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As filed with the Securities and Exchange Commission On May 12, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ENDOREX CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
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DELAWARE 41-1505029
(State or Other Jurisdiction Of (I.R.S. Employer
Incorporation or Organization) Identification Number)
28101 BALLARD DRIVE, SUITE F
LAKE FOREST, ILLINOIS 60045
(847) 573-8990
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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FRANK C. REID
VICE PRESIDENT, FINANCE AND CORPORATE DEVELOPMENT
ENDOREX CORPORATION
28101 Ballard Drive, Suite F
Lake Forest, Illinois 60045
(847) 573-8990
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of Agent For Service)
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COPIES TO:
RICHARD R. PLUMRIDGE, ESQ.
BROBECK, PHLEGER & HARRISON LLP
370 Interlocken Blvd, Suite 500
Broomfield, CO 80021
(303) 410-2000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Maximum Maximum Amount Of
Title Of Shares To Be Amount To Be Offering Price Aggregate Registration
Registered Registered Per Share(1) Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value.................. 3,587,226 $3.16 $11,335,634 $3,151.31
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Common Stock, $.001 par
value, underlying
warrants............... 2,281,297 $3.16 $ 7,208,899 $2,004.07
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Common Stock, $.001 par
value, underlying
preferred stock........ 2,289,346 $3.16 $ 7,234,333 $2,011.14
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Total................... 8,157,869 $3.16 $25,778,866 $7,166.52
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</TABLE>
(1) Based on the average high and low trading prices of the common stock, as
reported on the American Stock Exchange, on May 10, 2000.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
8,157,869 Shares
ENDOREX CORPORATION
Common Stock
This prospectus relates to the resale of up to 8,157,869 shares of our common
stock by certain of our current stockholders. We are registering our common
stock for resale by the selling stockholders identified in this prospectus.
Once issued, the prices at which such stockholders may sell the shares will be
determined by the prevailing market for the shares or in negotiated
transactions. We will not receive any proceeds from the sale of shares offered
under this prospectus.
Our common stock is traded on the American Stock Exchange (AMEX) under the
symbol "DOR." The closing price on May 10, 2000 was $3.063.
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The shares of common stock of Endorex offered or sold under this prospectus
involve a high degree of risk. See "Risk Factors" beginning on page 3.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is May 12, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company................................................................ 3
Risk Factors............................................................... 3
Forward Looking Information................................................ 9
Use of Proceeds............................................................ 9
Plan of Distribution....................................................... 9
Selling Stockholders....................................................... 11
Where to Find More Information............................................. 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
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THE COMPANY
Endorex Corporation is a development stage drug delivery company founded in
1985. Our principal executive office is located in the northern Chicago
suburbs at 28101 Ballard Drive, Suite F, Lake Forest, Illinois 60045 and our
telephone number is (847) 573-8990.
RISK FACTORS
An investment in our shares being offered in this prospectus involves a high
degree of risk and if any of the risks discussed below come to fruition you
may lose all or part of your investment. The U.S. Securities and Exchange
Commission, or SEC, allows us to "incorporate by reference" information that
we file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will periodically update and supersede this
information. In deciding whether to purchase shares of our common stock, you
should carefully consider the following risk factors, in addition to other
information contained in this prospectus, in our most recent annual report on
Form 10-KSB and in any other documents incorporated by reference into this
prospectus from other SEC filings. This prospectus also contains forward-
looking statements that involve risks and uncertainties. Our actual results
could differ materially from those discussed here or incorporated by
reference. Factors that could cause or contribute to differences in our actual
results include those discussed in this section, as well as those discussed
elsewhere in this prospectus and in other documents incorporated by reference
into this prospectus.
If we cannot obtain additional funding, our product development and
commercialization efforts may be reduced or discontinued.
We will require additional funding to sustain our research and development
efforts, provide for future clinical trials, and continue our operations until
we are able to generate sufficient revenue from the sale and/or licensing of
our products. We cannot be certain whether we will be able to obtain required
additional funding on terms satisfactory to us, if at all. In addition, we
have expended, and will continue to expend, substantial funds on the
development of our product candidates and for clinical trials. We currently
have commitments to expend additional funds for the development of the
Orasome(TM) oral delivery system, the MEDIPAD(R) infusion pump for iron
chelation therapy, license contracts, severance arrangements, employment
agreements, and consulting agreements. If we are unable to raise additional
funds when necessary, we may have to reduce or discontinue development,
commercialization or clinical testing of some or all of our product candidates
or enter into financing arrangements on terms that we would not otherwise
accept.
We have had significant losses and anticipate future losses.
We are a development stage company, have experienced significant losses
since inception and have a significant accumulated deficit. We expect to incur
significant additional operating losses in the future and expect cumulative
losses to substantially increase due to expanded research and development
efforts, preclinical studies and clinical trials. All of our products are
currently in development, preclinical studies or clinical trials, and we have
not generated significant revenues from product sales. We do not expect to
generate significant product revenues in the next year. There can be no
guarantee that we will ever generate product revenues sufficient to become
profitable or to sustain profitability.
We are dependent on our joint ventures with Elan Corporation and any future
joint ventures.
Our strategy for research, development and commercialization of certain of
our products is to rely on arrangements with corporate partners. As a result,
our products are dependent upon the success of third parties in performing
preclinical studies and clinical trials, obtaining regulatory approvals,
manufacturing and marketing. In connection with our two joint ventures with
Elan Corporation, plc, or Elan, we are obligated to fund research and
development activities in proportion to our ownership interest in each joint
venture, currently 80.1% of each joint venture, based on the research and
development plan and budget that we mutually agree upon with Elan. If
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we do not have sufficient resources to meet our funding obligations under each
of the two Elan joint ventures, we may have to terminate the venture prior to
commercialization or renegotiate the terms of the joint venture with Elan, or
our interest in the venture may be diluted. We intend to pursue additional
collaborations in the future; however, the terms available may not be
acceptable to us and the collaborations may not be successful. In addition,
the amount and timing of resources that our collaborators devote to these
activities are not within our control.
Problems in product development may cause our cash depletion rate to increase.
We have limited experience with clinical trials and if we encounter
unexpected difficulties with our operations or clinical trials, we may have to
expend additional funds, which would increase our cash depletion rate. Our
ability to manage expenses and our cash depletion rate are keys to the
continued development of product candidates and the completion of ongoing
clinical trials. Our cash depletion rate will vary substantially from quarter
to quarter as we fund non-recurring items associated with clinical trials,
product development, patent legal fees and consulting fees.
Our product development and commercialization efforts may not be successful.
Our product candidates, which have not received regulatory approval, are
generally in the early stages of development. If the initial results from any
of the clinical trials are poor, those results will adversely effect our
ability to raise additional capital, which will affect our ability to continue
full-scale research and development for our oral delivery technology. In
addition, product candidates resulting from our research and development
efforts, if any, are not expected to be available commercially for several
years, if at all. Our products, if approved, may not be immediately used by
doctors unfamiliar with our product applications. We or our marketing partner
may be required to implement an aggressive education and promotion plan with
doctors in order to gain market recognition, understanding and acceptance of
our products. Any such effort may be time consuming and might not be
successful. Accordingly, we cannot guarantee that our product development
efforts, including clinical trials, or commercialization efforts will be
successful or that any of our products, if approved, can be successfully
marketed.
Our technology and products may prove ineffective or harmful, or be too
expensive to market successfully.
Our future success is significantly dependent on our ability to develop and
test workable products for which we will seek approval from the U.S. Food and
Drug Administration, or FDA, and/or from the FDA's equivalents in other
countries, to market to certain defined patient groups. The products we are
currently developing will require significant additional laboratory and
clinical testing and investment for the foreseeable future. Although we are
optimistic that we will be able to complete development of one or more
products, our proposed products may not prove to be effective in clinical
trials or they may cause harmful side effects during clinical trials. In
addition, our product candidates, if approved, may prove impracticable to
manufacture in commercial quantities at a reasonable cost and/or with
acceptable quality. Any of these factors could negatively affect our financial
position and results of operations.
Our dependence on a limited number of suppliers may negatively impact our
ability to complete clinical trials and market our products.
Prior to commercial distribution of any of our products, if approved, we
will be required to identify and contract with a commercial supplier or
manufacturer. We cannot guarantee that these suppliers or manufacturers will
be able to qualify their facilities under regulations imposed by the FDA or
that they will be able to label and supply us with drugs in a timely manner,
if at all. Accordingly, any change in our existing or future contractual
relationships with, or an interruption in supply from, any third-party service
provider or supplier could negatively impact our ability to complete clinical
trials and to market our products, if approved.
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We do not have a sales force to market our products.
If and when we receive approval from the FDA for our initial product
candidates, the marketing of these products will be contingent upon our
ability to either license these products or enter into marketing agreements
with partner companies or our ability to recruit, develop, train and deploy
our own sales force. We currently intend to sell our products in the United
States and internationally in collaboration with one or more marketing
partners. However, we presently have only one agreement for the licensing or
marketing of our product candidates, and we cannot assure you that we will be
able to enter into any such additional agreements in a timely manner or on
commercially favorable terms, if at all. Additionally, we do not presently
have a sales force, or possess the resources or experience necessary to market
any of our product candidates, if and when they are approved. Development of
an effective sales force requires significant financial resources, time and
expertise. We cannot assure you that we will be able to obtain the financing
necessary to establish such a sales force in a timely or cost effective
manner, if at all, or that such a sales force will be capable of generating
demand for our product candidates, if and when they are approved.
We maintain only limited product liability insurance and may be exposed to
claims if our insurance coverage is insufficient.
The manufacture and sale of our products involves an inherent risk of
product liability claims. We currently have product liability insurance with
limits of liability of $10 million. Because product liability insurance is
expensive and difficult to obtain, we cannot assure you that we will be able
to maintain existing insurance or obtain additional product liability
insurance on acceptable terms or with adequate coverage against potential
liabilities. Our inability to obtain sufficient insurance coverage on
acceptable terms or to otherwise protect against potential product liability
claims in excess of our insurance coverage, if any, could negatively impact
our financial position and results of operations.
We may not be able to compete with our competitors in the biotechnology
industry.
The biotechnology industry is intensely competitive, subject to rapid change
and sensitive to new product introductions or enhancements. Virtually all of
our existing competitors have greater financial resources, larger technical
staffs, and larger research budgets than we have, as well as greater
experience in developing products and conducting clinical trials. Our
competitors in the vaccine delivery field include Aviron, which is developing
a nasal flu vaccine that is in phase III, BioVector, which is in phase II
trials with an intranasal flu vaccine and another major vaccine, specialized
biotechnology firms, universities, and governmental agencies. Our competitors
in the liposomal formulation field include The Liposome Company (owned by Elan
Corporation), NexStar (owned by Gilead Sciences, Inc.) and Sequus (owned by
ALZA Corporation). Our competitors in the field of the oral delivery of drugs
include Emisphere, which has recently started Phase III trials for oral
heparin and phase I trials with oral calcitonin, and is in preclinical
development with oral hormones; Unigene, which has an oral calcitonin product
in phase I; and Protein Delivery which has an oral insulin in early clinical
trials in Europe and the U.S. In addition, there may be other companies which
are currently developing competitive technologies and products or which may in
the future develop technologies and products which are comparable or superior
to our technologies and products. Accordingly, we cannot assure you that we
will be able to compete successfully with our existing and future competitors
or that competition will not negatively affect our financial position or
results of operations in the future.
We may not be successful if we are unable to obtain and maintain patents and
licenses to patents.
Our success depends, in large part, on our ability to obtain and maintain a
proprietary position in our products through patents, trade secrets and orphan
drug designations. We have been granted several United States patents and have
submitted several United States patent applications and numerous corresponding
foreign patent applications, and have also obtained licenses to patents or
patent applications owned by other entities. However, we cannot assure you
that any of these patent applications will be granted or that our patent
licensors will not terminate any of our patent licenses. We also cannot
guarantee that any issued patents will provide competitive
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advantages for our products or that any issued patents will not be
successfully challenged or circumvented by our competitors. Further, the laws
of certain countries may not protect our proprietary rights to the same extent
as U.S. law. We are dependent upon our license of oral delivery technology
from MIT, and licenses from Elan in connection with our two joint ventures
with Elan. We cannot assure you that the technology underlying such licenses
will be profitable, or that we will be able to retain licenses for such
technologies or that we will obtain patent protection outside the United
States. To the extent that we rely on trade secret protection and
confidentiality agreements to protect our technology, others may develop
similar technology, or otherwise obtain access to our findings or research
materials embodying those findings. The application of patent law to the field
of biotechnology is relatively new and has resulted in considerable
litigation. There is a substantial risk in the rapidly developing
biotechnology industry that patents and other intellectual property rights
held by us could be infringed by others or that products developed by us or
their method of manufacture could be covered by patents owned by other
companies. Although we believe that our patents and our licensors' patents do
not infringe on any third party's patents, we cannot be certain that we can
avoid litigation involving such patents or other proprietary rights. Patent
and proprietary rights litigation entails substantial legal and other costs,
and we may not have the necessary financial resources to defend or prosecute
our rights in connection with any litigation. Responding to, defending or
bringing claims related to patents and other intellectual property rights may
require our management to redirect our human and monetary resources to address
these claims and may take years to resolve.
Our product development and commercialization efforts may be reduced or
discontinued due to difficulties or delays in clinical trials.
We may encounter unanticipated problems, including development,
manufacturing, distribution, financing and marketing difficulties, during the
product development, approval and commercialization process. Our product
candidates may take longer than anticipated to progress through clinical
trials. In addition, patient enrollment in the clinical trials may be delayed
or prolonged significantly, thus delaying the clinical trials and causing
increased costs. If we experience any such difficulties or delays, we may have
to reduce or discontinue development, commercialization or clinical testing of
some or all of our product candidates.
Our product development and commercialization efforts may be reduced or
discontinued due to delays or failure in obtaining regulatory approvals.
We will need to do substantial additional development and clinical testing
prior to seeking any regulatory approval for commercialization of our product
candidates. Testing, manufacturing, commercialization, advertising, promotion,
export and marketing, among other things, of our proposed products are subject
to extensive regulation by governmental authorities in the United States and
other countries. The testing and approval process requires substantial time,
effort and financial resources and we cannot guarantee that any approval will
be granted on a timely basis, if at all. At least initially, we intend, to the
extent possible, to rely on licensees to obtain regulatory approval for
marketing our products. The failure by us or our licensees to adequately
demonstrate the safety and efficacy of any of our product candidates under
development could delay, limit or prevent regulatory approval of the product,
which may require us to reduce or discontinue development, commercialization
or clinical testing of some or all of our product candidates. Companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks
in conducting advanced human clinical trials, even after obtaining promising
results in earlier trials. Furthermore, the United States Food & Drug
Administration may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk. Also, even if regulatory approval of a product is
granted, such approval may entail limitations on the indicated uses for which
it may be marketed. Accordingly, we may experience difficulties and delays in
obtaining necessary governmental clearances and approvals to market our
products, and we may not be able to obtain all necessary governmental
clearances and approvals to market our products.
Our products, if approved, may not be commercially viable due to health care
changes and third-party reimbursement limitations.
Recent initiatives to reduce the federal deficit and to change health care
delivery are increasing cost-containment efforts. We anticipate that Congress,
state legislatures and the private sector will continue to review
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and assess alternative benefits, controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare
and Medicaid spending, price controls on pharmaceuticals, and other
fundamental changes to the health care delivery system. Any such changes could
negatively impact the commercial viability of our products, if approved. Our
ability to successfully commercialize our product candidates, if and when they
are approved, will depend in part on the extent to which appropriate
reimbursement codes and authorized cost reimbursement levels of such products
and related treatment are obtained from governmental authorities, private
health insurers and other organizations, such as health maintenance
organizations. In the absence of national Medicare coverage determination,
local contractors that administer the Medicare program, within certain
guidelines, can make their own coverage decisions. Accordingly, there can be
no assurance that any of our product candidates, if approved and when
commercially available, will be included within the then current Medicare
coverage determination or the coverage determination of state Medicaid
programs, private insurance companies and other health care providers. In
addition, third-party payers are increasingly challenging the prices charged
for medical products and services. Also, the trend toward managed health care
and the growth of health maintenance organizations in the United States may
all result in lower prices for our products, if approved and when commercially
available, than we currently expect. The cost containment measures that health
care payers and providers are instituting and the effect of any health care
changes could negatively affect our financial performance, if and when one or
more of our products are approved and available for commercial use.
Our operations and financial performance could be negatively affected if we
cannot attract and retain key personnel.
Our success is dependent, in part, upon a limited number of key executive
officers and technical personnel, including Michael S. Rosen, our President
and Chief Executive Officer, Dr. Robert N. Brey, our Vice President of
Research and Development, and Frank C. Reid, our Vice President of Finance and
Corporate Development. We also believe that our future success will depend
largely upon our ability to attract and retain highly skilled research and
development and technical personnel. We maintain key man insurance only on Mr.
Rosen. We face intense competition in our recruiting activities, including
competition from larger companies with greater resources. We cannot assure you
that we will be successful in attracting or retaining skilled personnel. The
loss of certain key employees or our inability to attract and retain other
qualified employees could negatively affect our operations and financial
performance.
Our stock price is highly volatile and our common stock is thinly traded.
The market price of our common stock, like that of many other development-
stage public pharmaceutical and biotechnology companies, has been highly
volatile and may continue to be so in the future. Factors such as disclosure
of results of preclinical and clinical testing, adverse reactions to products,
governmental regulation and approvals, and general market conditions may have
a significant effect on the market price of the common stock and our other
equity securities. Since it commenced trading on the American Stock Exchange
on August 6, 1998, our common stock has been thinly traded. We cannot
guarantee that a more active trading market will develop in the future.
Investors may suffer substantial dilution.
Endorex has a number of agreements or obligations that may result in
dilution to investors. These include:
. warrants to purchase 2,012,622 shares of common stock at $2.54375 per
share, subject to adjustment, issued in connection with the October 1997
private placement of our common stock;
. warrants to purchase 230,770 shares of common stock at $10.00 per share,
subject to adjustment, held by Elan;
. warrants to purchase 43,334 shares of common stock at $2.3125 per share,
subject to adjustment, held by the Aries Master Fund II and warrants to
purchase 23,334 shares of common stock at $2.3125 per share, subject to
adjustment, held by the Aries Domestic Fund, L.P., both issued on May
19, 1997 pursuant to a senior line of credit that has been subsequently
retired;
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. warrants to purchase 452,383 shares of common stock at $5.91, subject to
adjustment, held by certain investors pursuant to the April 2000 private
placement of our common stock;
. warrants to purchase 226,190 shares of common stock at $5.25, subject to
adjustment, issued to the finder in connection with the April 2000
private placement of our common stock;
. conversion rights and dividend rights of preferred stock held by Elan,
consisting of 92,973, subject to adjustment, shares of Series B
Convertible Preferred Stock ($8.0 million original liquidation value)
bearing an 8% cumulative payment-in-kind dividend and convertible at
liquidation value into common stock at $7.38 per share, subject to
adjustment, and 91,218, subject to adjustment, shares of Series C
Exchangeable Convertible Preferred Stock ($8.4 million original
liquidation value) bearing a 7% cumulative payment-in-kind dividend and
which is exchangeable for part of Endorex's interest in one of the joint
ventures with Elan or convertible at liquidation value into common stock
at $8.86 per share;
. options to purchase approximately 1.7 million shares of common stock
issued to participants in our stock option plan with a weighted average
exercise price of approximately $2.88; and
. anti-dilution rights under the above warrants and preferred stock, which
can permit purchase of additional shares and/or lower
exercise/conversion prices under certain circumstances. To the extent
that anti-dilution rights are triggered, or warrants, options or
conversion rights are exercised, our stockholders will experience
substantial dilution and the Company's stock price may decrease.
Future sales of common stock by our existing stockholders could adversely
affect our stock price.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market, or the
perception that these sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate.
We have not paid cash dividends.
We have never paid cash dividends on our common stock and we do not
anticipate paying any dividends in the foreseeable future. We currently intend
to retain earnings, if any, for the development of our business.
We have certain interlocking relationships that may present potential
conflicts of interest.
Lindsay A. Rosenwald, M.D., is the Chairman and sole stockholder of
Paramount Capital Asset Management, Inc., or PCAM, Paramount Capital, Inc., or
Paramount, and Paramount Capital Investment LLC, or PCI, a merchant banking
and venture capital firm specializing in biotechnology companies. PCAM is the
investment manager of The Aries Master Fund II, a Cayman Island exempted
company, and the general partner of each of the Aries Domestic Fund, L.P. and
the Aries Domestic Fund II, L.P., each of which is a significant stockholder
of Endorex. In addition, certain officers, employees and/or associates of
Paramount and/or its affiliates own securities in a subsidiary of Endorex. In
the regular course of its business, PCI identifies, evaluates and pursues
investment opportunities in biomedical and pharmaceutical products,
technologies and companies. Generally, Delaware corporate law requires that
any transactions between Endorex and any of its affiliates be on terms that,
when taken as a whole, are substantially as favorable to us as those then
reasonably obtainable from a person who is not an affiliate in an arms-length
transaction. Nevertheless, neither such affiliates nor PCI is obligated
pursuant to any agreement or understanding with us to make any additional
products or technologies available to us. We do not expect and you should not
expect, that any biomedical or pharmaceutical product or technology identified
by such affiliates or PCI in the future will be made available to us. In
addition, certain of the current officers and directors of Endorex or any
officers or directors of the company hereafter appointed may from time to time
serve as officers, directors or consultants of other biopharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not have interests in conflict with us.
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Certain directors and stockholders have significant influence.
Our directors, executive officers and principal stockholders and certain of
their affiliates have the ability to influence the election of directors and
most other stockholder actions. In particular, pursuant to a placement agency
agreement, Paramount may propose up to three persons for nomination as
directors until October 2000. In addition, our Board of Directors cannot
exceed six persons without the prior written consent of Paramount until
October 2000. These arrangements may discourage or prevent any proposed
takeover of Endorex, including transactions in which stockholders might
otherwise receive a premium for their shares over the then current market
prices. Such stockholders may influence corporate actions, including
influencing elections of directors and significant corporate events.
FORWARD-LOOKING INFORMATION
This prospectus includes "forward-looking statements" regarding future
events or our future performance within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements other than
statements of historical facts included in this prospectus or incorporated by
reference regarding our financial position and business strategy may
constitute forward-looking statements. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
can not guarantee that these expectations will prove to be correct. Important
factors that could cause actual results to differ materially from our
expectations are listed in this prospectus, and they include the forward-
looking statements under "risk factors." All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares. All proceeds
will be received by the selling stockholders. See "Selling Stockholders".
PLAN OF DISTRIBUTION
Endorex is registering all 8,157,869 shares on behalf of the selling
stockholders. Endorex will receive no proceeds from this offering. The selling
stockholders named in the table below or pledgees, donees, transferees or
other successors-in-interest selling shares received from the selling
stockholders as a gift, partnership distribution or other non-sale related
transfer after the date of this prospectus may sell the shares from time to
time. The selling stockholders will act independently of Endorex in making
decisions with respect to the timing, manner and size of each sale. The sales
may be made on one or more exchanges or in the over-the-counter market or
otherwise, at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The selling
stockholders may effect these transactions by selling the shares to or through
broker-dealers.
The shares may be sold by one or more of, or a combination of, the
following:
. a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by this broker-
dealer for its account through this prospectus;
. an exchange distribution that complies with the rules of the exchange;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
. in privately negotiated transactions.
9
<PAGE>
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with broker-
dealers in connection with distributions of the shares or otherwise. In these
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholder. The
selling stockholders also may sell shares short and redeliver the shares to
close out these short positions. The selling stockholders may enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the shares. The broker-dealer may then resell or
otherwise transfer these shares through this prospectus. The selling
stockholders each may also loan or pledge the shares to a broker-dealer. The
broker-dealer may sell the shares so loaned, or upon a default the broker-
dealer may sell the pledged shares by use of this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder. Broker-
dealers or agents may also receive compensation from the purchasers of the
shares for whom they act as agents or to whom they sell as principals, or
both. Compensation as to a particular broker-dealer might be in excess of
customary commissions and will be in amounts to be negotiated in connection
with the sale. Broker-dealers or agents and any other participating broker-
dealers or the selling stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act in connection with sales of
the shares. Accordingly, any commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be
deemed to be underwriting discounts or commissions under the Securities Act.
Because the selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will
be subject to the prospectus delivery requirements of the Securities Act. In
addition, any securities covered by this prospectus which qualify for sale
through Rule 144 promulgated under the Securities Act may be sold under Rule
144 rather than through this prospectus. The selling stockholders have advised
Endorex that they have not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of the
securities. There is no underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling stockholder.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act,
any person engaged in the distribution of the shares may not engage in market
making activities with respect to our common stock for a period of one
business day before the commencement of this distribution. In addition, the
selling stockholders will be subject to applicable provisions of the
Securities Exchange Act and the associated rules and regulations under the
Securities Exchange Act, including Regulation M, which provisions may limit
the timing of purchases and sales of shares of our common stock by the selling
stockholder. Endorex will make copies of this prospectus available to the
selling stockholders and has informed each of them of the need for delivery of
copies of this prospectus to purchasers at or before the time of any sale of
the shares.
Endorex will file a supplement to this prospectus, if required, under Rule
424(b) under the Securities Act upon being notified by the selling
stockholders that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. This supplement will disclose:
. the name of the selling stockholders and of the participating broker-
dealer(s);
. the number of shares involved;
. the price at which these shares were sold;
10
<PAGE>
. the commissions paid or discounts or concessions allowed to the broker-
dealer(s), where applicable;
. that the broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
. other facts material to the transaction.
In addition, upon being notified by any selling stockholder that a donee or
pledgee intends to sell more than 500 shares, Endorex will file a supplement
to this prospectus.
Endorex will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to their respective sales of the shares.
The selling stockholders may agree to indemnify any broker-dealer or agent
that participates in transactions involving sales of the shares against some
liabilities, including liabilities arising under the Securities Act. Endorex
and the selling stockholders have agreed to indemnify each other against some
liabilities in connection with the offering of the shares, including
liabilities arising under the Securities Act.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders and the
number of shares being registered for sale as of the date of the prospectus
and sets forth the number of shares of common stock known by us to be
beneficially owned by each of the selling stockholders. Except as indicated
below, none of the selling stockholders has had a material relationship with
the Company within the past three years other than as a result of the
ownership of the shares or other securities of the Company. The shares offered
by this prospectus may be offered from time to time by the selling
stockholders. This information is based upon information provided by each
respective selling stockholder, schedules 13D and other public documents filed
with the SEC. The number of shares of common stock beneficially owned and used
to calculate the percentage beneficial ownership of each listed person
includes the shares of common stock underlying warrants or preferred stock
held by such persons that are exercisable or convertible within 60 days of
April 30, 2000. The term "selling stockholders" includes the stockholders
listed below and their transferees, assignees, pledgees, donees or other
successors. The percent of beneficial ownership for each stockholder is based
on 12,703,237 shares of common stock outstanding as of April 30, 2000.
11
<PAGE>
<TABLE>
<CAPTION>
Beneficial
Ownership
Number of Shares of Common Stock After Offering
Registered for Sale Hereby (1) (2)
--------------------------------- -----------------
Shares of
Common
Stock
Shares of Underlying
Number of Shares Common Series B
Beneficially Shares of Stock and Series C
Name of Selling Owned Prior Common Underlying Preferred Number of
Stockholder to Offering(2)(3) Stock Warrants Stock Shares Percent
--------------- ------------------ --------- ---------- ------------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
AFAX Group Ltd.......... 66,138 52,910 13,228 -- -- --
Aries Domestic Fund,
L.P.(4)................ 1,063,760 565,332 56,533 -- 441,895 3.46%
The Aries Master Fund
II(5).................. 2,346,945 1,121,587 112,159 -- 1,113,199 8.69%
Banque SCS Alliances
S.A.................... 132,275 105,820 26,455 -- -- --
Beacon Global Advisors.. 132,275 105,820 26,455 -- -- --
Credito Privato
Commericale............ 132,275 105,820 26,455 -- -- --
Crescent International
Ltd.................... 138,562 105,820 26,455 -- 6,287 *
Deephaven Private
Placement.............. 132,275 105,820 26,455 -- -- --
DG Lux Lacuna APO
Biotech................ 317,460 253,968 63,492 -- -- --
Drax Holdings Group
L.P.................... 502,930 211,640 52,910 -- 238,380 1.87%
Elan Pharmaceutical
Investments, Ltd.(6)... 1,798,259 -- -- 2,289,346 538,462 3.79%
Robert I. Falk.......... 113,185 52,910 13,228 -- 47,047 *
Financiere Tuileries.... 39,683 31,746 7,937 -- -- --
Heritage Finance and
Trust Co............... 127,552 84,656 21,164 -- 21,732 *
Peter Kash(7)........... 78,865 78,865 -- -- -- --
Peter Kash and Donna
Kash JTWROS............ 11,920 11,920 -- -- -- --
Keys Foundation,
Curacao................ 112,311 84,656 21,164 -- 6,491 *
Nomura Bank
(Switzerland) Ltd...... 264,550 211,640 52,910 -- -- --
Paramount Capital,
Inc.(8)................ -- -- 226,190 -- -- --
PKB Privatbank AG....... 219,672 169,312 42,328 -- 8,032 *
Tis Prager.............. 23,940 10,582 2,646 -- 10,712 *
Lindsay A. Rosenwald,
M.D.(9)................ 4,862,084 -- 1,434,032 -- 3,428,052 23.85%
St. John's Trust........ 132,275 105,820 26,455 -- -- --
Bruno Widmer............ 15,445 10,582 2,646 -- 2,217 *
</TABLE>
- --------
* Less than 1%.
(1) This prospectus includes 3,380,428 shares of common stock that were
previously registered on a registration statement on Form S-2,
Registration No. 333-44583, filed by the Company with the SEC on January
21, 1998, but which were not sold while such registration statement was
effective.
(2) The calculations for the beneficial ownership of each selling stockholder
assumes (i) that any shares subject to warrants or conversion privileges
within 60 days of April 30, 2000 shall be deemed owned and outstanding for
the purpose of determining beneficial ownership and the percentage of
outstanding shares beneficially owned by such person, but shall not be
deemed to be outstanding for the purpose of computing the percentage
beneficially owned by any other person, and (ii) that such selling
stockholder has sold all of its shares registered hereunder. Some of the
selling stockholders may also sell shares of common stock registered under
prior registration statements or pursuant to Rule 144. Because the selling
stockholders may offer all, some or none of the shares pursuant to this
prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares, no estimate
can be given as to the number of shares that will be held by the selling
stockholders after completion of the sale of shares hereunder. See "Plan
of Distribution."
(3) On April 12, 2000, the Company, pursuant to a private placement to certain
investors, issued 1,809,522 shares of common stock and warrants
exercisable for 452,383 shares of common stock issuable upon exercise of
the warrants until April 12, 2005 at a price of $5.91 per share. The
number of shares of common
12
<PAGE>
stock beneficially owned by each such selling stockholder includes the
shares of common stock underlying warrants issued pursuant to the April
2000 private placement if such selling stockholder was an investor in the
April 2000 private placement.
(4) Number of shares beneficially owned includes 23,334 shares of common stock
issuable upon exercise of warrants exercisable until May 19, 2002 at a
price of $2.3125 per share, and 56,533 shares issuable upon exercise of
warrants exercisable until April 16, 2003 at a price of $2.54375 per
share. Does not include warrants to purchase 1,434,032 shares of common
stock held by Lindsay A. Rosenwald, M.D., the Chairman of PCAM, which is
the general partner of the Aries Domestic Fund, L.P., in his individual
capacity. Dr. Rosenwald and PCAM share the power to vote and/or dispose of
the shares of common stock held by the Aries Domestic Fund, L.P., but
disclaim beneficial ownership thereof except to the extent of their
pecuniary interest therein, if any.
(5) Number of shares beneficially owned includes 43,334 shares of common stock
issuable upon exercise of warrants exercisable until May 19, 2002 at a
price of $2.3125 per share, and 112,159 shares of common stock issuable
upon exercise of warrants exercisable until April 16, 2003 at a price of
$2.54375 per share. Does not include warrants to purchase 1,434,032 shares
of common stock held by Lindsay A. Rosenwald, M.D., the Chairman of PCAM,
which is the investment manager of The Aries Master Fund II, in his
individual capacity. Dr. Rosenwald and PCAM share the power to vote and/or
dispose of the shares of common stock held by The Aries Master Fund II,
but disclaim beneficial ownership thereof except to the extent of their
pecuniary interest therein, if any.
(6) Number of shares beneficially owned includes 1,259,757 shares of common
stock issuable upon conversion of Series B Preferred Stock and 230,770
shares issuable upon exercise of warrants exercisable until January 21,
2004 at a price of $10.00 per share. Although this registration statement
registers 1,029,549 shares of common stock issuable upon conversion of
Series C Preferred Stock after October 20, 2000, the shares underlying the
Series C Preferred Stock have not been included in calculating the
beneficial ownership prior to or after the offering because the Series C
Preferred Stock is not convertible into common stock within 60 days of
April 30, 2000.
(7) Does not include 11,920 shares over which Peter Kash and Donna Kash have
beneficial ownership as joint tenants with rights of survivorship. Mr.
Kash is a Senior Managing Director of Paramount.
(8) As compensation for services as financial advisor and finder for the April
2000 private placement, the Company issued warrants for 226,190 shares of
common stock with an exercise price of $5.25 to Paramount. Although this
registration statement registers the 226,190 shares issuable upon exercise
of such warrants, the shares underlying these warrants have not been
included in calculating the beneficial ownership prior to or after the
offering since these warrants are not exercisable within 60 days of April
30, 2000. Paramount has indicated that it will transfer all or a portion
of such warrants to its employees, officers and its affiliates.
(9) Lindsay A. Rosenwald, M.D., is the Chairman and sole stockholder of PCAM,
which is the Investment Manager and General Partner of the Aries Master
Fund II and Aries Domestic Fund, L.P., respectively. Paramount's chairman
and sole stockholder is Lindsay A. Rosenwald, M.D. The securities
beneficially owned by Lindsay A. Rosenwald include 1,434,032 shares of
common stock issuable upon exercise of warrants exercisable until April
16, 2003 at a price of $2.54375 per share, 1,063,760 shares beneficially
owned by Aries Domestic Fund, L.P., 2,346,945 shares beneficially owned by
Aries Master Fund II and 17,346 shares beneficially owned by Aries
Domestic Fund II, L.P. Dr. Rosenwald disclaims beneficial ownership of the
shares owned by the Aries Master Fund II, Aries Domestic Fund II, L.P. and
Aries Domestic Fund, L.P., except to the extent of any pecuniary interest
therein.
Relationships with Selling Stockholders
In addition to the relationships set forth in the table above and the
footnotes thereto, the Company has the following relationships with Selling
Stockholders.
On January 21, 1998, we established a joint venture, with Elan for the
exclusive research, development and commercialization of oral and mucosal
prophylactic and therapeutic vaccines. As part of the transaction, Elan
International Services, Ltd., or EIS, a wholly owned subsidiary of Elan, made
a $2.0 million initial investment
13
<PAGE>
by purchasing 307,692 shares of Common Stock and warrants to acquire 230,770
shares of Common Stock. The six-year warrants have an exercise price of $10.00
per share. In addition, in connection with the joint venture and the execution
of a license agreement, we issued $8.0 million of Series B Convertible
Preferred Stock to EIS.
On October 21, 1998, we established a second joint venture, Endorex Newco,
Ltd., with Elan for the exclusive research, development and commercialization
of the Medipad(TM) disposable drug delivery system with two undisclosed drugs.
In connection with the joint venture and the execution of a license agreement,
we issued $8.4 million of Series C Convertible Preferred Stock to EIS.
Pursuant to a placement agreement dated as of July 1, 1997 between Paramount
and ourselves, until October 2000 Paramount may propose up to three persons
for nomination as our directors and our Board of Directors cannot exceed six
persons without the prior written consent of Paramount.
Pursuant to a Financial Advisory Agreement between Paramount and us, dated
as of October 25, 1999, Paramount will provide to us financial advisory
services for a period of twelve months from the date of the agreement.
Paramount will receive as compensation for its services $5,000 per month for
the term of the Financial Advisory Agreement and is entitled to receive
options for 46,000 shares of common stock at an exercise price of $2.54 per
share. Of these options, options for 10,000 shares of common stock are
immediately exercisable upon the issuance of such options and expire after
October 25, 2000 and are subject to our right to repurchase such options for
$50,000; options for 9,000 shares of common stock become exercisable after
October 25, 2000 and expire after October 25, 2009; options for 9,000 shares
of common stock become exercisable after April 25, 2001 and expire after
October 25, 2009; and options for 18,000 shares of common stock become
exercisable after October 25, 2002 and expire after October 25, 2009.
Pursuant to a Finder Agreement dated as of February 29, 2000, as amended on
April 6, 2000, between Paramount and us, Paramount agreed to act as a finder
in connection with our April 2000 private placement of common stock and
warrants. In return for its services under the Finder Agreement, Paramount
received a cash payment of $598,500 and warrants exercisable for 226,190
shares of common stock at an exercise price of $5.25 per share. The warrants
are not exercisable until October 12, 2000 and expire on October 11, 2007.
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act with respect to the common stock offered hereby. This
prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and the schedules thereto. For further
information with respect to the Company and such common stock, reference is
made to the registration statement and exhibits and schedules thereto.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and, with respect to
any contract or other document filed as an exhibit to the registration
statement or documents incorporated herein by reference, each such statement
is qualified in all respects by reference to the applicable exhibit, or
documents incorporated by reference therein. Copies of the registration
statement and the exhibits are on file at the offices of the SEC and may be
obtained upon payment of the prescribed fee or may be examined without charge
at the public reference facilities of the SEC described above.
The SEC allows us to "incorporate by reference" into this prospectus the
documents we file with them, which means that we can disclose important
information to you by referring you to these documents. The information that
we incorporate by reference into this prospectus is considered to be part of
this prospectus. We incorporate by reference into this prospectus the
documents listed below:
. Annual Report on Form 10-KSB for the year ended December 31, 1999, as
filed with the SEC on March 30, 2000;
14
<PAGE>
. Current Report on Form 8-K, as filed with the SEC on March 20, 2000;
. Definitive Proxy Statement with respect to the Annual Meeting of
Stockholders as filed with the SEC on April 13, 2000;
. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the Company's fiscal year
ended December 31, 1999; and
. The description of our common stock contained in our registration
statement on Form 8A/A as filed with the SEC on August 4, 1998.
We will also incorporate by reference each of the following documents that
we will file with the SEC after the date of this prospectus until this
offering is completed or after the date of this initial registration statement
before the effectiveness of the registration statement:
. Reports filed under Sections 13 (a) and (c) of the Exchange Act;
. Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting;
and
. Any reports filed under Section 15 (d) of the Exchange Act.
We will provide, without charge, upon written or oral request of any person
to whom a copy of this prospectus is delivered, a copy of any or all of the
foregoing documents and information that has been or may be incorporated by
reference herein (other than exhibits to such documents). Requests for such
documents and information should be directed to the following address:
Endorex Corporation
Attention: Frank C. Reid
Vice President, Finance and Corporate Development
28101 Ballard Drive, Suite F
Lake Forest, Illinois 60045
Telephone number (847) 573-8990
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized
no one to provide you with different information. We are not making an offer
of these securities in any state where the offer is not permitted. You should
not assume that the information in this prospectus is accurate as of any date
other than on the front of this document.
Our common stock is traded on the American Stock Exchange under the symbol
"DOR". Reports, proxy statements and other information concerning Endorex may
be inspected at the Nasdaq-Amex Market Group at 80 Merritt Blvd., Trumbull, CT
06611.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Broomfield, Colorado.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB for the year ended December 31,
1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
15
<PAGE>
8,157,869 Shares
ENDOREX CORPORATION
Common Stock
PROSPECTUS
May 12, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The selling stockholders will not pay any of the expenses of this offering.
The following table sets forth an estimate of the expenses to be incurred by
the Company in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<CAPTION>
Amount to
Be Paid
---------
<S> <C>
Registration Fee--SEC................................................. $ 7,000
Legal Fees and Expenses............................................... 40,000
Accounting Fees and Expenses.......................................... 10,000
Printing Fees and Expenses............................................ 10,000
Miscellaneous......................................................... 3,000
-------
Total............................................................... $70,000
=======
</TABLE>
Item 15. Indemnification of Directors and Officers
Article Thirteenth of the Company's Certificate of Incorporation, as
amended, and Article VII of the Company's By-Laws provide that the Company may
indemnify each current and former director, officer, and any employee or agent
of the corporation, his or her heirs, executors, and administrators, against
expenses reasonably incurred or any amounts paid by him or her in connection
with any action, suit, or proceeding to which he or she may be made a party by
reason of being or having been a director, officer, employee or agent of the
corporation to the fullest extent permitted by the Delaware General
Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Reference is made to Section 145 of the Delaware General Corporation Law as
such Section pertains to indemnification matters.
II-1
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
Series B Preferred Certificate of Designation, Preferences and Rights filed as of January 21, 1998
3.1 (1).
Series C Preferred Certificate of Designation, Preferences and Rights filed as of October 21, 1998
3.2 (1).
4.1 Form of Subscription Agreement by and between the Registrant and each investor dated as of
April 11, 2000.
4.2 Form of Amendment and Supplement to Subscription Agreement entered into by each investor as of
April 11, 2000.
4.3 Form of Second Amendment and Supplement to Subscription Agreement entered into by each
investor as of April 11, 2000.
4.4 Form of Investor Warrant issued to each investor dated as of April 12, 2000.
4.5 Form of Finder Warrant issued to Paramount Capital, Inc. dated as of April 12, 2000.
4.6 Warrant issued to Aries Fund dated as of May 19, 1997.
4.7 Warrant issued to Aries Domestic Fund, L.P. dated as of May 19, 1997.
4.8 Warrant issued to Paramount Capital, Inc. dated as of October 16, 1997. (2)
4.9 Warrant issued to Paramount Capital, Inc. dated as of October 16, 1997. (2)
5.1 Opinion of Brobeck, Phleger & Harrison, LLP.
10.1 Finder Agreement between the Registrant and Paramount Capital, Inc. dated as of February 29, 2000.
10.2 Amendment and Supplement to Finder Agreement dated as of April 6, 2000.
10.3 Financial Advisory Agreement between the Registrant and Paramount Capital, Inc. dated as of
October 25, 1999.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison, LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney.
</TABLE>
- --------
(1) Incorporated by reference to our Quarterly Report on Form 10-QSB, for the
period ended on September 30, 1998.
(2) Incorporated by reference to our Quarterly Report on Form 10-QSB, as
amended, for the period ended on September 30, 1997.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities
II-2
<PAGE>
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) include any additional or changed material information on the plan
of distribution;
PROVIDED, HOWEVER, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or 15(d) of the Securities
Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lake Forest, State of Illinois, on
May 12, 2000.
Endorex Corporation
/s/ Michael S. Rosen
By: _________________________________
Michael S. Rosen
President and Chief Executive
Officer, and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
the registration statement has been signed by the following persons in the
capacities indicated on May 12, 2000.
<TABLE>
<S> <C>
/s/ Michael S. Rosen President, Chief Executive Officer, and Director
By: _______________________________________ (Principal Executive Officer)
Michael S. Rosen
/s/ Frank C. Reid Vice President, Finance and Corporate
By: _______________________________________ Development (Principal Financial and Accounting
Frank C. Reid Officer)
* Director
By: _______________________________________
Richard Dunning
* Director
By: _______________________________________
Steve H. Kanzer
* Director
By: _______________________________________
Paul D. Rubin
* Director
By: _______________________________________
H. Laurence Shaw
* Director
By: _______________________________________
Kenneth Tempero
* Director
By: _______________________________________
Steven Thornton
/s/ Frank C. Reid
*By: ______________________________________
Frank C. Reid
Attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Series B Preferred Certificate of Designation, Preferences and Rights
filed as of January 21, 1998(1).
3.2 Series C Preferred Certificate of Designation, Preferences and Rights
filed as of October 21, 1998(1).
4.1 Form of Subscription Agreement by and between the Registrant and each
investor dated as of April 11, 2000.
4.2 Form of Amendment and Supplement to Subscription Agreement entered
into by each investor as of April 11, 2000.
4.3 Form of Second Amendment and Supplement to Subscription Agreement
entered into by each investor as of April 11, 2000.
4.4 Form of Investor Warrant issued to each investor dated as of April 12,
2000.
4.5 Form of Finder Warrant issued to Paramount Capital, Inc. dated as of
April 12, 2000.
4.6 Warrant issued to Aries Fund dated as of May 19, 1997.
4.7 Warrant issued to Aries Domestic Fund, L.P. dated as of May 19, 1997.
4.8 Warrant issued to Paramount Capital, Inc. dated as of October 16,
1997(2).
4.9 Warrant issued to Paramount Capital, Inc. dated as of October 16,
1997(2).
5.1 Opinion of Brobeck, Phleger & Harrison, LLP.
10.1 Finder Agreement between the Registrant and Paramount Capital, Inc.
dated as of February 29, 2000.
10.2 Amendment and Supplement to Finder Agreement dated as of April 6,
2000.
10.3 Financial Advisory Agreement between the Registrant and Paramount
Capital, Inc. dated as of October 25, 1999.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison, LLP. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney.
</TABLE>
- --------
(1) Incorporated by reference to our Quarterly Report on Form 10-QSB, for the
period ended on September 30, 1998.
(2) Incorporated by reference to our Quarterly Report on Form 10-QSB, as
amended, for the period ended on September 30, 1997.
<PAGE>
Exhibit 4.1
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth on
the signature page hereof between Endorex Corporation, a Delaware Corporation
(the "Company") and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in connection with the proposed sale of securities of the Company (the
"Offering"). This Agreement is being executed and delivered in reliance upon the
exemption from securities registration afforded by Rule 506 under Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act");
and
WHEREAS, the Company desires to sell to the Subscriber and the Subscriber
desires to purchase from the Company the number of Units set forth beside such
Subscriber's name on the signature page hereto. Each "Unit" shall consist of (i)
a number of shares of common stock of the Company (rounded to the nearest whole
share, with one-half (0.5) of one share, or greater fraction thereof, being
rounded upward), par value $.001 per share (the "Common Stock"), determined by
dividing one hundred thousand dollars ($100,000) by the lower of (a) the average
closing price of the Common Stock, as quoted on the American Stock Exchange, for
the five (5) consecutive trading days immediately preceding the date on which
the Company executes this Agreement (the "Pricing Date"), (b) the average
closing price of the Common Stock, as quoted on the American Stock Exchange, for
the fifteen (15) consecutive trading days immediately preceding the Pricing Date
or (c) $7.25 (the lower of such prices being referred to herein as the "Common
Stock Price"); provided, however, that the Company shall not be obligated to
execute this Agreement or sell the Units if the Common Stock Price, were this
Agreement to be executed by the Company, would be below $3.25 and (ii) a warrant
(collectively, the "Warrants"), substantially in the form attached hereto as
Exhibit A, to purchase a number of shares of Common Stock equal to twenty five
percent (25%) of the shares of Common Stock included in such Unit, such warrants
to be exercisable, in whole or in part, at any time prior to the fifth
anniversary of the date of issuance at an exercise price equal to one hundred
twenty five percent (125%) of the Common Stock Price (the Common Stock, the
Warrants, and the Common Stock issuable upon the exercise of the Warrants are
sometimes herein collectively referred to as the "Securities").
NOW, THEREFORE, in consideration of the promises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
-1-
<PAGE>
I. SUBSCRIPTION FOR UNITS, REPRESENTATIONS AND COVENANTS BY SUBSCRIBER
-------------------------------------------------------------------
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units and the Company agrees to sell such Units to the Subscriber as
is set forth upon the signature page hereof at a price equal to $100,000 per
Unit (the "Purchase Price"). The Purchase Price is payable by personal or
business check or wire transfer of immediately available funds made payable to
"State Street Bank & Trust Co., "Escrow Agent," F/B/O Endorex Corporation"
contemporaneously with the execution and delivery of this Agreement by the
Subscriber. The certificates representing the Common Stock, and the Warrants,
subscribed for pursuant to this Agreement will be delivered by the Company
within ten (10) days following the Pricing Date as set forth in Article III
hereof. The Subscriber understands, however, that this purchase of Units is
contingent upon the Company receiving subscriptions for a number of Units which
would provide aggregate gross proceeds to the Company of at least $2,000,000
(the "Minimum Offering") prior to May 1, 2000 (the "Offering Termination Date").
1.2 The Subscriber recognizes that the purchase of Units involves a
high degree of risk, as set forth in the "Risk Factors" section of the Company's
Prospectus dated January 5, 2000, contained in the Subscriber Package (defined
in Section 1.5 hereof).
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Act, as indicated by the Subscriber's responses to the questions contained
in the Confidential Investor Questionnaire attached hereto as Exhibit B (the
"Investor Questionnaire"), and that the Subscriber is able to bear the economic
risk of an investment in the Units.
1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in securities
which are non-listed, unregistered and/or not traded on the Nasdaq National or
SmallCap Market, a national or regional stock exchange (including, without
limitation, the New York Stock Exchange or the American Stock Exchange), or the
Subscriber has employed the services of an investment advisor, attorney and/or
accountant to read all of the documents furnished or made available by the
Company to the Subscriber and to all other prospective investors in the Units
and to evaluate the merits and risks of such an investment on the Subscriber's
behalf; (ii) the Subscriber recognizes the highly speculative nature of this
investment; and (iii) the Subscriber is able to bear the economic risk which the
Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of
this Agreement and all attachments to it (including, without limitation, the
Offering Summary, the Executive Summary, the Warrant, the Company's press
release dated March 1, 2000, and the Company's periodic reports on Form 10-QSB
and Form 10-KSB (and Forms 8-K, if any) filed since March 29, 1999 and prior to
March 3, 2000, the Company's Proxy Statement for its 1999 Meeting of
Shareholders and the Company's Prospectus dated January 5, 2000 (the "SEC
-2-
<PAGE>
Documents" and collectively with this Agreement and the attachments to it, the
"Subscriber Package")); and hereby represents that the Subscriber has been
furnished by the Company during the course of this transaction with all
information regarding the Company which the Subscriber has requested or desired
to know, has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering, and has received any
additional information which the Subscriber has requested.
1.6 (a) To the extent necessary, the Subscriber has retained, at
his/her/its sole expense, and relied upon appropriate professional advice
regarding the investment, tax and legal merits and consequences of this
Agreement and its purchase of the Units hereunder. The Subscriber acknowledges
and agrees that Paramount Capital, Inc. (the "Finder") has not supplied any
information other than information furnished in writing to the Company by Finder
relating to Finder, that Finder has no responsibility for the accuracy or
completeness of the information, and that the Subscriber has not relied upon the
independent investigation or verification, if any, which may have been
undertaken by the Finder.
(b) The Subscriber represents that no Units were offered or sold
to it by means of any form of general solicitation or general advertising, and
in connection therewith the Subscriber did not: (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.
1.7 The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with, and who are not compensated by, the Company or any affiliate
or selling agent of the Company, including Finder, directly or indirectly), has
the capacity to protect the Subscriber's own interests in connection with the
transaction contemplated hereby.
1.8 The Subscriber hereby acknowledges that the offering of Units has
not been reviewed by the United States Securities and Exchange Commission or any
state regulatory authority, since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Act pursuant to Regulation D
promulgated under the Act. The Subscriber shall not sell or otherwise transfer
the Securities comprising the Units unless such Security is registered under the
Act or unless an exemption from such registration is available.
1.9 The Subscriber understands that the Securities comprising the
Units have not been registered under the Act by reason of Rule 506 under
Regulation D of the Act, a claimed exemption under the provisions of the Act,
which depends, in part, upon the Subscriber's investment intention. In this
connection, the Subscriber hereby represents that the Subscriber is purchasing
the Securities comprising the Units for the Subscriber's own account for
investment
-3-
<PAGE>
and not with a view toward the resale or distribution to others. The Subscriber,
if an entity, was not formed for the purpose of purchasing the Securities.
1.10 The Subscriber understands that although there currently is a
public market for the Common Stock, Rule 144 ("Rule 144") promulgated under the
Act requires, among other conditions, a one-year holding period prior to the
resale (in limited amounts and subject to other restrictions) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the Act, unless such resale shall otherwise be exempt from
such registration requirements. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register any of the
Units or any of the Common Stock (including the Common Stock issuable upon
exercise of the Warrants) comprising the Units under the Act or any state
securities or "blue sky" laws other than as set forth in Article V herein. The
Subscriber agrees to hold the Company and its directors, officers, employees,
controlling persons and agents (including Finder and its officers, directors,
employees, counsel, controlling persons and agents) and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of, (i) any
misrepresentation made by the Subscriber contained in this Agreement (including
the Investor Questionnaire), (ii) any sale or distribution by the Subscriber in
violation of the Act or any applicable state securities or "blue sky" laws or
(iii) any untrue statement of a material fact made by the Subscriber and
contained herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Common Stock that such shares of
Common Stock have not been registered under the Act or any state securities or
"blue sky" laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of such Common Stock.
1.12 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional
units and to close the Offering to the Subscriber at any time.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its principal
business address if it is a corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Securities comprising the Units. This Agreement
constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.
-4-
<PAGE>
1.15 If the Subscriber is a corporation, partnership, limited
liability company, trust, employee benefit plan, individual retirement account,
Keogh Plan, or other entity (a) it is authorized and qualified to become an
investor in the Company and the person signing this Agreement on behalf of such
entity has been duly authorized by such entity to do so and (b) it is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the Investor Questionnaire.
1.17 The Subscriber represents that since the period from the date
that Subscriber was first contacted with respect to the potential purchase of
Securities, the Subscriber has not sold "short" or "shorted against the box" (as
those terms are generally understood) any equity security of the Company. The
Subscriber covenants and agrees that until the last date upon which Subscriber
holds any Securities or Registrable Securities, the Subscriber shall not,
directly or indirectly, through related parties, affiliates or otherwise, (i)
sell "short" or "short against the box" (as those terms are generally
understood) any equity security of the Company or (ii) otherwise engage in any
transaction, except for any transaction contemplated by this Agreement, that
involves hedging of the Subscriber's position in any equity security of the
Company.
1.18 The Subscriber represents that he/she/it is not an Affiliate (as
defined in Section 5.1 below) of the Company or a director, officer, employee or
agent of any such Affiliate of the Company.
II REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
-----------------------------------------------
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as described in the Company's financial statements. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in the State of Illinois and in each jurisdiction in which the failure to do so
would have a material adverse effect on the Company's business or financial
condition.
2.2 Capitalization. As of December 31, 1999, the authorized capital
stock of the Company consisted of (i) 50,000,000 shares of common stock, par
value $0.001 per share, of which 10,755,653 shares were issued and outstanding,
and of which 2,209,914 shares were reserved for issuance under the Company's
stock incentive plans (for which options to purchase 1,571,502 shares were
outstanding) and 2,459,600 shares were reserved for issuance under the
-5-
<PAGE>
Company's outstanding warrants, and (ii) 500,000 shares of preferred stock, par
value $.05 per share, of which 183,177 shares were issued and outstanding. The
terms, preferences and privileges of the outstanding shares of capital stock are
set forth in the Company's Certificate of Incorporation as amended to the date
hereof (the "Certificate"). Except as set forth in the Company's financial
statements and other SEC filings, there are no existing options, warrants,
calls, preemptive (or similar) rights, subscriptions or other rights,
agreements, arrangements or commitments of any character obligating the Company
to issue, transfer or sell, or cause to be issued, transferred or sold, any
shares of the capital stock of the Company or other equity interests in the
Company or any securities convertible into or exchangeable for such shares of
capital stock or other equity interests, and there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or other equity interests. Except as set
forth in Company's financial statements and other filings filed with the SEC, no
holder of any capital stock or securities of the Company has any registration
rights.
2.3 Authorization; Enforceability. The Company has all corporate
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities contemplated herein
and the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. Upon the issuance and delivery of the
Securities as contemplated by this Agreement, and upon compliance by the
Subscriber with the terms hereof, such Securities will be validly issued, fully
paid and nonassessable. The Common Stock issuable upon exercise of the Warrants,
when issued in accordance with the terms thereof for the consideration expressed
therein, will have been duly and validly issued, fully paid and nonassessable.
The issuance and sale of the Securities contemplated hereby will not give rise
to any preemptive rights or rights of first refusal on behalf of any person.
2.4 No Conflict; Governmental and Other Consents.
(i) The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or By-
Laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of the Company.
-6-
<PAGE>
(ii) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution, delivery and performance of
this Agreement, except such filings as may be required to be made with the SEC,
the National Association of Securities Dealers, Inc. ("NASD"), the American
Stock Exchange ("AMEX"), such filings as may be required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended ("HSR") and filings with
governmental authorities for purposes of effecting compliance with the
securities and blue sky laws in the states in which Units are offered and/or
sold, which compliance, if required to be effected by the Company, will be
effected in accordance with such laws. The Company has not received any
delisting notices, notice of violation or similar inquiry regarding its
eligibility for listing from AMEX.
2.5 Licenses. Except as set forth in the Company's financial
statements and other SEC filings, the Company has sufficient licenses, permits
and other governmental authorizations currently required for the conduct of its
business or ownership of properties and is in all material respects complying
therewith.
2.6 Litigation. Except as set forth in the Company's financial
statements and other filings filed with the SEC, to the best knowledge of the
Company after due inquiry, there is no pending or threatened legal or
governmental proceedings against the Company which could materially adversely
affect the business, property, financial condition or operations of the Company.
2.7 Accuracy of Reports. All material reports required to be filed by
the Company within the two years prior to the date of this Agreement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), have been duly
filed with the Commission, complied at the time of filing in all material
respects with the requirements of their respective forms and, except to the
extent updated or superseded by any subsequently filed report, to the best of
the Company's knowledge, were complete and correct in all material respects as
of the dates at which the information was furnished, and contained (as of such
dates) no untrue statement of a material fact nor omitted to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
2.8 Offering Summary; Disclosure. No information set forth in the
Offering Summary or in any exhibit to the Offering Summary contains, as of the
respective date thereof, any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.9 Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder.
-7-
<PAGE>
2.10 Changes. Since September 30, 1999, there has not been (a) any
incurrence by the Company of any material liability, absolute or contingent, or
(b) any event or condition of any character that has materially and adversely
affected or might materially and adversely affect the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted), except as has been disclosed
to Subscriber, including, without limitation, any disclosure made pursuant to
the Subscriber Package being furnished to the Subscriber herewith. There is no
material liability or contingency of the Company that is not disclosed in the
Subscriber Package.
2.11 Patents and Trademarks. To its knowledge, except as disclosed in
the SEC Documents, the Company owns or possesses the right to use to all
patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted, without infringement
of any rights of a third party. Except as is disclosed in the SEC Documents, the
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, tradenames, copyrights, trade secrets or
other proprietary rights or processes of any other person or entity, which
violation would have a material adverse effect on the Company. Except as
disclosed in the SEC Documents, the Company has not granted (nor has the Company
licensed from a third party) any material rights to or licenses to its patents,
trademarks, service marks, tradenames, copyrights, trade secrets or other
proprietary rights or processes.
2.12 Use of Proceeds. The Company currently intends that the net
proceeds of the Offering will be used by the Company for its research and
development activities, including preclinical and clinical studies, and general
corporate purposes. The Company may also use a portion of the net proceeds for
the acquisition of businesses, products and technologies.
III. TERMS OF SUBSCRIPTION
---------------------
3.1 The Company shall sell to the Subscribers a number of Units which
would provide aggregate gross proceeds to the Company of at least $2,000,000
(the "Minimum Offering Amount") but in no event shall the Company sell to
Subscribers a number of Units comprised of more than 1,500,000 shares of Common
Stock (excluding the shares of Common Stock underlying the Warrants) (the
"Maximum Offering"), at a purchase price of $100,000 per Unit (the "Purchase
Price"). The Purchase Price is payable on the date of Subscriber's execution
hereof by personal or business check or wire transfer of immediately available
funds made payable to "State Street Bank & Trust Co., N.A., "Escrow Agent,"
F/B/O Endorex Corp." The Company may execute this Agreement at any time after
its receipt of the Minimum Offering Amount and prior to the Offering Termination
Date (the date of such execution being the "Pricing Date"). The Company shall
notify each Subscriber by telephone and/or facsimile that the Company has
executed this Agreement on the date of such execution. The Company shall deliver
the shares of Common Stock and the Warrants being subscribed for hereunder
directly to the Subscriber's account maintained by the Finder or, if no such
account exists, to the residential
-8-
<PAGE>
or business address indicated on the signature page hereto, on a date specified
by the Company and the Finder (the "Closing Date"), provided, however, that the
Closing Date shall be no later than ten (10) days after the Pricing Date.
3.2 Pending the sale of the Units, all funds paid hereunder shall be
held in escrow with the Escrow Agent, having a branch at 61 Broadway, New York,
New York. If the Company shall not have obtained subscriptions (including this
subscription) for purchases of the Minimum Offering on or before the Offering
Termination Date, then this subscription shall be void and all funds paid
hereunder by the Subscriber shall be promptly returned to the Subscriber, with
interest, if any; provided, however, that the Subscriber hereby authorizes and
directs the Company to return any funds for unaccepted subscriptions to the same
account from which the funds were drawn.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
--------------------------------------------
4.1 The Subscribers' obligation to purchase the Units at the Closing
is subject to the fulfillment on or prior to the Closing of the following
conditions, which conditions may be waived at the option of each Subscriber to
the extent permitted by law:
(a) Representations and Warranties Correct. The representations
and warranties made by the Company in Article II hereof shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on each Closing with the same force and effect as if they had
been made on and as of said date.
(b) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to such
purchase shall have been performed or complied with in all material respects.
(c) Listing. The Company shall have filed an Application for
Listing of Additional Shares with the American Stock Exchange.
(d) No Legal Order Pending. There shall not then be in effect
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(e) No Law Prohibiting or Restricting Such Sale. There shall not
be in effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person which shall not have been
obtained to issue the Securities (except as otherwise provided in this
Agreement).
(f) Minimum Subscriptions. The Company shall have received
binding subscriptions for Units with an aggregate purchase price of at least
$2,000,000.
-9-
<PAGE>
(g) Legal Opinion. At the Closing, counsel to the Company shall
have delivered to the Subscribers a legal opinion reasonably satisfactory to the
Finder relating to certain matters with respect to the Offering.
V. REGISTRATION RIGHTS
-------------------
5.1 As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" shall mean, with respect to any Person (as
defined below), any other Person controlling, controlled by or under direct or
indirect common control with such Person (for the purposes of this definition
"control," when used with respect to any specified Person, shall mean the power
to direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday on
which banks are generally open for business in New York.
(c) "Holders" shall mean the Subscribers and any person holding
Registrable Securities (including, without limitation, the shares of Common
Stock issuable upon exercise of the warrants to be granted to the Finder and/or
its designees pursuant to the Finders Agreement between the Company and the
Finder dated February 29, 2000 (such agreement being referred to herein as the
"Finders Agreement" and such warrants being referred to herein as the "Paramount
Warrants")) or any person to whom the rights under Article V have been
transferred in accordance with Section 5.9 hereof.
(d) "Person" shall mean any person, individual, corporation,
limited liability company, partnership, trust or other nongovernmental entity or
any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(e) The terms "register," "registered" and "registration" refer
to the registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
(f) "Registrable Securities" shall mean (i) the shares of Common
Stock included in the Units; (ii) the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares"); (iii) the shares of Common
Stock issuable upon exercise of the Paramount Warrants; (iv) any shares of
Common Stock issued as (or issuable upon the conversion of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to or in replacement of the Common Stock; provided, however, that securities
shall only be treated as Registrable Securities if and only for so long as they
(A) have not been disposed of pursuant to a registration statement declared
effective by the Commission, (B) have not been sold in a transaction exempt from
the registration and prospectus delivery
-10-
<PAGE>
requirements of the Act so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such sale or
(C) are held by a Holder or a permitted transferee pursuant to Section 5.9.
(g) "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 5.2 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, fees and
expenses of counsel for the Company, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration (but
excluding the fees of legal counsel for any Holder).
(h) "Registration Statement" shall have the meaning ascribed to
such term in Section 5.2.
(i) "Registration Period" shall have the meaning ascribed to
such term in Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and expenses of legal counsel for any Holder.
5.2 No later than thirty (30) days after the Closing Date (the
"Filing Date"), the Company shall file a "shelf" registration statement on the
appropriate form (the "Registration Statement") with the Commission and use its
best efforts to effect the registration, qualifications or compliances
(including, without limitation, the execution of any required undertaking to
file post-effective amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) of the Registrable
Securities prior to the date which is 75 days after the Closing Date.
Notwithstanding the foregoing, the Company shall not be obligated to enter into
any underwriting agreement for the sale of any of the Registrable Securities.
5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.
5.4 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:
(a) use its best efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws which the
Company determines to obtain, continuously effective until the Holders have
completed the distribution described in the registration statement relating
thereto. The period of time during which the Company is required hereunder to
keep the Registration Statement effective is referred to herein as "the
Registration
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Period." Notwithstanding the foregoing, at the Company's election, the Company
may cease to keep such registration, qualification, exemption or compliance
effective with respect to any Registrable Securities, and the registration
rights of a Holder shall expire, at such time as they are no longer, by reason
of Rule 144 promulgated under the Act (or other exemption from registration
acceptable to the Company) required to register for the sale thereof; and
(b) advise the Holders:
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making
of any changes in the Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in the light of the circumstances under
which they were made) not misleading;
(c) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the earliest
possible time;
(d) furnish to each Holder upon request, without charge, at
least one copy of such Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by reference) in
the form filed with the Commission;
(e) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use, consistent with the provisions
hereof, of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus or any amendment or
supplement thereto. In addition, upon the reasonable request of the Holder and
subject in all
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cases to confidentiality protections reasonably acceptable to the Company, the
Company will meet with a Holder or a representative thereof at the Company's
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder's exposure to liability under the Act,
including the reasonable production of information at the Company's
headquarters;
(f) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing, provided that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction, and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
(g) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request at least three (3) business days prior to
sales of Registrable Securities pursuant to such Registration Statement;
(h) upon the occurrence of any event contemplated by Section
5.4(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
5.5 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 5.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Company shall indemnify
each Holder and each person controlling such Holder within the meaning of
Section 15 of the Act, with respect to which any registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 5.6(c) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus or offering circular, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and will reimburse each
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Holder and each person controlling such Holder, for reasonable legal and other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action as incurred; provided that the
Company will not be liable in any such case to the extent that any untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; and, provided further,
that the Company will not be liable in any such case where the claim, loss,
damage or liability arises out of or is related to the failure of the Holder to
comply with the covenants and agreements contained in this Agreement respecting
sales of Registrable Securities, or the failure of the Finder to comply with the
covenants and agreements contained in the Finders Agreement (as defined in
Section 5.1(c) hereof), and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the amended prospectus filed with the Commission pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet under Rule
434 of the Act, which together meet the requirements of Section 10(a) of the Act
(the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any such Holder or any such controlling person, if a copy of the
Final Prospectus furnished by the Company to the Holder for delivery was not
furnished to the person or entity asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the Act and the Final
Prospectus would have cured the defect giving rise to such loss, liability,
claim or damage.
(b) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company within the meaning of Section 15 of the
Act, against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus was not made available to the Holder and such
current
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<PAGE>
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage or liability. Notwithstanding the foregoing, in no event shall a
Holder be liable for any such claims, losses, damages or liabilities in excess
of the proceeds received by such Holder in the offering, except in the event of
fraud by such Holder.
(c) Each party entitled to indemnification under this Section
5.6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
5.7 (a) Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event requiring the preparation of a supplement
or amendment to a prospectus relating to Registrable Securities so that, as
thereafter delivered to the Holders, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement contemplated by Section 5.2 until its receipt of
copies of the supplemented or amended prospectus from the Company and, if so
directed by the Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
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<PAGE>
(b) Each Holder shall suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the Registration Statement and
prospectus contemplated by Section 5.2 during (i) any period not to exceed two
30-day periods within any one 12-month period the Company requires in connection
with a primary underwritten offering of equity securities and (ii) any period,
not to exceed one 45-day period per circumstance or development, when the
Company determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information regarding
such Holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article V.
(d) Each Holder hereby covenants with the Company (i) not to
make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any transaction other
than on a national securities exchange, Nasdaq National Market, Nasdaq SmallCap
Market or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, to notify the Company at least five (5)
business days prior to the date on which the Holder first offers to sell any
such Registrable Securities.
(e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Registration Statement described in this Section
are not transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (i) the Registrable Securities have been sold in accordance with
such Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder agrees not to take any action with respect to
any distribution deemed to be made pursuant to such registration statement which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Company is
obligated to keep the Registration Statement current and effective as described
above, the Holders of Registrable Securities included in the Registration
Statement shall discontinue sales of shares pursuant to such Registration
Statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such Registration Statement which remain
unsold, and such Holders shall notify the Company of the number of shares
registered which remain unsold immediately upon receipt of such notice from the
Company.
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<PAGE>
5.8 With a view to making available to the Holders the benefits of
certain rules and regulations of the Commission which at any time permit the
sale of the Registrable Securities to the public without registration, the
Company shall use its reasonable best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Act, at all times;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, furnish to such Holder, upon any reasonable request, a written
statement by the Company as to its compliance with Rule 144 under the Act, and
of the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
5.9 The rights to cause the Company to register Registrable
Securities granted to the Holders by the Company under Section 5.1 may be
assigned in full by a Holder in connection with a transfer by such Holder of its
Registrable Securities, provided, however, that (i) such transfer may otherwise
be effected in accordance with applicable securities laws; (ii) such Holder
gives prior written notice to the Company; and (iii) such transferee agrees to
comply with the terms and provisions of this Agreement, and such transfer is
otherwise in compliance with this Agreement. Except as specifically permitted by
this Section 5.9, the rights of a Holder with respect to Registrable Securities
as set out herein shall not be transferable to any other Person, and any
attempted transfer shall cause all rights of such Holder therein to be
forfeited.
5.10 With the written consent of the Company and the Holders holding
at least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
5.11 Except to the extent any delay is due to the failure of a
Subscriber or the Finder to reasonably cooperate in providing to the Company
such information as shall be reasonably requested by the Company for use in the
Registration Statement, in the event that the Registration Statement is not
filed by the date that is 30 days following the Closing Date, the Company shall,
for no additional consideration, pay to each Subscriber as liquidated damages
and not as a penalty an amount in cash equal to one percent (1%) of the amount
invested by such Subscriber for each 30 day period in which the Registration
Statement remains unfiled; provided, however, that in no event shall the amount
of liquidated damages payable by the Company to any
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Subscriber pursuant to this Section 5.11 exceed twelve percent (12%) of the
amount invested by such Subscriber.
VI MISCELLANEOUS
-------------
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefore,
addressed to Endorex Corporation, 28101 Ballard Drive, Suite F, Lake Forest, IL
60045 Attn: Chief Financial Officer, and to the Subscriber at the Subscriber's
address indicated on the signature page of this Agreement. Notices shall be
deemed to have been given or delivered on the date of mailing, except notices of
change of address, which shall be deemed to have been given or delivered when
received.
6.2 Except as provided in Section 5.10 above, this Agreement shall
not be changed, modified or amended except by a writing signed by the parties to
be charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.9 and 6.13, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and to
their respective heirs, legal representatives, successors and assigns. This
Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject, however, to
the right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN
THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR
RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT ARE EITHER THE
SUPREME COURT OF THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE
FEDERAL COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE
PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE
TO SAID VENUE.
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<PAGE>
6.6 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
6.7 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
6.8 This Agreement may be executed in two or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.9 (a) The Subscribers severally agree not to issue any public
statement with respect to the Subscribers' investment or proposed investment in
the Company or the terms of any agreement or covenant between them and the
Company without the Company's prior written consent, except such disclosures as
may be required under applicable law or under any applicable order, rule or
regulation.
(b) The Company agrees not to disclose the names, addresses or
any other information about the Subscribers, except as required by law;
provided, that the Company may use the name (but not the address) of the
Subscriber in the Registration Statement.
6.10 (a) Each Subscriber severally represents and warrants that it
has not engaged, consented to nor authorized any broker, finder or intermediary
to act on its behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
Each Subscriber hereby severally agrees to indemnify and hold harmless the
Company from and against all fees, commissions or other payments owing to any
such person or firm acting on behalf of such Subscriber hereunder.
(b) The Company has not engaged, consented to or authorized any
broker, finder or intermediary to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement, except for Paramount Capital, Inc.
6.11 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities as a result of a transfer conducted in
accordance with the provisions of Section 5.9 hereof.
6.12 The Company acknowledges and agrees that irreparable damage would
occur in the event that any of the provisions of Article V of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached and that such damage would not be compensable in money damages and that
it would be extremely difficult or impracticable to measure the resultant
damages. Accordingly, that any Subscriber shall be entitled to an injunction or
injunctions with respect to the provisions of this Agreement and to enforce
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specifically the terms and provisions hereof, in addition to any other remedy to
which it may be entitled at law or in equity, and the Company expressly waives
any defense that a remedy in damages would be adequate and expressly waives any
requirement in an action for specific performance for the posting of a bond by
the Subscriber bringing such action.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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[Signature Page]
NUMBER OF UNITS ___________ X $100,000 = ______________ (the "Purchase Price")
- ------------------------------ -----------------------------------
Signature Signature (if purchasing jointly)
- ------------------------------ -----------------------------------
Name Typed or Printed Name Typed or Printed
- ------------------------------ -----------------------------------
Entity Name Entity Name
- ------------------------------ -----------------------------------
Address Address
- ------------------------------ -----------------------------------
City, State and Zip Code City, State and Zip Code
- ------------------------------ -----------------------------------
Telephone-Business Telephone--Business
- ------------------------------ -----------------------------------
Telephone-Residence Telephone--Residence
- ------------------------------ -----------------------------------
Facsimile-Business Facsimile--Business
- ------------------------------ -----------------------------------
Facsimile-Residence Facsimile--Residence
- ------------------------------ -----------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: ___________________________
Dated: __________________________ ___, ____
This Subscription Agreement is agreed to and accepted as of ________, 2000.
ENDOREX CORPORATION
By:____________________________________
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Exhibit 4.2
ENDOREX CORPORATION
AMENDMENT AND SUPPLEMENT
TO SUBSCRIPTION AGREEMENT
DATED MARCH 22, 2000
This Amendment and Supplement (this "Supplement") amends and supplements the
Subscription Agreement to be entered into by and among Endorex Corporation (the
"Company") and Subscribers in the Offering. The information contained in this
Supplement should be considered together with the more detailed information
included in the Subscription Agreement and exhibits thereto, as supplemented and
amended hereby. Capitalized terms used, but not defined, in this Supplement
shall have the meanings given to them in the Subscription Agreement unless the
context otherwise requires.
The second recital of the Subscription Agreement is hereby replaced in its
entirety to provide as follows:
WHEREAS, the Company desires to sell to the Subscriber and the Subscriber
desires to purchase from the Company the number of Units set forth beside such
Subscriber's name on the signature page hereto. Each "Unit" shall consist of (i)
a number of shares of common stock of the Company (rounded to the nearest whole
share, with one-half (0.5) of one share, or greater fraction thereof, being
rounded upward), par value $.001 per share (the "Common Stock"), determined by
dividing one hundred thousand dollars ($100,000) by the lowest of (a) eighty-
five percent (85%) of the average closing price of the Common Stock, as quoted
on the American Stock Exchange, for the five (5) consecutive trading days
immediately preceding the date on which the Company executes this Agreement (the
"Pricing Date"), (b) ninety percent (90%) of the closing price of the Common
Stock on the date immediately preceding the Pricing Date, as quoted on the
American Stock Exchange, and (c) $5.00 (the lowest of such prices being referred
to herein as the "Common Stock Price"); provided, however, that the Company
shall not be obligated to execute this Agreement or sell the Units if the Common
Stock Price, were this Agreement to be executed by the Company, would be below
$3.25 and (ii) a warrant (collectively, the "Warrants"), substantially in the
form attached hereto as Exhibit A, to purchase a number of shares of Common
Stock equal to twenty five percent (25%) of the shares of Common Stock included
in such Unit, such warrants to be exercisable, in whole or in part (but not for
less than 5,000 shares of Common Stock, unless the number of shares underlying
such Warrant is less than 5,000, in which case the Warrant shall be exercisable
for such lesser number), at any time prior to the fifth anniversary of the date
of issuance at an exercise price equal to one hundred twenty five percents
(125%) of the Common Stock Price (the Common Stock, the Warrants, and the Common
Stock issuable upon the exercise of the Warrants are sometimes herein
collectively referred to as the "Securities").
Agreed and Accepted:
By: ________________________________
Name:
Title:
<PAGE>
Exhibit 4.3
ENDOREX CORPORATION
Second Amendment and Supplement
To Subscription Agreement
April 6, 2000
This Second Amendment and Supplement (this "Supplement") amends and
supplements the Subscription Agreement, as amended by the Amendment and
Supplement to Subscription Agreement, to be entered into by and among Endorex
Corporation (the "Company") and Subscribers in the Offering (as amended, the
"Subscription Agreement"). The information contained in this Supplement should
be considered together with the more detailed information included in the
Subscription Agreement and exhibits thereto, as supplemented and amended hereby.
Capitalized terms used, but not defined, in this Supplement shall have the
meanings given to them in the Subscription Agreement unless the context
otherwise requires.
1. Notwithstanding anything to the contrary in the Subscription Agreement
and any prior amendments thereto, the price per Unit shall be $100,000, each
"Unit" shall consists of 21,164 shares of Common Stock and 5,291 Warrants. The
Per Share Common Stock Price shall be $4.725 and the exercise price per Warrant
shall be $5.91.
2. The first sentence of Section 3.1 of the Subscription Agreement is
hereby replaced in its entirety to provide as follows:
"The Company shall sell to the Subscribers a number of Units which would
provide aggregate gross proceeds to the Company of at least $2,000,000 (the
"Minimum Offering Amount") but in no event shall the company sell to Subscribers
a number of Units comprised of more than 1,850,000 shares of Common Stock
(excluding the shares of Common Stock underlying the Warrants) (the "Maximum
Offering"), at a purchase price of $100,000 per Unit (the "Purchase Price")."
Agreed and Accepted:
By:___________________________
Name:
Title:
<PAGE>
Exhibit 4.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS WARRANT IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN SUBSCRIPTION
AGREEMENT, BETWEEN THE COMPANY AND THE HOLDER, DATED ________ __, 2000.
Warrant to Purchase Common Stock
of
Endorex CORPORATION
No. CSW-___ Date of Issuance - _________ __, 2000
This certifies that, for value received, _____________________, or its
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from Endorex Corporation, a Delaware corporation (the "Company"),
_________ shares of the Common Stock of the Company (the "Common Stock"), as
constituted on the date hereof (the "Warrant Issue Date"), upon surrender
hereof, at the principal office of the Company referred to below, with the
Notice of Exercise form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States at the Exercise Price as set forth
in Section 2 below. The number of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein shall include
this Warrant and any warrants delivered in substitution or exchange therefor as
provided herein. This Warrant is issued in connection with the transactions
described in that certain Subscription Agreement between the Company and the
Subscribers described therein, dated as of _________ ___, 2000, as the same may
from time to time be amended, modified or supplemented (the "Purchase
Agreement"). The Holder is subject to certain restrictions set forth in the
Purchase Agreement and shall be entitled to certain rights and privileges set
forth in the Purchase Agreement. This Warrant is one of the Warrants referred to
as the "Warrants" in the Purchase Agreement.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, at any time
prior to __________ __, 2005.
2. Exercise Price. The exercise price at which this Warrant may be
exercised shall be ____________ ($______) per share of Common Stock (the
"Exercise Price").
<PAGE>
3. Exercise of Warrant.
a. The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, but not for less than 5,000
shares (unless the number of shares underlying this Warrant is less than 5,000,
in which case the Warrant shall be exercisable for such lesser number), at any
time, or from time to time, during the term hereof as described in Section 1
above, by the surrender of this Warrant and the Notice of Exercise annexed
hereto as Exhibit A duly completed and executed on behalf of the Holder, at the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company), together with payment in immediately
available funds or by check acceptable to the Company in an amount equal to the
product of the Exercise Price set forth in Section 2 above multiplied by the
number of shares of Common Stock being purchased upon such exercise.
b. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates
representing the number of shares issuable upon such exercise. In the event that
this Warrant is exercised in part, the Company at its expense will also execute
and deliver a new Warrant of like tenor exercisable for the number of shares for
which this Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of loss, theft, or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company, at its expense, shall execute and deliver, in lieu of this Warrant,
a new warrant of like tenor and amount.
6. Rights of Stockholders. This Warrant shall not entitle the Holder
to any of the rights of a stockholder of the Company.
7. Transfer of Warrant.
a. Warrant Register. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his or its address
as shown on the Warrant Register by written notice to the Company requesting
such change. Any notice or written communication required or permitted to be
given to the Holder may be delivered or given by
<PAGE>
mail to such Holder in the name as shown on the Warrant Register and at the
address shown on the Warrant Register. Until this Warrant is transferred on the
Warrant Register of the Company, the Company may treat the Holder as shown on
the Warrant Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
b. Transferability and Nonnegotiability of Warrant. This
Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company) and in compliance with subsection
(e) below. Subject to the provisions of this Warrant with respect to compliance
with the Securities Act of 1933, as amended (the "Act"), and further subject to
the requirement that any transferee must first agree in writing, in a form
reasonably acceptable to the Company, to be bound by the terms of the Purchase
Agreement, and exhibits thereto, title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment Form annexed hereto as
Exhibit B) and delivery in the same manner as a negotiable instrument
transferable by endorsement and delivery. The Common Stock to be issued upon
exercise hereof may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if such are requested by the Company).
c. Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed for transfer on the Assignment Form, and
subject to the provisions of this Warrant with respect to compliance with the
Act and with the limitations on assignments and transfers contained in this
Section 7, the Company, at its expense, shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of shares issuable upon exercise thereof.
d. Compliance with Securities Laws.
(1) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment, and that the Holder will
not offer, sell, or otherwise dispose of this Warrant or any shares of Common
Stock to be issued upon exercise hereof except under circumstances that will not
result in a violation of the Act or any state securities laws. Upon exercise of
this Warrant, the Holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the shares of Common Stock so
purchased are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale, except under circumstances that will not result in a
violation of the Act or any state securities laws.
(2) This Warrant and all shares of Common Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
3
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
8. Reservation of Stock. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its Restated Certificate of Incorporation, as
amended from time to time (the "Certificate"), to provide sufficient reserves of
shares of Common Stock issuable upon exercise of the Warrant. The Company
further covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth herein, will be free
from all taxes, liens, and charges in respect of the issue thereof (other than
taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein), and will be fully paid and nonassessable. The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon the
exercise of this Warrant.
9. Notices.
a. Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 10 hereof, the Company shall
issue a certificate signed by its Treasurer setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated and the Exercise Price and number of shares
purchasable hereunder after giving effect to such adjustment, and shall cause a
copy of such certificate to be mailed (by first class mail, postage prepaid) to
the Holder of this Warrant as provided in Section 12.1 hereof.
b. In case
(1) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
(2) the Company shall consummate any reorganization,
reclassification, combination, exchange or subdivision of the capital stock of
the Company, any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the assets of the
Company to another corporation, or
(3) of any voluntary dissolution, liquidation or winding-up of
the Company,
4
<PAGE>
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, combination,
exchange, subdivision, consolidation, merger, conveyance, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such stock or securities
at the time receivable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, combination, exchange, subdivision, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed
at least twenty (20) business days prior to the date therein specified.
c. All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third (3) business day
following the date of such mailing.
10. Adjustments. The number of shares purchasable hereunder are subject to
adjustment from time to time as follows:
10.1. Merger, Sale of Assets, Etc.
a. If at any time, while this Warrant, or any portion thereof, remains
outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) a sale or transfer of
substantially all of the Company's properties and assets to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price then in effect in
the manner set forth in Section 3, the number of shares of stock or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer which a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, merger, consolidation, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 10. The foregoing provisions of this Section 10.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation which are
at the time receivable upon the exercise of this Warrant. If the per share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the
5
<PAGE>
rights and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
b. Notices of Record Date. In the event that the Company shall propose
at any time to merge with or into any other corporation, or sell, lease or
convey all or substantially all its property or business, or to liquidate,
dissolve or wind up, then the Company shall send to the holder of this Warrant
at least twenty (20) business days' prior written notice of the date on which a
record shall be taken for determining rights to vote in respect of such event.
10.2. Reclassification, etc. If the Company at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired shall, by
reclassification of securities or otherwise, change any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change, and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in Section 10.
10.3. Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the number of shares of such securities available for purchase in
effect immediately prior to such subdivision, combination, or dividend or other
distribution and the Exercise Price per share for such securities shall be
proportionately adjusted. Adjustments set forth herein shall be readjusted in
the same manner for any successive event or events described herein.
10.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion thereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend,
then, and in each case, this Warrant shall represent the right to acquire, in
addition to the number of shares of the security receivable upon exercise of
this Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available to it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 10.
10.5. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 10, the Company, at its
expense, shall
6
<PAGE>
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any such Holder, furnish or cause to be furnished to
such Holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of this Warrant.
10.6. No Impairment. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 10 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.
11. Miscellaneous.
11.1. Notices. Any notices required to be sent to a Holder will be
delivered to the address of such Holder shown on the books of the Company. All
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid, and will be deemed to have been given when so delivered
or sent unless otherwise provided herein.
11.2. Descriptive Headings; Governing Law. The descriptive headings of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the State of New York, without
regard to principles of conflicts or choice of law.
IN WITNESS WHEREOF, ENDOREX CORPORATION caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: April 12, 2000
ENDOREX CORPORATION
By:
--------------------------------------
Michael S. Rosen
President and Chief Executive Officer
CSW00-17
7
<PAGE>
EXHIBIT A
---------
FORM OF NOTICE OF EXERCISE
--------------------------
To: ENDOREX CORPORATION
(1) Pursuant to the terms of the attached Warrant, the undersigned hereby
elects to purchase ___________ shares of Common Stock of ENDOREX CORPORATION
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the Exercise Price of such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
______________________________
[Name]
______________________________
[Name]
(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
______________________________
[Name]
- ---------- ----------------------------
[Date] [Signature]
<PAGE>
EXHIBIT B
---------
FORM OF ASSIGNMENT FORM
-----------------------
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- -------- -------------
and does hereby irrevocably constitute and appoint ___________________________
Attorney to make such transfer on the books of ENDOREX CORPORATION maintained
for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof are being acquired for investment and that the Assignee will not
offer, sell or otherwise dispose of this Warrant or any shares of stock to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended, or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this Warrant,
the Assignee shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of stock so purchased are being
acquired for investment and not with a view toward distribution or resale.
DATED: ____________________
___________________________________
Signature of Holder
___________________________________
(Witness)
<PAGE>
Exhibit 4.5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, ACCOMPANIED BY AN OPINION OF COUNSEL TO THE TRANSFEROR IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY.
ENDOREX CORPORATION
-------------------
Finder Warrant for the Purchase of Shares of
Common Stock
No. CSWf-1 226,190 Shares
FOR VALUE RECEIVED, ENDOREX CORPORATION, a Delaware corporation (the
"Company"), hereby certifies that Paramount Capital, Inc., its designee or its
permitted assigns is entitled to purchase from the Company, at any time or from
time to time commencing on October 12, 2000 and prior to 5:00 P.M., New York
City time, on October 11, 2007, 226,190 fully paid and non-assessable shares of
common stock, $.001 par value per share, of the Company for an aggregate
purchase price of $1,187,497.50. (Hereinafter, (i) said common stock, $.001 par
value per share, of the Company, is referred to as the "Common Stock"; (ii) the
shares of the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares"; (iii) the
aggregate purchase price payable for the Warrant Shares purchasable hereunder is
referred to as the "Aggregate Warrant Price"; (iv) the price payable (initially
$5.25 per share subject to adjustment) for each of the Warrant Shares hereunder
is referred to as the "Per Share Warrant Price"; (v) this Warrant and all
warrants hereafter issued in exchange or substitution for this Warrant are
referred to as the "Warrants"; (vi) the holder and any subsequent transferees of
this Warrant is referred to as the "Holder" and the Holder of this Warrant and
all other Warrants and Warrant Shares are referred to as the "Holders" and
Holders of more than fifty percent (50%) of the outstanding Warrants and Warrant
Shares are referred to as the "Majority of the Holders"); and (vii) the then
Current Market Price per share of the Common Stock (the "Current Market Price")
shall be deemed to be the last reported trade of the Common Stock on the trading
day prior to such date or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices of the Common Stock
on such day, in either case on the principal national securities exchange on
which the Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the representative closing sale price
of the Common Stock as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ"), or other similar
organization if NASDAQ is no longer reporting such information, or, if the
Common Stock is not reported on NASDAQ, the high per share sale price for the
Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the fair
market value of the Common Stock as determined in good faith by the Board of
Directors. The Aggregate Warrant Price is not subject to adjustment except as
provided under Section 3(a) herein. The Per Share Warrant Price is subject to
No. CSWf-1 - 1 -
<PAGE>
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares deliverable upon exercise of this Warrant shall be
adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price
in effect immediately after such adjustment.
This Warrant, together with warrants of like tenor, constituting in
the aggregate Warrants to purchase 226,190 Warrant Shares, was originally issued
pursuant to a Finder Agreement dated February 29, 2000, as amended (the "Finder
Agreement"), between the Company and Paramount Capital, Inc. in connection with
a private placement by the Issuer (the "Offering") of 85.5 units (the "Units"),
each Unit consisting of 21,164 shares of Common Stock and Warrants to purchase
5,291 shares of Common Stock at an exercise price of $5.91 per share.
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole at any time, or in part
from time to time, but not for less than 5,000 Warrant Shares (unless the number
of shares underlying this warrant is less than 5,000, in which case the Warrant
shall be exercisable for such lesser number), commencing on October 12, 2000 and
prior to 5:00 P.M., New York City time, on October 11, 2007 by the Holder:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Section 10(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with
payment for the Warrant Shares made by certified or official bank check
payable to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Section 10(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the difference
between the then Current Market Price and the Per Share Warrant Price, and
the denominator of which shall be the then Current Market Price. For
purposes of any computation under this Section 1(a), the then Current
Market Price shall be based on the trading day prior to the Cashless
Exercise.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares that have not been
exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Common Stock to which the Holder shall be entitled, pay
to the Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
(c) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person
No. CSWf-1 - 2 -
<PAGE>
entitled to receive the shares of Common Stock issuable upon such exercise shall
be treated for all purposes as the holder of record of such shares as of the
close of business on such date.
(d) In the event that the closing bid price for any 20 consecutive
Trading Days (used herein as defined in the Finder Agreement) is at least 250%
of the Per Share Warrant Price, as adjusted, then upon 30 days prior written
notice to the Holder, the Company shall have the right to redeem this Warrant
for an aggregate amount equal to the then current Per Share Warrant Price
multiplied by the number of shares of Common Stock issuable upon exercise of
this Warrant at the time the Company exercises its right under this Section
1(d), to the extent this Warrant has not been exercised prior to the expiration
of the 30 day notice period.
2. Reservation of Warrant Shares; Listing.
The Company agrees that, prior to the expiration of this Warrant, the
Company shall at all times (a) have authorized and in reserve, and shall keep
available, solely for issuance and delivery upon the exercise of this Warrant,
the shares of the Common Stock and other securities and properties as from time
to time shall be receivable upon the exercise of this Warrant, free and clear of
all restrictions on sale or transfer, other than under Federal or state
securities laws, and free and clear of all preemptive rights and rights of first
refusal and (b) the Company shall use its best efforts to keep the Warrant
Shares authorized for listing on the American Stock Exchange or any national
securities exchange or the Nasdaq Smallcap Market.
3. Protection Against Dilution.
(a) If, at any time or from time to time after the date of this
Warrant, the Company shall distribute pro rata to the holders of shares of
Common Stock evidence of its indebtedness, any other non-voting securities of
the Company or any cash, property or other assets (excluding a subdivision,
combination or reclassification, or dividend or distribution payable in shares
of Common Stock, referred to in Section 3(b), and also excluding cash dividends
or cash distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a "Special
Dividend")), the Per Share Warrant Price shall be adjusted by subtracting from
the Per Share Warrant Price then in effect the quotient of (i) the aggregate
fair market value (as determined in good faith by the Company's Board of
Directors) of the evidence of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend divided by (ii) the
number of shares of Common Stock outstanding on the record date of such issuance
or distribution; provided, however, that the Aggregate Warrant Price shall be
reduced to an amount that is equal to the number of shares of Common Stock
issuable upon exercise of this Warrant just prior to such Section 3(a)
adjustment, multiplied by the Per Share Warrant Price after such Section 3(a)
adjustment; no such adjustment in the Per Share Warrant Price pursuant to this
Section 3(a) will increase the number of shares of Common Stock issuable upon
exercise of this Warrant at the time of such adjustment to the Per Share Warrant
Price. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company that the Holder would have owned immediately
following such action had such
No. CSWf-1 - 3 -
<PAGE>
Warrant been exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(b) shall become effective immediately after the record date in
the case of a dividend or distribution, and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the
Company shall hereafter issue or sell any Common Stock, any securities
convertible into Common Stock, any rights, options or warrants to purchase or
otherwise receive issuances of Common Stock or any securities convertible into,
or exercisable or exchangeable for, Common Stock, in each case for a price per
share or entitling the holders thereof to purchase Common Stock at a price per
share (determined by dividing (i) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise thereof (the "Total Consideration") by (ii) the number of additional
shares of Common Stock issued, sold or issueable upon exercise of such
securities) that is less than the then Current Market Price in effect on the
date of such issuance or sale, then the Per Share Warrant Price shall be
adjusted as of the date of such issuance or sale by multiplying the Per Share
Warrant Price then in effect by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding on the record
date of such issuance or sale plus (B) the Total Consideration divided by the
Current Market Price, and the denominator of which shall be (y) the number of
shares of Common Stock outstanding on the record date of such issuance or sale
plus the maximum number of additional shares of Common Stock issued, sold or
issueable upon exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in
the case of the issuance by the Company of Common Stock or any securities
convertible into Common Stock, any rights, options or warrants to purchase or
otherwise receive issuances of Common Stock or any securities convertible into,
or exercisable or exchangeable for, Common Stock (i) pursuant to the exercise of
any option or warrant; (ii) pursuant to the exercise of any stock options or
warrants currently outstanding or securities issued after the date hereof
pursuant to any Company benefit plan to officers, directors, consultants or
employees, but only with respect to such warrants or stock options as are
exercisable at prices no lower than the fair market value of the Common Stock as
of the date of grant thereof or (iii) pursuant to the issuance, as consideration
for an acquisition, in the good faith determination of the Board of Directors of
the value of such consideration for the acquisition.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as a entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Section 3(e) shall similarly apply to successive
No. CSWf-1 - 4 -
<PAGE>
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The Company shall require the issuer of any
shares of stock or other securities or property thereafter deliverable on the
exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than thirty (30) days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(f)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(g) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants. The Company may, but shall not be obligated to unless
requested by two-thirds of the Holders, obtain, at its expense, a certificate of
a firm of independent public accountants of recognized standing selected by the
Board of Directors (who may be the regular auditors of the Company) setting
forth the Per Share Warrant Price and the number of Warrant Shares in effect
after such adjustment or the effect of such modification, a brief statement of
the facts requiring such adjustment or modification and the manner of computing
the same and cause copies of such certificate to be mailed to the Holders of the
Warrants.
(h) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of earned surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than ten (10) days prior to the record
date fixed for determining stockholders entitled to participate in such dividend
or other distribution.
(i) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
No. CSWf-1 - 5 -
<PAGE>
(j) Upon the expiration of any rights, options, warrants or conversion
privileges with respect to the issuance of which an adjustment to the Per Share
Warrant Price had been made, if such option, right warrant or conversion shall
not have been exercised, the number of Warrant Shares purchasable upon exercise
of this Warrant, to the extent this Warrant has not then been exercised, shall,
upon such expiration, be readjusted and shall thereafter be such as they would
have been had they been originally adjusted (or had the original adjustment not
been required, as the case may be) on the basis of (A) the fact that Common
Stock, if any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion privileges, and (B) the fact that such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion privileges whether or not exercised;
provided, however, that no such readjustment shall have the effect of decreasing
the number of Warrant Shares purchasable upon exercise of this Warrant by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion
privileges.
(k) In case any event shall occur as to which the other provisions of
this Section 3 are not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Board of Directors of the Company shall in good faith
determine the adjustment, if any, on a basis consistent with the essential
intent and principles established herein, necessary to preserve the purchase
rights represented by the Warrants. Upon such determination, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein.
4. Fully Paid Stock; Taxes. The shares of the Common Stock represented
by each and every certificate for Warrant Shares delivered on the exercise of
this Warrant shall at the time of such delivery, be duly authorized, validly
issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights or rights of first refusal, and the Company will take all such
actions as may be necessary to assure that the par value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company shall pay, when due and payable, any and all Federal
and state stamp, original issue or similar taxes which may be payable in respect
of the issue of any Warrant Share or any certificate thereof to the extent
required solely because of the issuance by the Company of such security to the
Holder.
5. Registration Under Securities Act of 1933. (a) The Holder shall
have the right to participate in the registration rights granted to purchasers
of the Units pursuant to Article V of the subscription agreement (the
"Subscription Agreement") between such purchasers and the Company that were
entered into at the time of the initial sale of the Units. By acceptance of this
Warrant, the Holder agrees to comply with the provisions in Article V of the
Subscription Agreement to same extent as if it were a party thereto.
(b) Until all of the Warrant Shares and any shares of Common Stock
issuable pursuant to the Article V Rights (as defined below) with respect to the
Warrant Shares have been sold under a Registration Statement or pursuant to Rule
144(k), the Company shall use its reasonable best efforts to file with the
Securities and Exchange Commission all current reports and the information as
may be necessary to enable the Holder to effect sales of its shares in reliance
upon Rule 144(k) promulgated under the Act.
6. Article V Rights. Upon exercise of this Warrant, the Holder shall
be entitled to the contractual rights set forth in Article V of the Subscription
Agreement pursuant to which the Units were sold with respect to any Warrant
Shares acquired upon such exercise.
No. CSWf-1 - 6 -
<PAGE>
7. Investment Intent; Limited Transferability.
(a) The Holder represents, by accepting this Warrant, that it
understands that this Warrant and any securities obtainable upon exercise of
this Warrant have not been registered for sale under Federal or state securities
laws and are being offered and sold to the Holder pursuant to one or more
exemptions from the registration requirements of such securities laws. In the
absence of an effective registration of such securities or an exemption
therefrom, any certificates for such securities shall bear the legend set forth
on the first page hereof. The Holder understands that it must bear the economic
risk of its investment in this Warrant and any securities obtainable upon
exercise of this Warrant for an indefinite period of time, as this Warrant and
such securities have not been registered under Federal or state securities laws
and therefore cannot be sold unless subsequently registered under such laws or
unless the requirements set forth in the legend at the beginning of this Warrant
are satisfied.
(b) The Holder, by its acceptance of this Warrant, represents to the
Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "Act"). The Holder
agrees that this Warrant and any such securities will not be sold or otherwise
transferred unless (i) a registration statement with respect to such transfer is
effective under the Act and any applicable state securities laws or (ii) upon
meeting the requirements set forth in the legend at the beginning of this
warrant.
(c) This Warrant may not be sold, transferred, assigned or
hypothecated for six (6) months from the date hereof except, subject to Federal
or state securities laws and the restrictions set forth herein (i) to any firm
or corporation that succeeds to all or substantially all of the business of
Paramount Capital, Inc., (ii) to any of the officers, employees, associates or
affiliated companies of Paramount Capital, Inc., or of any such successor firm,
(iii) to any NASD member participating in the Offering or any officer or
employee of any such NASD member or (iv) in the case of an individual, pursuant
to such individual's last will and testament or the laws of descent and
distribution, and is so transferable only upon the books of the Company which
the Company shall cause to be maintained for such purpose. The Company may treat
the registered Holder of this Warrant as it appears on the Company's books at
any time as the Holder for all purposes. The Company shall permit any Holder of
a Warrant or its duly authorized attorney, upon written request during ordinary
business hours, to inspect and copy or make extracts from its books showing the
registered Holders of Warrant. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the holder thereof shall be identical to those of the Holder.
(d) The Holder represents to the Company that it is an "accredited
investor" as defined under Rule 501 of the Act.
8. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
9. Warrant Holder Not Stockholder. This Warrant does not confer upon
the Holder any right to vote on or consent to or receive notice as a stockholder
of the Company, as such, in respect of any matters whatsoever, nor any other
rights or liabilities as a stockholder,
No. CSWf-1 - 7 -
<PAGE>
prior to the exercise hereof; this Warrant does, however, require certain
notices to Holders as set forth herein.
10. Communication. Notices or other communications under this Warrant
shall be effective and shall be deemed to have been given if the same is in
writing and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at Endorex Corporation, 28101 Ballard Drive, Suite F,
Lake Forest, IL 60045, Facsimile: (847) 573-9285, Attn: President, or such
other address as the Company has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital, Inc., 787 Seventh Avenue,
48th Floor, New York, NY 10019 or other such address as the Holder has
designated in writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
13. Amendment, Waiver, etc. Except as expressly provided herein,
neither this Warrant nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the Majority of the
Holders.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
No. CSWf-1 - 8 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and has caused its corporate seal to be hereunto affixed and
attested by its Secretary this 12th day of April, 2000.
ENDOREX CORPORATION
By: _____________________________
Name: Frank C. Reid
Title: Vice President, Finance and
Corporate Development
ATTEST:
______________________________________________________
Name: Michael S. Rosen
Title: Acting Secretary
[Corporate Seal]
No. CSWf-1 - 9 -
<PAGE>
SUBSCRIPTION (cash)
------------
The undersigned, ___________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.001 per share, of
Endorex Corporation covered by said Warrant, and makes payment therefor in full
at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.001 per share, of Endorex Corporation
pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
No. CSWf-1 - 10 -
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer said Warrant on the books of Endorex Corporation.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of Common Stock, par
value $.001 per share, of Endorex Corporation covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint ____________________, attorney, to
transfer such part of said Warrant on the books of Endorex Corporation.
Dated:_______________ Signature:____________________
Address:______________________
No. CSWf-1 - 11 -
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
ENDOREX CORP.
Warrant for the Purchase of Shares of
-------------------------------------
Common Stock
------------
No. 2 650,000 Shares
FOR VALUE RECEIVED, ENDOREX CORP., a Delaware corporation (the "Company"),
hereby certifies that ARIES FUND, a Cayman Islands Trust, or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing on May 19, 1997, and prior to 5:00 P.M., New York City time, on
May 19, 2002 (the "Termination Date"), six-hundred and fifty-thousand (650,000)
fully paid and non-assessable shares of the Common Stock, $.001 par value per
share, of the Company at an exercise price equal to the Offering Price (as
defined in the PPM) of the Common Stock of the Company issued in connection with
the Company's current private placement offering pursuant to the confidential
Term Sheet dated May 19, 1997 (as hereafter supplemented and amended, the "PPM")
(Hereinafter, (i) said Common Stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock", (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable for the Warrant Shares hereunder is referred to as the "Aggregate
Warrant Price", (iv) the price payable for each of the Warrant Shares hereunder
is referred to as the "Per Share Warrant Price", (v) this Warrant, all similar
Warrants issued on the date hereof and all warrants hereafter issued in exchange
or substitution for this Warrant or such similar warrants are referred to as the
"Warrants" and (vi) the holder of this Warrant is referred to as the "Holder"
and the holder of this Warrant and all other Warrants or Warrant Shares issued
upon the exercise of any Warrant are referred to as the "Holders"). The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price is subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant
1
<PAGE>
Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per
Share Warrant Price in effect immediately after such adjustment.
1. Exercise of Warrant
-------------------
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on May 19, 1997 and prior to the Termination Date, by
the holder:
(i) by the surrender of this Warrant (with the subscription form at the end
hereof duly executed) at the address set forth in Subsection 9 (a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with payment
for Warrant Shares made by certified or official bank check payable to the order
of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form at
the end hereof duly executed) (a "Cashless Exercise") at the address set forth
in Subsection 9 (a) hereof. Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between the then current Market Price
per share (as hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current Market Price per
share of Common Stock. The then current market price per share of the Common
Stock at any date (the "Market Price") shall be deemed to be the last sale price
of the Common Stock on the business day prior to the date of the Cashless
Exercise or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such reported by the NASDAQ Bulletin Board ("NASDAQ"), or other similar
organization if NASDAQ is no longer reporting such information, or it not so
available, the fair market price of the Common Stock as determined in good faith
by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon surrender of this Warrant, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2
<PAGE>
2. Reservation of Warrant Share; Listing. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal; and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. Protection Against Dilution.
------------------------------
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidence of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3 (b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a "Special
Dividend"), the Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be the then current Market Price of the Common Stock less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price of the
Common Stock. An adjustment made pursuant to this Subsection 3 (a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which he would have owned immediately following
such action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3 (b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
3
<PAGE>
(c) Except as provided in Subsections 3 (a) and 3 (d), in case the Company
shall hereafter issue or sell any Common Stock, any securities convertible into
Common Stock or any rights, options or warrants to purchase Common Stock or
securities convertible into Common Stock, in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such securities plus the
total consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then either the current Market Price of the Common Stock or the current Per
Share Warrant Price in effect on the date of such issuance or sale, the Per
Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price
then in effect by a fraction, the numerator of which shall be (x) the sum of (A)
the number of shares of Common Stock outstanding on the date of such issuance or
sale plus (B) the Total Consideration divided by either the current Market Price
of the Common Stock or the current Per Share Warrant Price, whichever is
greater, and the denominator of which shall be (y) the number of shares of
Common Stock outstanding on the date of such issuance or sale plus the maximum
number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in the
case of the issuance by the Company of (i) Common Stock pursuant to the exercise
or conversion of any Warrant or any other options, warrants or any convertible
securities currently outstanding or outstanding as a result of securities issued
pursuant to the PPM; provided, that the exercise price or conversion price at
which such options, warrants or convertible securities are exercised or
converted, as the case may be, is equal to the exercise price or conversion
price in effect as of the date of this Warrant or as of the date of issuance
with respect to securities issued pursuant to the PPM (except for standard anti-
dilution adjustments) and (ii) shares of Common Stock issued or sold pursuant to
stock purchase or stock option plans or other similar arrangements that are
approved by the Company's Board of Directors.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3 (e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers,
4
<PAGE>
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3 (g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment; provided, further, however,
that adjustments shall be required and made in accordance with the provisions of
this Section 3 (other than this Subsection 3 (g)) not later than such time as
may be required in order to preserve the tax-free nature of a distribution to
the Holder of this Warrant or Common Stock issuable upon the exercise hereof.
All calculations under this Section 3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 3
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Chief Financial Officer of the Company shall
promptly prepare a certificate setting forth the Per Share Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants. In the event of a
dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm) reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
5
<PAGE>
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
-----------------------------------------
(a) The Company shall include the Warrant Shares on the Shelf Registration
Statement (as defined in the PPM) and the Holder shall otherwise have the
registration rights set forth in Section 5 of the subscription agreement (the
"Subscription Agreement") to be entered into between the purchasers of units (as
described in the PPM) and the Company. By acceptance of this Warrant, the Holder
agrees that it shall have the same obligations, and otherwise comply with, the
provisions in such Section 5 of the Subscription Agreement to same extent as if
it were a party thereto. To the extent that no Final Closing Date (as defined in
the Subscription Agreement) occurs or the Offering is terminated, the rights
granted to Holder hereunder to have its shares registered shall begin as of
November 19, 1997 on the same terms as provided in Section 5 of the Subscription
Agreement.
(b) Until all Warrant Shares have been sold under a Registration Statement
or pursuant to Rule 144, the Company shall use its reasonable best efforts to
file with the Securities and Exchange Commission all current reports and the
information as may be necessary to enable the Holder to effect sales of its
shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from
6
<PAGE>
its books showing the registered holders of Warrants. All warrants issued upon
the transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 900 North Shore Drive, Lake Bluff, IL, 60044, Attention:
Chief Executive Officer or other address as the Company has designated in
writing to the Holder, or
(b) the Holder at c/o Paramount Capital Asset Management, Inc., 787 Seventh
Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D. or other such
address as the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary this 19th day of May 1997.
ENDOREX CORP.
By: ___________________________________
Michael S. Rosen
President & Chief Executive Officer
ATTEST:
__________________________
Treasurer
[Corporate Seal]
8
<PAGE>
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase
______________________ shares of the Common Stock, par value $.00l per share, of
Endorex, Corp. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated: ___________________ Signature:___________________
Address: ____________________
9
<PAGE>
CASHLESS EXERCISE
-----------------
The undersigned, ____________________, pursuant to the provisions of
the foregoing Warrant, hereby elects to exchange its Warrant for ______________
shares of Common Stock, par value $.001 per share, of Endorex Corp. pursuant to
the Cashless Exercise provisions of the Warrant.
Dated:____________________ Signature: ___________________
Address: _____________________
10
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ___________________ hereby sells, assigns and
transfers unto______________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
___________________________, attorney, to transfer said Warrant on the books of
Endorex Corp.
Dated:____________________ Signature: ____________________
Address: ______________________
11
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ____________________ hereby assigns and transfers
unto ______________________ the right to purchase ___________ shares of the
Common Stock, par value $.001 per share, of Endorex, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
______________________, attorney, to transfer that part of said Warrant on the
books of Endorex, Inc.
Dated: ______________________ Signature: ___________________
Address: _____________________
12
<PAGE>
Exhibit 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE SECURITES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. ANY SUCH TRANSFER
MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
ENDOREX CORP.
Warrant for the Purchase of Shares of
-------------------------------------
Common Stock
------------
No. 1 350,000 Shares
FOR VALUE RECEIVED, ENDOREX CORP., a Delaware corporation (the "Company"),
hereby certifies that ARIES DOMESTIC FUND, L.P., or its permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing on May 19, 1997, and prior to 5:00 P.M., New York City time, on May
19, 2002 (the "Termination Date"), three-hundred and fifty-thousand (350,000)
fully paid and non-assessable shares of the Common Stock, $.001 par value per
share, of the Company at an exercise price equal to the Offering Price (as
defined in the PPM) of the Common Stock of the Company issued in connection with
the Company's current private placement offering pursuant to the confidential
Term Sheet dated May 19, 1997 (as hereafter supplemented and amended, the "PPM")
(Hereinafter, (i) said Common Stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock", (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable for the Warrant Shares hereunder is referred to as the "Aggregate
Warrant Price", (iv) the price payable for each of the Warrant Shares hereunder
is referred to as the "Per Share Warrant Price", (v) this Warrant, all similar
Warrants issued on the date hereof and all warrants hereafter issued in exchange
or substitution for this Warrant or such similar warrants are referred to as the
"Warrants" and (vi) the holder of this Warrant is referred to as the "Holder"
and the holder of this Warrant and all other Warrants or Warrant Shares issued
upon the exercise of any Warrant are referred to as the "Holders"). The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price is subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant
1
<PAGE>
Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per
Share Warrant Price in effect immediately after such adjustment.
1. Exercise of Warrant
-------------------
(a) This Warrant may be exercised, in whole at any time or in part from
time to time, commencing on May 19, 1997 and prior to the Termination Date, by
the holder:
(i) by the surrender of this Warrant (with the subscription form at the end
hereof duly executed) at the address set forth in Subsection 9 (a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with payment
for Warrant Shares made by certified or official bank check payable to the order
of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form at
the end hereof duly executed) (a "Cashless Exercise") at the address set forth
in Subsection 9 (a) hereof. Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between the then current Market Price
per share (as hereinafter defined) of Common Stock and the Per Share Warrant
Price, and the denominator of which shall be the then current Market Price per
share of Common Stock. The then current market price per share of the Common
Stock at any date (the "Market Price") shall be deemed to be the last sale price
of the Common Stock on the business day prior to the date of the Cashless
Exercise or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such reported by the NASDAQ Bulletin Board ("NASDAQ"), or other similar
organization if NASDAQ is no longer reporting such information, or it not so
available, the fair market price of the Common Stock as determined in good faith
by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon surrender of this Warrant, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2
<PAGE>
2. Reservation of Warrant Share; Listing. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal; and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
3. Protection Against Dilution.
---------------------------
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidence of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3 (b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a "Special
Dividend"), the Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be the then current Market Price of the Common Stock less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price of the
Common Stock. An adjustment made pursuant to this Subsection 3 (a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which he would have owned immediately following
such action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this Subsection 3 (b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
3
<PAGE>
(c) Except as provided in Subsections 3 (a) and 3 (d), in case the Company
shall hereafter issue or sell any Common Stock, any securities convertible into
Common Stock or any rights, options or warrants to purchase Common Stock or
securities convertible into Common Stock, in each case for a price per share or
entitling the holders thereof to purchase Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received or receivable by
the Company in consideration of the issuance or sale of such securities plus the
total consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then either the current Market Price of the Common Stock or the current Per
Share Warrant Price in effect on the date of such issuance or sale, the Per
Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price
then in effect by a fraction, the numerator of which shall be (x) the sum of (A)
the number of shares of Common Stock outstanding on the date of such issuance or
sale plus (B) the Total Consideration divided by either the current Market Price
of the Common Stock or the current Per Share Warrant Price, whichever is
greater, and the denominator of which shall be (y) the number of shares of
Common Stock outstanding on the date of such issuance or sale plus the maximum
number of additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities.
(d) No adjustment in the Per Share Warrant Price shall be required in the
case of the issuance by the Company of (i) Common Stock pursuant to the exercise
or conversion of any Warrant or any other options, warrants or any convertible
securities currently outstanding or outstanding as a result of securities issued
pursuant to the PPM; provided, that the exercise price or conversion price at
which such options, warrants or convertible securities are exercised or
converted, as the case may be, is equal to the exercise price or conversion
price in effect as of the date of this Warrant or as of the date of issuance
with respect to securities issued pursuant to the PPM (except for standard anti-
dilution adjustments) and (ii) shares of Common Stock issued or sold pursuant to
stock purchase or stock option plans or other similar arrangements that are
approved by the Company's Board of Directors.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3 (e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers,
4
<PAGE>
statutory exchanges, sales or conveyances. The issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Warrant shall be responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than 30 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(f) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company.
(g) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3 (g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment; provided, further, however,
that adjustments shall be required and made in accordance with the provisions of
this Section 3 (other than this Subsection 3 (g)) not later than such time as
may be required in order to preserve the tax-free nature of a distribution to
the Holder of this Warrant or Common Stock issuable upon the exercise hereof.
All calculations under this Section 3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 3
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required by this
Section 3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants in
accordance with this Section 3, the Chief Financial Officer of the Company shall
promptly prepare a certificate setting forth the Per Share Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants. In the event of a
dispute with respect to any adjustment required pursuant to Section 3, the
Holder may appoint, at the Company's expense, an independent financial advisor
(e.g. an investment banking or accounting firm) reasonably acceptable to the
Company to calculate such adjustment. Such determination shall be binding upon
the Holder and the Company.
5
<PAGE>
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock, the Company shall mail
notice thereof to the Holders of the Warrants not less than 15 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become entitled
to receive shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine the
allocation of the adjusted Per Share Warrant Price between or among shares or
such classes of capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
5. Registration Under Securities Act of 1933.
-----------------------------------------
(a) The Company shall include the Warrant Shares on the Shelf Registration
Statement (as defined in the PPM) and the Holder shall otherwise have the
registration rights set forth in Section 5 of the subscription agreement (the
"Subscription Agreement") to be entered into between the purchasers of units (as
described in the PPM) and the Company. By acceptance of this Warrant, the Holder
agrees that it shall have the same obligations, and otherwise comply with, the
provisions in such Section 5 of the Subscription Agreement to same extent as if
it were a party thereto. To the extent that no Final Closing Date (as defined in
the Subscription Agreement) occurs or the Offering is terminated, the rights
granted to Holder hereunder to have its shares registered shall begin as of
November 19, 1997 on the same terms as provided in Section 5 of the Subscription
Agreement.
(b) Until all Warrant Shares have been sold under a Registration Statement
or pursuant to Rule 144, the Company shall use its reasonable best efforts to
file with the Securities and Exchange Commission all current reports and the
information as may be necessary to enable the Holder to effect sales of its
shares in reliance upon Rule 144 promulgated under the Act.
6. Limited Transferability. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from
6
<PAGE>
its books showing the registered holders of Warrants. All warrants issued upon
the transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Communication. No notice or other communication under this Warrant shall
be effective unless, but any notice or other communication shall be effective
and shall be deemed to have been given if, the same is in writing and is mailed
by first-class mail, postage prepaid, addressed to:
(a) the Company at 900 North Shore Drive, Lake Bluff, IL, 60044, Attention:
Chief Executive Officer or other address as the Company has designated in
writing to the Holder, or
(b) the Holder at c/o Paramount Capital Asset Management, Inc., 787 Seventh
Avenue, New York, NY, 10019, Attn: Lindsay A. Rosenwald, M.D. or other such
address as the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary this 19th day of May 1997.
ENDOREX CORP.
By: ___________________________________
Michael S. Rosen
President & Chief Executive Officer
ATTEST:
__________________________
Treasurer
[Corporate Seal]
8
<PAGE>
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase
______________________ shares of the Common Stock, par value $.00l per share, of
Endorex, Corp. covered by said Warrant, and makes payment therefor in full at
the price per share provided by said Warrant.
Dated: ___________________ Signature:___________________
Address: ____________________
9
<PAGE>
CASHLESS EXERCISE
-----------------
The undersigned, ____________________, pursuant to the provisions of
the foregoing Warrant, hereby elects to exchange its Warrant for ______________
shares of Common Stock, par value $.001 per share, of Endorex Corp. pursuant to
the Cashless Exercise provisions of the Warrant.
Dated:____________________ Signature: ___________________
Address: ____________________
10
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED ___________________ hereby sells, assigns and
transfers unto ______________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
___________________________, attorney, to transfer said Warrant on the books of
Endorex Corp.
Dated:____________________ Signature: ____________________
Address: _____________________
11
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED ____________________ hereby assigns and transfers
unto ______________________ the right to purchase ___________ shares of the
Common Stock, par value $.001 per share, of Endorex, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
______________________, attorney, to transfer that part of said Warrant on the
books of Endorex, Inc.
Dated: ______________________ Signature: ___________________
Address: ____________________
12
<PAGE>
Exhibit 5.1
May 12, 2000
Endorex Corporation
28101 Ballard Drive, Suite F
Lake Forest, IL 60045
Re: Endorex Corporation Registration Statement on Form S-3
for 8,157,869 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Endorex Corporation, a Delaware corporation
(the "Company"), in connection with the resale by certain stockholders of the
Company of up to 8,157,869 shares of the Company's common stock (the "Shares"),
consisting of 3,578,226 shares of common stock, (the "Common Shares"), 2,281,197
shares of common stock issuable upon exercise of warrants (the "Warrant Shares")
and 2,289,346 shares of common stock issuable upon conversion of Series B and C
Convertible Preferred Stock (the "Preferred Shares"), pursuant to the Company's
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").
This opinion is being furnished in accordance with the requirements of Item
16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-B.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the issuance and sale of the
Shares. Based on such review, we are of the opinion that:
(i) the Common Shares are legally issued, fully paid and
nonassessable;
(ii) assuming that the shares of common stock issuable upon exercise
of the warrants are issued, delivered and paid for in accordance
with the terms of the warrants, the Warrant Shares will be
legally issued, fully paid and nonassessable; and
(iii) assuming that the shares of common stock issuable upon
conversion of the Series B and Series C Preferred Stock are
issued and delivered in accordance with the terms of the
Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock and Certificate of
<PAGE>
Endorex Corporation
Page 2
Designations, Preferences and Rights of Series C Convertible
Preferred Stock, respectively, as filed with the Secretary of
the State of Delaware, the Preferred Shares will be legally
issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-B.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 10.1
February 29, 2000
Mr. Michael S. Rosen
President and Chief Executive Officer
Endorex Corporation
28101 Ballard Drive, Suite F
Lake Forest, IL 60045
Finder Agreement
----------------
Dear Sirs:
Reference is made to our recent discussions relating to a proposed private
placement under Rule 506 of Regulation D of the Securities Act of 1933, as
amended (the "Act") of securities of Endorex Corporation (the "Company") as
hereinafter described. Based upon our discussions and representations which you
have made to us describing the Company and its principals, the present and
proposed business activities of the Company and the Company's operations and
financial condition, Paramount Capital, Inc. ("Paramount") hereby confirms in
principle its interest in acting as a finder for the Company, on a "best
efforts" basis, in connection with the private placement offering of the
Company's Units (the "Offering"), upon the following basic terms and conditions:
1. Paramount will introduce the Company to "accredited investors" as
defined in Rule 501 of Regulation D promulgated under the Act for the purchase
of Units. Each "Unit" shall consist of (i) a number of shares of common stock of
the Company (rounded to the nearest whole share, with one-half (0.5) of one
share, or greater fraction thereof, being rounded upward), par value $.001 per
share (the "Common Stock"), determined by dividing one hundred thousand dollars
($100,000) by the lower of (a) the average closing price of the Common Stock, as
quoted on the American Stock Exchange, for the five (5) consecutive trading days
immediately preceding the Pricing Date (as defined in paragraph 2 below); (b)
the average closing price of the Common Stock, as quoted on the American Stock
Exchange, for the fifteen (15) consecutive Trading Days immediately preceding
the Pricing Date and (c) $7.25, and (ii) a five year warrant (collectively, the
"Warrants") to purchase a number of shares of Common Stock equal to twenty five
percent (25%) of the shares of Common Stock included in such Unit, such warrants
to be exercisable, in whole or in part, at any time prior to the fifth
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<PAGE>
anniversary of the date of issuance at an exercise price equal to one hundred
twenty five percent (125%) of the Offering Price (the Common Stock, the
Warrants, and the Common Stock issuable upon the exercise of the Warrants are
sometimes herein collectively referred to as the "Securities"). In no event,
however, will the Company be required to sell securities at a price per share
less than $3.25. The Company will sell a maximum number of Units which would
include up to 1,500,000 shares of Common Stock (exclusive of the Warrants and
any Paramount Warrants (as defined below)) (the "Maximum Offering"). The sale of
any Units is contingent upon the Company making sales of a number of Units which
would provide aggregate gross proceeds to the Company of at least $2,000,000
(the "Minimum Offering"). For purposes hereof, "closing bid price" shall mean,
for each trading day, the reported per share closing bid price of the Common
Stock on the American Stock Exchange during such trading day. "Trading Day"
shall mean a day on which the American Stock Exchange is open for the
transaction of business.
2. At any time after receipt of subscriptions for at least the Minimum
Offering Amount and prior to May 1, 2000, the Company may execute a subscription
agreement (the "Subscription Agreement") with each of the investors (the date of
such execution being the "Pricing Date") and may conduct a closing (a "Closing")
at any time immediately following receipt of the Minimum Offering (the date of
any such Closing a "Closing Date"). Certificates representing shares of the
Common Stock, and the Warrants, shall be delivered to the investors no later
than ten (10) days after the Closing Date.
3. Pending completion or termination (pursuant to paragraph 20 below) of
the Offering, the Company agrees that it will not enter into any agreement,
discussion or negotiations with any other person or entity relating to a
possible private offering or placement of its securities.
4. (a) The Company will, as soon as practicable, but not later than 30
days after the Closing Date (the "Outside Filing Date"), (a) file a shelf
registration statement (the "Shelf Registration Statement") with respect to (i)
the resale of the shares of Common Stock sold in the Offering; (ii) the shares
of Common Stock issuable upon exercise of the Warrants; and (iii) the shares of
Common Stock issuable upon exercise of the Paramount Warrants (as defined below)
(collectively, the "Registrable Capital Stock") with the SEC and use its best
efforts to have such Shelf Registration Statement declared effective by the SEC
prior to the date which is 75 days after the Closing Date and (b) cause such
Shelf Registration Statement to remain effective until such date as the holders
of the securities have completed the distribution described in the Shelf
Registration Statement or at such time that such shares are no longer, by reason
of Rule 144(k) under the Act, required to be registered for the sale thereof by
such holders.
(b) Except to the extent any delay is due to the failure of a investor
or Paramount to reasonably cooperate in providing to the Company such
information as shall be reasonably requested by the Company in writing for use
in the Shelf Registration Statement, in the event that the Shelf Registration
Statement is not filed by the Outside Filing Date the Company shall, for no
additional consideration, pay to each investor as liquidated damages and
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<PAGE>
not as a penalty an amount in cash equal to one percent (1%) of the amount
invested by such investor for each 30 day period in which the Shelf Registration
Statement remains unfiled; provided, however, that in no event shall the amount
of liquidated damages payable by the Company to any investor exceed twelve (12%)
of the amount invested by such investor.
5. Prior to the effective date of the Shelf Registration Statement, the
Company will file a listing application for (a) the shares of Common Stock sold
in the Offering and (b) the Common Stock issuable upon exercise of the Paramount
Warrants (as defined below) with the American Stock Exchange.
6. Paramount will receive cash commissions equal to seven percent (7%) of
the aggregate gross proceeds received by the Company in the Offering (the "Cash
Commissions"). Paramount may, in its discretion, retain others, who shall be
members in good standing of the National Association of Securities Dealers, Inc.
("NASD"), to act as selected dealers in placing the Common Stock. Such other
others will be compensated by Paramount out of its commissions. The Company has
advised Paramount that no person is entitled, directly or indirectly, to
compensation from the Company for services as a finder in connection with the
proposed Offering or any other transaction contemplated by this Finders
Agreement.
7. Pending completion of the Offering and for a 30 day period thereafter,
the Company will not issue press releases with respect to the Offering or engage
in other publicity without giving Paramount advance copies of any such releases.
During the 12 month period following the completion of the Offering, the Company
will not lower the exercise price or conversion price of any currently
outstanding options, warrants or convertible securities without the prior
written consent of Paramount (other than as required by existing anti-dilution
provisions currently in effect).
8. The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the proposed Offering,
including but not limited to, the costs of preparing, printing and filing with
the Securities and Exchange Commission (the "SEC") the Shelf Registration
Statement and amendments, post-effective amendments and supplements thereto;
preparing, printing and delivering exhibits thereto and copies of the
preliminary, final and supplemental prospectus; preparing, printing and
delivering all selling documents, including but not limited to this Agreement,
subscription agreements, warrant agreements and stock and warrant certificates;
blue sky fees, filing fees and legal fees and disbursements of our counsel in
connection with blue sky matters; fees and disbursements of the transfer and
warrant agent; the cost of a total of two sets of bound closing volumes for
Paramount and its counsel) (collectively, the "Company Expenses"). The Company
shall be responsible for Paramount's legal fees and other reasonable out-of-
pocket expenses in connection with this transaction, such fees and expenses not
to exceed $75,000 (the "Paramount Expenses").
9. Upon consummation of the Offering contemplated hereby, the Company will,
in consideration of the services rendered by Paramount in connection with the
Offering, issue to Paramount and/or its designees for no additional
consideration, warrants (the "Paramount Warrants") to acquire a number of shares
of Common Stock equal to the sum of (i) ten percent
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<PAGE>
(10%) of the number of shares of Common Stock included in the Units sold in the
Offering and (ii) ten percent (10%) of the number of shares of Common Stock
issuable upon exercise of Warrants contained in the Units sold in the Offering
in the Offering, exercisable for a period of seven (7) years commencing six (6)
months after the closing of the Offering at an exercise price equal to 110% of
the price per share of Common Stock sold in the Offering. The Paramount Warrants
cannot be transferred, sold, assigned or hypothecated for six (6) months except
that they may be assigned in whole or in part during such period to any NASD
member participating in the Offering or any officer or employee of Paramount or
any such NASD member. The Paramount Warrants will contain a cashless exercise
feature, anti-dilution protection and the right to have the Common Stock
issuable upon exercise thereof included on the Shelf Registration Statement. In
the event that the closing bid price for any 20 consecutive Trading Days is at
least 250% of the exercise price of Paramount Warrants, then upon 30 days prior
written notice to Paramount, the Company shall have the right to redeem
Paramount Warrants at a price equal to the exercise price if such Paramount
Warrants have not been exercised prior to the expiration of such 30 day period.
10. At the request of Paramount, the Company will use its best efforts to
obtain from its officers and directors, an agreement that, from the date
Subscription Agreements are made available to investors until 180 days following
the Closing Date, they will not sell, assign or transfer any of their shares of
the Company's securities without Paramount's prior written consent.
11. Paramount shall be entitled to receive the cash commissions described
in paragraph 6 and the Paramount Warrants described in paragraph 9 in the event
that any investor who is or has been introduced to the Company by Paramount, and
who invests in the Company during the 12-month period following the date hereof;
provided, however, that Paramount shall not be entitled to any such cash
commissions or Paramount Warrants as a result of any investment made as a part
of a public offering of the Company's securities. Paramount will provide the
Company with a list of such introduced investors on the Closing Date. In
addition, the Company shall in all events be responsible for Paramount's
reasonable out of pocket expenses in connection with any such private
investment.
12. The Company shall not use any proceeds from the Offering to repay any
indebtedness of the Company, including, but not limited to, any indebtedness to
current executive officers or principal stockholders of the Company, but
excluding accounts payable incurred in the ordinary course and the Line of
Credit with Finova.
13. Unless required by law, any services and advice rendered by Paramount
pursuant to this Agreement (and the existence of this Agreement) shall not be
disclosed publicly in any manner without Paramount's prior written approval and
shall be treated by the Company as confidential information. All material non-
public information given to Paramount by the Company shall be treated by
Paramount as confidential information and shall not be used by Paramount except
in rendering its services pursuant to this Agreement. The Company will use its
best efforts to clearly delineate to Paramount any such information.
-4-
<PAGE>
14. Paramount shall be entitled to rely on the representations, warranties
and covenants of the Company as set forth in any Subscription Agreement or other
document used by the Company in connection with or otherwise related to the
Offering, including without limitation the legal opinion of counsel to the
Company. Further, Paramount reserves the right to conduct legal, business and
financial due diligence of the Company to the extent that Paramount, in its sole
discretion, deems it necessary and appropriate.
15. (a) The Company agrees to indemnify each of Paramount, the directors,
officers, employees, shareholders, controlling persons under the Act, affiliates
and agents thereof (each an "Indemnitee," together, the "Indemnitees"), pay on
demand and protect, defend, save and hold each Indemnitee harmless from and
against any and all liabilities, damages, losses, settlements, claims, actions,
suits, penalties, fines, costs or expenses (and all actions in respect thereof)
(including, without limitation, reasonable attorneys' fees and related expenses)
incurred by or asserted against any Indemnitee of whatever kind or nature,
arising from, in connection with or occurring as a result of, this Agreement or
the matters contemplated by this Agreement, including without limitation, (i)
the engagement of Paramount pursuant to this Agreement or any other related
agreement, including any modifications or future additions to such engagement
and related activities prior to the date hereof, (ii) any act by Paramount or
any Indemnitee taken in connection with this Agreement or the transactions
contemplated therein (including, without limitation, the purchase of securities
of the Company) other than the gross negligence or willful misconduct of
Paramount, (iii) a breach of any representation, warranty, covenant, or
agreement of the Company contained in this Agreement, the Subscription Agreement
between the Company and the investors in the Offering or any of the other
documents utilized in connection with the Offering, (iv) the employment by the
Company of any device, scheme or artifice to defraud, or the engaging by the
Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the Offering, or (v) any untrue statement or alleged untrue
statement of a material fact contained in any of the documents used in
connection with or otherwise related to the Offering or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading unless as a result of the gross negligence or willful misconduct of
Paramount. The Company further agrees that it will not, without the prior
written consent of Paramount, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
Paramount or any Indemnitee is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of Paramount and each other Indemnitee
hereunder from all liability arising out of such claim, action, suit or
proceeding.
(b) The foregoing shall be in addition to any rights that any
Indemnitee may have at common law or otherwise.
-5-
<PAGE>
(c) The Company hereby consents to personal jurisdiction and service
and venue in any court in which any claim which is subject to this agreement is
brought against any Indemnitee.
16. This Agreement shall continue for a term of sixty (60) days from the
date hereof, subject to the right of the Company to extend the term for up to an
additional thirty (30) day period, provided that good-faith negotiations are
continuing with investors to complete the Offering. Paragraphs 3, 7, 8, 11, 13,
14, 15, 16, 17, 18, 19, 20, 21 and 22 of this Agreement shall remain operative
and in full force and effect regardless of any expiration or termination of this
Agreement by the Company.
17. The Company agrees not to use the name of Paramount in any written
document used externally without the prior consent of Paramount, which shall not
be unreasonably withheld, except as otherwise required by law.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
law. The parties hereby irrevocably submit to the exclusive jurisdiction of the
Courts of the State of New York.
19. This Agreement shall be binding upon and inure to the benefit of
Paramount and the Company and each of their successors and assigns. This
Agreement may not be assigned by either party without the prior written consent
of the other.
20. Paramount may terminate this Agreement at any time prior to the closing
of the Offering in its sole discretion, with or without cause, and without
liability whatsoever to the Company. The Company may in its sole judgment and
discretion, determine at any time not to proceed with the Offering; provided,
however, that in the event of such a termination, the Company shall pay to
Paramount it's reasonable out of pocket expenses (for which the Company shall in
all events remain liable)).
21. Nothing herein shall restrict or otherwise limit Paramount from
performing similar or dissimilar services for any other party or for its own
account. The provisions of this paragraph 21 shall be enforceable to the fullest
extent permitted by law.
22. This Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes any prior agreements or understandings, oral
or written, relating to the subject matter hereof. If any provision of this
Agreement is determined to be invalid or unenforceable in any respect, such
determination will not affect such provision in any other respect or any other
provision of this Agreement, which will remain in full force and effect. This
Agreement may not be amended or otherwise modified or waived except by an
instrument in writing signed by both the Company and Paramount.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
If the foregoing conforms to your understanding, please sign, date and
return to us the enclosed copy of this letter.
Very truly yours,
PARAMOUNT CAPITAL, INC.
By:_________________________________
Name: Lindsay A. Rosenwald,M.D.
Title: Chairman
The foregoing is in conformity
with our understanding:
ENDOREX CORPORATION
By:__________________________________
Name: Mr. Michael S. Rosen
Title: President and Chief Executive Officer
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<PAGE>
Exhibit 10.2
Amendment and Supplement
To Finder Agreement
April 6, 2000
This Amendment and Supplement (this "Supplement") amends and supplements the
Finder Agreement dated February 29, 2000 entered into by and between Endorex
Corporation (the "Company") and Paramount Capital, Inc. (the "Finder").
Capitalized terms used, but not defined, in this Supplement shall have the
meanings given to them in the Finder Agreement unless the context otherwise
requires.
A. Paragraph 1 of the Finder Agreement is hereby replaced in its entirety to
provide as follows:
1. Paramount will introduce the Company to "accredited investors" as
defined in Rule 501 of Regulation D promulgated under the Act for the purchase
of Units. Each "Unit" shall consist of (i) 21,164 shares of common stock of the
Company, par value $.001 per share (the "Common Stock") and (ii) a five year
warrant (collectively, the "Warrants") to purchase 5,291 shares of Common Stock,
such warrants to be exercisable, in whole or in part, at any time prior to the
fifth anniversary of the date of issuance at an exercise price equal to $5.91
per share of Common Stock underlying such Warrants (the Common Stock, the
Warrants, and the Common Stock issuable upon the exercise of the Warrants are
sometimes herein collectively referred to as the "Securities"). The purchase
price of each Unit shall be $100,000. The Company will sell a maximum number of
Units which would include up to 1,850,000 shares of Common Stock (exclusive of
the Warrants and any Paramount Warrants (as defined below)) (the "Maximum
Offering"). The sale of any Units is contingent upon the Company making sales of
a number of Units which would provide aggregate gross proceeds to the Company of
at least $2,000,000 (the "Minimum Offering"). "Trading Day" shall mean a day on
which the American Stock Exchange is open for the transaction of business.
B. Paragraph 9 of the Finder Agreement is hereby replaced in its entirety to
provide as follows:
9. Upon consummation of the Offering contemplated hereby, the Company will,
in consideration of the services rendered by Paramount in connection with the
Offering, issue to Paramount and/or its designees for no additional
consideration, warrants (the "Paramount Warrants") to acquire a number of shares
of Common Stock equal to the sum of (i) ten percent (10%) of the number of
shares of Common Stock included in the Units sold in the Offering and (ii) ten
percent (10%) of the number of shares of Common Stock issuable upon exercise of
Warrants contained in the Units sold in the Offering, exercisable for a period
of seven (7) years commencing six (6) months after the closing of the Offering
at an exercise price equal to $5.25 per share. The Paramount Warrants cannot be
exercised, transferred, sold, assigned or hypothecated for six (6) months except
that they may be assigned in whole or in part during such period to any NASD
member participating in the Offering or any officer or employee of Paramount or
any such NASD member. The Paramount Warrants will contain a cashless
<PAGE>
exercise feature, anti-dilution protection and the right to have the Common
Stock issuable upon exercise thereof included on the Shelf Registration
Statement. In the event that the closing bid price for any 20 consecutive
Trading Days is at least 250% of the exercise price of Paramount Warrants, then
upon 30 days prior written notice to Paramount, the Company shall have the right
to redeem Paramount Warrants at a price equal to the exercise price if such
Paramount Warrants have not been exercised prior to the expiration of such 30
day period.
In witness whereof, the parties have caused this Amendment to be executed
as of the date first set forth above.
PARAMOUNT CAPITAL, INC.
By:______________________________
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
The foregoing is in conformity
with our understanding:
ENDOREX CORPORATION
By:__________________________________
Name: Mr. Michael S. Rosen
Title: President and Chief Executive Officer
<PAGE>
Exhibit 10.3
FINANCIAL ADVISORY AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into this 25th day of
October, 1999, by and between Endorex Corporation, a Delaware corporation
(hereinafter termed the "Company"), on one hand; and Paramount Capital, Inc.
(hereafter "Advisor") on the other hand.
W I T N E S S E T H:
WHEREAS, the Company is engaged in, among other things, the development and
marketing of drug delivery systems and cancer therapy, and
WHEREAS, Advisor has agreed to provide certain financial advisory services
to the Company upon the following terms and conditions.
NOW, THEREFORE, for and in consideration of the terms and conditions
hereinafter set forth, the Parties hereto agree as follows:
1. TERM
The term of this Agreement will be for twelve (12) months from and after
the 25th day of October, 1999, unless earlier terminated (i) upon mutual
agreement of the parties, (ii) at any time by Advisor upon written notice to the
Company, (iii) by the Company upon written notice to Advisor on or before April
25, 2000, subject to its payment of the Termination Fee as set forth in Section
2(a), or (iv) by the Company upon written notice to Advisors at any time after
April 25, 2000 (the "Term").
2. COMPENSATION
(a) The Company will pay to Advisors ongoing fees for Services (as
described in Section 3) at the rate of $5,000 per month, with the first three
(3) months payable at the time of execution of this Agreement. If the Company
terminates the agreement prior to April 25, 2000, the Company shall be obligated
to continue monthly payments until April 25, 2000.
(b) Upon entering into this Agreement, Advisor, or its designees, will be
granted option to purchase 36,000 shares of Endorex Corporation Common Stock, at
an exercise price of $2.54 per share (hereinafter collectively referred to as
the "Vested Options"), to vest as follows: (i) 25% (9,000 shares) shall vest
upon execution of this Agreement (hereinafter "First Vested Options"); (ii) an
additional 25% (9,000 shares) shall vest six (6) months from the date of
execution of this Agreement (hereinafter "Second Vested Options"); and (iii) the
remaining 50% (18,000 shares) shall vest twelve (12) months from the date of
execution of this Agreement (hereinafter "Third Vested Options").
(c) Advisor can exercise the Vested Options as follows: (i) the First
Vested Options can be exercised twelve (12) months from the execution of this
Agreement; (ii) the Second Vested Options can be exercised 18 months from the
execution of this Agreement; and (iii) the
<PAGE>
Third Vested Options can be exercised twenty-four (24) months from the execution
of this Agreement. If the Company terminates this Agreement prior to the end of
six (6) months, pursuant to paragraph 1 above, the Company shall be obligated to
vest the Second Vested Options (9,000 shares) to Advisor. The options will
expire ten (10) years after the date of this Agreement. In addition, the Vested
Options shall contain a cashless exercise feature.
(d) Upon entering into this Agreement, Advisor, or its designees, will be
granted options to purchase an additional 10,000 shares of Endorex Corporation
Common Stock at an exercise price of $2.54 per share to be fully vested upon
grant. The options will expire one year after the date of this Agreement and
will be subject to the Company's right to repurchase such options for $50,000.
(e) Upon the Closing of each Investment of newly issued stock (as defined
below) during the Term, the Company shall pay to Advisor a fee in an amount of
no more than seven percent (7%) of the aggregate value of such Investment and
shall issue to Advisor warrants to purchase an amount of securities of no more
than ten percent (10%) of the newly-issued securities sold as part of such
Investment at an exercise price equal to one-hundred-ten percent (110%) of the
price of such securities, exercisable until seven (7) years from the date of
issuance of such warrants. For the purposes of this Agreement, an "Investment"
shall mean any purchase of newly-issued securities of the Company which is made
during the Term or during the twelve-month period following the term by an
investor first introduced to the Company by or through Advisor during the Term;
provided, however, that if the investor held an investment prior to the date of
this Agreement, such fee will be no more than 5% of the aggregate value of such
investment plus warrants as above.
(f) The Company also agrees to pay the Advisor in cash all out of pocket
expenses incurred by Advisor in providing its services hereunder, including
reasonable fees and disbursements of Advisor's counsel. Such expenses are to be
paid upon submission of a bill or bills by Advisor from time to time. If any
individual expense shall exceed five thousand dollars ($5,000.00), Paramount
agrees to obtain prior written authorization for such expense from Company.
3. SERVICES
"Services" will include the following: (1) identifying and contacting
potential investors in the Company's securities, (2) organizing meetings with
potential investors and (3) participating in meetings and discussions with
potential investors regarding the Company. Advisors will use their best efforts
in providing the Services. Advisors will be engaged until the engagement is
terminated as specified herein.
4. ASSIGNMENT
Advisor may not assign its rights or obligations under this Agreement
without the written consent of the Company. Neither this Agreement nor any
provision hereof may be changed, waived, discharged, or terminated other than by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is being asserted.
2
<PAGE>
5. ENTIRE AGREEMENT
This Agreement contains all the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersedes in full
and replaces the Financial Advisory Agreement between the Company and Paramount
Capital, Inc. dated October 16, 1997. If any provision of this Agreement is
held unenforceable or inoperative by any court, either whole or in part the
remaining provisions shall be deemed severable and unaffected and shall continue
in full force and effect.
6. MISCELLANEOUS
(a) Relationship to Parties. Advisor is an independent contractor of the
Company. Nothing in this Agreement shall be construed as creating an employer-
employee relationship or a guarantee of future employment or engagement. Advisor
further agrees to be responsible for all of its federal and state taxes,
withholding, social security, insurance, and other benefits except as otherwise
expressly set forth herein.
(b) Other Activities. Advisor is free to engage in other independent
contracting activities. Advisor also agrees not to induce or attempt to
influence, directly or indirectly, any employee at the Company to terminate
his/her employment and work for Advisor or any other person.
(c) Conflicts. Advisor represents and warrants that neither its agreement
to perform, nor its performance of the Services under to this Agreement will
violate any legal or regulatory statute, rule or requirement, or any agreement
or obligation between such Advisor and any third party.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflict of
law principles.
(e) Remedy for Breach. The parties hereto agree that, in the event of
breach or threatened breach of any covenants of Advisor, the damage or imminent
damage to the value and the goodwill of the Company's business shall be
inestimable, and that therefore any remedy at law or in damages shall be
inadequate. Accordingly, the parties hereto agree that the Company shall be
entitled to injunctive relief against Advisor in the event of any by Advisor, in
addition to any other relief (including damages) available to the Company under
this Agreement or under law.
(f) Survival. Sections 6(e) and 6(f) shall survive termination of this
Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the Parties hereto set their hands this 25th day of
October 1999.
ENDOREX CORPORATION
By: /s/ Michael S. Rosen
------------------------
Michael S. Rosen, President/CEO
PARAMOUNT CAPITAL, INC.
By: /s/ Lindsay Rosenwald
-----------------------
Lindsay Rosenwald, M.D., Chairman
4
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 4, 2000 relating to the
financial statements, which appears in Endorex Corporation's Annual Report on
Form 10-KSB for the year ended December 31, 1999. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Chicago, Illinois
May 11, 2000
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
We the undersigned directors and/or officers of Endorex Corporation (the
"Company"), hereby severally constitute and appoint Michael S. Rosen, President
and Chief Executive Officer, and Frank C. Reid, Vice President, Finance and
Corporate Development, and each of them individually, with full powers of
substitution and resubstitution, our true and lawful attorneys, with full power
to them and each of them to sign for us, in our names, the Registration
Statement on Form S-3 filed with the Securities and Exchange Commission, and any
and all amendments to said Registration Statement (including post-effective
amendments), in connection with the registration under the Securities Act of
1933, as amended, of equity securities of the Company, and to file or cause to
be filed the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as each of them might or could do in
person, and hereby ratifying and confirming all that said attorneys, and each of
them, or their substitute or substitutes, shall do or cause to be done by virtue
of this Power of Attorney.
WITNESS our hands on this second day of May, 2000.
_______________________ ________________________
Michael S. Rosen Frank C. Reid
_______________________ ________________________
Richard Dunning Steve H. Kanzer
_______________________ ________________________
Paul D. Rubin H. Laurence Shaw
_______________________ ________________________
Kenneth Tempero Steven Thornton
