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Generex Biotechnology to acquire Emmaus Life Sciences for $225M

Generex Biotechnology Corp. signed a letter of intent to acquire a 51% interest in Emmaus Life Sciences Inc. for about $225 million.

The company will pay Emmaus $10 million in cash and $215 million in Generex common stock, valued at $3.80 per share, provided that if a material event occurs that increases the fair market value of the shares before closing, the value attributed to of the shares will be increased to such higher market value up to a maximum of $12.00 per share.

This valuation assumes the consummation of a reverse stock split of the Generex's common stock at a 1000-to-1 ratio, and if such reverse stock does not occur or occurs on different terms, the per share price will be adjusted accordingly.

In case Emmaus does not receive FDA approval by July 7 for its oral pharmaceutical grade L-glutamine treatment for sickle cell anemia and sickle ß0-thalassemia and additional requirements, including trials and testing, required for FDA approval, then the purchase price may be adjusted in proportion to the funding needed from Generex to meet such additional requirements.

Generex has paid Emmaus an initial $500,000 in cash and will pay $1.5 million within three weeks of Jan. 16. The $500,000 payment was advanced to the company and was funded by Joseph Moscato, CEO and director, and Lawrence Salvo, the company's new senior vice president and director. The company does not have any formal arrangement for repayment of the amounts advanced by Moscato and Salvo.

An additional $2 million payment will be given to Emmaus upon signing of a definitive purchase agreement with the remaining $6 million to be paid at closing, which is expected to occur within 60 days of Jan. 16.

If the companies do not execute a definitive agreement within such 45-day period or the closing does not occur within the 60-day period, all cash payments are to be refunded to Generex, along with a breakup fee in the form of warrants to acquire Emmaus capital stock with a market value of $500,000 determined with a strike price corresponding to the closing valuation of Emmaus at $450 million.

In addition, Emmaus has an option to acquire back up to 36% of its shares. The option is exercisable at an exercise price of $100 per 1% of Emmaus' capital stock upon receiving U.S. FDA approval for its blood disorder drug candidate or securing a contractual agreement with a pharmaceutical company to which Emmaus receives an upfront payment from the pharmaceutical company.

Upon closing, Emmaus Chairman Yutaka Niihara will join Generex as executive chairman. Emmaus' directors will continue as directors of Generex for three years and a representative of Generex will be elected as a director.