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Posted On: 10/14/2022 7:22:32 PM
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For those of you scared to click on links on public boards I copied the main motion text below.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Fort Lauderdale Division
www.flsb.uscourts.gov
In re: Chapter 7
GENEREX BIOTECHNOLOGY CORP, Case No. 22-13166-PDR
Debtor.
/
TRUSTEE’S MOTION FOR ENTRY OF AN ORDER (I) APPROVING STALKING HORSE BID
AND STALKING HORSE EPA, (II) APPROVING BID PROCEDURES AND BID
PROTECTIONS IN CONNECTION WITH THE SALE OF DEBTOR’S EQUITY IN TWO
SUBSIDIARIES, (III) APPROVING THE FORM AND MANNER OF NOTICE OF SALE, (IV)
SCHEDULING AN AUCTION AND SALE HEARING AND (V) APPROVING THE SALE OF
THE EQUITY FREE AND CLEAR OF LIENS, CLAIMS, AND ENCUMBRANCES
Marc Barmat, Chapter 7 Trustee (“Trustee”) of Generex Biotechnology Corp. (the
“Debtor”) hereby files this motion (the “Motion”) and moves the Court for an order (I) approving
Stalking Horse Bid and Stalking Horse EPA, (II) approving bid procedures and bid protections in
connection with the sale of Debtor’s equity in two entities, including injunctive relief to preclude
transfer or issuance of additional equity, (III) approving the form and manner of notice of sale,
(IV) scheduling an auction and sale hearing, and (V) approving the sale of the equity free and clear
of all liens, claims, encumbrances, and interests of any kind, including without limitation any right
anyone may have to the Equity (as defined below), specifically including any right to claw back
equity pursuant to contract or other restrictions on transfer, except that any buyer will take the
Creek Olaregen Equity, as defined herein, subject to any valid lien asserted by Creek Mountain
Partners, Inc. In support of this Motion, the Trustee states as follows:
SUMMARY OF PROPOSED SALE AND REQUESTED SALE PROCEDURES
By the Stalking Horse Bid, the buyer, Bio & Med Tech of the Future SPV2, LP agrees to
purchase 64,153,151 common stock shares of Antigen Express, Inc. d/b/a NuGenerex Immuno-
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Oncology, Inc. and 100% of the shares of Olaregen Therapeutix, Inc. that are owned by Debtor for
the price of $1,5000,000, subject to better or higher bids of at least $1,700,000 or more, submitted
no later than December 23, 2022 at 5 p.m. The proposed sale of equity will be free and clear of
all liens, claims, and encumbrances, except with respect to the lien of Creek Mountain Partners,
Inc. on certain shares of Olaregen, to the extent it is a valid and enforceable lien. The proposed
Stalking Horse Bid was reached after weeks of arms’ length negotiations with multiple interested
parties, and contains protections for the stalking horse bidder of a breakup fee of $50,000. In
connection with the sale, the Trustee will seek findings, based on Debtor’s records and public
filings with the SEC, that the Debtor owns the equity sold, the absence of other equity classes in
the entities whose stock is being sold, that the stalking horse bidder is a good faith purchaser, and
that no other third party has any rights, interest, or equity in or to the shares sold. Notice of the
requested sale procedures herein will be served all scheduled creditors, all creditors who have filed
a proof of claim, and all other potential bidders who have expressed interest in the purchase, and
the Trustee will publish notice of the sale in the Wall Street Journal. The deadline to object to the
proposed sale and bid procedures herein is December 16, 2022, with the auction of qualifying
bidders occurring on December 27, 2022.
BACKGROUND
1. On April 23, 2022 (“Petition Date”), Three Brothers Trading, LLC, GS Capital
Partners, LLC, BHP Capital NY, Inc., Beijing Youfeng Biological Technology Co., Ltd. and
Bedford Capital Group LLC (“Original Petitioning Creditors”) filed an involuntary petition as to
Generex Biotechnology Corp (“Debtor”) for relief under title 11 of the United States Code
commencing this case. (ECF 1.)
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2. The Debtor owns (a) 64,153,151 common stock shares and 100,000 shares of
Series A Super Voting Preferred Stock in Antigen Express, Inc. d/b/a NuGenerex Immuno-
Oncology (“NGIO”) and (b) 100% of the equity in Olaregen Therapeutix, Inc. (“Olaregen”).
3. The Trustee has entered into an Equity Purchase Agreement with Bio & Med Tech
of the Future SPV2, LP or its designee or successor or assigns (the “Stalking Horse Bidder”) for
the sale of all outstanding shares, equity, ownership interests, rights, and interests in property of
Debtor in NGIO and Olaregen (collectively, the “Equity”). The purchase price is One Million
Five Hundred Thousand Dollars ($1,500,000.00). The sale will be subject to higher or otherwise
better offers of at least $1,700,000. The Trustee submits that the sale of the Equity to the Stalking
Horse Bidder, or the highest and best bidder following an auction pursuant to Court approved
bidding procedures, is in the best interests of the estate.
4. The Trustee believes the best way to maximize the value of the Equity for the
benefit of the Estate is through an auction sale. The Trustee solicited eight prospective brokers for
potential engagement in this bankruptcy case, and issues precluding retention were (1) the
expedited timeline to market and sell the equity, and (2) the upfront retainer solicited by the
brokers.
EQUITY PURCHASE AGREEMENT
5. On October 13, 2022, the Trustee entered into the EPA with the Stalking Horse
Bidder, a copy of which is attached as Exhibit 1. Key terms of the EPA are summarized below.
The following is only a summary of certain material terms set forth in the EPA, and to the extent
there are any inconsistencies, the executed EPA controls:
i. “Equity” shall mean all shares, common and preferred, voting and non-voting, and
rights and property interests of Antigen Express, Inc. d/b/a NuGenerex Immuno-
Oncology, Inc. and Olaregen Therapeutix, Inc. that are owned by Debtor
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ii. Bankruptcy Court Approval. The Parties acknowledge and agree that this
Agreement is not binding and cannot be performed by or enforced against Seller or
Buyer unless and until the Bankruptcy Court approves this Agreement and
authorizes Seller’s performance of this Agreement. If the Agreement is not
approved by the Court, the Seller’s obligation to sell the Equity to the Buyer shall
terminate without any further liability or obligation on the part of any Party, and
this Agreement shall terminate without any party having any further liability or
obligation hereunder, except for Seller’s obligation to refund the First and Second
Deposits to the Buyer.
iii. Acquisition. Upon the terms and subject to the conditions contained in this
Agreement, on the Closing Date (as hereinafter defined) the Seller, in his capacity
as the Trustee, shall sell, convey, transfer, deliver and assign to the Buyer, and the
Buyer shall purchase and acquire from the Seller, all of the Seller’s right, title and
interest in and to the Equity free and clear of all Liens and Interests on an “as-is,
where-is” basis, with no warranties or representations except as set forth herein,
except that the Creek Olaregen Equity shall be taken subject to assumption of any
valid lien asserted by Creek Mountain Partners, Inc. The purchase and sale of the
Equity is referred to in this Agreement as the “Acquisition.”
iv. Purchase Price. As consideration for the Acquisition, the total purchase price
(“Purchase Price”) shall be One Million Five Hundred Thousand Dollars
($1,500,000.00). The Purchase Price shall be paid by the Buyer to the Seller in cash
or immediately available funds as follows:
(1) Buyer shall pay Seller Seventy-Five Thousand Dollars
($75,000.00) within fourteen (14) days of the full execution of this
Agreement (the “First Deposit”). The Deposit will be held in escrow by the
Trustee and shall be released only as provided by this Agreement;
(2) Buyer shall pay Seller Seventy-Five Thousand Dollars
($75,000.00) before the occurrence of the Overbid Deadline (the “Second
Deposit”). The Deposit will be held in escrow by the Trustee and shall be
released only as provided by this Agreement;
(3) Buyer shall pay Seller One Million Three Hundred Fifty
Thousand Dollars ($1,350,000.00) at Closing.
v. Due Diligence Review. The Buyer and/or its agents and/or representatives shall
until the Overbid Deadline (the “Due Diligence Review Period”) to continue the
review of the business of, and the legal and accounting matters associated with, the
Debtor, the Equity, and the Companies (the “Due Diligence Review”). The Buyer
will be given access by the Trustee to Records concerning the Debtor and the
Companies subject to the execution of a mutually-acceptable Confidentiality and
Non-Disclosure Agreement (“NDA”).
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vi. Buyer’s Right to Terminate. Notwithstanding anything to the contrary contained in
this Agreement, the obligation of the Buyer to Close under this Agreement,
including its obligation to pay the Purchase Price, is subject to Buyer’s satisfaction,
in its sole and absolute discretion, with the results of its Due Diligence Review. At
any time on or before the expiration of the Due Diligence Review Period, Buyer
may elect to terminate this Agreement, by giving written notice of termination to
Seller (the “Buyer Termination Notice”) by any reasonable means, including email
to Seller’s counsel, based on Buyer’s determination, in its sole and absolute
discretion, that it is not satisfied with the results of its Due Diligence Review. If
Buyer does not provide a Buyer Termination Notice on or before the expiration of
the Due Diligence Review Period, the Buyer shall be deemed to have completed
and be satisfied with the results of its Due Diligence Review. In the event that the
Buyer delivers a Buyer Termination Notice to the Seller, then this Agreement shall
terminate without any further liability or obligation hereunder on the part of any
party, except that all obligations in the NDA shall survive the termination of this
Agreement. The Seller shall return all deposits made by the Buyer within seven
days after receipt of a Buyer Termination Notice.
vii. Break Up Fee. In the event that the Bankruptcy Court approves a higher or better
offer for the purchase of the Equity from a Person other than the Buyer or any
Person directly or indirectly Affiliated with or otherwise related to the Buyer or any
nominee thereof, and the Seller closes a sale transaction with that other buyer, then
the Buyer shall be paid upon from the proceeds of the sale of the Equity to such
other Person the sum of no more than Fifty Thousand Dollars ($50,000.00) (the
“Break Up Fee”), subject to the approval of the Bankruptcy Court.
viii. Higher and Better Offers. Subject to the terms and conditions contained in
Paragraph 8(E) of this Agreement, the Buyer acknowledges and agrees that this
Agreement is subject to higher or better offers for the Equity which may be solicited
by and/or received by the Seller through an auction. The Buyer shall have the right
and opportunity, but not the obligation, to make one (1) or more competitive bids
at an auction to be held on or before December 27, 2022 (the “Auction”). If the
Buyer’s bid is not accepted and approved by the Bankruptcy Court, the Seller’s
obligation to sell the Equity to the Buyer shall terminate without any further liability
or obligation on the part of any Party, and this Agreement shall terminate without
any party having any further liability or obligation hereunder, except for Seller’s
obligation to refund the First and Second Deposits to the Buyer, and to pay the
Break-Up Fee if and to the extent approved by the Bankruptcy Court.
ix. Subsequent Bidding Terms. In the event that the Seller desires and/or is required
to seek additional bids (each an “Additional Bid”) for the Equity, then the parties
agree as follows:
(1) The Seller will only consider and/or accept Additional Bids
from the Buyer or from a “Qualifying Bidder” (as defined hereinafter). For
purposes of this Agreement, a Qualifying Bidder shall be defined as a bidder
that has made a Qualifying Bid (as defined hereinafter) on or before the
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deadline to submit such Qualifying Bid, which deadline shall be no later
than December 23, 2022 at 5 p.m. EST (the “Overbid Deadline”).
(2) For purposes of this Agreement, a “Qualifying Bid” is
defined as: a written offer that (i) provides that the bidder shall purchase the
Equity on terms which, in the business judgment of the Seller, are no less
favorable to the Estate than those contained in this Agreement and/or any
Additional Bid from the Buyer; (ii) does not provide and/or entitle any such
bidder to any transaction or break-up fee, expense reimbursement,
termination, or similar type of fee or payment; (iii) does not contain any due
diligence, financing or regulatory contingencies of any kind; (iv) is at least
Two Hundred Thousand Dollars ($200,000.00) (the “Minimum Overbid”)
higher than the Purchase Price or One Million Seven Hundred Thousand
Dollars ($1,700,000.00) (the “Minimum Bid Increment”) higher than the
most recent highest bid contained in any subsequent Qualifying Bid; (v)
contains such financial disclosures and documentation which demonstrate,
in the Trustee’s sole business judgment, the potential bidder’s financial and
other capabilities to consummate the Additional Bid; and (vi) fully discloses
the identity of each person and/or entity that is bidding for the Equity or
otherwise participating in connection with such bid and the complete terms
of any such participation. Within 24 hours after the Overbid Deadline, the
Trustee shall notify the Buyer of all Qualifying Bids that the Trustee has
received, along with a copy of each such Qualifying Bid.
x. Title. The Seller shall convey to Buyer the Equity, and shall request Bankruptcy
Court approval to convey the Equity free and clear of any and all Liens and Interests
or other restrictions on transfer, except with respect to lien asserted by Creek
Mountain Partners, Inc. on 592,682 shares of Series A Preferred Shares in Olaregen
owned by Debtor. Upon the consummation of the Closing, the Seller shall transfer
and convey to the Buyer, and Buyer shall be vested with any title to, the Equity that
Debtor owns, free and clear of any Liens and Interests or other restrictions on
transfer, subject to Bankruptcy Court approval.
xi. Conditions Precedent to Buyer’s Obligations. The obligations of Buyer under this
Agreement are subject to the satisfaction of the following conditions on or prior to
the Closing Date, all or any of which may be waived in writing by Buyer:
(1) The Agreement has not been terminated by the Buyer
pursuant to its rights under this Agreement.
(2) The Seller shall have delivered all documents required to
sell, convey, transfer, deliver and assign to the Buyer the Equity, and all
such documents shall have been properly executed by the Seller.
(3) The Seller shall be able to sell, convey, transfer, deliver and
assign to the Buyer the Equity free and clear of any and all liens, claims,
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and encumbrances, except that the Creek Olaregen Equity shall be taken
subject to any valid lien asserted by Creek Mountain Partners, Inc.
(4) The Court shall have entered the Sale Order, in a form
approved by the Buyer (in the Buyer’s sole discretion that, among other
things: (i) authorizes the sale of the Equity to Buyer; (ii) is not be subject to
any stay and is final and nonappealable; and (iii) finds that the Buyer is a
good faith purchaser within the meaning of Section 363(m); (iv) makes the
Equity Findings; and (v) finds that there has been no share issuance or other
event causing dilution of the Equity.
xii. Conditions Precedent to Seller’s Obligations. The obligations of the Seller under
this Agreement are subject to the satisfaction of the following conditions on or prior
to the Closing Date, all or any of which may be waived in writing by the Seller:
(1) The Buyer shall have delivered to the Seller all documents
required to be delivered by the Buyer, and all such documents shall have
been properly executed by the Buyer.
(2) The Buyer shall have tendered the Purchase Price in
accordance with the terms set forth in this Agreement.
(3) The Bankruptcy Court shall have entered the Sale Order
authorizing the sale of the Equity to Buyer and it shall not be subject to any
stay.
xiii. The Closing. Unless otherwise agreed to in writing by the parties, the closing
contemplated by this Agreement (the “Closing”) shall take place on or before
January 30, 2022, so long as Sale Order is entered by December 30, 2022 and is not
subject to any stay (the “Closing Date”). However, the Parties shall have the ability
to extend Closing if mutually agreed in writing by both Parties.
xiv. Brokers. Neither the Seller nor anyone acting on behalf of the Seller has employed,
either directly or indirectly, or incurred any liability to, any broker, finder or other
agent in connection with this Agreement.
RELIEF REQUESTED
A. Approve of Bidding Procedures and Terms of Sale
6. In order to ensure that the maximum value is received for the Property, the proposed
sale will be subject to the highest and best bidder at auction. The Trustee seeks to adopt procedures
which will foster competitive bidding among potential buyers, without eliminating or discouraging
any qualifying bids. In connection therewith, the Trustee requests that the Court approve the
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following bidding and sale procedures, which the Trustee believes are likely to maximize the
realizable value of the Equity (the “Sale Procedures”):
i. Participation Requirements: Unless otherwise ordered by the Court, in order to
participate in the bidding process, an interested bidder must:
(1) Wire into the trust account of the Trustee an escrow deposit
of Two Hundred Thousand Dollars ($200,000.00) so that the wire is
confirmed to be received by the Trustee through a balance verification of
the Trustee's trust account no later than 5:00 p.m. EST on December 23,
2022 (the “Bid Deadline”);
(2) Submit to the Trustee and Akerman LLP on or before the
Bid Deadline: (A) a fully executed equity purchase agreement (“EPA”)
substantially in the form of the EPA to be provided by the Trustee (the
effectiveness of such EPA being contingent only upon the Qualified Bidder
becoming the Successful Bidder pursuant to these procedures, subject only
to Bankruptcy Court approval, with no due diligence or financing
contingencies), with a purchase price of not less than One Million Seven
Hundred Thousand Dollars ($1,700,000.00), and (
a black-lined version
of the EPA to show any changes made by such bidder; provided that, an
EPA with any material changes may be rejected by the Trustee in its sole
business judgment; and
(3) Submit to Akerman and the Trustee on or before the Bid
Deadline such financial disclosures and documentation which demonstrate,
in the Trustee’s sole business judgment, the potential bidder’s financial and
other capabilities to consummate the sale.
ii. A person who timely complies with these Participation Requirements shall have
submitted a “Qualified Bid” and shall be deemed a “Qualified Bidder.” The list of
Qualified Bidders will not be shared with anyone prior to the Auction except the
Stalking Horse Bidder. The Stalking Horse Bidder shall be deemed a Qualified
Bidder.
iii. Waiver of Conflicts: Any person who has submitted a Qualified Bid shall be
deemed to have waived any right to claim there is a conflict with respect to an
unrelated transaction for which such person has employed the law firm of Akerman
LLP, or Furr Cohen, P.A., and the Trustee’s employment of Eyal Berger, Esq. and
the law firm of Akerman LLP as counsel for the sale of the Equity and related
transactions contemplated therein.
iv. Deadline to Object: The deadline to object to the Stalking Horse Bid and sale
procedures is December 16, 2022.
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v. Auction: In the event the Trustee receives a timely Qualified Bid, the Trustee will
conduct an auction (the “Auction”). The Auction shall take place on December 27,
2022 beginning at 9:30 a.m. via Zoom videoconferencing, or such other time or
place as the Trustee shall notify the Qualified Bidders. In the event the Trustee does
not receive a timely Qualified Bid, the Trustee will seek final approval of the sale
to the Stalking Horse bidder at the Sale Hearing.
vi. Auction Procedures: At the Auction, the Trustee will identify the Qualified Bid
which shall serve as the opening bid.
(1) All Qualified Bidders shall be entitled to make any
subsequent bids in increments of not less than $50,000.00 (a “Subsequent
Bid”). Bidding at the Auction shall continue until such time as the highest
or best offer is determined by the Trustee in the exercise of his sole business
judgment. The Trustee reserves the right to modify the bidding increments
or announce at the Auction additional procedural rules for conducting the
Auction in his sole business judgment.
(2) Each Qualified Bidder’s offer shall be irrevocable until the
selection of the Successful Bidder and, if applicable, the Back-Up Bidder
(as set forth in the EPA), provided that if such bidder is selected as the
Successful Bidder or the Back-Up Bidder, its offer shall remain irrevocable
until the closing of the sale to the Successful Bidder or the Back-Up Bidder.
vii. Broker’s Commissions: The bankruptcy estate shall not be liable for any broker
commissions.
viii. Successful Bid: After the conclusion of the Auction, the Trustee shall submit the
highest or best bid that has been accepted (the “Successful Bid”) for approval by
the Bankruptcy Court at a hearing at the United States Courthouse, 299 E. Broward
Blvd, Courtroom 301, Fort Lauderdale, FL 33301 on December 27, 2022 at 2:30
p.m. EST following the auction (the “Sale Hearing”). The Qualified Bidder who
has the Successful Bid presented for approval to the Court shall be referred to as
the “Successful Bidder.”
ix. Closing Date: The closing of the transaction (the “Closing”) shall take place on or
before January 30, 2023, so long Sale Order is entered by December 30, 2022 and
is not subject to any stay (the “Closing Date”), subject to the terms of the EPA. The
Successful Bidder must be prepared and must in fact consummate the purchase of
the Equity in accordance with the EPA.
x. Back Up Bid: Upon the failure of the Successful Bidder to consummate the closing
of the purchase of the Equity because of a breach or failure on the part of the
Successful Bidder, then the Trustee may elect in his business judgment to close
with the next highest or otherwise best Qualified Bidder to be the Successful Bidder
(the “Back Up Bidder”). At the Sale Hearing, the Trustee intends to seek approval
from the Court for the next highest or best bid (the “Back Up Bid”), which approval
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shall authorize the Trustee to consummate the Back Up Bid immediately after a
default under the Successful Bid without further order of the Court. Promptly
following the conclusion of the Sale Hearing, the Trustee shall return the deposits
to each unsuccessful Qualified Bidder (except the Back Up Bidder whose deposit
shall either be returned upon the closing of the sale to the Successful Bidder or
applied to the purchase price in a closing with such Back Up Bidder).
xi. As is/where is: The Equity will be sold “as is”, “where is”, with all faults, with no
guarantees or warranties, express or implied.
xii. Sale Hearing: The Trustee requests that a final Sale Hearing be scheduled to be
held immediately following the Auction on December 27, 2022.
B. Form and Manner of Notice of Sale Procedures and Sale.
7. Pursuant to Bankruptcy Rule 2002(a), the Trustee is required to provide creditors
with 21 days’ notice of the Sale Hearing. Pursuant to Bankruptcy Rule 2002(c), such notice must
include the date, time and place of the Auction and the Sale Hearing. The Trustee will serve the
Motion on the Debtor, all creditors scheduled on the creditor matrix, the Office of the United States
Trustee, and on the registered agent and corporate management of NGIO and Olaregen. After the
passage of the proof of claim deadline on November 3, 2022, the Trustee will serve the Motion on
all creditors who have filed a proof of claim. In addition, the Trustee will serve upon all creditors
and interested parties the Order granting the Motion (the “Sale Procedures Order”), in a form
substantially as attached hereto as Exhibit 2, which shall set forth among other things, the Sale
Procedures, and the time, date, and place of the Auction and Sale Hearing.
8. Further, the Trustee will publish notice of the proposed sale free and clear of all
Liens and Interests, as hereinafter defined, pursuant to Section 363(f) of the Bankruptcy Code in
(a) the Wall Street Journal not less than once per week for two consecutive weeks. Such publication
notice will set forth the time, date, and place of the Auction and Sale Hearing.
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C. Approval of Break-Up Fee.
9. To compensate the Stalking Horse Bidder for serving as the “stalking horse”
thereby subjecting its bid to higher or better offers, the Trustee seeks authority to pay the Break-
Up Fee in the amount of Fifty Thousand Dollars ($50,000.00) if the Bankruptcy Court approves a
higher or better offer for the purchase of the Equity from a person other than the Stalking Horse
Bidder or any person directly or indirectly affiliated with or otherwise related to the Stalking Horse
Bidder or any nominee thereof, and the Seller closes a sale transaction with that other buyer.
10. The ability of the Trustee to offer the Stalking Horse Bidder the Break-Up Fee
benefits the estate because it affords the Trustee the means necessary to induce the Stalking Horse
Bidder to submit its bid prior to the Auction, and thereby establish a “floor” and appropriate
parameters for submission of Qualified Bids in connection with the Auction. Thus, even if the
Stalking Horse Bidder is paid the Break-Up Fee because it is not the Successful Bidder, the estate
will have benefited from the higher floor established by the Stalking Horse and the certainty that
such bid brings to the sale process. Approval of break-up fees, expense reimbursements and other
forms of bidding protection in connection with the sale of significant property pursuant to section
363 of the Bankruptcy Code therefore has become an established practice in bankruptcy cases.
See, e.g., In re Gemini Cargo Logistics, Inc., No. 0610870 (Bankr. S.D. Fla. Apr. 17, 2006); In re
Piccadilly Cafeterias, Inc., No. 03-27976 (Bankr. S.D. Fla. Sept. 14, 2004).
11. Moreover, the amount of the Break-Up Fee is approximately 3.33% of the Purchase
Price and is consistent with the range of break-up fees approved by Courts in this District and
otherwise. See In re Protective Products of America, Inc., et al., No. 10-10711-JKO (Bankr. S.D.
Fla. Jan. 19, 2010) (approving 4% break-up fee and expense reimbursement); In re 160 Royal
Palm, LLC, No. 18-19441-EPK (Bankr. S.D. Fla. Nov. 9, 2018) (approving break-up fee of
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$350,000, constituting 1.09% of purchase price); In re Tousa, Inc., et al., Case No. 08-10928-JKO
(Bankr. S.D. Fla. Dec. 21, 2009) (approving 3% break-up fee).
12. The Trustee believes, in his business judgment, that the Break-Up Fee is reasonable
and appropriate in view of, among other things, the size and nature of the transaction contemplated
by the EPA. Moreover, the Break-Up Fee was a material inducement for, and a condition of, the
Stalking Horse Bidder’s entry into the EPA. Accordingly, the Trustee requests that the terms of
the EPA relating to the Break-Up Fee be approved.
D. Ownership of Equity
13. The Trustee seeks express findings of fact that the Equity is property of the Debtor's
bankruptcy estate.
(i) Olaregen Therapeutix, Inc.
14. Olaregen Therapeutix Inc. (“Olaregen”) is a New York based regenerative
medicine company engaged in the development, manufacturing and commercialization of
products that fill unmet needs in current wound healing market. Olaregen’s proprietary, patented,
wound conforming gel matrix, Excellagen, is an FDA-cleared, topically applied wound healing
product for the management of 17 wound healing indications. See Generex Form 10-K for fiscal
year-end July 31, 2020, pp. 5, 16-17, 97,1 attached as Exhibit 1 to the Appendix filed
contemporaneously with this Motion; Olaregen website, https://www.olaregen.com/about-us-2/.
15. On November 27, 2018, Generex and Olaregen entered into a binding letter of
intent (“LOI”) contemplating the Company’s acquisition of 51% of the outstanding capital stock
of Olaregen for a total consideration of twelve million dollars ($12,000,000). See Generex 8-K
1 The page numbers for the SEC filings refer to the page numbers at the bottom middle of each
page of the report.
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dated November 27, 2018, attached as Exhibit 2 to the Appendix; Binding Letter of Intent attached
as Exhibit 3 to the Appendix.
16. On January 7, 2019, pursuant to a Stock Purchase Agreement, Debtor acquired
3,282,632 common stock shares, representing 51% of the outstanding capital stock, of Olaregen
Therapeutix Inc. (“Olaregen”) for an aggregate of $12,000,000, among which $400,000 was paid
in cash and the remainder was paid by the issuance of a promissory note in the amount of
$11,600,000 (“Olaregen Note”). See Stock Purchase Agreement, attached as Exhibit 4 to the
Appendix; Generex 8-K dated January 7, 2019, attached as Exhibit 5 to the Appendix. The
Olaregen Note is secured by a pledge of the Olaregen Shares pursuant to a Pledge and Security
Agreement. Id. In the event that Debtor failed to pay the final installment of $6,000,000 due on
the Olaregen Note, Debtor was to forfeit the shares allocated to that installment (1,600,000
Olaregen shares) and Olaregen will be entitled to “claw back” fifty percent (50%) of any and all
shares paid for by the prior payments. Id.
17. On March 14, 2019, the Debtor and Olaregen amended the Stock Purchase
Agreement and Olaregen Note to extend the due date of the remaining balance of the second
tranche of payments amounting to $600,000 on or before April 1, 2019. See Appendix, Ex. 1, p.
129; Amendment Agreement attached as Exhibit 6 to the Appendix. The Debtor remitted
additional payments of $200,000 on April 30, 2019 and $38,500 on May 17, 2019. Id. On May
22, 2019, the Debtor and Olaregen amended the agreement to extend the due date of the remaining
balance of the second tranche of payments amounting to $361,500, the full balance of the third
tranche amounting to $3,000,000 and the full balance of the fourth tranche amounting to
$1,000,000 (total of $4,361,500) on or before June 30, 2019. Id.
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18. On March 14, 2019, Olaregen elected the option to proportionally increase the per
share purchase price to $4.00 for the remaining 2,899,658 of the total 3,282,632 shares to be
acquired. See Appendix, Ex. 1, p. 88; Appendix, Ex. 6. This resulted in an additional $998,633
for the Debtor to remit to Olaregen pursuant to the acquisition. See Appendix, Ex. 1, p. 88.
19. In May 2019, Debtor acquired from Creek Mountain Partners, LLC 592,683 shares
of Series A Preferred Stock of Olaregen (“Creek Olaregen Equity”) pursuant to a Stock Purchase
Agreement entered into January 14, 2019, subject to the approval of the Board of Directors of
Olaregen and consummated on May 10, 2019. See Appendix, Ex. 1, p. 114; Stock Purchase
Agreement, attached as Exhibit 7 to Appendix. Debtor acquired the Creek Olaregen Equity in
exchange for 4 million shares of the Debtor’s common stock, contributed and provided by the
Friends of Generex Biotechnology Investment Trust,2 plus the issuance of a $2 million promissory
note, id., thereby increasing Debtor’s interest in Olaregen to approximately 62% of Olaregen’s
outstanding voting shares. See Appendix, Ex. 1, p. 2. The 592,683 Olaregen shares represent
approximately 10% voting control of Olaregen. See Appendix, Ex. 1, p. 113. The $2,000,000
note was extended to have a maturity date of August 1, 2019. Id.
20. On August 16, 2019, Debtor entered into a Share Exchange Agreement to purchase
an additional 900,000 shares of common stock in Olaregen from other shareholders of Olaregen
in exchange for 1,905,912 shares of Generex common stock and 476,478 shares of NGIO common
stock which increased Debtor’s interest in Olaregen to approximately 77% of Olaregen’s
outstanding voting shares. See Appendix, Ex. 1, p. 113; Share Exchange Agreement attached as
2 The provided shares by the Friends of Generex Trust were already issued and outstanding and
did not result in any expense of the Debtor. Since these shares were transferred, to the shareholders
of Olaregen, by an existing shareholder to settle an obligation of the Debtor, the value of the shares
provided by the Friends of the Generex Trust to settle the debt was reflected in the financial
statements as an addition to contributed (paid-in) capital. See Appendix, Ex. 1, p. 70.
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Exhibit 8 to Appendix. The Share Exchange Agreement indicated that the 900,000 shares was
32.18% of the remaining shares, and the exhibit stated that an additional 1,461,075 shares of
common stock were outstanding. See Appendix, Ex. 8.
21. In September 2019, the Debtor converted all of the Series A Preferred Stock of
Olaregen into common stock of Olaregen. See Appendix, Ex. 1, p. 5.
22. On November 24, 2019, the Debtor and Olaregen amended the Stock Purchase
Agreement and Promissory Note to extend the due date of the remaining balance of the Olaregen
Note. See Appendix, Ex. 1, p. 88. Effective November 24, 2019, the deadline was extended to
January 31, 2020. See Appendix, Ex. 1, p. 88, 108.
23. On February 14, 2020, the remaining stockholders of Olaregen exchanged all of its
outstanding shares for 5,950,000 shares of Generex common stock and 2,765,000 shares of NGIO,
see Appendix, Ex. 1, p. 113, with a waiver of any penalties and accrued interest on the outstanding
Olaregen Note. See Appendix, Ex. 1, p. 108; Letter Agreement attached as Exhibit 9 to Appendix.
As a result of this transaction, Debtor owns 100% of the outstanding shares of Olaregen. See
Appendix, Ex. 1, p. 5, 79.
24. According to Debtor’s most recent SEC filing, a 10-Q for quarter ending April 30,
2021, Olaregen continues to be wholly-owned by the Debtor. See 10-Q for Generex for quarter
ending April 30, 2021, pp. 7, 14, 32, 42, attached as Exhibit 10 to Appendix.
25. Based on the foregoing, Trustee seeks the following factual findings (collectively,
the “Olaregen Findings”) in the Sale Procedures Order that: (a) Olaregen has 6,236,390 common
stock shares outstanding and no preferred or other classes of equity interests; (b) the Debtor owns
6,236,390 shares of Olaregen’s common stock, representing 100% of the outstanding shares of
Olaregen; (c) that the Debtor’s 100% ownership of Olaregen stock is property of the bankruptcy
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estate and the Trustee has authority to convey the Olaregen stock to the Buyer; (d) that Creek
Mountain’s Lien, if valid and enforceable, would attach only to 592,683 common shares of
Olaregen; (e) no other person or entity has any rights, interest, or equity in the shares of Olaregen;
and (f) there has been no share issuance or other event causing dilution of Debtor’s equity in
Olaregen.
(ii) Antigen Express, Inc. d/b/a NuGenerex Immuno-Oncology, Inc.
26. On August 8, 2003, Generex Biotechnology, Inc. ("Generex"
acquired all of the
outstanding capital stock of Antigen Express, Inc. ("Antigen" pursuant to an Agreement and Plan
of Merger (the "Merger Agreement" among Generex, Antigen and AGEXP Acquisition, Inc.
("AGEXP" , a wholly owned subsidiary of Generex formed for purposes of the transaction. See
Generex Form 8-K filed August 8, 2003, attached as Exhibit 11 to Appendix.
27. Antigen was engaged in research and development efforts focused on the
development of immunomedicines for the treatment of malignant, infectious, autoimmune and
allergic diseases. Antigen's potential products are based on two platform technologies (Ii-Key
hybrid peptides and Ii-Suppression) discovered by founder, Dr. Robert E. Humphreys. Id.
28. On December 30, 2019, the company filed for name change, changing its name to
NuGenerex Immuno-Oncology, Inc. See Certificate of Amendment of Certificate of
Incorporation, attached as Exhibit 12 to Appendix.
29. Prior to filing, NGIO was an oncology company focused on the modulation of the
immune system to treat cancer. NGIO is developing immunotherapeutic products and vaccines
based on our proprietary, patented platform technology, Ii-Key. The Ii-Key is a peptide derived
from the major histocompatibility complex (MHC) Class II associated invariant chain (Ii) that
regulates the formation, trafficking, and antigen-presenting functions of MHC class II complexes,
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essential for the activation of T cells in the immune response. See NGIO 10-K for year ending
July 31, 2020, attached as Exhibit 13 to Appendix, p. 3.
30. According to the 10-K for NGIO, NGIO had 400,300,000 shares of common stock,
outstanding as of October 28, 2020. See Appendix, Ex. 13, p. 1.
31. On January 20, 2021, NGIO designated 100,000 shares of preferred stock as “Series
A Super Voting Preferred Stock.” See NGIO 8-K for quarter ending April 30, 2021, attached as
Exhibit 14 to Appendix, p. 13. The holders of the Series A Super Voting Preferred Stock are
entitled to dividends, conversion, redemption, or liquidation preference and have the right to vote
in an amount equal to 3,000 votes per share. Id.
32. On February 2, 2021, NGIO issued 100,000 shares of the Series A Super Voting
Preferred Stock to Debtor in exchange for 300,000,000 shares of NGIO’s common stock, which
were immediately cancelled after the exchange. Id.
33. According to the most recent 8-K for NGIO, as of June 14, 2021, NGIO had
100,300,000 shares of common stock outstanding, of which Debtor owns 64,153,151 shares. Id.
34. The Debtor owns 64,153,151 common stock shares of NGIO and 100,000 shares
of NGIO’s Series A Super Voting Preferred Stock, according to the Debtor’s most recent quarterly
SEC filing, the 10-Q for quarter ending April 30, 2021. See Appendix, Ex. 10, p. 40.
35. Based on the foregoing, the Trustee seeks the following factual findings
(collectively, the “NGIO Findings’) in the Sale Procedures Order that: (a) NGIO has 100,300,000
common stock shares outstanding, and that the Debtor owns 64,153,151 of such common stock
shares of NGIO; (b) NGIO has 100,000 Series A Super Voting Preferred Stock outstanding, and
that the Debtor owns all 100,000 shares of such Series A Super Voting Preferred Stock; (c) there
are no other classes of equity interests in NGIO; (d) that the Debtor’s equity in NGIO is property
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of the bankruptcy estate and the Trustee has authority to convey the NGIO stock to the Buyer; (e)
no other person or entity has any rights, interest, or equity in the Debtor’s shares of NGIO; and (f)
there has been no share issuance or other event causing dilution of Debtor’s equity in NGIO.
E. Injunctive Relief to Preclude Transfer or Dilution Prior to Sale
36. In the EPA, the Trustee has agreed not to sell, pledge, dispose of, grant, transfer,
lease, license, guarantee, encumber, or authorize the sale, pledge, disposition, grant, transfer, lease,
license, guarantee or encumbrance of any of the Equity. The Trustee has further agreed not to
issue any additional equity or take any action to dilute the existing Equity subject to this agreement.
This term was a material inducement to the Stalking Horse Bidder to protect the value of the Equity
prior to the sale of the Equity. The Trustee submits it is an appropriate and necessary protection
pending the sale pursuant to 11 U.S.C. § 363.
37. To effectuate the intent of this provision, the Trustee requests that in the Sale
Procedures Order, the Court enjoin any and all parties from issuing any additional equity or taking
any action to dilute the existing Equity subject to this agreement. The Sale Procedures Order will
be served on the management of both NGIO and Olaregen.
38. In addition to the Court’s authority under 11 U.S.C. § 105 to issue any order
necessary or appropriate to carry out the provisions of the Bankruptcy Code, such injunction
against further issuance of additional equity or taking any actions to dilute the existing Equity is
justified by an SEC request that the Trustee consent to halt further over-the-counter trading of
shares of NGIO based on the SEC’s recent order instituting administrative proceedings, and by an
Order of the Southern District of New York court enjoining the transfer or dissipation of assets of
the Debtor. See SEC Order, attached as Exhibit 15 to Appendix, and Order of the Southern District
of New York Court attached as Exhibit 16 to Appendix.
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F. Sale of Equity as Property of the Estate Free and Clear of Liens and Interests, Claims
and Encumbrances
39. Pursuant to Section 363(b) of the Bankruptcy Code, the Trustee seeks to sell the
Equity to the highest or best bidder following the Auction, free and clear of all liens, claims,
encumbrances, and interests to the fullest extent possible under applicable law except with respect
to any valid lien asserted by Creek Mountain Partners, Inc. on 592,682 shares of Series A Preferred
Shares in Olaregen (“Creek Olaregen Equity”) owned by Debtor pursuant to UCC-1 Financing
Statement filed by Creek Mountain Partners, Inc. by reason of the UCC-1 Financing Statement
filed on January 28, 2020 under UCC Filing No. 2020 0618696 (“Creek Lien”) (with all liens,
claims, encumbrances, or interests except the Creek Lien referred to as the “Liens and Interests”).
The Buyer will take Creek Olaregen Equity subject only to any valid lien asserted by Creek
Mountain Partners, Inc.
40. The Trustee seeks the entry of an Order, substantially in the same form as the
proposed order attached hereto as Exhibit 2, authorizing the Trustee to sell and convey the Equity
free and clear of the Liens and Interests, including but not limited to the interest held by Oasis
Capital, LLC (“Oasis”) by reason of the UCC-1 Financing Statement filed on January 25, 2022
with the Delaware Secured Transaction Registry under UCC Filing No. 2022 0669879 (“Oasis
UCC-1”).
41. The Trustee requests that the Order further provide that the Liens and Interests shall
attach to the proceeds of the sale of the Equity in the order of their priority, with the validity, force
and effect that they had as of the Petition Date, if any, against the Equity, subject to the rights,
claims, defenses and objections of the Trustee and all interested parties with respect to such liens,
so that the purchaser of the Equity shall take the Equity free of all the Liens and Interests.
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42. Section 363(f) of the Bankruptcy Code authorizes the Trustee to sell property of
the estate free and clear of any liens, claims or encumbrances if one of the following is met: (1)
applicable non-bankruptcy law permits sale of such property free and clear of such interest; (2)
such entity consents, (3) such interest is a lien and the price at which such property is to be sold is
greater than the aggregate value of all liens on such property, (4) such interest is in bona fide
dispute or (5) such entity could be compelled, in a legal or equitable proceeding, to accept a money
satisfaction of such interest.
43. The language of Section 363(f) is in the disjunctive, so that a sale free and clear of
interests can be approved if any of the aforementioned conditions is met. In re Heine, 141 B.R.
185, 189 (Bankr. D.S.D. 1992); In re Elliot, 94 B.R. 343, 345 (E.D. Pa. 1988).
44. The Trustee believes that Section 363(f)(4) applies, as the purported lien of Oasis
is the subject of a bona fide dispute. The Oasis UCC-1 was filed, and thus its security interest was
perfected, less than 90 days before the Petition Date. Accordingly, the lien is subject to avoidance
as a preference.
45. Moreover, Section 363(f)(5) applies, as Oasis could be compelled, in a legal or
equitable proceeding, to accept a money satisfaction of such interest. Section 363(f)(5) has been
interpreted as applying where an entity could be forced to compelled to accept less than full
payment of the underlying debt in any actual or potential proceeding, under applicable
nonbankruptcy law or bankruptcy law. In re Healthco Intern., Inc., 174 B.R. 174, 176 (Bankr. D.
Mass. 1994); In re Hamilton Rd. Realty LLC, 8-19-72596-REG, 2021 WL 1620046, at *6 (Bankr.
E.D.N.Y. Apr. 26, 2021). Moreover, some courts have applied the section on a hypothetical basis,
so that, for example, if an lien holder could be compelled to accept less than payment in full in
satisfaction of its lien in a Chapter 11 cramdown proceeding, the same would be permitted in a
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Chapter 7 proceeding. In re Healthco Intern., Inc., 174 B.R. at 176-177. Since Oasis could be
forced to accept monetary payment in satisfaction of its purported lien, either in a non-bankruptcy
action to foreclose their interest or in a Chapter 11 cramdown, Section 363(f)(5) is met.
G. Sale of the Equity is in Good Faith
46. The Trustee requests that the Court find that the proposed sale to the Stalking Horse
Bidder, or the Successful Buyer, is in good faith under Section 363(m).
47. The Trustee will have provided notice of the sale and the Sale Procedures to all
creditors, NGIO, and Olaregen, and provided publication of same in the Wall Street Journal not
less than once per week for two consecutive weeks.
48. The Stalking Horse Bid was negotiated at arm’s length over several weeks between
sophisticated counsel, and after fielding multiple potential buyers for the Equity.
49. Although the Stalking Horse Bidder group includes a former insider of the Debtor,
Andrew Ro, the group also includes outside investors, and none of the group has any relationship
to the Trustee. The Trustee has given all other interested purchasers access to the same information
to which the Stalking Horse Bidder was given access.
50. The Trustee submits that as a result of the Auction, and the procedures requested
herein, the sale will be for a fair and reasonable price and is conducted in good faith.
51. In connection therewith, the Trustee submits the Stalking Horse Bidder (or the
Successful Bidder) will have acted in good faith and therefore the Trustee requests that the Sale
Order provide appropriate findings and protections pursuant to Section 363(m) of the Bankruptcy
Code.
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52. Collectively, the factors evidence that the Trustee’s proposed sale of the Equity to
the highest and best bidder at auction, without any further delay, is in the best interest of all
creditors of the estate.
H. Limitations on Credit Bids
53. The Trustee is aware of an alleged lien asserted by Oasis on all of the assets of the
Debtor, which lien the Trustee believes is subject to a bona fide dispute and the perfection of which
the Trustee will be seeking to avoid as a preferential transfer.
54. For the same reason, the Trustee seeks to limit the credit bids by Oasis.
55. Pursuant to section 363(k), the Court has the power to limit a creditor’s right to
credit bid for cause. Section 363(k) states that:
(k) At a sale under subsection (b) of this section of property that is subject to a lien that
secures an allowed claim, unless the court for cause orders otherwise the holder of such
claim may bid at such sale, and, if the holder of such claim purchases such property, such
holder may offset such claim against the purchase price of such property.
11. U.S.C. § 363(k) (emphasis added).
56. “[O]nly an allowed claim under § 502 is entitled to “credit bid” at § 363(b) sale.”
In re RML Dev., Inc., 528 B.R. 150, 154 (Bankr. W.D. Tenn. 2014). While a secured creditor has
the right to credit bid, the “law is equally clear, as Section 363(k) provides, that the Court may for
cause order otherwise.” In re Fisker Auto. Holdings, Inc., 510 B.R. 55, 59 (Bankr. D. Del. 2014)
(quotations and citations omitted). Further, section 105(a) states that the “court may issue any
order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.”
11 U.S.C. § 105(a).
57. “The term ‘cause’ is not defined in the Bankruptcy Code and is left to the courts to
determine on a case-by-case basis.” In re Old Prairie Block Owner, LLC, 464 B.R. 337, 348
(Bankr. N.D. Ill. 2011). Various courts have limited credit bid rights where a creditor’s allowed
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secured claim is in dispute, the creditor engaged in inequitable conduct and/or limiting a creditor’s
right to credit bid would foster a competitive bidding environment. For example, in In re Daufuskie
Island Properties, LLC, the court determined that William R. Dixon (“Dixon”) would not have the
right to credit bid because his secured claim was disputed. 441 B.R. 60, 63 (Bankr. D.S.C. 2010).
58. In In re The Free Lance-Star Publ'g Co. of Fredericksburg, VA, the debtors sought
to sell its assets through an auction. 512 B.R. 798, 799-800 (Bankr. E.D. Va. 2014). Around the
same time, the lender initiated an adversary for declaration that it had a valid and perfected lien on
substantially all of the debtor’s assets. Id. at 800. The court held an evidentiary hearing and
determined that the lender did not have a valid lien on certain assets and could not credit bid its
claim against such assets. Id.
59. As an initial matter, Oasis presently does not have any allowed claim. On this basis
alone, Oasis does not have the right to credit bid.
60. To the extent Oasis files a proof of claim, at the very least the secured nature of the
claim will be subject to dispute as the Oasis UCC-1 was filed within the preference period.
I. Trustee Will Comply with Applicable Securities Law
61. Since NGIO is a public company, the Trustee will comply with applicable law
related to the sale of securities. As part of such compliance, the solicitation of higher and better
bids will be limited to accredited investors that are exempt from prospectus and disclosure
requirements applicable to retail investors under securities laws. The proposed Stalking Horse
Bidder is exempt from such prospectus requirements as it meets the requisite sophistication and
investment limits.
62. Accordingly, the Trustee requests that the Court restrict the potential purchasers to
only those purchasers who are exempt from securities disclosures.
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J Waiver of Stay Period Pursuant to Fed. R. Bankr. P. 6004(h)
63. To the extent necessary, the Trustee requests that the Court waive the 14-day stay
period pursuant to Fed. R. Bankr. P. 6004(h).
K. Scheduling Auction and Final Hearing on Sale Motion
64. The Trustee requests that the Court schedule the Sale Hearing to consider final
approval of the sale of the Equity immediately following the Auction on December 27, 2022.
WHEREFORE, the Trustee respectfully requests that this Court enter an Order
substantially in the same form as the order attached hereto as Exhibit 2:
i) granting the Motion,
ii) approving the Equity Purchase Agreement between Trustee and the Stalking Horse
Bidder;
iii) authorizing the Trustee to schedule an auction sale of the Equity,
iv) approving the Sale Procedures and Break-Up Fee in connection with auction sale,
v) approving the form and manner of notice of sale,
vi) making the equity findings as to Debtor’s interest in the Equity as detailed in the
Motion, and finding that the Stalking Horse Bidder is a purchaser in good faith under Section
363(m);
vii) scheduling the Sale Hearing,
viii) approving the sale of the Debtor’s interest in the Equity, free and clear of the Liens
and Interests as set forth herein, and
ix) granting the Debtor such other and further relief as is proper.
Dated: October 14, 2022 Respectfully submitted,
By: /s/ Eyal Berger
Eyal Berger, Esq.
Florida Bar No.: 011069
Email: eyal.berger@akerman.com
AKERMAN LLP
201 East Las Olas Boulevard, Suite 1800
Fort Lauderdale, FL 33301-2999
Tel: 954-463-2700
Fax: 954-463-2224
- and –
Amanda Klopp, Esq.
Florida Bar No. 124156
Email: amanda.klopp@akerman.com
AKERMAN LLP
777 South Flagler Drive, Suite 1100, West Tower
West Palm Beach, FL 33401
Tel: 561-653-5000
Fax: 561-659-6316
Counsel for the Trustee
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Fort Lauderdale Division
www.flsb.uscourts.gov
In re: Chapter 7
GENEREX BIOTECHNOLOGY CORP, Case No. 22-13166-PDR
Debtor.
/
TRUSTEE’S MOTION FOR ENTRY OF AN ORDER (I) APPROVING STALKING HORSE BID
AND STALKING HORSE EPA, (II) APPROVING BID PROCEDURES AND BID
PROTECTIONS IN CONNECTION WITH THE SALE OF DEBTOR’S EQUITY IN TWO
SUBSIDIARIES, (III) APPROVING THE FORM AND MANNER OF NOTICE OF SALE, (IV)
SCHEDULING AN AUCTION AND SALE HEARING AND (V) APPROVING THE SALE OF
THE EQUITY FREE AND CLEAR OF LIENS, CLAIMS, AND ENCUMBRANCES
Marc Barmat, Chapter 7 Trustee (“Trustee”) of Generex Biotechnology Corp. (the
“Debtor”) hereby files this motion (the “Motion”) and moves the Court for an order (I) approving
Stalking Horse Bid and Stalking Horse EPA, (II) approving bid procedures and bid protections in
connection with the sale of Debtor’s equity in two entities, including injunctive relief to preclude
transfer or issuance of additional equity, (III) approving the form and manner of notice of sale,
(IV) scheduling an auction and sale hearing, and (V) approving the sale of the equity free and clear
of all liens, claims, encumbrances, and interests of any kind, including without limitation any right
anyone may have to the Equity (as defined below), specifically including any right to claw back
equity pursuant to contract or other restrictions on transfer, except that any buyer will take the
Creek Olaregen Equity, as defined herein, subject to any valid lien asserted by Creek Mountain
Partners, Inc. In support of this Motion, the Trustee states as follows:
SUMMARY OF PROPOSED SALE AND REQUESTED SALE PROCEDURES
By the Stalking Horse Bid, the buyer, Bio & Med Tech of the Future SPV2, LP agrees to
purchase 64,153,151 common stock shares of Antigen Express, Inc. d/b/a NuGenerex Immuno-
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Oncology, Inc. and 100% of the shares of Olaregen Therapeutix, Inc. that are owned by Debtor for
the price of $1,5000,000, subject to better or higher bids of at least $1,700,000 or more, submitted
no later than December 23, 2022 at 5 p.m. The proposed sale of equity will be free and clear of
all liens, claims, and encumbrances, except with respect to the lien of Creek Mountain Partners,
Inc. on certain shares of Olaregen, to the extent it is a valid and enforceable lien. The proposed
Stalking Horse Bid was reached after weeks of arms’ length negotiations with multiple interested
parties, and contains protections for the stalking horse bidder of a breakup fee of $50,000. In
connection with the sale, the Trustee will seek findings, based on Debtor’s records and public
filings with the SEC, that the Debtor owns the equity sold, the absence of other equity classes in
the entities whose stock is being sold, that the stalking horse bidder is a good faith purchaser, and
that no other third party has any rights, interest, or equity in or to the shares sold. Notice of the
requested sale procedures herein will be served all scheduled creditors, all creditors who have filed
a proof of claim, and all other potential bidders who have expressed interest in the purchase, and
the Trustee will publish notice of the sale in the Wall Street Journal. The deadline to object to the
proposed sale and bid procedures herein is December 16, 2022, with the auction of qualifying
bidders occurring on December 27, 2022.
BACKGROUND
1. On April 23, 2022 (“Petition Date”), Three Brothers Trading, LLC, GS Capital
Partners, LLC, BHP Capital NY, Inc., Beijing Youfeng Biological Technology Co., Ltd. and
Bedford Capital Group LLC (“Original Petitioning Creditors”) filed an involuntary petition as to
Generex Biotechnology Corp (“Debtor”) for relief under title 11 of the United States Code
commencing this case. (ECF 1.)
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2. The Debtor owns (a) 64,153,151 common stock shares and 100,000 shares of
Series A Super Voting Preferred Stock in Antigen Express, Inc. d/b/a NuGenerex Immuno-
Oncology (“NGIO”) and (b) 100% of the equity in Olaregen Therapeutix, Inc. (“Olaregen”).
3. The Trustee has entered into an Equity Purchase Agreement with Bio & Med Tech
of the Future SPV2, LP or its designee or successor or assigns (the “Stalking Horse Bidder”) for
the sale of all outstanding shares, equity, ownership interests, rights, and interests in property of
Debtor in NGIO and Olaregen (collectively, the “Equity”). The purchase price is One Million
Five Hundred Thousand Dollars ($1,500,000.00). The sale will be subject to higher or otherwise
better offers of at least $1,700,000. The Trustee submits that the sale of the Equity to the Stalking
Horse Bidder, or the highest and best bidder following an auction pursuant to Court approved
bidding procedures, is in the best interests of the estate.
4. The Trustee believes the best way to maximize the value of the Equity for the
benefit of the Estate is through an auction sale. The Trustee solicited eight prospective brokers for
potential engagement in this bankruptcy case, and issues precluding retention were (1) the
expedited timeline to market and sell the equity, and (2) the upfront retainer solicited by the
brokers.
EQUITY PURCHASE AGREEMENT
5. On October 13, 2022, the Trustee entered into the EPA with the Stalking Horse
Bidder, a copy of which is attached as Exhibit 1. Key terms of the EPA are summarized below.
The following is only a summary of certain material terms set forth in the EPA, and to the extent
there are any inconsistencies, the executed EPA controls:
i. “Equity” shall mean all shares, common and preferred, voting and non-voting, and
rights and property interests of Antigen Express, Inc. d/b/a NuGenerex Immuno-
Oncology, Inc. and Olaregen Therapeutix, Inc. that are owned by Debtor
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ii. Bankruptcy Court Approval. The Parties acknowledge and agree that this
Agreement is not binding and cannot be performed by or enforced against Seller or
Buyer unless and until the Bankruptcy Court approves this Agreement and
authorizes Seller’s performance of this Agreement. If the Agreement is not
approved by the Court, the Seller’s obligation to sell the Equity to the Buyer shall
terminate without any further liability or obligation on the part of any Party, and
this Agreement shall terminate without any party having any further liability or
obligation hereunder, except for Seller’s obligation to refund the First and Second
Deposits to the Buyer.
iii. Acquisition. Upon the terms and subject to the conditions contained in this
Agreement, on the Closing Date (as hereinafter defined) the Seller, in his capacity
as the Trustee, shall sell, convey, transfer, deliver and assign to the Buyer, and the
Buyer shall purchase and acquire from the Seller, all of the Seller’s right, title and
interest in and to the Equity free and clear of all Liens and Interests on an “as-is,
where-is” basis, with no warranties or representations except as set forth herein,
except that the Creek Olaregen Equity shall be taken subject to assumption of any
valid lien asserted by Creek Mountain Partners, Inc. The purchase and sale of the
Equity is referred to in this Agreement as the “Acquisition.”
iv. Purchase Price. As consideration for the Acquisition, the total purchase price
(“Purchase Price”) shall be One Million Five Hundred Thousand Dollars
($1,500,000.00). The Purchase Price shall be paid by the Buyer to the Seller in cash
or immediately available funds as follows:
(1) Buyer shall pay Seller Seventy-Five Thousand Dollars
($75,000.00) within fourteen (14) days of the full execution of this
Agreement (the “First Deposit”). The Deposit will be held in escrow by the
Trustee and shall be released only as provided by this Agreement;
(2) Buyer shall pay Seller Seventy-Five Thousand Dollars
($75,000.00) before the occurrence of the Overbid Deadline (the “Second
Deposit”). The Deposit will be held in escrow by the Trustee and shall be
released only as provided by this Agreement;
(3) Buyer shall pay Seller One Million Three Hundred Fifty
Thousand Dollars ($1,350,000.00) at Closing.
v. Due Diligence Review. The Buyer and/or its agents and/or representatives shall
until the Overbid Deadline (the “Due Diligence Review Period”) to continue the
review of the business of, and the legal and accounting matters associated with, the
Debtor, the Equity, and the Companies (the “Due Diligence Review”). The Buyer
will be given access by the Trustee to Records concerning the Debtor and the
Companies subject to the execution of a mutually-acceptable Confidentiality and
Non-Disclosure Agreement (“NDA”).
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vi. Buyer’s Right to Terminate. Notwithstanding anything to the contrary contained in
this Agreement, the obligation of the Buyer to Close under this Agreement,
including its obligation to pay the Purchase Price, is subject to Buyer’s satisfaction,
in its sole and absolute discretion, with the results of its Due Diligence Review. At
any time on or before the expiration of the Due Diligence Review Period, Buyer
may elect to terminate this Agreement, by giving written notice of termination to
Seller (the “Buyer Termination Notice”) by any reasonable means, including email
to Seller’s counsel, based on Buyer’s determination, in its sole and absolute
discretion, that it is not satisfied with the results of its Due Diligence Review. If
Buyer does not provide a Buyer Termination Notice on or before the expiration of
the Due Diligence Review Period, the Buyer shall be deemed to have completed
and be satisfied with the results of its Due Diligence Review. In the event that the
Buyer delivers a Buyer Termination Notice to the Seller, then this Agreement shall
terminate without any further liability or obligation hereunder on the part of any
party, except that all obligations in the NDA shall survive the termination of this
Agreement. The Seller shall return all deposits made by the Buyer within seven
days after receipt of a Buyer Termination Notice.
vii. Break Up Fee. In the event that the Bankruptcy Court approves a higher or better
offer for the purchase of the Equity from a Person other than the Buyer or any
Person directly or indirectly Affiliated with or otherwise related to the Buyer or any
nominee thereof, and the Seller closes a sale transaction with that other buyer, then
the Buyer shall be paid upon from the proceeds of the sale of the Equity to such
other Person the sum of no more than Fifty Thousand Dollars ($50,000.00) (the
“Break Up Fee”), subject to the approval of the Bankruptcy Court.
viii. Higher and Better Offers. Subject to the terms and conditions contained in
Paragraph 8(E) of this Agreement, the Buyer acknowledges and agrees that this
Agreement is subject to higher or better offers for the Equity which may be solicited
by and/or received by the Seller through an auction. The Buyer shall have the right
and opportunity, but not the obligation, to make one (1) or more competitive bids
at an auction to be held on or before December 27, 2022 (the “Auction”). If the
Buyer’s bid is not accepted and approved by the Bankruptcy Court, the Seller’s
obligation to sell the Equity to the Buyer shall terminate without any further liability
or obligation on the part of any Party, and this Agreement shall terminate without
any party having any further liability or obligation hereunder, except for Seller’s
obligation to refund the First and Second Deposits to the Buyer, and to pay the
Break-Up Fee if and to the extent approved by the Bankruptcy Court.
ix. Subsequent Bidding Terms. In the event that the Seller desires and/or is required
to seek additional bids (each an “Additional Bid”) for the Equity, then the parties
agree as follows:
(1) The Seller will only consider and/or accept Additional Bids
from the Buyer or from a “Qualifying Bidder” (as defined hereinafter). For
purposes of this Agreement, a Qualifying Bidder shall be defined as a bidder
that has made a Qualifying Bid (as defined hereinafter) on or before the
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deadline to submit such Qualifying Bid, which deadline shall be no later
than December 23, 2022 at 5 p.m. EST (the “Overbid Deadline”).
(2) For purposes of this Agreement, a “Qualifying Bid” is
defined as: a written offer that (i) provides that the bidder shall purchase the
Equity on terms which, in the business judgment of the Seller, are no less
favorable to the Estate than those contained in this Agreement and/or any
Additional Bid from the Buyer; (ii) does not provide and/or entitle any such
bidder to any transaction or break-up fee, expense reimbursement,
termination, or similar type of fee or payment; (iii) does not contain any due
diligence, financing or regulatory contingencies of any kind; (iv) is at least
Two Hundred Thousand Dollars ($200,000.00) (the “Minimum Overbid”)
higher than the Purchase Price or One Million Seven Hundred Thousand
Dollars ($1,700,000.00) (the “Minimum Bid Increment”) higher than the
most recent highest bid contained in any subsequent Qualifying Bid; (v)
contains such financial disclosures and documentation which demonstrate,
in the Trustee’s sole business judgment, the potential bidder’s financial and
other capabilities to consummate the Additional Bid; and (vi) fully discloses
the identity of each person and/or entity that is bidding for the Equity or
otherwise participating in connection with such bid and the complete terms
of any such participation. Within 24 hours after the Overbid Deadline, the
Trustee shall notify the Buyer of all Qualifying Bids that the Trustee has
received, along with a copy of each such Qualifying Bid.
x. Title. The Seller shall convey to Buyer the Equity, and shall request Bankruptcy
Court approval to convey the Equity free and clear of any and all Liens and Interests
or other restrictions on transfer, except with respect to lien asserted by Creek
Mountain Partners, Inc. on 592,682 shares of Series A Preferred Shares in Olaregen
owned by Debtor. Upon the consummation of the Closing, the Seller shall transfer
and convey to the Buyer, and Buyer shall be vested with any title to, the Equity that
Debtor owns, free and clear of any Liens and Interests or other restrictions on
transfer, subject to Bankruptcy Court approval.
xi. Conditions Precedent to Buyer’s Obligations. The obligations of Buyer under this
Agreement are subject to the satisfaction of the following conditions on or prior to
the Closing Date, all or any of which may be waived in writing by Buyer:
(1) The Agreement has not been terminated by the Buyer
pursuant to its rights under this Agreement.
(2) The Seller shall have delivered all documents required to
sell, convey, transfer, deliver and assign to the Buyer the Equity, and all
such documents shall have been properly executed by the Seller.
(3) The Seller shall be able to sell, convey, transfer, deliver and
assign to the Buyer the Equity free and clear of any and all liens, claims,
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and encumbrances, except that the Creek Olaregen Equity shall be taken
subject to any valid lien asserted by Creek Mountain Partners, Inc.
(4) The Court shall have entered the Sale Order, in a form
approved by the Buyer (in the Buyer’s sole discretion that, among other
things: (i) authorizes the sale of the Equity to Buyer; (ii) is not be subject to
any stay and is final and nonappealable; and (iii) finds that the Buyer is a
good faith purchaser within the meaning of Section 363(m); (iv) makes the
Equity Findings; and (v) finds that there has been no share issuance or other
event causing dilution of the Equity.
xii. Conditions Precedent to Seller’s Obligations. The obligations of the Seller under
this Agreement are subject to the satisfaction of the following conditions on or prior
to the Closing Date, all or any of which may be waived in writing by the Seller:
(1) The Buyer shall have delivered to the Seller all documents
required to be delivered by the Buyer, and all such documents shall have
been properly executed by the Buyer.
(2) The Buyer shall have tendered the Purchase Price in
accordance with the terms set forth in this Agreement.
(3) The Bankruptcy Court shall have entered the Sale Order
authorizing the sale of the Equity to Buyer and it shall not be subject to any
stay.
xiii. The Closing. Unless otherwise agreed to in writing by the parties, the closing
contemplated by this Agreement (the “Closing”) shall take place on or before
January 30, 2022, so long as Sale Order is entered by December 30, 2022 and is not
subject to any stay (the “Closing Date”). However, the Parties shall have the ability
to extend Closing if mutually agreed in writing by both Parties.
xiv. Brokers. Neither the Seller nor anyone acting on behalf of the Seller has employed,
either directly or indirectly, or incurred any liability to, any broker, finder or other
agent in connection with this Agreement.
RELIEF REQUESTED
A. Approve of Bidding Procedures and Terms of Sale
6. In order to ensure that the maximum value is received for the Property, the proposed
sale will be subject to the highest and best bidder at auction. The Trustee seeks to adopt procedures
which will foster competitive bidding among potential buyers, without eliminating or discouraging
any qualifying bids. In connection therewith, the Trustee requests that the Court approve the
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following bidding and sale procedures, which the Trustee believes are likely to maximize the
realizable value of the Equity (the “Sale Procedures”):
i. Participation Requirements: Unless otherwise ordered by the Court, in order to
participate in the bidding process, an interested bidder must:
(1) Wire into the trust account of the Trustee an escrow deposit
of Two Hundred Thousand Dollars ($200,000.00) so that the wire is
confirmed to be received by the Trustee through a balance verification of
the Trustee's trust account no later than 5:00 p.m. EST on December 23,
2022 (the “Bid Deadline”);
(2) Submit to the Trustee and Akerman LLP on or before the
Bid Deadline: (A) a fully executed equity purchase agreement (“EPA”)
substantially in the form of the EPA to be provided by the Trustee (the
effectiveness of such EPA being contingent only upon the Qualified Bidder
becoming the Successful Bidder pursuant to these procedures, subject only
to Bankruptcy Court approval, with no due diligence or financing
contingencies), with a purchase price of not less than One Million Seven
Hundred Thousand Dollars ($1,700,000.00), and (
a black-lined version of the EPA to show any changes made by such bidder; provided that, an
EPA with any material changes may be rejected by the Trustee in its sole
business judgment; and
(3) Submit to Akerman and the Trustee on or before the Bid
Deadline such financial disclosures and documentation which demonstrate,
in the Trustee’s sole business judgment, the potential bidder’s financial and
other capabilities to consummate the sale.
ii. A person who timely complies with these Participation Requirements shall have
submitted a “Qualified Bid” and shall be deemed a “Qualified Bidder.” The list of
Qualified Bidders will not be shared with anyone prior to the Auction except the
Stalking Horse Bidder. The Stalking Horse Bidder shall be deemed a Qualified
Bidder.
iii. Waiver of Conflicts: Any person who has submitted a Qualified Bid shall be
deemed to have waived any right to claim there is a conflict with respect to an
unrelated transaction for which such person has employed the law firm of Akerman
LLP, or Furr Cohen, P.A., and the Trustee’s employment of Eyal Berger, Esq. and
the law firm of Akerman LLP as counsel for the sale of the Equity and related
transactions contemplated therein.
iv. Deadline to Object: The deadline to object to the Stalking Horse Bid and sale
procedures is December 16, 2022.
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v. Auction: In the event the Trustee receives a timely Qualified Bid, the Trustee will
conduct an auction (the “Auction”). The Auction shall take place on December 27,
2022 beginning at 9:30 a.m. via Zoom videoconferencing, or such other time or
place as the Trustee shall notify the Qualified Bidders. In the event the Trustee does
not receive a timely Qualified Bid, the Trustee will seek final approval of the sale
to the Stalking Horse bidder at the Sale Hearing.
vi. Auction Procedures: At the Auction, the Trustee will identify the Qualified Bid
which shall serve as the opening bid.
(1) All Qualified Bidders shall be entitled to make any
subsequent bids in increments of not less than $50,000.00 (a “Subsequent
Bid”). Bidding at the Auction shall continue until such time as the highest
or best offer is determined by the Trustee in the exercise of his sole business
judgment. The Trustee reserves the right to modify the bidding increments
or announce at the Auction additional procedural rules for conducting the
Auction in his sole business judgment.
(2) Each Qualified Bidder’s offer shall be irrevocable until the
selection of the Successful Bidder and, if applicable, the Back-Up Bidder
(as set forth in the EPA), provided that if such bidder is selected as the
Successful Bidder or the Back-Up Bidder, its offer shall remain irrevocable
until the closing of the sale to the Successful Bidder or the Back-Up Bidder.
vii. Broker’s Commissions: The bankruptcy estate shall not be liable for any broker
commissions.
viii. Successful Bid: After the conclusion of the Auction, the Trustee shall submit the
highest or best bid that has been accepted (the “Successful Bid”) for approval by
the Bankruptcy Court at a hearing at the United States Courthouse, 299 E. Broward
Blvd, Courtroom 301, Fort Lauderdale, FL 33301 on December 27, 2022 at 2:30
p.m. EST following the auction (the “Sale Hearing”). The Qualified Bidder who
has the Successful Bid presented for approval to the Court shall be referred to as
the “Successful Bidder.”
ix. Closing Date: The closing of the transaction (the “Closing”) shall take place on or
before January 30, 2023, so long Sale Order is entered by December 30, 2022 and
is not subject to any stay (the “Closing Date”), subject to the terms of the EPA. The
Successful Bidder must be prepared and must in fact consummate the purchase of
the Equity in accordance with the EPA.
x. Back Up Bid: Upon the failure of the Successful Bidder to consummate the closing
of the purchase of the Equity because of a breach or failure on the part of the
Successful Bidder, then the Trustee may elect in his business judgment to close
with the next highest or otherwise best Qualified Bidder to be the Successful Bidder
(the “Back Up Bidder”). At the Sale Hearing, the Trustee intends to seek approval
from the Court for the next highest or best bid (the “Back Up Bid”), which approval
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shall authorize the Trustee to consummate the Back Up Bid immediately after a
default under the Successful Bid without further order of the Court. Promptly
following the conclusion of the Sale Hearing, the Trustee shall return the deposits
to each unsuccessful Qualified Bidder (except the Back Up Bidder whose deposit
shall either be returned upon the closing of the sale to the Successful Bidder or
applied to the purchase price in a closing with such Back Up Bidder).
xi. As is/where is: The Equity will be sold “as is”, “where is”, with all faults, with no
guarantees or warranties, express or implied.
xii. Sale Hearing: The Trustee requests that a final Sale Hearing be scheduled to be
held immediately following the Auction on December 27, 2022.
B. Form and Manner of Notice of Sale Procedures and Sale.
7. Pursuant to Bankruptcy Rule 2002(a), the Trustee is required to provide creditors
with 21 days’ notice of the Sale Hearing. Pursuant to Bankruptcy Rule 2002(c), such notice must
include the date, time and place of the Auction and the Sale Hearing. The Trustee will serve the
Motion on the Debtor, all creditors scheduled on the creditor matrix, the Office of the United States
Trustee, and on the registered agent and corporate management of NGIO and Olaregen. After the
passage of the proof of claim deadline on November 3, 2022, the Trustee will serve the Motion on
all creditors who have filed a proof of claim. In addition, the Trustee will serve upon all creditors
and interested parties the Order granting the Motion (the “Sale Procedures Order”), in a form
substantially as attached hereto as Exhibit 2, which shall set forth among other things, the Sale
Procedures, and the time, date, and place of the Auction and Sale Hearing.
8. Further, the Trustee will publish notice of the proposed sale free and clear of all
Liens and Interests, as hereinafter defined, pursuant to Section 363(f) of the Bankruptcy Code in
(a) the Wall Street Journal not less than once per week for two consecutive weeks. Such publication
notice will set forth the time, date, and place of the Auction and Sale Hearing.
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C. Approval of Break-Up Fee.
9. To compensate the Stalking Horse Bidder for serving as the “stalking horse”
thereby subjecting its bid to higher or better offers, the Trustee seeks authority to pay the Break-
Up Fee in the amount of Fifty Thousand Dollars ($50,000.00) if the Bankruptcy Court approves a
higher or better offer for the purchase of the Equity from a person other than the Stalking Horse
Bidder or any person directly or indirectly affiliated with or otherwise related to the Stalking Horse
Bidder or any nominee thereof, and the Seller closes a sale transaction with that other buyer.
10. The ability of the Trustee to offer the Stalking Horse Bidder the Break-Up Fee
benefits the estate because it affords the Trustee the means necessary to induce the Stalking Horse
Bidder to submit its bid prior to the Auction, and thereby establish a “floor” and appropriate
parameters for submission of Qualified Bids in connection with the Auction. Thus, even if the
Stalking Horse Bidder is paid the Break-Up Fee because it is not the Successful Bidder, the estate
will have benefited from the higher floor established by the Stalking Horse and the certainty that
such bid brings to the sale process. Approval of break-up fees, expense reimbursements and other
forms of bidding protection in connection with the sale of significant property pursuant to section
363 of the Bankruptcy Code therefore has become an established practice in bankruptcy cases.
See, e.g., In re Gemini Cargo Logistics, Inc., No. 0610870 (Bankr. S.D. Fla. Apr. 17, 2006); In re
Piccadilly Cafeterias, Inc., No. 03-27976 (Bankr. S.D. Fla. Sept. 14, 2004).
11. Moreover, the amount of the Break-Up Fee is approximately 3.33% of the Purchase
Price and is consistent with the range of break-up fees approved by Courts in this District and
otherwise. See In re Protective Products of America, Inc., et al., No. 10-10711-JKO (Bankr. S.D.
Fla. Jan. 19, 2010) (approving 4% break-up fee and expense reimbursement); In re 160 Royal
Palm, LLC, No. 18-19441-EPK (Bankr. S.D. Fla. Nov. 9, 2018) (approving break-up fee of
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$350,000, constituting 1.09% of purchase price); In re Tousa, Inc., et al., Case No. 08-10928-JKO
(Bankr. S.D. Fla. Dec. 21, 2009) (approving 3% break-up fee).
12. The Trustee believes, in his business judgment, that the Break-Up Fee is reasonable
and appropriate in view of, among other things, the size and nature of the transaction contemplated
by the EPA. Moreover, the Break-Up Fee was a material inducement for, and a condition of, the
Stalking Horse Bidder’s entry into the EPA. Accordingly, the Trustee requests that the terms of
the EPA relating to the Break-Up Fee be approved.
D. Ownership of Equity
13. The Trustee seeks express findings of fact that the Equity is property of the Debtor's
bankruptcy estate.
(i) Olaregen Therapeutix, Inc.
14. Olaregen Therapeutix Inc. (“Olaregen”) is a New York based regenerative
medicine company engaged in the development, manufacturing and commercialization of
products that fill unmet needs in current wound healing market. Olaregen’s proprietary, patented,
wound conforming gel matrix, Excellagen, is an FDA-cleared, topically applied wound healing
product for the management of 17 wound healing indications. See Generex Form 10-K for fiscal
year-end July 31, 2020, pp. 5, 16-17, 97,1 attached as Exhibit 1 to the Appendix filed
contemporaneously with this Motion; Olaregen website, https://www.olaregen.com/about-us-2/.
15. On November 27, 2018, Generex and Olaregen entered into a binding letter of
intent (“LOI”) contemplating the Company’s acquisition of 51% of the outstanding capital stock
of Olaregen for a total consideration of twelve million dollars ($12,000,000). See Generex 8-K
1 The page numbers for the SEC filings refer to the page numbers at the bottom middle of each
page of the report.
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dated November 27, 2018, attached as Exhibit 2 to the Appendix; Binding Letter of Intent attached
as Exhibit 3 to the Appendix.
16. On January 7, 2019, pursuant to a Stock Purchase Agreement, Debtor acquired
3,282,632 common stock shares, representing 51% of the outstanding capital stock, of Olaregen
Therapeutix Inc. (“Olaregen”) for an aggregate of $12,000,000, among which $400,000 was paid
in cash and the remainder was paid by the issuance of a promissory note in the amount of
$11,600,000 (“Olaregen Note”). See Stock Purchase Agreement, attached as Exhibit 4 to the
Appendix; Generex 8-K dated January 7, 2019, attached as Exhibit 5 to the Appendix. The
Olaregen Note is secured by a pledge of the Olaregen Shares pursuant to a Pledge and Security
Agreement. Id. In the event that Debtor failed to pay the final installment of $6,000,000 due on
the Olaregen Note, Debtor was to forfeit the shares allocated to that installment (1,600,000
Olaregen shares) and Olaregen will be entitled to “claw back” fifty percent (50%) of any and all
shares paid for by the prior payments. Id.
17. On March 14, 2019, the Debtor and Olaregen amended the Stock Purchase
Agreement and Olaregen Note to extend the due date of the remaining balance of the second
tranche of payments amounting to $600,000 on or before April 1, 2019. See Appendix, Ex. 1, p.
129; Amendment Agreement attached as Exhibit 6 to the Appendix. The Debtor remitted
additional payments of $200,000 on April 30, 2019 and $38,500 on May 17, 2019. Id. On May
22, 2019, the Debtor and Olaregen amended the agreement to extend the due date of the remaining
balance of the second tranche of payments amounting to $361,500, the full balance of the third
tranche amounting to $3,000,000 and the full balance of the fourth tranche amounting to
$1,000,000 (total of $4,361,500) on or before June 30, 2019. Id.
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18. On March 14, 2019, Olaregen elected the option to proportionally increase the per
share purchase price to $4.00 for the remaining 2,899,658 of the total 3,282,632 shares to be
acquired. See Appendix, Ex. 1, p. 88; Appendix, Ex. 6. This resulted in an additional $998,633
for the Debtor to remit to Olaregen pursuant to the acquisition. See Appendix, Ex. 1, p. 88.
19. In May 2019, Debtor acquired from Creek Mountain Partners, LLC 592,683 shares
of Series A Preferred Stock of Olaregen (“Creek Olaregen Equity”) pursuant to a Stock Purchase
Agreement entered into January 14, 2019, subject to the approval of the Board of Directors of
Olaregen and consummated on May 10, 2019. See Appendix, Ex. 1, p. 114; Stock Purchase
Agreement, attached as Exhibit 7 to Appendix. Debtor acquired the Creek Olaregen Equity in
exchange for 4 million shares of the Debtor’s common stock, contributed and provided by the
Friends of Generex Biotechnology Investment Trust,2 plus the issuance of a $2 million promissory
note, id., thereby increasing Debtor’s interest in Olaregen to approximately 62% of Olaregen’s
outstanding voting shares. See Appendix, Ex. 1, p. 2. The 592,683 Olaregen shares represent
approximately 10% voting control of Olaregen. See Appendix, Ex. 1, p. 113. The $2,000,000
note was extended to have a maturity date of August 1, 2019. Id.
20. On August 16, 2019, Debtor entered into a Share Exchange Agreement to purchase
an additional 900,000 shares of common stock in Olaregen from other shareholders of Olaregen
in exchange for 1,905,912 shares of Generex common stock and 476,478 shares of NGIO common
stock which increased Debtor’s interest in Olaregen to approximately 77% of Olaregen’s
outstanding voting shares. See Appendix, Ex. 1, p. 113; Share Exchange Agreement attached as
2 The provided shares by the Friends of Generex Trust were already issued and outstanding and
did not result in any expense of the Debtor. Since these shares were transferred, to the shareholders
of Olaregen, by an existing shareholder to settle an obligation of the Debtor, the value of the shares
provided by the Friends of the Generex Trust to settle the debt was reflected in the financial
statements as an addition to contributed (paid-in) capital. See Appendix, Ex. 1, p. 70.
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Exhibit 8 to Appendix. The Share Exchange Agreement indicated that the 900,000 shares was
32.18% of the remaining shares, and the exhibit stated that an additional 1,461,075 shares of
common stock were outstanding. See Appendix, Ex. 8.
21. In September 2019, the Debtor converted all of the Series A Preferred Stock of
Olaregen into common stock of Olaregen. See Appendix, Ex. 1, p. 5.
22. On November 24, 2019, the Debtor and Olaregen amended the Stock Purchase
Agreement and Promissory Note to extend the due date of the remaining balance of the Olaregen
Note. See Appendix, Ex. 1, p. 88. Effective November 24, 2019, the deadline was extended to
January 31, 2020. See Appendix, Ex. 1, p. 88, 108.
23. On February 14, 2020, the remaining stockholders of Olaregen exchanged all of its
outstanding shares for 5,950,000 shares of Generex common stock and 2,765,000 shares of NGIO,
see Appendix, Ex. 1, p. 113, with a waiver of any penalties and accrued interest on the outstanding
Olaregen Note. See Appendix, Ex. 1, p. 108; Letter Agreement attached as Exhibit 9 to Appendix.
As a result of this transaction, Debtor owns 100% of the outstanding shares of Olaregen. See
Appendix, Ex. 1, p. 5, 79.
24. According to Debtor’s most recent SEC filing, a 10-Q for quarter ending April 30,
2021, Olaregen continues to be wholly-owned by the Debtor. See 10-Q for Generex for quarter
ending April 30, 2021, pp. 7, 14, 32, 42, attached as Exhibit 10 to Appendix.
25. Based on the foregoing, Trustee seeks the following factual findings (collectively,
the “Olaregen Findings”) in the Sale Procedures Order that: (a) Olaregen has 6,236,390 common
stock shares outstanding and no preferred or other classes of equity interests; (b) the Debtor owns
6,236,390 shares of Olaregen’s common stock, representing 100% of the outstanding shares of
Olaregen; (c) that the Debtor’s 100% ownership of Olaregen stock is property of the bankruptcy
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estate and the Trustee has authority to convey the Olaregen stock to the Buyer; (d) that Creek
Mountain’s Lien, if valid and enforceable, would attach only to 592,683 common shares of
Olaregen; (e) no other person or entity has any rights, interest, or equity in the shares of Olaregen;
and (f) there has been no share issuance or other event causing dilution of Debtor’s equity in
Olaregen.
(ii) Antigen Express, Inc. d/b/a NuGenerex Immuno-Oncology, Inc.
26. On August 8, 2003, Generex Biotechnology, Inc. ("Generex"
acquired all of the outstanding capital stock of Antigen Express, Inc. ("Antigen"
pursuant to an Agreement and Plan of Merger (the "Merger Agreement"
among Generex, Antigen and AGEXP Acquisition, Inc. ("AGEXP"
, a wholly owned subsidiary of Generex formed for purposes of the transaction. See Generex Form 8-K filed August 8, 2003, attached as Exhibit 11 to Appendix.
27. Antigen was engaged in research and development efforts focused on the
development of immunomedicines for the treatment of malignant, infectious, autoimmune and
allergic diseases. Antigen's potential products are based on two platform technologies (Ii-Key
hybrid peptides and Ii-Suppression) discovered by founder, Dr. Robert E. Humphreys. Id.
28. On December 30, 2019, the company filed for name change, changing its name to
NuGenerex Immuno-Oncology, Inc. See Certificate of Amendment of Certificate of
Incorporation, attached as Exhibit 12 to Appendix.
29. Prior to filing, NGIO was an oncology company focused on the modulation of the
immune system to treat cancer. NGIO is developing immunotherapeutic products and vaccines
based on our proprietary, patented platform technology, Ii-Key. The Ii-Key is a peptide derived
from the major histocompatibility complex (MHC) Class II associated invariant chain (Ii) that
regulates the formation, trafficking, and antigen-presenting functions of MHC class II complexes,
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essential for the activation of T cells in the immune response. See NGIO 10-K for year ending
July 31, 2020, attached as Exhibit 13 to Appendix, p. 3.
30. According to the 10-K for NGIO, NGIO had 400,300,000 shares of common stock,
outstanding as of October 28, 2020. See Appendix, Ex. 13, p. 1.
31. On January 20, 2021, NGIO designated 100,000 shares of preferred stock as “Series
A Super Voting Preferred Stock.” See NGIO 8-K for quarter ending April 30, 2021, attached as
Exhibit 14 to Appendix, p. 13. The holders of the Series A Super Voting Preferred Stock are
entitled to dividends, conversion, redemption, or liquidation preference and have the right to vote
in an amount equal to 3,000 votes per share. Id.
32. On February 2, 2021, NGIO issued 100,000 shares of the Series A Super Voting
Preferred Stock to Debtor in exchange for 300,000,000 shares of NGIO’s common stock, which
were immediately cancelled after the exchange. Id.
33. According to the most recent 8-K for NGIO, as of June 14, 2021, NGIO had
100,300,000 shares of common stock outstanding, of which Debtor owns 64,153,151 shares. Id.
34. The Debtor owns 64,153,151 common stock shares of NGIO and 100,000 shares
of NGIO’s Series A Super Voting Preferred Stock, according to the Debtor’s most recent quarterly
SEC filing, the 10-Q for quarter ending April 30, 2021. See Appendix, Ex. 10, p. 40.
35. Based on the foregoing, the Trustee seeks the following factual findings
(collectively, the “NGIO Findings’) in the Sale Procedures Order that: (a) NGIO has 100,300,000
common stock shares outstanding, and that the Debtor owns 64,153,151 of such common stock
shares of NGIO; (b) NGIO has 100,000 Series A Super Voting Preferred Stock outstanding, and
that the Debtor owns all 100,000 shares of such Series A Super Voting Preferred Stock; (c) there
are no other classes of equity interests in NGIO; (d) that the Debtor’s equity in NGIO is property
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of the bankruptcy estate and the Trustee has authority to convey the NGIO stock to the Buyer; (e)
no other person or entity has any rights, interest, or equity in the Debtor’s shares of NGIO; and (f)
there has been no share issuance or other event causing dilution of Debtor’s equity in NGIO.
E. Injunctive Relief to Preclude Transfer or Dilution Prior to Sale
36. In the EPA, the Trustee has agreed not to sell, pledge, dispose of, grant, transfer,
lease, license, guarantee, encumber, or authorize the sale, pledge, disposition, grant, transfer, lease,
license, guarantee or encumbrance of any of the Equity. The Trustee has further agreed not to
issue any additional equity or take any action to dilute the existing Equity subject to this agreement.
This term was a material inducement to the Stalking Horse Bidder to protect the value of the Equity
prior to the sale of the Equity. The Trustee submits it is an appropriate and necessary protection
pending the sale pursuant to 11 U.S.C. § 363.
37. To effectuate the intent of this provision, the Trustee requests that in the Sale
Procedures Order, the Court enjoin any and all parties from issuing any additional equity or taking
any action to dilute the existing Equity subject to this agreement. The Sale Procedures Order will
be served on the management of both NGIO and Olaregen.
38. In addition to the Court’s authority under 11 U.S.C. § 105 to issue any order
necessary or appropriate to carry out the provisions of the Bankruptcy Code, such injunction
against further issuance of additional equity or taking any actions to dilute the existing Equity is
justified by an SEC request that the Trustee consent to halt further over-the-counter trading of
shares of NGIO based on the SEC’s recent order instituting administrative proceedings, and by an
Order of the Southern District of New York court enjoining the transfer or dissipation of assets of
the Debtor. See SEC Order, attached as Exhibit 15 to Appendix, and Order of the Southern District
of New York Court attached as Exhibit 16 to Appendix.
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F. Sale of Equity as Property of the Estate Free and Clear of Liens and Interests, Claims
and Encumbrances
39. Pursuant to Section 363(b) of the Bankruptcy Code, the Trustee seeks to sell the
Equity to the highest or best bidder following the Auction, free and clear of all liens, claims,
encumbrances, and interests to the fullest extent possible under applicable law except with respect
to any valid lien asserted by Creek Mountain Partners, Inc. on 592,682 shares of Series A Preferred
Shares in Olaregen (“Creek Olaregen Equity”) owned by Debtor pursuant to UCC-1 Financing
Statement filed by Creek Mountain Partners, Inc. by reason of the UCC-1 Financing Statement
filed on January 28, 2020 under UCC Filing No. 2020 0618696 (“Creek Lien”) (with all liens,
claims, encumbrances, or interests except the Creek Lien referred to as the “Liens and Interests”).
The Buyer will take Creek Olaregen Equity subject only to any valid lien asserted by Creek
Mountain Partners, Inc.
40. The Trustee seeks the entry of an Order, substantially in the same form as the
proposed order attached hereto as Exhibit 2, authorizing the Trustee to sell and convey the Equity
free and clear of the Liens and Interests, including but not limited to the interest held by Oasis
Capital, LLC (“Oasis”) by reason of the UCC-1 Financing Statement filed on January 25, 2022
with the Delaware Secured Transaction Registry under UCC Filing No. 2022 0669879 (“Oasis
UCC-1”).
41. The Trustee requests that the Order further provide that the Liens and Interests shall
attach to the proceeds of the sale of the Equity in the order of their priority, with the validity, force
and effect that they had as of the Petition Date, if any, against the Equity, subject to the rights,
claims, defenses and objections of the Trustee and all interested parties with respect to such liens,
so that the purchaser of the Equity shall take the Equity free of all the Liens and Interests.
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42. Section 363(f) of the Bankruptcy Code authorizes the Trustee to sell property of
the estate free and clear of any liens, claims or encumbrances if one of the following is met: (1)
applicable non-bankruptcy law permits sale of such property free and clear of such interest; (2)
such entity consents, (3) such interest is a lien and the price at which such property is to be sold is
greater than the aggregate value of all liens on such property, (4) such interest is in bona fide
dispute or (5) such entity could be compelled, in a legal or equitable proceeding, to accept a money
satisfaction of such interest.
43. The language of Section 363(f) is in the disjunctive, so that a sale free and clear of
interests can be approved if any of the aforementioned conditions is met. In re Heine, 141 B.R.
185, 189 (Bankr. D.S.D. 1992); In re Elliot, 94 B.R. 343, 345 (E.D. Pa. 1988).
44. The Trustee believes that Section 363(f)(4) applies, as the purported lien of Oasis
is the subject of a bona fide dispute. The Oasis UCC-1 was filed, and thus its security interest was
perfected, less than 90 days before the Petition Date. Accordingly, the lien is subject to avoidance
as a preference.
45. Moreover, Section 363(f)(5) applies, as Oasis could be compelled, in a legal or
equitable proceeding, to accept a money satisfaction of such interest. Section 363(f)(5) has been
interpreted as applying where an entity could be forced to compelled to accept less than full
payment of the underlying debt in any actual or potential proceeding, under applicable
nonbankruptcy law or bankruptcy law. In re Healthco Intern., Inc., 174 B.R. 174, 176 (Bankr. D.
Mass. 1994); In re Hamilton Rd. Realty LLC, 8-19-72596-REG, 2021 WL 1620046, at *6 (Bankr.
E.D.N.Y. Apr. 26, 2021). Moreover, some courts have applied the section on a hypothetical basis,
so that, for example, if an lien holder could be compelled to accept less than payment in full in
satisfaction of its lien in a Chapter 11 cramdown proceeding, the same would be permitted in a
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Chapter 7 proceeding. In re Healthco Intern., Inc., 174 B.R. at 176-177. Since Oasis could be
forced to accept monetary payment in satisfaction of its purported lien, either in a non-bankruptcy
action to foreclose their interest or in a Chapter 11 cramdown, Section 363(f)(5) is met.
G. Sale of the Equity is in Good Faith
46. The Trustee requests that the Court find that the proposed sale to the Stalking Horse
Bidder, or the Successful Buyer, is in good faith under Section 363(m).
47. The Trustee will have provided notice of the sale and the Sale Procedures to all
creditors, NGIO, and Olaregen, and provided publication of same in the Wall Street Journal not
less than once per week for two consecutive weeks.
48. The Stalking Horse Bid was negotiated at arm’s length over several weeks between
sophisticated counsel, and after fielding multiple potential buyers for the Equity.
49. Although the Stalking Horse Bidder group includes a former insider of the Debtor,
Andrew Ro, the group also includes outside investors, and none of the group has any relationship
to the Trustee. The Trustee has given all other interested purchasers access to the same information
to which the Stalking Horse Bidder was given access.
50. The Trustee submits that as a result of the Auction, and the procedures requested
herein, the sale will be for a fair and reasonable price and is conducted in good faith.
51. In connection therewith, the Trustee submits the Stalking Horse Bidder (or the
Successful Bidder) will have acted in good faith and therefore the Trustee requests that the Sale
Order provide appropriate findings and protections pursuant to Section 363(m) of the Bankruptcy
Code.
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52. Collectively, the factors evidence that the Trustee’s proposed sale of the Equity to
the highest and best bidder at auction, without any further delay, is in the best interest of all
creditors of the estate.
H. Limitations on Credit Bids
53. The Trustee is aware of an alleged lien asserted by Oasis on all of the assets of the
Debtor, which lien the Trustee believes is subject to a bona fide dispute and the perfection of which
the Trustee will be seeking to avoid as a preferential transfer.
54. For the same reason, the Trustee seeks to limit the credit bids by Oasis.
55. Pursuant to section 363(k), the Court has the power to limit a creditor’s right to
credit bid for cause. Section 363(k) states that:
(k) At a sale under subsection (b) of this section of property that is subject to a lien that
secures an allowed claim, unless the court for cause orders otherwise the holder of such
claim may bid at such sale, and, if the holder of such claim purchases such property, such
holder may offset such claim against the purchase price of such property.
11. U.S.C. § 363(k) (emphasis added).
56. “[O]nly an allowed claim under § 502 is entitled to “credit bid” at § 363(b) sale.”
In re RML Dev., Inc., 528 B.R. 150, 154 (Bankr. W.D. Tenn. 2014). While a secured creditor has
the right to credit bid, the “law is equally clear, as Section 363(k) provides, that the Court may for
cause order otherwise.” In re Fisker Auto. Holdings, Inc., 510 B.R. 55, 59 (Bankr. D. Del. 2014)
(quotations and citations omitted). Further, section 105(a) states that the “court may issue any
order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.”
11 U.S.C. § 105(a).
57. “The term ‘cause’ is not defined in the Bankruptcy Code and is left to the courts to
determine on a case-by-case basis.” In re Old Prairie Block Owner, LLC, 464 B.R. 337, 348
(Bankr. N.D. Ill. 2011). Various courts have limited credit bid rights where a creditor’s allowed
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secured claim is in dispute, the creditor engaged in inequitable conduct and/or limiting a creditor’s
right to credit bid would foster a competitive bidding environment. For example, in In re Daufuskie
Island Properties, LLC, the court determined that William R. Dixon (“Dixon”) would not have the
right to credit bid because his secured claim was disputed. 441 B.R. 60, 63 (Bankr. D.S.C. 2010).
58. In In re The Free Lance-Star Publ'g Co. of Fredericksburg, VA, the debtors sought
to sell its assets through an auction. 512 B.R. 798, 799-800 (Bankr. E.D. Va. 2014). Around the
same time, the lender initiated an adversary for declaration that it had a valid and perfected lien on
substantially all of the debtor’s assets. Id. at 800. The court held an evidentiary hearing and
determined that the lender did not have a valid lien on certain assets and could not credit bid its
claim against such assets. Id.
59. As an initial matter, Oasis presently does not have any allowed claim. On this basis
alone, Oasis does not have the right to credit bid.
60. To the extent Oasis files a proof of claim, at the very least the secured nature of the
claim will be subject to dispute as the Oasis UCC-1 was filed within the preference period.
I. Trustee Will Comply with Applicable Securities Law
61. Since NGIO is a public company, the Trustee will comply with applicable law
related to the sale of securities. As part of such compliance, the solicitation of higher and better
bids will be limited to accredited investors that are exempt from prospectus and disclosure
requirements applicable to retail investors under securities laws. The proposed Stalking Horse
Bidder is exempt from such prospectus requirements as it meets the requisite sophistication and
investment limits.
62. Accordingly, the Trustee requests that the Court restrict the potential purchasers to
only those purchasers who are exempt from securities disclosures.
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J Waiver of Stay Period Pursuant to Fed. R. Bankr. P. 6004(h)
63. To the extent necessary, the Trustee requests that the Court waive the 14-day stay
period pursuant to Fed. R. Bankr. P. 6004(h).
K. Scheduling Auction and Final Hearing on Sale Motion
64. The Trustee requests that the Court schedule the Sale Hearing to consider final
approval of the sale of the Equity immediately following the Auction on December 27, 2022.
WHEREFORE, the Trustee respectfully requests that this Court enter an Order
substantially in the same form as the order attached hereto as Exhibit 2:
i) granting the Motion,
ii) approving the Equity Purchase Agreement between Trustee and the Stalking Horse
Bidder;
iii) authorizing the Trustee to schedule an auction sale of the Equity,
iv) approving the Sale Procedures and Break-Up Fee in connection with auction sale,
v) approving the form and manner of notice of sale,
vi) making the equity findings as to Debtor’s interest in the Equity as detailed in the
Motion, and finding that the Stalking Horse Bidder is a purchaser in good faith under Section
363(m);
vii) scheduling the Sale Hearing,
viii) approving the sale of the Debtor’s interest in the Equity, free and clear of the Liens
and Interests as set forth herein, and
ix) granting the Debtor such other and further relief as is proper.
Dated: October 14, 2022 Respectfully submitted,
By: /s/ Eyal Berger
Eyal Berger, Esq.
Florida Bar No.: 011069
Email: eyal.berger@akerman.com
AKERMAN LLP
201 East Las Olas Boulevard, Suite 1800
Fort Lauderdale, FL 33301-2999
Tel: 954-463-2700
Fax: 954-463-2224
- and –
Amanda Klopp, Esq.
Florida Bar No. 124156
Email: amanda.klopp@akerman.com
AKERMAN LLP
777 South Flagler Drive, Suite 1100, West Tower
West Palm Beach, FL 33401
Tel: 561-653-5000
Fax: 561-659-6316
Counsel for the Trustee
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