as of the date of
grant, the second installment exercisable as of August 1, 2010 and the third
installment exercisable as of August 1, 2011.
The
Compensation Committee recommended these option grants as long-term equity
incentives for the purposes of executive retention and motivation to achieve our
business objectives and increase shareholder value. In determining
the amounts of the stock option awards, the Compensation Committee relied
partially on the consultant’s recommendations which indicated that Generex’s
equity compensation was below market as compared to the peer companies included
in the consultant’s report and partially on the discretion of the Compensation
Committee. Stock option awards were made on a roughly proportionate
basis to each named executive’s base salary. The value of the options
granted to the named executives was approximately 50% to 75% higher than the
recommended annual grants in the consultant’s report. The
Compensation Committee concluded that larger grants were appropriate because
Generex had not granted Mr. Fletcher new stock options since 2005 and had not
granted Ms. Gluskin or Ms. Perri new stock options since 2008.
On
October 20, 2009, the Compensation Committee recommended and the Board of
Directors approved the extension of the term of certain previously granted
options to purchase shares of our common stock. The term of such
options was extended through October 26, 2014. The terms of options
held by the named executive officers were extended as set forth in the table
below:
Named Executive Officer
|
No. of Shares of
Common Stock
Underlying Option
|
Exercise
Price per Share
|
Grant Date
|
Original Expiration
Date
|
Extended
Expiration Date
|
|||||||||
Ms.
Gluskin
|
250,000 | $ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
||||||||
1,120,704 | $ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
|||||||||
Ms.
Perri
|
250,000 | $ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
||||||||
576,752 | $ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
|||||||||
Mr.
Fletcher
|
250,000 | $ | 0.61 |
12/13/04
|
12/12/09
|
10/26/14
|
||||||||
470,726 | $ | 0.001 |
4/5/05
|
4/5/10
|
10/26/14
|
The
options set forth in the table above were originally issued pursuant to the
Generex Biotechnology Corporation Amended 2001 Stock Option Plan, which permits
the amendment of the terms of any previously option issued thereunder. The
extension of these options was done in conjunction with an extension of a number
of similar employee and director stock options, which were also due to expire
shortly after the extension date. As the options had been granted
primarily for long term incentive and retention purposes, the Compensation
Committee concluded that the extension of these options would continue to
provide future benefit to the company in terms of incentive and retention, as
well as the achievement of corporate goals. The stock option expense
cost to the company was less to extend these options, than to cancel and issue
new options. The stock options granted to the named executives on
April 5, 2005 with an exercise price of $0.001per share had been granted at that
time in lieu of cash payments. The Compensation Committee recommended
extension of the options granted on April 5, 2005 at the same time as the
extension of the “at market” stock options for the named executives, directors
and employees.
Benefits
and Perquisites
Named
executives may participate in benefit plans that are offered generally to
salaried employees such as short and long term disability, health and welfare
benefits, and paid time off.
We
provide very limited perquisites. During fiscal 2010, we provided our
President and Chief Executive Officer and our Chief Operating Officer and
Chief Financial Officer a car allowance with an estimated value of $800 per
month to compensate use of their cars for business purposes.
We do not
offer: deferred compensation plans, defined benefit plans, supplemental
executive retirement plans, supplemental life insurance, benefit restoration
plans, or tax gross-ups on change-in-control benefits.
On
December 9, 2005, the Board of Directors approved a one-time recompense payment
in the aggregate amount of $1,000,000 for each of Ms. Gluskin and Ms. Perri in
recognition of Generex’s failure to remunerate each of Ms. Gluskin and Ms. Perri
in each of the fiscal years ended July 31, 1998, 1999, 2000 and 2001 in a fair
and reasonable manner commensurate with comparable industry standards and the
duties, responsibilities and performance of Ms. Gluskin and Ms. Perri’s during
those years. Such amounts were payable (i) in cash at such time or times and in
such amounts as determined solely by Ms. Gluskin or Ms. Perri, as applicable,
and/or (ii) in shares of Generex’s common stock at such time or such times as
determined by Ms. Gluskin or Ms. Perri, as applicable, provided that the
conversion price for any such shares was equal to the average closing price of
Generex’s common stock ($0.95) on the NASDAQ Capital Market for the 20
successive trading days immediately preceding, but not including, December 9,
2005. No interest or other earnings were accrued on these
amounts. During fiscal 2010, Ms. Gluskin and Ms. Perri elected to
receive payment in cash for the outstanding balances payable as of July 31, 2009
in the amounts of $911,433 and $584,172, respectively. These amounts
were paid in cash as the Company had sufficient funds to pay out these amounts
and the amounts did not meet the criteria above for payment in
shares.
9
Employment
and Severance Agreements
During
fiscal 2010, we had terms of employment covering our named executives as
described in “Employment Agreements and Potential Payments Upon Termination or
Change-In-Control” clarifying terms and conditions of their employment. These
terms provide clarity concerning the employment relationship and provide a
competitive benefit level to executives, thus promoting stability among the
executive team.
We have
agreed to provide severance benefits to the named executives as set forth in the
terms of their employment. The intent of such severance is to provide
the named executives with financial security in the event of a covered
termination (including change in control) and to thus support executive
retention. To be eligible for certain benefits, including cash
payments, under these arrangements, a named executive must experience a covered
termination, which may include a change in control, a material reduction in
executive compensation, a material change in duties, or a material breach in the
agreement by Generex, The benefits payable to our named executives upon a change
in control of Generex require two conditions, or “double triggers,” to be
satisfied: the change in control must occur, and the named
executive’s employment must be terminated, voluntarily or involuntarily, as a
result of such event. Under the terms of employment, our President
and Chief Executive Officer and our Chief Operating Officer and Chief Financial
Officer would receive cash and stock in the event of a change in control only if
each terminated her employment with Generex upon thirty days notice in
connection with such event. Under the terms of his employment
arrangement, Mr. Fletcher will receive a benefit upon a change in control only
if he terminates his employment in connection with such event.
As of the
end of fiscal 2010, each of the named executive officers held stock options or
restricted stock granted pursuant to the 2001 Stock Option Plan and the 2006
Stock Plan. The 2001 Plan provides that outstanding options will
become immediately exercisable and vested upon a change in control, unless the
Board of Directors or its designee determines otherwise. In the event
that Generex will not be the surviving corporation, the Board or its designee
has flexibility under the 2001 Plan to determine how to treat stock
options. The 2001 Plan does not condition the acceleration and
vesting of stock options in such an event upon an option holder’s termination of
employment; however, the terms of the 2001 Plan provide that, unless otherwise
provided by the Board or its designee, an option holder can exercise outstanding
options after the date of his or her termination of employment only if the
option holder voluntarily terminated employment with Generex or was terminated
without cause by Generex. Under the terms of the 2006 Plan, unvested
stock options and restricted stock will become exercisable or unrestricted, as
applicable, thirty days prior to the change-in-control event and such
acceleration is not conditioned upon the termination of a participant’s
employment with Generex. The 2006 Plan further provides that if
Generex is not the surviving corporation as a result of a change in control, all
outstanding options that are not exercised will be assumed by, or replaced with
comparable options or rights by, the surviving corporation, and outstanding
grants of restricted stock will be converted to similar grants of equity in the
surviving corporation.
Tax
and Accounting Considerations
The
Compensation Committee considers implications of tax and accounting requirements
impacting compensation programs from the perspective of the company and the
individual named executive officers. The Compensation Committee may
also consider sections of the tax code which impact Generex or individual
taxpayers. For U.S. taxpayers, the Committee structures its programs
to comply with Section 409A of the Internal Revenue Code.
The
extension of expiry dates of the named executive stock options in October 2009,
as described above, resulted in a one-time charge to earnings in the amount of
$358,257 in the first quarter of fiscal 2010. There was a total
charge to earnings in this quarter of $875,773 relating to stock option expiry
date modifications, of which the balance related to employee, director and
consultant options. As the Company is currently in a significant tax
loss position, there were no material impacts to the Company’s income taxes due
to these option modifications.
Given
the high individual income tax liabilities which result from the awarding of
restricted stock to our executives whom are all tax residents of Canada, the
Compensation Committee expects to grant future equity awards in the form of
stock options for the foreseeable future.
Compensation
Committee Report
The
Compensation Committee of Generex Biotechnology Corporation has reviewed and
discussed the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K with management and, based on such review and discussions, the
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in Generex’s Annual Report on
Form 10-K for the year ended July 31, 2010 and in Generex’s 2011 Proxy
Statement.
10
THE
COMPENSATION COMMITTEE
John P.
Barratt, Chairman
Nola E.
Masterson
Brian T.
McGee
Executive
Compensation Tables
The
following executive compensation tables pertain to the fiscal year ended July
31, 2010. Therefore, the tables contain information relating to the
named executives who served as of the fiscal year end and refer to the positions
held by such named executives as of July 31, 2010. On September 29,
2010, the Board of Directors terminated Mrs. Gluskin in her employment as
President and Chief Executive and appointed Mark A. Fletcher as interim
President and Chief Executive Officer and Secretary. On that date,
the Board also appointed John P. Barratt as Chairman of the Board.
Summary
Compensation Table
The
following table provides information concerning compensation of Generex’s named
executives for Generex’s last three completed fiscal years ending July 31, 2008,
2009 and 2010. In respect of fiscal years 2008, 2009 and 2010, the
named executives did not receive compensation in the form of non-equity
incentive plan compensation or changes in pension value or non-qualified
deferred compensation earnings. Therefore, the table below does not include
columns for these types of compensation.
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||
Anna
E. Gluskin
|
2010
|
$ | 525,000 | 0 | 0 | $ | 324,468 | (4) | $ | 27,846 | (6) | $ | 877,314 | |||||||||||||
President
and
|
2009
|
$ | 525,000 | 0 | $ | 37,750 | (3) | $ | 9,219 | (4) | $ | 23,991 | (6) | $ | 595,960 | |||||||||||
Chief
Executive Officer
|
2008
|
$ | 514,583 | (1) | $ | 215,000 | (2) | $ | 113,250 | (3) | $ | 17,516 | (4) | $ | 288,775 | (5),(6) | $ | 1,149,124 | ||||||||
Rose
C. Perri
|
2010
|
$ | 420,000 | 0 | 0 | $ | 284,739 | (4) | $ | 27,846 | (6) | $ | 732,585 | |||||||||||||
Chief
Operating Officer,
|
2009
|
$ | 420,000 | 0 | $ | 33,031 | (3) | $ | 24,583 | (4) | $ | 23,991 | (6) | $ | 501,605 | |||||||||||
Chief
Financial Officer, Treasurer
and Secretary
|
2008
|
$ | 411,667 | (7) | $ | 165,000 | (2) | $ | 99,094 | (3) | $ | 41,484 | (4) | $ | 256,083 | (5),(6) | $ | 973,328 | ||||||||
Mark
A. Fletcher
|
2010
|
$ | 320,833 | (8) | $ | 225,000 | 0 | $ | 233,970 | (4) | 0 | $ | 779,803 | |||||||||||||
Executive
Vice President
|
2009
|
$ | 315,000 | 0 | $ | 18,875 | (3) | 0 | 0 | $ | 333,875 | |||||||||||||||
And
General Counsel
|
2008
|
$ | 308,750 | (9) | $ | 125,000 | (2) | $ | 56,625 | (3) | $ | 0 | $ | 228,846 | (5) | $ | 719,221 |
*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 average Canadian/U.S. dollar exchange rate for the years
ended July 31, 2010, July 31, 2009 and July 31, 2008.
(1) This
amount reflects the base salary of $500,000 earned by the named executive up
until December 31, 2008 and a salary increase to $525,000 effective
retroactively to January 1, 2009, as approved by the Board on May 6,
2008.
(2) On
May 6, 2008, the Board awarded this discretionary bonus to Ms. Gluskin, Ms.
Perri and Mr. Fletcher in respect of fiscal 2007. Due to the timing of the
Board’s decision, this bonus is reported as compensation received in fiscal
2008.
(3) This
amount represents the aggregate grant date fair value computed in accordance
with FASB ASC Topic 718 with respect to the fiscal years ended July 31, 2010,
2009 and 2008 for restricted stock awards granted in August 2007, a portion of
which was in respect of fiscal 2007 and was immediately vested. The fair value
is calculated using the closing price of Generex stock on the date of grant. For
additional information, refer to Note 15 to our Consolidated Financial
Statements included in the Form 10-K for the year ended July 31, 2010 as filed
with the SEC. This amount reflects our accounting expense for these awards, and
does not correspond to the actual value that will be recognized by the named
executives.
(4) This
amount reflects the aggregate grant date fair value computed in accordance with
FASB ASC Topic 718 for option awards granted in May 2008 and March 2010. Such
awards were made pursuant to the 2006 Stock Plan. Specifically, amounts
reflected in this column relate to options to purchase shares of common stock
granted to Ms. Gluskin (50,000 shares) and Ms. Perri (125,000 shares) on May 27,
2008 and options to purchase shares of common stock granted to Ms. Gluskin
(500,000 shares), Ms. Perri (400,000 shares) and Mr. Fletcher (300,000 shares)
on March 8, 2010. The options vest incrementally over two years. The
total fair values of the respective option grants are being expensed over the
two-year vesting periods for the options. We utilize a closed-form model
(Black-Scholes) to estimate the fair value of stock option grants on the date of
grant. Assumptions used in the calculation of these amounts are as follows:
risk-free interest rate of 0.12%, expected dividend yield of 0.0%, 10 year
expected life of options and expected volatility rate of 105.7%. Also included
in this column is the incremental fair value, computed as of October 20, 2009 in
accordance with FASB ASC Topic 718, with respect to the modified
options. While these amounts reflect the aggregate grant date fair
value computed in accordance with ASC Topic 718, they may not correspond to the
actual value that will be recognized by the option holders. See Grants of Plan-Based Awards in
Fiscal 2010 for a list of the options for which the expiration dates were
extended.
(5) This
amount includes cash payments to each of the following named executives: Ms.
Gluskin - $261,538 (CAD $281,101), Ms. Perri - $228,846 (CAD $245,963) and Mr.
Fletcher - $228,846 (CAD $245,963). On May 6, 2008, the Board approved such
payments to these named executives to compensate them for income tax liabilities
incurred in respect of the restricted stock awards granted in August 2007. These
amounts were converted at the exchange rate of US $1.00 to CAD $1.0748, which
represented the market exchange rate on the date of the grant.
(6)
Represent 50% of the management fee paid to the property management company that
manages all of our real estate properties and is owned by Ms. Perri, Ms. Gluskin
and the estate of Mark Perri, our former Chairman of the Board. In addition, Ms.
Gluskin and Ms. Perri each received a car allowance with an estimated value of
$800 per month to compensate use of their cars for business purposes, but such
amounts have not been included in this column as the total value of such
perquisites is less than $10,000 per named executive for fiscal year 2010, 2009
and 2008..
11
(7) This
amount reflects the base salary of $400,000 earned by the named executive up
until December 31, 2008 and a salary increase to $420,000 effective
retroactively to January 1, 2009, as approved by the Board on May 6,
2008.
(8) This
amount reflects a base salary of $315,000 earned by the named executive up until
December 31, 2010 and a salary increase to $325,000 effective retroactively to
January 1, 2010, as approved by the Board on March 8, 2010.
(9) This
amount reflects a base salary of $300,000 earned by the named executive up until
December 31, 2008 and a salary increase to $315,000 effective retroactively to
January 1, 2009, as approved by the Board on May 6, 2008.
Grants
of Plan-Based Awards in Fiscal 2010
The
following table provides information about equity awards granted to the named
executives or modified in the fiscal year ended July 31, 2010, including: (1)
the grant date; (2) the number of shares underlying stock options awarded to the
named executives, (3) the number of shares underlying existing stock options the
terms of which were extended, (4) the exercise price of the stock options
awarded or extended, and (5) the grant date fair value of each equity award
computed under SFAS 123R.
Name
|
Grant Date
|
All Other Option
Awards: Number of
Securities Underlying
Options (#)
|
Exercise Price or
Base Price of
Option Awards
($/Sh)
|
Grant Date Fair
Value of Stock and
Option Awards
|
||||||||||
Anna
E. Gluskin
|
12/13/2004
(1)
|
250,000 | $ | 0.61 | (2) | $ | 0.41 | (3) | ||||||
President
and
|
4/5/2005
(4)
|
819,672 | (5) | $ | 0.001 | $ | 0 | (3) | ||||||
Chief
Executive Officer
|
4/5/2005
(4)
|
301,032 | (6) | $ | 0.001 | $ | 0 | (3) | ||||||
03/08/2010
|
500,000 | (7) | $ | 0.64 | (8) | $ | 0.58 | (9) | ||||||
Rose
C. Perri
|
12/13/2004 (1)
|
250,000 | $ | 0.61 | (2) | $ | 0.41 | (3) | ||||||
Chief
Operating Officer, Chief
|
4/5/2005
(4)
|
409,836 | (10) | $ | 0.001 | $ | 0 | (3) | ||||||
Financial
Officer, Treasurer &
|
4/5/2005
(4)
|
166,916 | (11) | $ | 0.001 | $ | 0 | (3) | ||||||
Secretary
|
03/08/2010
|
400,000 | (7) | $ | 0.64 | (8) | $ | 0.58 | (9) | |||||
Mark
A. Fletcher
|
12/13/2004
(1)
|
250,000 | $ | 0.61 | (2) | $ | 0.41 | (3) | ||||||
Executive
Vice President
|
4/5/2005
(4)
|
327,869 | (12) | $ | 0.001 | $ | 0 | (3) | ||||||
and
General Counsel
|
4/5/2005
(4)
|
142,857 | (13) | $ | 0.001 | $ | 0 | (3) | ||||||
03/08/2010
|
300,000 | (7) | $ | 0.64 | (8) | $ | 0.58 | (9) |
(1) On
October 20, 2009, the Board of Directors approved the extension of the exercise
periods for such stock options. By their original terms, the options were due to
expire on December 12, 2009. The Board of Directors approved the extension of
the exercise periods for the options through October 26, 2014.
(2) The
options have an exercise price of $0.61 which is equal to the closing trading
price of our common stock on December 13, 2004, the date of grant.
(3) This
column shows the incremental fair value of the stock options following the
extension of the exercise period computed as of the modification date in
accordance with SFAS 123R.
(4) On
October 20, 2009, the Board of Directors approved the extension of the exercise
periods for such stock options. By their original terms, the options were due to
expire on April 5, 2010. The Board of Directors approved the extension of the
exercise periods for the options through October 26, 2014.
(5) The
options to purchase 819,672 shares were granted to Ms. Gluskin representing a
bonus of $500,000 awarded on April 5, 2005 with the number of shares calculated
using the closing price of the common stock on The NASDAQ Capital Market on
December 13, 2004 ($0.61 per share).
(6) The
options to purchase 301,032 shares were issued to Ms. Gluskin on April 5, 2005
in satisfaction of retroactive salary adjustment as of August 1, 2004 and unpaid
salary amounts accrued through March 31, 2005 ($168,578), with the number of
shares calculated using the closing price of the common stock on the NASDAQ
Capital Market on April 4, 2005 ($0.56 per share).
(7) The
options were granted on March 8, 2010 pursuant to the terms of our 2006 Stock
Plan. The options vest as follows: 1/3 of the options are exercisable on the
date of grant; 1/3 of the options become exercisable on August 1, 2010, and 1/3
of the options become exercisable on August 1, 2011.
(8) The
options have an exercise price equal to the official closing price of our common
stock on the NASDAQ Capital Market on the date of grant ($0.64 per
share).
(9) This
column shows fair value of the options calculated using the Black Scholes value
on the grant date of $0.58. See note 4 of the Summary Compensation Table for a
discussion of fair value calculation related to the options and the valuation
assumptions made with respect to the options.
(10) The
options to purchase 409,836 shares were granted to Ms. Perri representing a
bonus of $250,000 awarded on April 5, 2005, with the number of shares calculated
using the closing price of the common stock on The NASDAQ Capital Market on
December 13, 2004 ($0.61 per share).
(11) The
options to purchase 166,916 shares were issued to Ms. Perri on April 5, 2005 in
satisfaction of retroactive salary adjustment as of August 1, 2004 and unpaid
salary amounts accrued through March 31, 2005 ($93,473), with the number of
shares calculated using the closing price of the common stock on the NASDAQ
Capital Market on April 4, 2005 ($0.56 per share).
12
(12) The
options to purchase 327,869 shares were granted to Mr. Fletcher representing a
bonus of $200,000 awarded on April 5, 2005, with the number of shares awarded
calculated using the closing price of the common stock on The NASDAQ Capital
Market on December 13, 2004 ($0.61 per share).
(13) The
options to purchase 142,857 shares were issued to Mr. Fletcher on April 5, 2005
in satisfaction of retroactive salary adjustment as of August 1, 2004 and unpaid
salary amounts accrued through March 31, 2005 ($80,000), with the number of
shares calculated using the closing price of the common stock on the NASDAQ
Capital Market on April 4, 2005 ($0.56 per share).
Compensation
Elements; Employment Agreements and Agreements Providing Payments Upon
Retirement, Termination or Change in Control for Named Executives
Historically,
the key components of our executive compensation have been base salary, cash
bonuses, and equity incentives, including stock bonuses, restricted stock, and
stock options awarded at the discretion of our Compensation Committee and Board
of Directors. As a development stage company, we have reviewed compensation of
our executive management team from time to time and at the discretion of the
Compensation Committee when warranted by our financial condition and achievement
of our business goals.
Set forth
below are the material terms of employment for each of the named executives as
of the end of fiscal 2010. The terms of employment provide for
certain payments upon retirement, termination or change in
control. Such benefits are in addition to benefits available
generally to salaried employees who joined the company prior to 2010, such as
distributions under the 401(k) savings plan, disability and death benefits and
accrued vacation pay.
Terms
of Employment for Ms. Gluskin and Ms. Perri
On
December 9, 2005, upon the recommendation of a majority of the members of the
Compensation Committee, the Board of Directors approved the terms and conditions
of employment for Ms. Gluskin as President and Chief Executive Officer and Ms.
Perri as Chief Financial Officer and Chief Operating Officer. Prior to such
date, Ms. Gluskin and Ms. Perri served in such capacities without formal
employment terms. The terms of employment with Ms. Gluskin and Ms. Perri have
not been memorialized in separate written agreements. The material terms of
Generex’s employment of each of Ms. Gluskin and Ms. Perri are identical except
as otherwise noted and are as follows:
|
·
|
Each
named executive’s employment is effective as of January 1, 2006. The
initial term of employment is five years, subject to the termination
provisions described below. Generex or either executive may give notice of
non-renewal not less than six months prior to the expiration of the term.
If no such notice is given, the term of employment will extend
indefinitely and will be terminable upon not less than six months’ prior
written notice.
|
|
·
|
The
named executive will be entitled to an annual bonus as determined by
Generex’s Compensation Committee in respect of each fiscal year of Generex
during the term of employment and reimbursement of all reasonable expenses
incurred by her in connection with Generex’s
business.
|
|
·
|
The
named executive will be included on any management slate of nominees
submitted to Generex’s stockholders for election to the Board of
Directors.
|
|
·
|
Standard
employee confidentiality, non-competition and non-solicitation covenants
will apply.
|
|
·
|
Each
named executive is entitled to receive an annual base salary under the
terms of her respective employment with Generex, which salary may not be
reduced during the term of such
employment.
|
|
·
|
Each
named executive’s employment may be
terminated:
|
|
(a)
|
by
Generex for cause (without any additional payment to the named
executive);
|
|
(b)
|
automatically
upon expiration of the term;
|
|
(c)
|
automatically
upon the named executive’s death or disability;
or
|
|
(d)
|
by
the named executive upon thirty days’ prior written notice if there is
a:
|
|
(i)
|
a
material change in duties (other than removal of the title of Chief
Financial Officer and the duties associated therewith in the case of Ms.
Perri),
|
|
(ii)
|
a
material reduction in the named executive’s
remuneration,
|
|
(iii)
|
a
material breach of the terms of employment by
Generex,
|
|
(iv)
|
a
change of control of Generex, or
|
|
(v)
|
a
sale of all or substantially all of the property and assets of
Generex.
|
In the
event of termination pursuant to clause (b) above as a result of Generex’s
notice of non-renewal or pursuant to clause (d) above, Generex will pay the
named executive an amount equal to the greater of:
13
|
(x)
|
an
amount equal to five times the named executive’s base annual salary as of
the date of termination, which amount will be payable in a lump sum on the
date of termination, or
|
|
(y)
|
$5,000,000,
$3,000,000 of which will be payable in a lump sum on the date of
termination and $2,000,000 of which will be payable in stock issuable
within three business days of the date of termination and valued at the
20-day volume weighted average price as of the close of business on the
date of termination.
|
In
addition, in such a termination event, the named executive will be entitled to
participate in and receive benefits for a period of twelve months following
termination and will have no duty to mitigate.
Terms
of Employment for Mr. Fletcher
On March
17, 2003, our Board of Directors approved the terms and conditions of Mr.
Fletcher’s employment, prior to his joining Generex on or about April 21, 2003.
Pursuant to the terms of his employment, Mr. Fletcher holds the position of
Executive Vice President and General Counsel. Subject to termination in
accordance with the terms and conditions of his employment, Mr. Fletcher's term
of service extends through March 16, 2008, which term has not been formally
extended to date. Mr. Fletcher is entitled to receive annual base compensation
and may receive additional cash bonuses at the discretion of the Board of
Directors.
On
September 29, 2010, Generex and Mr. Fletcher agreed to amend the terms of Mr.
Fletcher’s employment to provide that the replacement of Ms. Gluskin as a
director or Chief Executive Officer will not constitute a “change of control”
and to provide for an increase in Mr. Fletcher’s base salary (to $475,000) upon
his appointment as interim Chief Executive Officer. Under the terms
of his employment with Generex, Mr. Fletcher is entitled to receive annual base
compensation and may receive additional cash bonuses at the discretion of the
Board.
The terms
of his employment provide that Mr. Fletcher will be bound by standard
restrictive covenants prohibiting him from disclosing confidential information
about Generex. Either party may give at least 12 months’ notice of non-renewal
of the term; if such notice is not given, the term of employment will be
indefinite.
Generex
may terminate its obligations with respect to Mr. Fletcher’s employment as
follows:
|
(i)
|
upon
30 days written notice;
|
|
(ii)
|
for
“cause”;
|
|
(iii)
|
in
the event of Mr. Fletcher’s
disability;
|
|
(iv)
|
in
the event of Mr. Fletcher’s death;
or
|
|
(v)
|
in
the event of Mr. Fletcher voluntarily
resigning.
|
Mr.
Fletcher may terminate his obligations upon 30 days written notice
upon:
|
(a)
|
a
material change in his duties,
|
|
(b)
|
a
material reduction in compensation,
|
|
(c)
|
a
material breach or default by Generex,
or
|
|
(d)
|
a
change in control of Generex.
|
In the
event that Mr. Fletcher terminates his employment voluntarily (and not under the
circumstances described in (a), (b), (c) or (d) above) or Generex terminates his
employment under the circumstances described in (ii), (iii), (iv) or (v) above,
Mr. Fletcher will be entitled only to that portion of his base salary due and
owing as of his last day worked, less any amounts owed to Generex. Under these
circumstances, he will not be entitled to any bonus or incentive
compensation.
If
Generex terminates Mr. Fletcher’s employment under the circumstance described in
(i) above (and not for cause, disability or death) or Mr. Fletcher gives notice
of termination pursuant to (a), (b), (c) or (d) above, Mr. Fletcher will be
entitled to receive a lump sum severance payment on the termination date in an
amount equal to 18 months of base salary plus the average annual bonus paid
to him during each fiscal year of the term of his employment and he will be
entitled to participate in and receive benefits for 18 months after the
termination date. Mr. Fletcher will have 90 days after the eighteenth month
anniversary of the termination date to exercise vested options, and all unvested
options that he holds will accelerate and fully vest on the termination date. He
has no duty to mitigate his damages based on the termination of
employment.
Modification
of Existing Options
In
October 2009, the Board of Directors approved the extension of the exercise
periods for certain stock options held by the named executives. By
their original terms, these options were due to expire on either December 12,
2009 or April 5, 2010. The Board of Directors approved the extension
of the exercise periods for the options through October 26, 2014. The
extension of these options was done in conjunction with an extension of a number
of similar employee and director stock options which were also due to expire
shortly after the extension date. The modified options are identified
in the tables under the headings Grants of Plan-Based Awards in
Fiscal 2010 and Outstanding Equity Awards at 2010
Fiscal Year-End in this Part III-Item 11 – Executive
Compensation.
14
Outstanding
Equity Awards at 2010 Fiscal Year-End
The
following table provides information on the current holdings of stock option by
the named executives. This table includes unexercised and unvested option awards
as of July 31, 2010. Each equity grant is shown separately for each
named executive. The vesting schedule for each outstanding award is set forth in
the footnotes to the table. We do not have any current “stock awards” or “equity
incentive plans” as defined in Regulation S-K Item 402(a)(6)(iii); thus, the
columns relating to stock awards and equity incentive awards are not included in
the table below.
Option
Awards
|
|||||||||||||||||||
Name
|
Grant Date
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option Expiration
Date
|
||||||||||||||
Anna
E. Gluskin,
|
3-8-2010
|
333,333 | (1) | 166,667 | $ | 0.64 | 3-8-2020 | ||||||||||||
President
and Chief
|
12-13-2004
|
250,000 | (2) | 0 | $ | 0.61 | 10-26-2014 | ||||||||||||
Executive
Officer
|
4-5-2005
|
819,672 | (3) | 0 | $ | 0.001 | 10-26-2014 | ||||||||||||
4-5-2005
|
301,032 | (4) | 0 | $ | 0.001 | 10-26-2014 | |||||||||||||
5-27-2008
|
50,000 | (5) | 0 | $ | 0.96 | 5-27-2013 | |||||||||||||
Rose
C. Perri,
|
3-8-2010
|
266,666 | (1) | 133,334 | $ | 0.64 | 3-8-2020 | ||||||||||||
Chief
Operating Officer,
|
12-13-2004
|
250,000 | (2) | 0 | $ | 0.61 | 10-26-2014 | ||||||||||||
Chief
Financial Officer,
|
4-5-2005
|
409,836 | (6) | 0 | $ | 0.001 | 10-26-2014 | ||||||||||||
Treasurer
And Secretary
|
4-5-2005
|
166,916 | (7) | 0 | $ | 0.001 | 10-26-2014 | ||||||||||||
5-27-2008
|
125,000 | (5) | 0 | $ | 0.96 | 5-27-2013 | |||||||||||||
Mark
E. Fletcher,
|
3-8-2010
|
200,000 | (1) | 100,000 | $ | 0.64 | 3-8-2020 | ||||||||||||
Executive
Vice
|
12-13-2004
|
250,000 | (2) | 0 | $ | 0.61 | 10-26-2014 | ||||||||||||
President
|
4-5-2005
|
327,869 | (8) | 0 | $ | 0.001 | 10-26-2014 | ||||||||||||
and
General Counsel
|
4-5-2005
|
142,857 | (9) | 0 | $ | 0.001 | 10-26-2014 |
(1)These
options were granted on March 8, 2010. The grants were made pursuant to the
terms of our 2006 Stock Plan. The exercise price per share is equal to the
closing price of Generex common stock on March 8, 2010. The options vest as
follows: 33% of the options are exercisable on the date of grant; 33% of the
options become exercisable on August 1, 2010, and the remaining 33% of the
options become exercisable on August 1, 2011.
(2) These
stock options were approved by the Board of Directors on April 5, 2005 with an
effective grant date of December 13, 2004. The exercise price per share is equal
to the closing price of Generex common stock on December 13, 2004. These options
were exercisable immediately upon their grant. The fair value of Generex common
stock on April 5, 2005 was $0.56 per share.
(3) These
options were granted to Ms. Gluskin representing a bonus of $500,000 awarded to
Ms. Gluskin on April 5, 2005. The number of shares awarded was calculated using
the closing price of the common stock on The NASDAQ Capital Market on December
13, 2004 ($0.61 per share). The options were immediately exercisable on the date
of grant. They were issued under the 2001 Plan. The fair value of Generex common
stock on April 5, 2005 was $0.56 per share.
(4) These
options were issued to Ms. Gluskin on April 5, 2005 in satisfaction of
retroactive salary adjustment as of August 1, 2004 and unpaid salary amounts
accrued through March 31, 2005 ($168,578). The number of shares was calculated
using the closing price of the common stock on the NASDAQ Capital Market on
April 4, 2005 ($0.56 per share). The options were immediately exercisable on the
date of grant and were issued under the 2001 Plan.
(5) These
options were granted on May 27, 2008. The grants were made pursuant to the terms
of our 2006 Stock Plan. The options vest as follows: 50% of the options are
exercisable on the date of grant; 25% of the options become exercisable on the
first anniversary of the date of grant, and the remaining 25% of the options
become exercisable on the second anniversary of the date of grant.
(6) These
options were granted to Ms. Perri representing a bonus of $250,000 awarded to
Ms. Perri on April 5, 2005. The number of shares awarded was calculated using
the closing price of the common stock on The NASDAQ Capital Market on December
13, 2004 ($0.61 per share). The options were immediately exercisable on the date
of grant. They were issued under the 2001 Plan.
(7) These
options were issued to Ms. Perri on April 5, 2005 in satisfaction of retroactive
salary adjustment as of August 1, 2004 and unpaid salary amounts accrued through
March 31, 2005 ($93,473). The number of shares was calculated using the closing
price of the common stock on the NASDAQ Capital Market on April 4, 2005 ($0.56
per share). The options were immediately exercisable on the date of grant and
were issued under the 2001 Plan.
15
(8) These
options were granted to Mr. Fletcher representing a bonus of $200,000 awarded to
Mr. Fletcher on April 5, 2005. The number of shares awarded was calculated using
the closing price of the common stock on The NASDAQ Capital Market on December
13, 2004 ($0.61 per share). The options were immediately exercisable on the date
of grant. They were issued under the 2001 Plan. The fair value of Generex common
stock on April 5, 2005 was $0.56 per share.
(9) These
options were issued to Mr. Fletcher on April 5, 2005 in satisfaction of
retroactive salary adjustment as of August 1, 2004 and unpaid salary amounts
accrued through March 31, 2005 ($80,000). The number of shares was calculated
using the closing price of the common stock on the NASDAQ Capital Market on
April 4, 2005 ($0.56 per share). The options were immediately exercisable on the
date of grant and were issued under the 2001 Plan.
Option
Exercises and Stock Vested in Fiscal Year 2010
The
following table sets forth the number of shares acquired and the value realized
upon the vesting of restricted stock awards during fiscal year 2010 for each of
the named executive officers. None of the named executive officers
exercised any outstanding options in fiscal year 2010.
Stock Awards
|
||||||||
Name
|
Number of Shares
Acquired on Vesting
(#)
|
Value Realized on
Vesting ($) (1)
|
||||||
Anna
E. Gluskin, President and Chief Executive Officer
|
50,000 | $ | 29,000 | |||||
Rose
C. Perri, Chief Operating Officer, Chief Financial Officer, Treasurer and
Secretary
|
43,750 | $ | 25,375 | |||||
Mark
E. Fletcher, Executive Vice President and General Counsel
|
25,000 | $ | 14,500 |
(1)
|
Value realized on vesting is
based on the fair market value of our common stock on the date of vesting
and does not necessarily reflect proceeds actually received by the named
executive.
|
Nonqualified
Deferred Compensation
On
December 9, 2005, the Board of Directors approved a one-time recompense payment
in the aggregate amount of $1,000,000 for each of Ms. Gluskin and Ms. Perri in
recognition of Generex’s failure to remunerate each of Ms. Gluskin and Ms. Perri
in each of the fiscal years ended July 31, 1998, 1999, 2000 and 2001 in a fair
and reasonable manner commensurate with comparable industry standards and Ms.
Gluskin and Ms. Perri’s duties, responsibilities and performance during such
years. Such amounts were payable (i) in cash at such time or times and in such
amounts as determined solely by Ms. Gluskin or Ms. Perri, as applicable, and/or
(ii) in shares of Generex’s common stock at such time or such times as
determined by Ms. Gluskin or Ms. Perri, as applicable, provided that the
conversion price for any such shares was equal to the average closing price of
Generex’s common stock ($0.95) on the NASDAQ Capital Market for the 20
successive trading days immediately preceding, but not including, December 9,
2005. No interest or other earnings were accrued on this deferred
compensation. In fiscal 2010, the outstanding balances owed to Ms.
Gluskin and Ms. Perri, which were $911,433 and $584,172, respectively, as of the
previous fiscal year end, July 31, 2009 were fully paid out in
cash.
Other
Benefit Plans
We have
no defined benefit or actuarial pension plans.
Potential
Payments Upon Termination or Change-in-Control
The
following table shows potential payments to our named executives under existing
employment agreements, plans or arrangements, whether written or unwritten, for
various scenarios involving termination of employment or a change in control,
assuming termination on July 31, 2010 and, if applicable, based upon the
closing stock price of Generex common stock on that date. These benefits are in
addition to benefits available generally to salaried employees who joined the
company prior to 2010, such as distributions under the 401(k) savings plan,
disability and death benefits and accrued vacation pay.
The
following table provides the intrinsic value (that is, the value based upon
Generex’s stock price, and in the case of options minus the exercise price) of
equity awards that would become exercisable or vested if the named executive had
died or become disabled or been terminated as of July 31, 2010.
16
The terms
of employment for Ms. Gluskin, Ms. Perri and Mr. Fletcher do not provide
specific definitions for the various termination events. For the
purposes of the table, below are the standard definitions for certain
termination events as defined in the Amended Generex 2001 Stock Option Plan,
which we refer to as the “2001 Plan,” and the Amended and Restated 2006 Stock
Plan, which refer to as the “2006 Plan.”
"Cause"
means that a named executive has:
|
(i)
|
breached his or her employment or
service contract with
Generex;
|
|
(ii)
|
engaged in disloyalty to Generex,
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 Generex to persons not entitled to receive
such information;
|
|
(iv)
|
breached any written
confidentiality, non-competition or non-solicitation agreement between the
named executive and Generex;
or
|
|
(v)
|
has engaged in such other
behavior detrimental to the interests of Generex as determined by the
Compensation Committee.
|
“Change
in Control” means any of the following:
|
(i)
|
a liquidation or dissolution of
Generex,
|
|
(ii)
|
a sale of all or substantially
all of Generex’s assets,
|
|
(iii)
|
a merger in which Generex’s
stockholders hold less than a majority of the voting stock in the
surviving corporation, or
|
|
(iv)
|
when a person or group acquires
control of a significant percentage of the voting stock without the
approval of the Board of Directors (20% under the 2001 Plan and 50% or
more under the 2006 Plan).
|
“Disability"
means being unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
Potential
Payments Upon Termination or Change in Control for Named Executives as of July
31, 2010
Name
|
Benefit
|
Cause
|
Without
Cause/Non-
Renewal
|
Voluntary
Termination
by Executive
|
Breach
by
Generex (1)
|
Change in
Control
|
Disability
|
Death
|
|||||||||||||||||||||||
Anna
E. Gluskin
|
Cash Payment
|
(2)
|
$ | 0 | $ | 3,000,000 | $ | 0 | $ | 3,000,000 | $ | 3,000,000 | $ | 0 |
(15)
|
$ | 0 |
(12)
|
|||||||||||||
Stock
|
(3)
|
$ | 0 | $ | 2,000,000 | $ | 0 | $ | 2,000,000 | $ | 2,000,000 | $ | 0 | $ | 0 | ||||||||||||||||
Stock
Options
|
$ | 447,161 |
(4)
|
$ | 447,161 |
(5)
|
$ | 447,161 |
(5)
|
$ | 447,161 |
(5)
|
$ | 447,161 |
(9)
|
$ | 447,161 |
(6)
|
$ | 447,161 |
(7)
|
||||||||||
Restricted
Stock
|
(13)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Benefits
|
$ | 0 | $ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 | $ | 0 | |||||||||||||
Total
|
$ | 447,161 | $ | 5,447,161 | $ | 447,161 | $ | 5,447,161 | $ | 5,447,161 | $ | 447,161 | $ | 447,161 | |||||||||||||||||
Rose
C. Perri
|
Cash
Payment
|
(2)
|
$ | 0 | $ | 3,000,000 | $ | 0 | $ | 3,000,000 | $ | 3,000,000 |
(15)
|
(12)
|
|||||||||||||||||
Stock
|
(3)
|
$ | 0 | $ | 2,000,000 | $ | 0 | $ | 2,000,000 | $ | 2,000,000 | $ | 0 | $ | 0 | ||||||||||||||||
Stock
Options
|
$ | 210,174 |
(4)
|
$ | 210,174 |
(5)
|
$ | 210,174 |
(5)
|
$ | 210,174 |
(5)
|
$ | 210,174 |
(9)
|
$ | 210,174 |
(6)
|
$ | 210,174 |
(7)
|
||||||||||
Restricted
Stock
|
(13)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Benefits
|
$ | 0 | $ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 |
(8)
|
$ | 0 | $ | 0 | |||||||||||||
Total
|
$ | 210,174 | $ | 5,210,174 | $ | 210,174 | $ | 5,210,174 | $ | 5,210,174 | $ | 210,174 | $ | 210,174 | |||||||||||||||||
|
|||||||||||||||||||||||||||||||
Mark
A. Fletcher
|
Cash
Payment
|
$ | 0 | $ | 756,767 |
(10)
|
$ | 0 | $ | 756,767 |
(10)
|
$ | 756,767 |
(10)
|
(15)
|
(1)
|
|||||||||||||||
Stock
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||
Stock
Options
|
$ | 187,820 |
(4)
|
$ | 187,820 |
(5),(11)
|
$ | 187,820 |
(5)
|
$ | 187,820 |
(5),(11)
|
$ | 187,820 |
(9)
|
$ | 187,820 |
(6)
|
$ | 187,820 |
(7)
|
||||||||||
Restricted
Stock
|
(13)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Benefits
|
$ | 0 | $ | 0 |
(8),(10)
|
$ | 0 |
(8)
|
$ | 0 |
(8),(10)
|
$ | 0 |
(8),(10)
|
$ | 0 | $ | 0 | |||||||||||||
Total
|
$ | 187,820 | $ | 944,587 | $ | 187,820 | $ | 944,587 | $ | 944,587 | $ | 187,820 | $ | 187,820 |
17
(1)
|
This termination event includes a
material change in duties or material reduction in remuneration of such
named executive.
|
(2)
|
This
amount would be payable upon the date of termination in a lump
sum.
|
(3)
|
This
amount would be payable in shares of Generex common stock based upon the
20-day volume weighted average price ($0.82) as of the close of business
on the date of termination. Such shares would be issuable within three
business days of the date of
termination.
|
(4)
|
The
options granted on April 5, 2005 (including those effective as of December
13, 2004) survive termination of the named executive’s employment. Other
options granted to the named executive pursuant to the 2001 Plan and any
options granted pursuant to the 2006 Plan would terminate immediately -
and shares underlying such options forfeited - upon the named executive’s
termination for cause.
|
(5)
|
The
2001 and 2006 Plans permit a named executive who voluntarily terminates
employment with Generex or whose employment is terminated without cause to
exercise vested options outstanding at the date of termination for a
period of up to 90 days thereafter or the expiration date of the option,
whichever is earlier.
|
(6)
|
The
2001 and 2006 Plans permit a named executive to exercise vested options
outstanding at the time of the named executive’s cessation of employment
due to disability for a period of up to one year thereafter or the
expiration of the option, whichever is
earlier.
|
(7)
|
The
2001 and 2006 Plans permit a named executive’s beneficiary to exercise
vested options outstanding at the time of the named executive’s death for
a period of up to one year after death or the expiration date of the
option, whichever is earlier.
|
(8)
|
The
named executive would be entitled to receive health benefits for a period
of 12 months after termination of employment. Since these benefits are
widely available to salaried employees of Generex, they are excluded from
the table above. The total aggregate value of these benefits in each case
is below $5,000.
|
(9)
|
Upon
a change of control, the 2001 and 2006 Plan provide for the acceleration
of exercisability and vesting of any outstanding options and removal of
all restrictions and conditions on outstanding restricted stock awards,
unless otherwise determined by the Board of Directors or its designee. We
have assumed for purposes of this column that the named executive will
exercise all of his/her fully exercisable and vested options and will
receive all shares underlying restricted stock awards in connection with a
change of control of Generex, which we have assumed occurred on July 31,
2010.
|
(10)
|
Pursuant
to his employment arrangement, if Generex terminates Mr. Fletcher’s
employment upon written notice (and not for cause, disability or death) or
Mr. Fletcher gives notice of termination pursuant to a material change in
duties, reduction of remuneration, material default or breach by Generex
or change in control of Generex, Mr. Fletcher will be entitled to receive
a lump sum severance payment on the termination date in an amount equal to
18 months of base salary plus the average annual bonus paid to him during
each fiscal year of the term of his employment and he will be entitled to
participate in and receive benefits for 18 months after the termination
date.
|
(11)
|
Pursuant
to the terms of his employment with Generex, if Generex terminates Mr.
Fletcher’s employment upon written notice (and not for cause, disability
or death) or Mr. Fletcher gives notice of termination pursuant to a
material change in duties, reduction of remuneration, material default or
breach by Generex or change in control of Generex, Mr. Fletcher will have
90 days after the eighteenth month anniversary of the termination date to
exercise vested options.
|
(12)
|
Each
named executive is entitled to receive monthly disability payments and
his/her survivor(s) are entitled to receive a lump sum payment upon such
named executive’s death, in either case up to an amount equal to his/her
annual base salary or $100,000, whichever is less. Insurance premiums are
paid by Generex and such insurance coverage is widely available to all
salaried employees at Generex. Thus, the amounts payable upon the
disability or death of the named executive (as well as the premiums paid
by Generex) are excluded from the table
above.
|
(13)
|
The
restricted stock award agreement with the named executive officers
provides that in the event the named executive ceases to be employed by,
or provide service to, us, any unvested shares of restricted stock will be
immediately forfeited.
|
Non-Employee
Directors' Compensation
In fiscal
2010, our policy for compensation of non-employee directors was as
follows.
|
·
|
Nonemployee directors receive an
annual cash base retainer. Each nonemployee director serving on the Board
of Directors as of May 27, 2008 is entitled to an annual cash retainer of
$40,000. Each new nonemployee directors will initially receive a cash
retainer of $20,000, increasing to $30,000 for the second year, and
$40,000 thereafter.
|
|
·
|
At the discretion of the full
Board of Directors, nonemployee directors may receive stock options to
purchase shares of our common stock or shares of restricted stock each
fiscal year. The number and terms of such options or shares is within the
discretion of the full Board of
Directors.
|
|
·
|
Nonemployee directors serving on
committees of the Board of Directors receive additional cash compensation
as follows:
|
Committee
|
Chairperson
|
Member
|
||||||
Audit
Committee
|
$ | 15,000 | $ | 5,000 | ||||
Compensation
Committee
|
$ | 15,000 | $ | 5,000 | ||||
Governance
& Nominating Committee
|
$ | 5,000 | $ | 2,000 |
Directors
who are officers or employees of Generex do not receive separate consideration
for their service on the Board of Directors. The compensation received by Ms.
Gluskin and Ms. Perri as employees of Generex is show in the Summary
Compensation Table above.
In
October 2009, the Board of Directors approved the extension of the exercise
periods for certain stock options held by Messrs. Barratt and
McGee. By their original terms, these options were due to expire on
either October 26, 2009 or April 5, 2010. The Board of Directors
approved the extension of the exercise periods for the options through October
26, 2014. The extension of these options was done in conjunction with
an extension of a number of similar employee and executive options which were
also due to expire shortly after the extension date. As the options
had been granted for long-term incentive and retention purposes, the Board of
Directors concluded that the extension of these options would continue to
provide future benefit to the company in terms of incentive and
retention. The modified options are identified in footnote (3) of the
Fiscal Year 2010 Director
Compensation Table below.
18
Fiscal
Year 2010 Director Compensation Table
Name
|
Fees
Earned or
Paid in
Cash (1)
|
Stock
Awards
(2)
|
Option
Awards
(3)
|
All Other
Compensation
|
Total
|
|||||||||||||||
John
P. Barratt
|
$ | 65,000 | $ | 0 | $ | 97,995 | $ | 0 | $ | 162,995 | ||||||||||
Brian
T. McGee
|
$ | 65,000 | $ | 0 | $ | 97,995 | $ | 0 | $ | 162,995 | ||||||||||
Nola
E. Masterson
|
$ | 55,000 | $ | 0 | $ | 43,850 | $ | 0 | $ | 98,850 |
(1)
Includes the annual retainer and additional fees for directors who chair a Board
committee or who serve on a Board committee.
(2) There
were no restricted stock awards to directors in fiscal year 2010. As
of July 31, 2010, the aggregate number of shares underlying stock awards
previously granted to each non-employee director was as follows: Mr. Barratt
(150,000), Ms. Masterson (100,000) and Mr. McGee (150,000).
(3)
Includes the grant date fair value for options to purchase 100,000 shares of
common stock granted to each director on March 8, 2010, calculated in accordance
with FASB ASC Topic 718. For fiscal 2010, assumptions used to calculate these
amounts are set forth in Note 15 of the Notes to Consolidated Financial
Statements included in Item 8 – Financial Statements and
Supplementary Data of the Form 10-K. The grant date fair value
for these options is based on the Black-Scholes model valuation of $0.58 per
share. The following assumptions were used in the calculation: expected term of
10 years; a risk-free interest rate of 0.12%; and expected price volatility of
105.7%. The options granted on March 8, 2010 vest as follows: 1/3 of
the options are exercisable on the date of grant; 1/3 of the options become
exercisable on August 1, 2010, and 1/3 of the options become exercisable on
August 1, 2011
Also
includes the incremental fair value computed as of the modification date in
accordance with FASB ASC Topic 718 for certain outstanding options held by each
of Messrs. Barratt and McGee the exercise periods of which were extended through
October 26, 2014 by the Board of Directors on October 20, 2009:
No. of Shares of Common Stock
Underlying
Option
|
Exercise
Price per Share
|
Grant Date
|
Original Expiration Date
|
Incremental Fair Value as of
10/26/09
|
|||||||
70,000
|
$ | 0.94 |
10/26/04
|
10/26/09
|
$ | 0.43 | |||||
35,714
|
$ | 0.001 |
4/5/05
|
4/4/10
|
$ | 0 | |||||
100,000
|
$ | 0.56 |
4/5/05
|
4/4/10
|
$ | 0.24 |
At fiscal
year end, the total number of stock options held by each non-employee director
was as follows: : Mr. Barratt (375,714), Mr. McGee (305,714) and Ms.
Masterson (100,000).
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The table
on the following pages sets forth information regarding the beneficial ownership
of the common stock by: our named executive officers and directors and all the
named executives and directors as a group. We are not aware of any
person or group that beneficially owns more than five percent of our outstanding
shares of common stock.
The
information contained in these tables is as of November 23, 2010. At that date,
we had 274,445,713 shares of common stock outstanding.
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.
Except as
otherwise indicated, the address of each person named in the table below is c/o
Generex Biotechnology Corporation, 33 Harbour Square, Suite 202, Toronto, Canada
M5J 2G2.
Beneficial
Ownership
Name of Beneficial Owner
|
Number of
Shares
|
Percent
of
Class |
||||||
Named
Executives and Directors
|
||||||||
John
P. Barratt (1)
|
492,381 | * | ||||||
Mark
Fletcher (2)
|
1,186,803 | * | ||||||
Anna
E. Gluskin (3)
|
2,933,831 | 1.0 | % | |||||
Rose
C. Perri (4)
|
5,392,221 | 2.0 | % | |||||
Brian
T. McGee (5)
|
522,381 | * | ||||||
Nola
Masterson (6)
|
116,667 | * | ||||||
Named
Executives and Directors as a group (6 persons)
|
10,634,283 | 3.9 | % |
19
* Less
than 1%.
(1) Includes
70,000 shares, 70,000 shares issuable upon stock options granted on October 26,
2004, 100,000 shares issuable upon exercise of stock options granted on April 5,
2005 under the 2001 Plan, 35,714 shares issuable upon exercise of stock options
granted on April 5, 2005 under the 2001 Plan received in lieu of cash
compensation, 66,667 vested options of 100,000 options which were granted on
March 8, 2010 under 2006 Plan and 150,000 shares of restricted stock awarded on
May 30, 2006 under the 2006 Plan.
(2) Includes
266,077 shares, 250,000 shares issuable upon exercise of stock options granted
on April 5, 2005 with an effective date of December 13, 2004 under the 2001 Plan
, 470,726 shares issuable upon exercise of stock options granted on April 5,
2005 under the 2001 Plan, 200,000 vested options of 300,000 options which were
granted on March 8, 2010 under 2006 Plan and 175,000 shares of restricted stock
granted in August 2007 under 2006 Stock Plan, which shares were vested as of
August 17, 2009.
(3) Includes
26,127 shares held by Ms. Gluskin, 953,667 shares owned of record by GHI, Inc.
that are beneficially owned by Ms. Gluskin, 250,000 shares issuable upon
exercise of stock options granted on April 5, 2005 with an effective date of
December 13, 2004 under the 2001 Plan, 1,120,704 shares issuable upon exercise
of stock options granted on April 5, 2005 under the 2001 Plan, 200,000 shares of
restricted stock granted in August 2007 under 2006 Stock Plan, which shares were
vested as of August 17, 2009, 333,333 vested options of 500,000 options which
were granted on March 8, 2010 under 2006 Plan and 50,000 shares issuable upon
the exercise of options granted on May 27, 2008 under the 2006 Stock
Plan.
(4) Includes
458,726 shares held by Ms. Perri, 54,000 shares acquired on October 27,
2010, 953,667 shares owned of record by GHI, Inc. that are beneficially owned by
Ms. Perri, 250,000 shares issuable upon exercise of stock options granted on
April 5, 2005 with an effective date of December 13, 2004 under 2001 Plan,
576,752 shares issuable upon exercise of stock options granted on April 5, 2005
under the 2001 Plan, 175,000 shares of restricted stock granted in August 2007
under 2006 Stock Plan that were vested as of August 17, 2009, 266,666 vested
options of 400,000 options which were granted on March 8, 2010 under 2006 Plan
and 125,000 shares issuable upon the exercise of options granted on May 27, 2008
under the 2006 Stock Plan. Also includes the shares that are owned by the estate
of Mr. Mark Perri, of which Ms. Perri is executor and beneficiary, but is not
considered to beneficially own for some purposes: 45,914 shares previously owned
of record by Mr. Mark Perri; 1,100,000 shares owned of record by EBI, Inc. (of
which Mr. Mark Perri was beneficial owner); 305,332 shares held of record by
brokerage accounts. Also includes 341,496 shares owned of record by EBI, Inc.,
which Ms. Perri may be deemed to beneficially own because of the power to vote
the shares but which are beneficially owned by other stockholders because they
are entitled to the economic benefits of the shares. Ms. Perri is also deemed to
beneficially own an additional 953,667 shares owned of record by GHI, Inc. by
holding the right to vote such shares. These shares are also beneficially owned
by Ms. Gluskin.
(5) Includes
70,000 shares issuable upon exercise of stock options granted on October 26,
2004, 100,000 shares issuable upon exercise of stock options granted on April 5,
2005 under the 2001 Plan, 35,714 shares issuable upon exercise of stock options
granted on April 5, 2005 under the 2001 Plan received in lieu of cash
compensation, 66,667 vested options of 100,000 options which were granted on
March 8, 2010 under 2006 Plan and 150,000 shares of restricted stock awarded on
May 30, 2006 under the 2006 Plan. Also includes 100,000 shares acquired in
February and March 2006.
(6) Includes
66,667 vested options of 100,000 options which were granted on March 8, 2010
under 2006 Plan, 50,000 shares of restricted common stock granted to Ms.
Masterson on August 17, 2007 under the 2006 Plan.
Changes
in Control
We know
of no arrangements, including any pledge by any person of our securities, the
operation of which may at a subsequent date result in the change in control of
Generex.
Equity
Compensation Plan Information
The
following table sets forth information as of July 31, 2010 regarding all of our
existing compensation plans and individual compensation arrangements pursuant to
which equity securities are authorized for issuance to employees, non-employee
directors or non-employees (such as directors, consultants and advisors) in
exchange for consideration in the form of services:
Plan Category
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
compensation plans approved by security holders
|
||||||||||||
2000
Stock Option Plan
|
0 | $ | 0 | 2,000,000 | ||||||||
2001
Stock Option Plan
|
4,535,638 | $ | 0.39 | 4,048,490 | ||||||||
2006 Stock Plan
|
2,930,000 | $ | 0.65 | 18,668,245 | (1) | |||||||
Total
|
7,465,638 | $ | 0.49 | 24,716,735 | ||||||||
Equity compensation plans not approved by security
holders (2)
|
4,274,975 | (2) | $ | 0.79 | 0 | |||||||
Total
|
11,740,613 | $ | 0.60 | 24,716,735 |
(1) Such
shares are available for future issuance under the 2006 Stock Plan as options or
restricted stock.
20
(2) Includes
1,397,232 warrants issued to various consultants pursuant to the agreements with
them, 2,457,743 warrants issued to placement agents as commission, and 420,000
warrants issued to various employees as part of their compensation
arrangements. Please see Part II, Item 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase
of Equity Securities under the heading Sales of Unregistered Securities,
Item 7, Management Discussion and Analysis of Financial Condition and Result of
Operations under the heading Financial Condition, Liquidity and
Resources, and Note 14 of the Consolidated Financial Statements in Item 8, Financial Statements and
Supplementary Data of the Form 10-K for more information on such
warrants.
Item
13. Certain Relationships and
Related Transactions, and Director Independence.
Certain
Relationships and Related Transactions
Review
of Related Party Transactions
We
presently have 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. We also have a
policy requiring the approval by the Audit Committee for any transactions in
which a director or an executive officer has a material interest apart from such
director's or officer’s interest in Generex.
Related
Transactions
One-Time Recompense
Payment: On December 9, 2005, our Board of Directors approved
a one-time recompense payment in the aggregate amount of $1,000,000 for each of
Ms. Gluskin, our former Chairwoman, Chief Executive Officer and President, and
Ms. Rose Perri, our Chief Operating Officer, Chief Financial Officer and
Treasurer, in recognition of the Company’s failure to remunerate each of Ms.
Gluskin and Ms. Perri in each of the fiscal years ended July 31, 1998, 1999,
2000 and 2001 in a fair and reasonable manner commensurate with comparable
industry standards and Ms. Gluskin’s and Ms. Perri’s duties, responsibilities
and performance during such years. These amounts were payable (a) in cash at
such time or times and in such amounts as determined solely by Ms. Gluskin or
Ms. Perri, as applicable, and/or (b) in shares of our common stock at such time
or times as determined by Ms. Gluskin or Ms. Perri, as applicable, provided that
the conversion price for any such shares shall be equal to the average closing
price of our common stock on the NASDAQ Capital Market for the 20 successive
trading days immediately preceding, but not including, December 9,
2005. The outstanding amounts were fully paid as of
July 31, 2010
Real Estate
Transactions: On December 9, 2005, our Board of Directors
approved the grant to Ms. Perri of a right of first refusal in respect of any
sale, transfer, assignment or other disposition of either or both real
properties municipally known as 1740 Sismet Road, Mississauga, Ontario and 98
Stafford Drive, Brampton, Ontario (collectively, the “Properties”). We granted
Ms. Perri this right in recognition of the fair market value transfer to us
during the fiscal year ended July 31, 1998 by Ms. Perri (or parties related to
her) of the Properties.
We use a
management company to manage all of our real properties. The property management
company is owned by Ms. Perri, Ms. Gluskin and the estate of Mark Perri, our
former Chairman of the Board. In the fiscal years ended July 31, 2010 and 2009,
we paid the management company approximately $55,691 and $47,981, respectively,
in management fees. We believe that the amounts paid to the management company
approximate the rates that would be charged by a non-affiliated property
management company.
Director
Independence
The Board
of Directors currently consists of five members, three of whom are “independent”
as defined under applicable rules of the SEC and The NASDAQ Stock Market LLC.
The three independent members of the Board of Directors are John P. Barratt,
Brian T. McGee and Nola E. Masterson.
For a
director to be considered independent, the Board must determine that the
director has no relationship which, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director.
All
members of the Audit Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee must be independent directors under NASDAQ
rules. Members of the Audit Committee also must satisfy a separate SEC
independence requirement, which provides that they may not accept directly or
indirectly any consulting, advisory or other compensatory fee from the Company
or any of its subsidiaries other than their directors’ compensation. In
addition, under SEC rules, an Audit Committee member who is an affiliate of the
issuer (other than through service as a director) cannot be deemed to be
independent.
Item
14. Principal Accounting Fees and
Services.
MSCM LLP
("MSCM") has served as our independent auditors since September 5, 2008. The
appointment of MSCM as our independent public accountants was unanimously
approved by the Audit Committee of our Board of Directors. MSCM is the successor
to our former independent auditors, Danziger Hochman Partners LLP (“Danziger
Hochman”), following MSCM’s merger with Danziger Hochman in September 2008.
Danziger Hochman served as our independent auditors from February 1, 2006 until
September 5, 2008.
21
The
following table sets forth the aggregate fees paid by Generex for the fiscal
years ended July 31, 2010 and 2009 to our independent auditors:
Fiscal Year
Ended
July 31, 2010
|
Fiscal Year
Ended
July 31, 2009
|
|||||||
Audit
Fees
|
$ | 220,983 | (1) | $ | 212,756 | (1) | ||
Audit-Related
Fees
|
$ | 128,867 | (2) | $ | -0- | |||
Tax
Fees
|
$ | -0- | (3) | $ | -0- | |||
All
Other Fees
|
$ | 11,923 | (4) | $ | -0- | |||
TOTAL
|
$ | 361,773 | $ | 212,756 |
(1)
|
Represents charges of MSCM LLP,
Generex's auditors for the financial statement audits of the fiscal years
ended July 31, 2010 and 2009, including fees associated with quarterly
reviews of financial statements included in Generex’s Form
10-Q.
|
(2)
|
Represents charges of MSCM LLP,
Generex's auditor in fiscal year ended July 31, 2010 for Sarbanes-Oxley
Section 404 audit of internal controls over financial
reporting.
|
(3)
|
MSCM
LLP did not provide and did not bill for any tax
services.
|
(4)
|
Represents
fees associated with review of responses to comments of the SEC Staff and
review of financial statements included in Form
S-8.
|
Policy
for Pre-Approval of Audit and Non-Audit Services
The Audit
Committee’s policy is to pre-approve all audit services and all non-audit
services that Generex’s independent auditor is permitted to perform for Generex
under applicable federal securities regulations. As permitted by the applicable
regulations, the Audit Committee’s policy utilizes a combination of specific
pre-approval on a case-by-case basis of individual engagements of the
independent auditor and general pre-approval of certain categories of
engagements up to predetermined dollar thresholds that are reviewed annually by
the Audit Committee. Specific pre-approval is mandatory for the annual financial
statement audit engagement, among others.
The
pre-approval policy was implemented effective as of October 30, 2003. All
engagements of the independent auditor to perform any audit services and
non-audit services since that date have been pre-approved by the Audit Committee
in accordance with the pre-approval policy. The policy has not been waived in
any instance. All engagements of the independent auditor to perform any audit
services and non-audit services prior to the date the pre-approval policy was
implemented were approved by the Audit Committee in accordance with its normal
functions.
PART
IV
Item.
15 Exhibits
and Financial Statements and Schedules.
Exhibits
are incorporated herein by reference or are filed with this Form 10-K/A as set
forth in the Exhibit Index beginning on page 24 hereof.
22
Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized this 24th day of November
2010.
GENEREX
BIOTECHNOLOGY CORPORATION
|
|
By:
|
/s/ Mark A. Fletcher
|
Name: Mark
A. Fletcher
|
|
Title: Interim
President and Chief Executive
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Name
|
Capacity in Which Signed
|
Date
|
||
/s/ Mark A. Fletcher
|
Interim
President and Chief Executive Officer and General
|
November
24, 2010
|
||
Mark
A. Fletcher
|
Counsel
and Secretary (Principal Executive Officer)
|
|||
/s/ Rose C. Perri
|
Chief
Operating Officer, Chief Financial, Officer, Treasurer,
|
November
24, 2010
|
||
Rose
C. Perri
|
Director
(Principal Financial and Accounting Officer)
|
|||
/s/ Brian T. McGee
|
Director
|
November
24, 2010
|
||
Brian
T. McGee
|
||||
/s/ John P. Barratt
|
Director
|
November
24, 2010
|
||
John
P. Barratt
|
||||
/s/ Nola E. Masterson
|
Director
|
November
24, 2010
|
||
Nola
E. Masterson
|
||||
/s/ Stephen Fellows
|
VP,
Finance
|
November
24, 2010
|
||
Stephen
Fellows
|
23
EXHIBIT
INDEX
Exhibit Number
|
Description of Exhibit
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002†
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002†
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002†
|
† Filed herewith.
24