<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Endorex Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
ENDOREX CORPORATION
28101 Ballard Dr., Suite F
Lake Forest, Illinois 60045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 2000
To the Stockholders:
The annual meeting of stockholders (the "Annual Meeting") of Endorex
Corporation (the "Company") will be held at Hyatt Deerfield, 1750 Lake Cook
Road, Deerfield, IL 60015, telephone number (847) 945-3400, on May 17, 2000, at
9:00 A.M. (central daylight time) for the following purposes, each as more
fully described herein:
(1) To elect seven directors to serve until the next Annual Meeting or
until their respective successors shall have been duly elected and
qualified;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants for the year ending December 31, 2000;
(3) To approve the Amended and Restated Certificate of Incorporation of
Endorex Corporation; and
(4) To transact such other business as may properly come before the Annual
Meeting.
Only stockholders of record at the close of business on March 20, 2000 are
entitled to notice of and to vote at the Annual Meeting. A list of stockholders
eligible to vote at the meeting will be available for inspection at the meeting
and for a period of ten days prior to the meeting, during regular business
hours at the corporate headquarters at the address above. Should you receive
more than one proxy because your shares are registered in different names, each
proxy should be signed and returned to assure that all your shares will be
voted. You may revoke your proxy at any time prior to the Annual Meeting. If
you attend the Annual Meeting and vote by ballot, your proxy will be revoked
automatically and only your vote at the Annual Meeting will be counted.
Whether or not you expect to attend the Annual Meeting, your proxy vote is
important. To assure your representation at the Annual Meeting, please sign and
date the enclosed proxy card and return it promptly in the enclosed envelope,
which requires no additional postage if mailed in the United States.
The Board of Directors recommends that you vote "FOR" the three proposals
discussed in this proxy statement.
By Order of the Board of Directors
Michael S. Rosen
Chief Executive Officer and
President
Lake Forest, Illinois
April 6, 2000
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
- --------------------------------------------------------------------------------
<PAGE>
ENDOREX CORPORATION
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
Introduction
This Proxy Statement is furnished to stockholders of record of Endorex
Corporation (the "Company") as of the close of business on March 20, 2000 in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors" or "Board") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on May 17, 2000.
Shares cannot be voted at the meeting unless the owner is present in person
or by proxy. All properly executed and unrevoked proxies in the accompanying
form that are received in time for the meeting will be voted at the meeting or
any adjournment thereof in accordance with instructions thereon, or if no
instructions are given, will be voted "FOR" the election of the named nominees
as Directors of the Company, "FOR" the ratification of PricewaterhouseCoopers
LLP as independent public accountants for the year ending December 31, 2000,
"FOR" approval of the Amended and Restated Certificate of Incorporation and
will be voted in accordance with the best judgment of the persons appointed as
proxies with respect to other matters which properly come before the Annual
Meeting. Any person giving a proxy may revoke it by written notice to the
Company at any time prior to exercise of the proxy. In addition, although mere
attendance at the Annual Meeting will not revoke the proxy, a stockholder who
attends the meeting may withdraw his or her proxy and vote in person.
Abstentions and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum for the transaction of business at the
Annual Meeting. Abstentions will be counted in the tabulation of votes cast on
each of the proposals presented at the Annual Meeting and will have the same
effect as votes against a proposal, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved.
The Annual Report of the Company (which does not form a part of the proxy
solicitation materials), including the Annual Report on Form 10-KSB (the "Form
10-KSB") with the financial statements of the Company for the fiscal year ended
December 31, 1999, is being distributed concurrently herewith to the
stockholders.
The mailing address of the principal executive offices of the Company is
28101 Ballard, Suite F, Lake Forest, IL 60045. This Proxy Statement and the
accompanying form of proxy are being mailed to the stockholders of the Company
on or about April 10, 2000.
VOTING SECURITIES
The Company has two classes of voting securities: Common Stock and Series B
Preferred Stock. At the Annual Meeting, each stockholder of record of Common
Stock at the close of business on March 20, 2000 will be entitled to one vote
for each share of Common Stock owned on that date as to each matter presented
at the Annual Meeting. In addition, each stockholder of record on March 20,
2000 of Series B Convertible Preferred Stock will be entitled to 13.33 votes
for each share of Series B Convertible Preferred Stock owned as to each matter
presented at the Annual Meeting. On March 20, 2000, 10,892,223 shares of Common
Stock and 92,973 shares of Series B Convertible Preferred Stock representing
1,239,640 shares of Common Stock were outstanding. A list of stockholders
eligible to vote at the Annual Meeting will be available for inspection at the
Annual Meeting and for a period of ten days prior to the Annual Meeting, during
regular business hours at the principal executive offices of the Company at the
address specified above.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise directed, the persons appointed in the accompanying form of
proxy intend to vote at the Annual Meeting for the election of the seven
nominees named below as Directors of the Company to serve until the next Annual
Meeting or until their successors are duly elected and qualified. If any
nominee is unable to be a candidate when the election takes place, the shares
represented by valid proxies will be voted in favor of the remaining nominees.
The Board of Directors does not currently anticipate that any nominee will be
unable to be a candidate for election.
The Board of Directors currently has seven members, all of whom are nominees
for re-election. Each director shall serve until the next Annual Meeting or
until his respective successor shall have been duly elected and qualified. All
nominees were elected to the Board of Directors by the stockholders at the 1999
annual stockholders meeting.
The affirmative vote of a plurality of the Company's outstanding Common
Stock represented and voting at the Annual Meeting is required to elect the
Directors.
Nominees for Election as Directors
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each nominee during
the last five years has been furnished to the Company by such nominee. Except
as indicated, each of the nominees has had the same principal occupation for
the last five years.
Michael S. Rosen, M.B.A., 47, has served as President, Chief Executive
Officer and a member of the Board of Directors of the Company since August
1996. From January 1995 until August 1996, he was President and Chief Executive
Officer of PharmaMar, S.A., a European biotechnology company. From June 1991
until January 1995, Mr. Rosen was General Manager of the northern Latin
American businesses for Monsanto Company, a multinational
chemical/pharmaceutical company. Mr. Rosen received a B.A. in
Sociology/International Relations from Beloit College and an M.B.A. in
International Business from the University of Miami. He has undertaken post-
graduate courses at Northwestern University and Sophia University in Tokyo,
Japan.
Richard Dunning, 54, has served as a member of the Board of Directors of the
Company since his election in August 1997. He has been Chairman and Chief
Executive Officer of Nexell Therapeutics Inc. since May 1999. Prior to that, he
was President and Chief Executive Officer since April 1996. Nexell, formerly
known as VIMRX Pharmaceuticals Inc., is the leading developer and marketer of
innovative diagnostics and ex vivo cell therapies for cancer, autoimmune,
metabolic and genetic diseases. Prior to joining Nexell, Mr. Dunning played an
instrumental role in the formation of The DuPont Merck Pharmaceutical Company
and acted as that organization's Executive Vice President and Chief Financial
Officer from 1991 to 1995. Mr. Dunning received a B.S. in Economics and an
M.B.A. in Finance from the University of Delaware.
Steve H. Kanzer, C.P.A., J.D., 36, has served as a member of the Board of
Directors since his election in June 1996. He is President, Chief Executive
Officer and a member of the board of directors of Corporate Technology
Development, Inc. since 1999. Prior thereto he was President and Chief
Executive Officer of the Institute for Drug Research, Inc., a private
pharmaceutical research and development company with offices in Budapest,
Hungary, and New York since December 1997. From 1992 until December 1998, Mr.
Kanzer was a founder of Paramount Capital Inc., and Senior Managing Director
and Head of Venture Capital of Paramount Capital Investment, LLC, a
biotechnology and biopharmaceutical venture capital and merchant banking firm.
Mr. Kanzer is a founder and Chairman of the Board of Discovery Laboratories,
Inc. and a member of the board of directors of Atlantic Technology Ventures,
Inc., both publicly traded pharmaceutical research and
2
<PAGE>
development companies. From 1993 until June 1998, Mr. Kanzer was a founder and
a member of the board of directors of Boston Life Sciences, Inc., a publicly
traded pharmaceutical research and development company. Mr. Kanzer is also a
founder and member of the board of directors and has been a Chairman and
Interim President of several private pharmaceutical research and development
companies. Mr. Kanzer received his J.D. from New York University School of Law
in 1988 and a B.B.A. in Accounting from Baruch College in 1985.
Paul D. Rubin, M.D., 46, has served as a member of the Board of Directors of
the Company since his election in November 1997. Since 1999, he has been
Executive Vice President for Drug Development at Sepracor, Inc., having
previously been Senior Vice President since 1996. He is responsible for
managing research and development programs for the company's improved chemical
entities portfolio, which includes the management of Discovery Research,
Regulatory, Clinical, Preclinical, and Project Management teams. Dr. Rubin also
plays a key role in the evaluation of external technology and licensing
opportunities. From 1993 to 1996, Dr. Rubin was the Vice President and
Worldwide Director of Early Clinical Development and Clinical Pharmacology at
Glaxo Wellcome. Prior to Glaxo, Dr. Rubin held various executive research
positions at Abbott Laboratories. Dr. Rubin received his M.D. from Rush Medical
College in Chicago and completed his residency in Internal Medicine at the
University of Wisconsin Hospitals and clinics in Madison, Wisconsin.
H. Laurence Shaw, M.D., 53, has served as a member of the Board of Directors
of the Company since his election in August 1997. In 1999, he was appointed as
Chief Executive Officer of Applied Spectral Imaging, a company focused on the
application of technology that combines conventional imaging with spectroscopy
to display previously undetected information. It has applications in diverse
areas such as cytogenetics, pathology, ophthalmology, as well as fields
unrelated to healthcare. He was Chairman, President and Chief Executive Officer
of Pacific Pharmaceuticals, Inc. ("Pacific") from December 1996 until March
1999. From 1995 to 1996, Dr. Shaw was Corporate Vice President Research and
Development for C.R. Bard, Inc. in New Jersey. From September 1993 to 1995, he
was Founder, President and Chief Executive Officer of Atlantic Pharmaceuticals,
Inc. Dr. Shaw graduated from University College Hospital Medical School,
London, England.
Kenneth Tempero, M.D., Ph.D., M.B.A., 60, was elected Chairman of the Board
in May 1999 and has served as a member of the Board of Directors since
September 1996. Prior thereto, he served as Chairman and Chief Executive
officer of MGI PHARMA, Inc., a company that focuses on the development and sale
of cancer therapeutics and related products. From November 1983 to August 1987,
Dr. Tempero held various positions with G.D. Searle & Co., a pharmaceutical
company, most recently as Senior Vice President of Research and Development.
Dr. Tempero holds M.S. and Ph.D. degrees in Pharmacology from Northwestern
University, an M.D. in Medicine and Surgery from Northwestern University and an
M.B.A. in Pharmaceutical Marketing from Fairleigh Dickinson University.
Steven Thornton, 42, has served as a member of the Board of Directors since
February 1998. He has served as Executive Vice President of Commercial
Development for Elan Pharmaceutical Technologies ("EPT") since December 1997.
Prior to joining EPT, Mr. Thornton served from July 1994 as President of Schein
Bayer Pharmaceutical Services Inc., a joint venture of Bayer and Schein
Pharmaceutical Inc. From 1991 to 1994, he served with Bayer as Region Director
with responsibility for pharmaceutical operations in Australia, New Zealand and
South Africa. Mr. Thornton graduated with honors from Lancaster University in
1978, receiving a B.A. in applied social psychology.
Committees of the Board of Directors
The Audit Committee of the Board of Directors reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters: including the selection of the Company's independent public
accountants, the scope of the annual audits, fees to be paid to the auditors,
the performance of the Company's auditors and the accounting practices of the
Company. Mr. Kanzer, chairman of the committee, and Dr. Shaw are the only
members of the Audit Committee. The Audit Committee had no meetings during
fiscal year 1999.
3
<PAGE>
The Compensation Committee of the Board of Directors determines the salaries
and incentive compensation of the officers of the Company and provides
recommendations for the salaries and incentive compensation of the other
employees and consultants of the Company. The Compensation Committee also
administers various incentive compensation, stock and benefit plans. Dr. Rubin,
chairman of the Committee, and Mr. Thornton are the only members of the
Compensation Committee. The Compensation Committee had one meeting during
fiscal year 1999.
The Executive Committee of the Board of Directors acts on the matters
referred to it by the full Board of Directors. Dr. Tempero, Mr. Dunning and Mr.
Rosen are the only members of the Executive Committee. The Executive Committee
had one meeting during fiscal year 1999.
Attendance at Board and Committee Meetings
During the year ended December 31, 1999, the Board of Directors held six
formal meetings. In addition to formal meetings, the Board of Directors and the
Executive, Audit and Compensation Committees confer frequently on an informal
basis. During the year, all members of the Board attended at least 75% of the
aggregate number of formal meetings of the Board of Directors and the total
number of meetings held by all Committees on which they served.
Compensation of Directors
Cash Compensation. As of December 1999, Directors receive a $2,000 fee for
attending quarterly Board of Directors meetings in person and $500 for
telephonic attendance of such meetings and for attendance at committee
meetings, and are reimbursed for travel expenses incurred in connection with
performing their respective duties as Directors of the Company.
Director Fee Option Grant Program. Each non-employee Director has the right
to apply all or a portion of his annual cash retainer fee (currently no cash
retainer is paid) to the acquisition of a special option grant under the
Director Fee Option Grant Program. The grant will automatically be made on the
first trading day in January following the filing of the stock-in-lieu-of-cash
election and will have an exercise price per share equal to one-third of the
fair market value of the option shares on the grant date. The number of shares
subject to the option will be determined by dividing the amount of the retainer
fee applied to the program by two-thirds of the fair market value per share of
Common Stock on the grant date. As a result, the total spread on the option
(the fair market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be equal to the portion
of the retainer fee invested in that option.
The option will become exercisable for fifty percent (50%) of the option
shares upon the Director's completion of six (6) months of Board service in the
calendar year in which the option is granted. The balance of the option shares
will become exercisable in six (6) successive equal monthly installments upon
the Director's completion of each additional month of Board service during that
calendar year. The option will remain exercisable until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the end of the three (3)-
year period measured from the date of the Director's cessation of Board
service. The option will become immediately exercisable in its entirety should
the Director die or become permanently disabled while a Board member. In
addition, upon the successful completion of a hostile take over, each option
may be surrendered to the Company for a cash distribution per surrendered
option share in an amount equal to the excess of (a) the take-over price per
share over (b) the exercise price payable for such share.
Stock Option Grant. Non-employee Directors are eligible to receive an option
to purchase 42,000 shares of common stock at the commencement of Board service.
The options vest at the rate of 15,000 shares on the anniversary of the grant
date, plus 1,500 for each meeting attended. In addition, each non-employee
Director who continues to serve on the Board will automatically be granted an
option to purchase an additional 12,000 shares of Common Stock on the date of
the second anniversary of such individual's initial share option grant and on
every two (2) years thereafter. This grant vests at a rate of 1,500 shares for
each meeting attended.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
The names of the Company's executive officers as of March 1, 2000 and
certain information about them are set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael S. Rosen 47 President, Chief Executive Officer and Director
Robert N. Brey, 50 Vice President, Research and Development
Ph.D.
David G. 37 Vice President, Chief Financial Officer, Treasurer,
Franckowiak, and Corporate Secretary
CPA
Frank C. Reid 50 Vice President, Finance and Corporate Development
</TABLE>
Information regarding executive officers who are not Directors is as
follows:
Robert N. Brey, Ph.D. has served as Vice President, Research and Development
since January 1, 1998 and prior to then as Vice President, Vaccine Development
since December 1996. From 1994 to 1996, he served as Principal of Vaccine
Design Group, a consulting practice focused on research and development
strategies in vaccines and immunological therapies. From 1992 to 1994, Dr. Brey
served as Director of Research at Vaxcel, Inc., a company involved in vaccine
delivery technology. From 1986 to 1992, he held a variety of positions at
Lederle-Praxis Biologicals, where he managed the Molecular Biology and Oral
Vaccine Development areas. Dr. Brey received a B.S. in Biology from Trinity
College and a Ph.D. in Microbiology from the University of Virginia School of
Medicine. He also served as a Postdoctoral Fellow in biology at the
Massachusetts Institute of Technology. Dr. Brey has written numerous
publications and filed several patents in the area of vaccines.
David G. Franckowiak, C.P.A., C.M.A., M.Acc. became Chief Financial Officer
in February 1999. Prior to then he served as Vice President, Finance and
Administration since January 1998, and before that as Controller/Treasurer
since April 1997. He was also appointed Corporate Secretary in July 1997. From
1985 to March 1997, Mr. Franckowiak held several positions with
PricewaterhouseCoopers LLP, the last of which was audit manager. Mr.
Franckowiak received his B.S. in Commerce, Accountancy and a Master of
Accountancy at DePaul University. He is also a Certified Public Accountant and
a Certified Management Accountant. He is a founding director of the Chicago
Biotech Network Association and has served as Treasurer since March 1998.
Pursuant to a letter agreement dated March 13, 2000, Mr. Franckowiak will no
longer serve as an officer of the Company effective March 31, 2000 but will
work with the Company for up to four months to transition certain of his
duties.
Frank C. Reid joined Endorex in February 2000, as Vice President, Finance
and Corporate Development. From August 1998 until joining Endorex Mr. Reid was
an independent consultant and a principal of BioCapital Strategies, Inc., a
management consulting firm dedicated to M&A, technology valuation and strategic
planning for biotechnology and specialty pharmaceutical companies. From 1997 to
1998 Mr. Reid was a management consultant for Strategic Decisions Group, a
strategy consulting firm serving Fortune 200 companies, including major
pharmaceutical firms. From 1995 to 1996, he served as a consultant to Coulter
Pharmaceutical, Inc. for business development, technology acquisition and
financing activities. Mr. Reid received a B.S. in Molecular Biophysics and
Biochemistry from Yale University in 1971, a graduate degree in business from
the Catholic University of Louvain (Belgium) in 1975, and an M.B.A. in Finance
and Accounting from the University of Chicago in 1976.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company's Directors, executive officers, and persons who beneficially
own more than 10% of a registered class of the Company's equity securities,
must file initial reports of ownership and reports of changes in ownership of
any equity securities of the Company with the Securities and Exchange
Commission. Copies of the reports must be furnished to the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company, all persons subject to these reporting requirements
filed the required reports on a timely basis with respect to the Company's most
recent fiscal year.
5
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation paid
during the Company's fiscal years ended December 31, 1999, 1998, and 1997 to
the Company's Chief Executive Officer and all other executive officers whose
base salaries during the year were in excess of $100,000 (collectively, the
"Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------- ----------------------------
Securities
Name and Principal Underlying All Other
Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
- ------------------ -------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Michael S. Rosen........ 12/31/99 249,600 12,500 (1) 25,000 6,997 (4)
President & CEO 12/31/98 248,808 72,000 (2) 1,219 (4)
12/31/97 209,882 100,000 (3) 650,000 4,600 (4)
Robert N. Brey.......... 12/31/99 131,904 7,000 (1) 10,000 --
Vice President,
Research 12/31/98 126,829 13,270 (2) 19,000 (6)
and Development 12/31/97 104,778 16,913 (3) 50,000 --
David G. Franckowiak
(5).................... 12/31/99 127,000 -- 17,000 --
Vice President, Chief
Financial Officer, 12/31/98 112,476 17,063 (2) 50,000 --
Treasurer, and
Corporate Secretary 12/31/97 66,850 13,400 (3) 50,000 --
</TABLE>
- --------
(1) Bonuses accrued in 1999 and paid entirely in 2000.
(2) Bonuses accrued in 1998 and paid entirely in 1999.
(3) Bonuses accrued in 1997 and paid entirely in 1998.
(4) Life insurance premiums incurred and paid during the period.
(5) Mr. Franckowiak joined the Company on April 1, 1997.
(6) Reimbursed relocation expenditures.
The following table contains information concerning options granted to the
Named Executive Officers during the fiscal year ended December 31, 1999. No
SARs were granted during the period.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percentage
Securities of Total
Underlying Options Exercise Expiration
Individual Grants Granted (1) Price (2) Date
----------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Michael S. Rosen............. 25,000 14% $2.00 2/23/09
Robert N. Brey............... 10,000 5% $2.00 2/23/09
David G. Franckowiak......... 17,000 9% $2.00 2/23/09
</TABLE>
- --------
(1) Based on an aggregate of 183,000 options granted to employees and non-
employee board members in the fiscal year ended December 31, 1999,
including options granted to the Named Executive Officers.
(2) The exercise price of each grant is equal to the fair market value of the
Company's Common Stock on the date of the grant.
6
<PAGE>
The following table sets forth certain information concerning exercisable
and unexercisable stock options held as of December 31, 1999 by each of the
Named Executive Officers:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option
Values
<TABLE>
<CAPTION>
Number of
Unexercised Options In-the-Money Options (1)
------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael Rosen............... 365,625 309,375 $102,832 $98,730
Robert Brey................. 28,125 31,875 $ 7,910 $13,652
David G. Franckowiak........ 40,625 76,375 $ 7,910 $18,902
</TABLE>
- --------
(1) Based on the difference between the closing price on December 31, 1999
($2.75) and the exercise price of outstanding options.
Employment Agreements and Change in Control Arrangements
On July 25, 1996, the Company entered into an employment agreement with
Michael S. Rosen to serve as the President, Chief Executive Officer, and a
Director of the Company. The term of Mr. Rosen's employment agreement with the
Company commenced on August 19, 1996 and ends on August 30, 2000. Mr. Rosen was
elected a Director of the Company on August 22, 1996. In the event Mr. Rosen's
employment is terminated otherwise than for cause, Mr. Rosen is entitled to his
base salary for one year following such termination (plus bonuses earned but
not yet paid), subject to setoff for amounts earned from alternative
employment.
On December 1, 1996, the Company entered into an employment agreement with
Robert N. Brey to serve as Vice President--Vaccine Development. Dr. Brey's
employment agreement with the Company commenced on December 1, 1996 and ends on
November 30, 2000.
On March 10, 1997, the Company entered into an employment agreement with
David G. Franckowiak to serve as Controller/Treasurer. Mr. Franckowiak's
employment agreement commenced on April 1, 1997 and ends on March 31, 2001.
Pursuant to a letter agreement dated March 13, 2000, Mr. Franckowiak will no
longer serve as an officer of the Company effective March 31, 2000 but will
work with the Company for up to four months to transition certain of his
duties.
On February 8, 2000, the Company entered into an employment agreement with
Frank C. Reid to serve as Vice President, Finance and Corporate Development.
Mr. Reid's employment commenced February 21, 2000 and the agreement ends on
February 20, 2004. His annual base salary is $130,000.
The Compensation Committee has the authority to provide for the accelerated
vesting of the options granted to the Chief Executive Officer and the Company's
other executive officers under the Option Plan in the event of (i) a change in
control of the Company effected through a successful tender offer for more than
50% of the Company's outstanding Common Stock or a change in the majority of
the Board as a result of one or more contested elections for Board membership,
or (ii) the individual's termination of employment (whether involuntarily or
through a forced resignation) within a designated period following such a
change in control or an acquisition of the Company by merger or asset sale.
Limitation of Liability and Indemnification Matters
The Company's Certificate of Incorporation provides that, except to the
extent prohibited by the Delaware General Corporation Law, its directors shall
not be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as directors of the Company. Under
Delaware law, the directors have a fiduciary duty to the Company which is not
eliminated by this provision of the Certificate of Incorporation and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to the Company for acts or omissions which are found
by a court of competent jurisdiction to be not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends
7
<PAGE>
or approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision also does not affect the directors' responsibilities under
any other laws, such as the Federal securities laws or state or Federal
environmental laws. In addition, the Company has obtained liability insurance
for its officers and directors.
The Certificate of Incorporation also provides that the Company shall
indemnify, to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law, all of its present and former officers and directors,
and any party agreeing to serve as an officer, director or trustee of any
entity at the Company's request, in connection with any civil or criminal
proceeding threatened or instituted against such party by reason of actions or
omissions while serving in such capacity. Indemnification by the Company
includes payment of expenses in defense of the indemnified party in advance of
any proceeding or final disposition thereof. The rights to indemnification
provided in this provision do not preclude the exercise of any other
indemnification rights by any party pursuant to any law, agreement or vote of
the stockholders or the disinterested directors of the Company.
Section 145 of the Delaware General Corporation Law generally allows the
Company to indemnify the parties described in the preceding paragraph for all
expenses, judgments, fines and amounts in settlement actually paid and
reasonably incurred in connection with any proceedings so long as such party
acted in good faith and in a manner reasonably believed to be in or not opposed
to the Company's best interests and, with respect to any criminal proceedings,
if such party had no reasonable cause to believe his or her conduct to be
unlawful. Indemnification may only be made by the Company if the applicable
standard of conduct set forth in Section 145 has been met by the indemnified
party upon a determination made (1) by the Board of Directors by a majority
vote of a quorum of directors who are not parties to such proceedings, or (2)
if such a quorum is not obtainable or if directed by a quorum of disinterested
directors, by independent legal counsel in a written opinion, or (3) by the
stockholders.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors advises the Chief
Executive Officer and the Board of Directors on matters of the Company's
compensation philosophy and the compensation of executive officers and other
individuals compensated by the Company. The Compensation Committee also is
responsible for the administration of the Company's Option Plan under which
option grants may be made to executive officers. The Compensation Committee
authorized and reviewed compensation paid to executive officers in fiscal year
1999.
General Compensation Policy. The fundamental policy of the Compensation
Committee is to provide the Company's executive officers with competitive
compensation opportunities based upon their contribution to the development and
financial success of the Company and their personal performance. It is the
Compensation Committee's objective to have a portion of each executive
officer's compensation contingent upon the Company's performance as well as
upon such executive officer's own level of performance. Accordingly, the
compensation package for each executive officer is comprised of two elements:
(i) base salary and annual bonus to reflect individual performance, designed
primarily to be competitive with cash compensation levels in the industry, and
(ii) long-term stock-based incentive awards to strengthen the mutual interests
between the executive officers and the Company's stockholders.
Factors. The principal factors that the Compensation Committee considered
with respect to each executive officer's compensation package for fiscal year
1999 are summarized below. The Compensation Committee may, however, in its
discretion apply entirely different factors in advising the Chief Executive
Officer and the Board of Directors with respect to executive compensation for
future years.
. Base Salary. The base salary for each executive officer is based on the
following factors: experience, personal performance, salary levels in effect
for comparable positions within and outside the industry, the
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<PAGE>
company's internal base salary comparability considerations and the status of
the company. The weight given to each of these factors differs from individual
to individual, as the Compensation Committee deems appropriate.
From time to time, the Compensation Committee may advocate cash bonuses when
they are deemed to be in the best interest of the Company.
. Long-Term Incentive Compensation. Long-term incentives are provided
through grants of stock options. The grants are intended to align the interests
of each executive officer with those of the stockholders and to provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the Company. Each option grant
allows the individual to acquire shares of the Company's Common Stock at a
fixed price per share (generally, the market price on the grant date) over a
specified period of time (up to ten years). Each option generally becomes
exercisable in installments over a four-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option grant will provide a return to the executive officer only if the
executive officer remains employed by the Company during the vesting period,
and then only if the market price of the underlying shares appreciates.
The number of shares authorized for each option grant is intended to create
a meaningful opportunity for stock ownership based on the executive officer's
current position with the Company, the base salary associated with that
position, the size of comparable awards made to individuals in similar
positions in the industry, the individual's potential for increased
responsibility and promotion over the option term and the individual's personal
contribution to corporate progress in recent periods. The Compensation
Committee also considers the number of unvested options held by the executive
officer in order to maintain an appropriate level of equity incentive for that
individual. The Compensation Committee does not adhere to any specific
guidelines as to the relative option holdings of the Company's executive
officers.
CEO Compensation. In advising the Board of Directors with respect to the
compensation payable to the Company's Chief Executive Officer, the Compensation
Committee seeks to achieve two objectives: (i) establish a level of base salary
competitive with that paid by companies within the industry which are of
comparable size to the Company and by companies outside of the industry with
which the Company competes for executive talent and (ii) to make a significant
percentage of the total compensation package contingent upon the Company's
performance and stock price appreciation.
The suggested base salary established for Mr. Rosen on the basis of the
foregoing criteria was intended to provide a level of stability and certainty
each year. Accordingly, this element of compensation was not affected to any
significant degree by Company performance factors. At the discretion of the
Board of Directors, Mr. Rosen is also eligible for a bonus of up to 50% of his
annual base salary. In March 2000, the Board of Directors paid Mr. Rosen a
bonus of $12,500 based on performance relative to 1999 Company objectives. On
October 21, 1997, the Board of Directors granted options to purchase 650,000
shares of Common Stock. Based on completion of employment services each
quarter, the options become exercisable in equal quarterly installments over
the 4-year period following the grant date. The Board granted 25,000 additional
options in February 1999, which vest annually over four years. As of December
31, 1999, Mr. Rosen has vested option exercise rights in 365,625 shares of
common stock.
Compliance with Internal Revenue Code Section 162(m). As a result of Section
162(m) of the Internal Revenue Code of 1986, as amended, which was enacted into
law in 1993, the Company will not be allowed a federal income tax deduction for
compensation paid to certain executive officers, to the extent that
compensation exceeds $1 million per officer in any one year. This limitation
will apply to all compensation paid to the covered executive officers which is
not considered to be performance based. Compensation which does qualify as
performance-based compensation will not have to be taken into account for
purposes of this limitation. The Omnibus Plan contains certain provisions which
are intended to assure that any compensation
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<PAGE>
deemed paid in connection with the exercise of stock options granted under that
plan with an exercise price equal to the market price of the option shares on
the grant date will qualify as performance-based compensation.
The Compensation Committee does not expect compensation to be paid to the
Company's executive officers for the 2000 fiscal year to exceed the $1 million
limit per officer. Because it is very unlikely that cash compensation payable
to any of the Company's executive officers in the foreseeable future will
approach the $1 million limit, the Compensation Committee has decided at this
time not to take any action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Compensation
Committee will reconsider this decision should the individual compensation of
any executive officer ever approach the $1 million level.
THE COMPENSATION COMMITTEE
Dr. Paul Rubin, Chairman
Mr. Steve Thornton
March 1, 2000
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 1, 2000, certain information
with respect to the beneficial ownership of shares of Common Stock of: (i) each
person who is known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock, (ii) each Director of the Company and
each Named Executive Officer, and (iii) all directors and executive officers of
the Company as a group. As of March 1, 2000, the Company had 10,786,337 shares
of Common Stock outstanding.
<TABLE>
<CAPTION>
Beneficially Percent
Name and Address of Beneficial Owner Owned (1) of Class
------------------------------------ ------------ --------
<S> <C> <C>
The Aries Master Fund (2)........................... 2,346,945 21.45%
c/o Paramount Capital Asset Management, Inc.
787 Seventh Avenue,
New York, NY 10019
Aries Domestic Fund (3)............................. 1,063,760 9.79%
c/o Paramount Capital Asset Management, Inc.
787 Seventh Avenue,
New York, NY 10019
Paramount Capital Asset Management, Inc. (6)........ 3,428,051 31.10%
787 Seventh Avenue,
New York, NY 10019
Lindsay A. Rosenwald, M.D. (4)...................... 4,862,083 39.03%
787 Seventh Avenue,
New York, NY 10019
Elan International Services, Ltd. (5)............... 1,778,102 14.51%
102 St. James Court
Flatts Smith, SL 04
Bermuda
Michael S. Rosen, MBA (7)(8)........................ 457,735 4.07%
Steve Kanzer (7)(9)................................. 187,000 1.70%
Richard Dunning (7)(9).............................. 45,000 **
Paul Rubin (7)(9)................................... 45,000 **
H. Laurence Shaw (7)(9)............................. 45,000 **
Kenneth Tempero (7)(9).............................. 70,000 **
Steven Thornton (7)(9).............................. 31,500 **
Robert N. Brey (7)(9)............................... 36,875 **
David G. Franckowiak (7)(10)........................ 64,625 **
All Directors and Officers as a group............... 982,735 9.11%
--------- -----
Total........................................... 7,622,720 51.15%
========= =====
</TABLE>
- --------
**Represents less than 1% of outstanding Common Stock or voting power.
(1) Shares of the Company's Common Stock which any person or entity set forth
in this table has a right to acquire, pursuant to the exercise of options
or warrants, are deemed to be outstanding for the purpose of computing the
percentage ownership of such person or entity, but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person or entity.
(2) Number of shares Beneficially Owned includes 155,493 shares issuable upon
exercise of warrants exercisable until May 19, 2002 at a price of $2.54375
each held by such entity. Does not include warrants to purchase 1,434,033
shares of common stock owned by Lindsay A. Rosenwald, M.D., the Chairman
of Paramount Capital Asset Management, Inc., the investment manager of The
Aries Master Fund, in his individual capacity. Dr. Rosenwald and Paramount
share the power to vote and/or dispose of the shares of common stock held
by The Aries Master Fund, but disclaim beneficial ownership thereof except
to the extent of their pecuniary interest therein, if any.
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<PAGE>
(3) Number of shares Beneficially Owned includes 79,866 shares issuable upon
exercise of warrants exercisable until May 19, 2002 at a price of $2.54375
each held by such entity. Does not include warrants to purchase 1,434,033
shares of common stock owned by Lindsay A. Rosenwald, M.D., the Chairman
of Paramount Capital Asset Management, Inc., the general partner of the
Aries Domestic Fund, in his individual capacity. Dr. Rosenwald and
Paramount 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.
(4) Lindsay A. Rosenwald, M.D., is the Chairman and sole stockholder of
Paramount Capital Asset Management, Inc., the Investment Manager and
General Partner of the Aries Master Fund and Aries Domestic Fund, L.P.,
respectively. Dr. Rosenwald disclaims beneficial ownership of the shares
owned by Aries Funds except to the extent of any pecuniary interest
therein. Securities beneficially owned by Dr. Rosenwald are presented on
an as-converted basis and consist of the following: Warrants to purchase
292,411 shares of Common Stock and options to purchase 1,141,622 shares of
Common Stock owned directly by Dr. Rosenwald.
(5) Includes 1,239,640 shares issuable upon conversion of Series B Preferred
Stock convertible within the 60-day period following March 1, 2000, and
230,770 shares issuable upon exercise of warrants that are exercisable
within the 60-day period following March 1, 2000.
(6) Paramount Capital Asset Management, Inc. ("Paramount"), the Investment
Manager of The Aries Master Fund, a Cayman Islands exempted company (the
"Fund"), is also the General Partner of the Aries Domestic Fund, L.P. and
the Aries Domestic Fund II, L.P., each a Delaware limited partnership, and
each of which also owns securities of the Issuer. Lindsay A. Rosenwald,
M.D., is the sole shareholder of Paramount. Paramount and Dr. Rosenwald
disclaim beneficial ownership of the securities held by the funds, except
to the extent of their pecuniary interest therein, if any. Paramount
disclaims beneficial ownership of warrants to purchase 1,434,033 shares of
common stock owned by Lindsay A. Rosenwald, M.D.
(7) The address of this individual is c/o Endorex Corporation, 28101 Ballard,
Lake Forest, IL 60045.
(8) Includes of 453,125 shares issuable upon exercise of options held that are
exercisable within the 60-day period following March 1, 2000.
(9) Consists entirely of shares issuable upon exercise of options held that
are exercisable within the 60-day period following March 1, 2000.
(10) Includes of 63,625 shares issuable upon exercise of options held that are
exercisable within the 60-day period following March 1, 2000.
Certain Relationships and Related Transactions
On June 13, 1996, Dominion Resources, Inc. ("Dominion") entered into an
agreement with The Aries Fund and the Aries Domestic Fund, L.P. (collectively,
the "Aries Funds"), with the Company as a party to the agreement, whereby the
Aries Funds purchased an aggregate of 266,667 shares of Common Stock from
Dominion at $1.50 per share. The purchase price was paid from the Aries Funds'
general funds. As part of the transaction, Dominion transferred to the Aries
Funds certain of its rights under an existing agreement with the Company,
including the right to designate a director of the Company and the right to
have the shares registered under the Securities Act of 1933, as amended (the
"Securities Act"). Upon completion of the sale of the 266,667 shares, Steven H.
Kanzer was elected to the Board as the designee of the Aries Funds. On June 26,
1996, the Aries Funds purchased from the Company an additional 333,334 shares
of Common Stock at a price of $3.00 per share. The purchase price was paid from
the Aries Funds' general funds. The purchase agreement relating to such shares
contains various representations and warranties concerning the Company and its
activities and also various affirmative and negative covenants. The purchase
agreement grants to the Aries Funds the right to have the shares registered
under the Securities Act. The agreement restricts the Company from entering
into mergers, acquisitions, or sales of its assets without the prior approval
of the Aries Funds.
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<PAGE>
In connection with a senior line of credit agreement entered into by the
Company with the Aries Funds, on May 19, 1997, the Company granted warrants to
purchase an aggregate of 66,668 shares of Common Stock at an initial exercise
price equal to the offering price of the Company's Private Placement (as
defined below), subject to adjustment under certain circumstances. Such
warrants are exercisable until May 19, 2002. Paramount Capital Asset
Management, Inc. ("PCAM") is the investment manager of The Aries Fund and the
general partner of the Aries Domestic Fund, L.P. Lindsay Rosenwald, M.D., is
the president sole stockholder of PCAM and of the Placement Agent (as defined
below).
Pursuant to a private placement (the "Private Placement") of Common Stock,
the Company issued and sold an aggregate of 8,648,718 shares of Common Stock to
certain accredited investors on July 16, October 10, and October 16, 1997, in
consideration of an aggregate amount of $20,000,000. The net proceeds to the
Company after deducting commissions and expenses of Paramount Capital, Inc.,
which acted as the placement agent for the Private Placement (the "Placement
Agent"), were $17,400,000.
In connection with the Private Placement, the Company issued and sold to the
Placement Agent and/or its designees warrants (the "Placement Warrants") to
purchase up to an aggregate of 864,865 shares of Common Stock. Also, in
connection with the execution of a financial advisory agreement, dated October
16, 1997, between the Company and the Placement Agent, the Company issued and
sold to the Placement Agent warrants (the "Advisory Warrants") to purchase up
to an aggregate of 1,297,297 shares of Common Stock. The Placement Warrants and
the Advisory Warrants are exercisable until April 16, 2003, at an exercise
price of $2.54375 per share, subject to adjustment under certain circumstances.
On January 21, 1998, the Company established a joint venture, with Elan
Corporation, plc ("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. ("EIS"), a wholly
owned subsidiary of Elan, made a $2.0 million initial investment in the Company
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, the Company issued $8.0 million of Series B Convertible
Preferred Stock to EIS.
On October 21, 1998, the Company 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, the Company issued $8.4 million of Series C Convertible
Preferred Stock to EIS.
PROPOSAL 2
SELECTION OF AN INDEPENDENT PUBLIC ACCOUNTANT AND AUDITOR
Upon the recommendation of the Audit Committee, the Board of Directors
appointed PricewaterhouseCoopers LLP, independent public accountants and
auditors of the Company, as auditors of the Company to serve for the year
ending December 31, 2000, subject to the ratification of such appointment by
the stockholders at the Annual Meeting. The affirmative vote of a plurality of
the Company's outstanding Common Stock present in person or by proxy is
required to ratify the appointment of the auditors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them "FOR" the
ratification of PricewaterhouseCoopers LLP, to serve as the Company's auditors
for the year ending December 31, 2000.
A representative of PricewaterhouseCoopers LLP is expected to be available
at the Annual Meeting, will have the opportunity to make a statement if he or
she desires to do so, and will be available to respond to appropriate
questions.
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<PAGE>
PROPOSAL 3
APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Company's stockholders are being asked to approve the Amended and
Restated Certificate of Incorporation which will restate the Company's charter
for amendments previously filed with the Secretary of State of Delaware and to
amend the Certificate of Incorporation as described in this proposal.
The Company was originally incorporated in Delaware under the name
Biological Therapeutics, Inc. The date of incorporation was January 16, 1987.
On March 13, 1987, the Company filed with the Secretary of State of the State
of Delaware a Certificate of Ownership and Merger which merged Biological
Therapeutics, Inc., a North Dakota corporation, with and into the Company,
pursuant to which the Company changed its name to Immunotherapeutics, Inc. The
Company filed a Certificate of Correction to the Certificate of Incorporation
on November 2, 1998. Certificates of Amendment to the Certificate of
Incorporation were filed with the Secretary of State of the State of Delaware
on September 7, 1989, November 13, 1990, May 29, 1991, two amendments on
February 27, 1992, June 29, 1993 and July 3, 1995 respectively, and on June 10,
1997. A Certificate of Amendment was filed with the Secretary of State of the
State of Delaware on August 15, 1996, pursuant to which the Corporation changed
its name to Endorex Corp. A Certificate of Amendment was filed with the
Secretary of State of the State of Delaware on December 9, 1998, pursuant to
which the Corporation changed its name to Endorex Corporation. Certificates of
Designation were filed with the Secretary of State of the State of Delaware on
January 21, 1998 and October 20, 1998, respectively.
On February 8, 2000, the Board of Directors duly adopted resolutions
proposing to amend and restate the Certificate of Incorporation of the
Corporation, declaring said amendment and restatement to be advisable and in
the best interests of the Corporation and its stockholders, and authorizing the
appropriate officers of the Corporation to solicit the consent of the
stockholders.
This proposed Amended and Restated Certificate of Incorporation will restate
the current Certificate of Incorporation and all amendments, corrections and
Certificates of Designation, described above, into one Amended and Restated
Certificate of Incorporation. It will also make the following amendments:
a) Increase the authorized number of shares of preferred stock from
500,000 to 5,000,000 shares.
b) Currently, Article 8 of the Certificate of Incorporation provides
that the election of the directors of the Company need not be by written
ballots, subject to the provisions of the Bylaws of the Company. The
proposed Amended and Restated Certificate of Incorporation will delete the
language, "unless otherwise provided in the Bylaws of the Corporation."
The present capital structure of the Company authorizes 50,000,000 shares of
Common Stock and 500,000 shares of preferred stock each having a par value of
$.001 per share. The Board of Directors believes this capital structure is
inadequate for the present and future needs of the Company. Therefore, the
Board of Directors has unanimously approved the increase of the authorized
number of shares of preferred stock from 500,000 shares to 5,000,000 shares.
The Board believes this capital structure more appropriately reflects the
present and future needs of the Company and recommends such amendment and
restatement to the Company's stockholders for adoption. The undesignated
preferred stock may be issued from time to time in one or more series with such
rights, preferences and privileges as may be determined by the Board of
Directors. On March 1, 2000, 10,786,337 shares of Common Stock were outstanding
and 184,191 shares of preferred stock were outstanding, consisting of 92,973
shares of Series B convertible preferred stock and 91,218 shares of Series C
exchangeable convertible preferred stock.
Purpose of Authorizing Additional Common Stock
Authorizing an additional 4,500,000 shares of preferred stock would give the
Board of Directors the express authority, without further action of the
stockholders, to issue such preferred stock from time to time as
14
<PAGE>
the Board of Directors deems necessary. The Board of Directors believes it is
necessary to have the ability to issue such additional shares of preferred
stock for general corporate purposes. Potential uses of the additional
authorized shares may include acquisition transactions, equity financings,
stock dividends or distributions without further action by the stockholders,
unless such action were specifically required by applicable law or rules of any
stock exchange on which the Company's securities may then be listed.
The proposed increase in the authorized number of shares of preferred stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management
by diluting the stock ownership or voting rights of persons seeking to cause
such removal. In addition, an issuance of additional shares by the Company
could have an effect on the potential realizable value of a stockholder's
investment. In the absence of a proportionate increase in the Company's
earnings and book value, an increase in the aggregate number of outstanding
shares of the Company caused by the issuance of the additional shares would
dilute the earnings per share and book value per share of all outstanding
shares of the Company's Common Stock. If such factors were reflected in the
price per share of Common Stock, the potential realizable value of a
stockholder's investment could be adversely affected.
The affirmative vote of a plurality of the Company's outstanding Common
Stock present in person or by proxy is required to approve the Amended and
Restated Certificate of Incorporation. Unless otherwise instructed, the proxy
holders will vote the proxies received by them "FOR" approval of the Amended
and Restated Certificate of Incorporation.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange
Commission, stockholder proposals intended for presentation at the 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than January 1, 2001 if such proposals are to be considered for inclusion
in the Company's Proxy Statement.
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
meeting other than those set forth above. If any other matters properly come
before the meeting, the persons named in the enclosed form of proxy will vote
the shares represented by proxies in accordance with their best judgment on
such matters.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
By Order of the Board of Directors
Michael S. Rosen
Chief Executive Officer and
President
Lake Forest, Illinois
April 6, 2000
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<PAGE>
PROXY CARD
ENDOREX CORPORATION
28101 BALLARD DR., SUITE F - LAKE FOREST, IL 60045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
The annual meeting of stockholders (the "Annual Meeting") of Endorex
Corporation (the "Company") will be held at Hyatt Deerfield, 1750 Lake
Cook Road, Deerfield, IL 60015, telephone number 847-845-3400 on May 17,
2000 at 9:00 A.M. (central daylight time) for the following purposes,
each as more fully described herein:
Only stockholders of record at the close of business on March 20, 2000 are
entitled to notice of and to vote at the Annual Meeting. A list of stockholders
eligible to vote at the meeting will be available for inspection at the meeting
and for a period of ten days prior to the meeting during regular business hours
at the corporate headquarters at the address above.
Whether or not you expect to attend the Annual Meeting, your proxy vote is
important. To assure your representation at the Annual Meeting, please sign and
date the enclosed proxy card and return it promptly in the enclosed envelope,
which requires no additional postage if mailed in the United States.
(1) To elect seven directors to serve until the next Annual Meeting or
until their respective successors shall have been duly elected and
qualified;
Nominees:
Michael S. Rosen
Richard Dunning
Steve H. Kanzer
Paul D. Rubin
H. Laurence Shaw
Kenneth Tempero
Steven Thornton
(2) To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants for the year ending December 31, 2000;
(3) To Approve the Amended and Restated Certificate of Incorporation
(4) To transact such other business as may properly come before the Annual
Meeting.
1
