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EX. 10.17
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR
PORTIONS OF THIS EXHIBIT PURSUANT TO RULE 24B-2
UNDER THE SECURITIES EXCHANGE AC TO 1934, AS AMENDED.
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of January 21, 1998
between ENDOREX CORP., a Delaware corporation (the "Company"), and ELAN
INTERNATIONAL SERVICES, LTD., a Bermuda corporation ("EIS").
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, on the Closing Date (as defined below),
(i) 307,692 shares (the "Initial Common Stock") of the Company's common stock,
par value $.001 per share (the "Common Stock"), and (ii) a warrant to acquire an
aggregate of 230,770 shares (subject to adjustment) of Common Stock, in the form
attached hereto as Exhibit A (the "Warrant"), the Initial Common Stock and the
Warrant together to be sold for aggregate consideration of $2,000,000, and (iii)
80,100 shares of Series B Convertible Preferred Stock (the "Series B Preferred
Stock"; together with the Common Stock and the Warrant, the "Securities"), which
shall be issued to EIS pursuant to the Certificate of Designations in the form
attached hereto as Exhibit B (the "Certificate of Designations") for aggregate
consideration of $8,010,000, all to be paid by wire transfer of immediately
available funds by EIS to the Company on the Closing Date.
B. The Company and EIS have caused to be formed Endorex
Vaccine Delivery Technologies, Inc., a Delaware corporation ("Newco"), for the
purpose of researching, developing and commercializing certain technologies
relating to oral and muscosal vaccine delivery based on technology to be
licensed to Newco by affiliates of EIS and the Company. The initial stockholders
in Newco shall be the Company and EIS. The parties intend, as provided herein,
that the proceeds of the issuance of Series B Preferred Stock shall be applied
by the Company solely to fund the Company's initial investment in Newco.
C. The Company and EIS are executing and delivering on the
date hereof a Registration Rights Agreement in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"; together with this Agreement,
the Securities, and each other document or instrument executed and delivered in
connection with the transactions contemplated hereby, including in connection
with the initial formation and capitalization of Newco, the "Transaction
Documents") in respect of the purchase of Initial Common Stock and the Common
Stock underlying the Series B Preferred Stock and the Warrant.
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A G R E E M E N T:
The parties agree as follows:
SECTION 1. Closings. (a) Time and Place. The closing of the
transactions contemplated hereby (the "Closing") shall occur no later than the
tenth day following receipt by the parties of notice of the expiration or
termination of the applicable HSR (as defined below) waiting period, if any (the
"Closing Date"), at the offices of counsel to EIS or such other place as the
parties may agree, but in any event, the Closing Date shall occur on or prior to
March 31, 1998. If the Closing Date shall not have occurred on or prior to such
date for any reason, either party shall have the right, upon written notice to
the other, to terminate this Agreement and the transactions contemplated hereby,
so long as such terminating party shall not be in material default hereunder.
(b) Issuance of Securities. At the Closing, (x) the Company
shall issue and sell to EIS, and EIS shall purchase from the Company the Initial
Common Stock and the Warrant, upon the terms and subject to the conditions set
forth herein, for an aggregate purchase price of $2,000,000, and (y) the Company
shall issue and sell to EIS, and EIS shall purchase from the Company the Series
B Preferred Stock, for an aggregate purchase price of $8,010,000.
(c) Delivery. At the Closing, EIS shall pay the purchase price
for the Initial Common Stock, the Warrant and the Series B Preferred Stock by
wire transfer of immediately available funds to an account or accounts
designated by the Company and the parties hereto shall execute and deliver to
each other, as applicable: (i) a certificate or certificates for the shares of
the Initial Common Stock; (ii) the Warrant; (iii) a certificate or certificates
for the shares of Series B Preferred Stock; (iv) certificates as to the
incumbency of the officers executing this Agreement and each of the other
documents or instruments executed in connection herewith; and (v) each of the
other documents or instruments executed in connection herewith. In addition, at
the Closing, the Company shall cause to be delivered to EIS an opinion of
counsel in form attached hereto as Exhibit D.
(e) Exemption from Registration. The Securities will be issued
under an exemption or exemptions from registration under the Securities Act of
1933, as amended; accordingly, the certificates evidencing the Securities shall,
upon issuance, contain the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT UNDER ANY CIRCUMSTANCES BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF
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COUNSEL SATISFACTORY TO THE CORPORATION
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH
ACT OR APPLICABLE STATE SECURITIES LAWS.
(f) Registration Rights Agreement. On the date hereof, the
Company and EIS are each executing and delivering the Registration Rights
Agreement, covering the shares of the Initial Common Stock, as well as any
Common Stock issuable upon conversion, exercise or exchange of any of the
Securities.
SECTION 2. Representations and Warranties of the Company. The
Company hereby represents on behalf of itself and, as applicable, its
subsidiaries and affiliates:
(a) Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and lease
its properties, to carry on its business as presently conducted and as proposed
to be conducted and to consummate the transactions contemplated hereby. The
Company is qualified and in good standing to do business in jurisdictions set
forth on Schedule 2(a), which constitute all of the jurisdictions in which the
nature of the business conducted or the property owned by it requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect (as defined below) on the business, prospects, properties or
condition (financial or otherwise) of the Company.
(b) Capitalization. (i) The authorized capital stock of the
Company as of December 31, 1997 consisted of 50,000,000 shares of Common Stock,
of which 9,736,641 were issued and outstanding, and 500,000 shares of Preferred
Stock, of which 100,000 are designated as Series A Junior Participating
Preferred Stock, none of which were issued or outstanding.
(ii) Except as set forth in Schedule 2(b) and in the Company's
filings with the Securities and Exchange Commission (the "SEC Filings"), as of
the Closing Date there are no options, warrants or other rights outstanding to
purchase, subscribe for or otherwise acquire, or any securities convertible
into, any of the Company's authorized capital stock. Other than as set forth in
this Agreement and as described in Schedule 2(b), there are no agreements,
arrangements or understandings concerning the voting, acquisition or disposition
of any of the Company's outstanding securities to which the Company is a party
or of which it is otherwise aware, and, other than as set forth in Schedule 2(b)
or in the Registration Rights Agreement, there are no agreements to register any
of the Company's outstanding securities under the U.S. Federal securities laws.
(iii) All of the outstanding shares of capital stock of the
Company have been issued in accordance with applicable state and federal laws
and regulations governing the sale and purchase of securities, all of such
shares of have duly and validly issued and are fully paid and non-assessable,
and none of such shares carries preemptive or similar rights.
(c) Authorization of Transaction Documents. The Company has
full corporate
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power and authority to execute and deliver this Agreement and each of the other
Transaction Documents, and to perform its obligations hereunder and thereunder.
Execution, delivery and performance by the Company of the Transaction Documents
(including the issuance and sale of the Securities) have been authorized by all
requisite corporate actions by the Company; and the Transaction Documents
(including the issuance and sale of the Securities) have been duly executed and
delivered by the Company are the valid and binding obligations of the Company,
enforceable against each in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the enforcement of creditors' rights
generally, and except as enforcement of rights to indemnity and contribution
hereunder and thereunder may be limited by U.S. Federal or state securities laws
or principles of public policy.
(d) No Conflicts. The execution, delivery and performance by
the Company of the Transaction Documents (including the issuance and sale of the
Securities), and compliance with the provisions thereof by the Company, will not
(i) violate any provision of applicable law, statute, rule or regulation
applicable to the Company or any ruling, writ, injunction, order, judgment or
decree of any court, arbitrator, administrative agency or other governmental
body applicable to the Company or any of their respective properties or assets
or (ii) conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute (with notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
or result in the creation of, any Encumbrance (as defined below) upon any of the
properties or assets of the Company under its Certificate of Incorporation, as
amended, its Certificate of Designations (in the form to be filed as provided
herein) or By-laws, or any material contract to which the Company is a party,
except where such violation, conflict or breach would not, individually or in
the aggregate, have a Material Adverse Effect on the Company (as used in
connection to either of them, a "Material Adverse Effect"). As used herein,
"Encumbrance" shall mean any liens, charges, encumbrances, equities, claims,
options, proxies, pledges, security interests, or other similar rights of any
nature, except for such conflicts, breaches or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect.
(e) Approvals. Except as set forth on Schedule 2(e), no
material permit, authorization, consent or approval of or by, or any
notification of or filing with, any person or entity (governmental or otherwise)
is required in connection with the execution, delivery or performance of the
Transaction Documents (including the issuance and sale of the Securities) by the
Company or Newco. There is no approval of the Company's stockholders required
under applicable laws in connection with the execution and delivery the
Transaction Documents or the consummation of the transactions contemplated
thereby, including the filing of the Certificate of Designations and the
issuance of the Securities.
(f) Filings, Taxes and Financial Statements. (i) The Company
has filed its annual report on Form 10-K for the transition period ended
December 31, 1996 (the "Annual Report"), its related proxy materials and its
quarterly report on Form 10-Q for the quarter ended September 30, 1997 (the
"Quarterly Report") with the Securities and Exchange Commission and
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any other required person or entity (governmental or otherwise) in a timely
manner and as otherwise required by applicable laws and regulations, including
the federal securities acts. The audited financial statements of the Company for
the transition period ended December 31, 1996 included in the Annual Report (the
"Audited Financial Statements"), and the Company's unaudited balance sheet for
the period ending September 30, 1997, together with the accompanying statements
of operations and cash flows including the notes thereto (the "September
Financial Statements"; collectively, with the Audited Financial Statements, the
"Financial Statements") are accurate and complete in all material respects and
fairly present the financial condition of the Company as at the dates thereof
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as may be otherwise indicated in such financial statements or the notes
thereto), subject, in the case of the September Financial Statements, to normal
year-end audit adjustments (which shall not be material in the aggregate) and
the absence of footnote disclosures.
(ii) The Company has filed in a timely manner all material
federal, state, local and foreign tax returns, reports and filings
(collectively, "Returns"), including income, franchise, property and other
taxes, and has paid or accrued the appropriate amounts reflected on such
Returns. None of the Returns have been audited or challenged, nor has the
Company received any notice of challenge nor have any of the amounts or other
data included in the Returns been challenged or reviewed by any governmental
authority.
(iii) Except as listed in Schedule 2(f), which sets forth a
true and accurate list and description of any such plans maintained or sponsored
by the Company or to which the Company is required to make contributions, the
Company does not maintain, sponsor, is not required to make contributions to or
otherwise have any liability with respect to any pension, profit sharing, thrift
or other retirement plan, employee stock ownership plan, deferred compensation,
stock ownership, stock purchase, performance share, bonus or other incentive
plan, severance plan, health or group insurance plan, welfare plan, or other
similar plan, agreement, policy or understanding (whether written or oral),
whether or not such plan is intended to be qualified under Section 401(a) of the
Code, within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, which plan covers any employee or former
employee of the Company.
(g) Absence of Changes. Except as set forth on Schedule 2(g),
since September 30, 1997, there has not been (a) any material adverse change in
the business, properties, condition (financial or otherwise), operations or
prospects of the Company; (b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties, condition (financial or otherwise), operations or prospects of the
Company; (c) any declaration, setting aside or payment of any dividend or other
distribution or payment (whether in cash, stock or property) in respect of the
capital stock of the Company, or any redemption or other acquisition of such
stock by the Company; (d) any disposal or lapse of any trade secret, invention,
patent, trademark, trademark registration, service xxxx, service xxxx
registration, copyright, copyright registration, or any application therefor or
filing in respect
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thereof; (e) loss of the services of any of the key officers or key employees of
the Company; (f) any incurrence of or entry into any liability, mortgage, lien,
commitment or transaction, including without limitation, any borrowing (or
assumption or guarantee thereof) or guarantee of a third party's obligations, or
capital expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of $50,000; or (g) any material change by the Company in
accounting methods or principles or (h) any change in the assets, liabilities,
condition (financial or otherwise), results or operations or prospects of the
Company from those reflected on the Quarterly Report, except changes in the
ordinary course of business that have not, individually or in the aggregate, had
a Material Adverse Effect.
(h) No Liabilities. Except as set forth in the SEC Filings or
Schedule 2(h), neither the Company nor Newco nor any of their respective
subsidiaries has incurred or suffered any liability or obligation, matured or
unmatured, contingent or otherwise, except in the ordinary course of business
that have not, individually or in the aggregate, had a Material Adverse Effect.
(i) Properties and Assets; Etc. (i) The Company does not own
any interest in real property, and (ii) the Company owns or has the right to use
pursuant to license, sub-license, agreement or permission all Intellectual
Property necessary for the operation of its business as presently conducted,
including patents, patent applications, continuations, continuations-in-part,
extensions, trademarks and trademark applications, know-how and other
intellectual property, as reflected in the Financial Statements, subject in each
case, to no Encumbrances required to be disclosed in the Financial Statements
except as set forth therein. Except as set forth on Schedule 2(i), (i) all of
the Company's patents, trademarks, service marks, trade names, and copyrights
which are owned by the Company are owned free and clear of all liens, claims and
encumbrances and are valid and duly issued or existing; none of the Company's
rights in or use of such patents, trademarks, service marks, trade names or
copyrights has been or is currently being threatened to be, challenged; to the
Company's knowledge, without makng any inquiry other than those, if any,
routinely conducted by the Company in the ordinary course of business, no
current or currently planned product based upon the Company's intellectual
property would infringe any patent, trademark, service xxxx, trade name or
copyright of any other person or entity issued or pending on the Closing Date if
the Company were to distribute, sell or manufacture such products; and the
Company is not aware, after due inquiry, of any actual or threatened claim by
any person or entity alleging any infringement by the Company of a patent,
trademark, service xxxx, trade name or copyright possessed by such Person; (ii)
all of such patents, trademark registrations, service xxxx registrations, trade
name registrations and copyrights and copyright registrations, whether foreign
or domestic, have been duly issued and have not been canceled, abandoned, or
otherwise terminated; and (iii) all of the Company's patent applications,
trademark applications, service xxxx applications, trade name applications and
copyright applications have been duly filed.
(ii) Each of the Contracts listed as an exhibit to the
Company's Annual Report is a legal and valid agreement binding upon each of the
parties thereto and is in full force and effect and, to the best knowledge of
the Company, there is no breach or default by any party
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thereunder. Such Contracts constitute all material agreements, arrangements or
understandings required to be included in such Annual Report under Securities
and Exchange Commission regulations promulgated in connection therewith.
(iii) The Company has and maintains adequate and sufficient
insurance, including liability, casualty and products liability insurance,
covering risks associated with its business, properties and assets, including
insurance that is customary for companies similarly situated.
(iv) The Company, its business and properties and assets are
in compliance, in all material respects, with all applicable laws and
regulations, including without limitation, those relating to (a) health, safety
and employee relations, (ii) environmental matters, including the discharge of
any hazardous or potentially hazardous materials into the environment, and (iii)
the development, commercialization and sale of pharmaceutical and biotechnology
products, including all applicable regulations of the U.S. Food and Drug
Administration and comparable foreign regulatory authorities.
(j) Legal Proceedings, etc. There is no legal, administrative,
arbitration or other action or proceeding or governmental investigation pending
or threatened against the Company, or any director, officer or employee of the
Company, which is required to be described in the Company's SEC Filings and is
not so described. The Company is not in violation of or default under, any
material laws, judgments, injunctions, orders or decrees of any court,
governmental department, commission, agency, instrumentality or arbitrator
applicable to its business.
(k) Disclosure. The Company's SEC Filings and the
representations and warranties set forth herein and the Transaction Documents,
when viewed collectively, do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements contained
herein and therein not misleading.
(l) Brokers or Finders. Other than as set forth on Schedule
2(l), the Company has not retained any investment banker, broker or finder in
connection with the transactions contemplated by the Transaction Documents; and
the Company agrees to indemnify and hold EIS harmless against any liability,
settlement or expense arising out of, or in connection with, any claim related
thereto.
SECTION 3. Representations,Warranties and Covenants of EIS.
EIS hereby represents, warrants and covenants to the Company as follows:
(a) Organization. EIS is a corporation duly organized, validly
existing and in good standing under the laws of Bermuda and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to
consummate the transactions contemplated hereby. EIS is qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to so qualify would not reasonably be expected to have a material
adverse effect on the business or condition
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(financial or otherwise) of EIS.
(b) Authorization of Agreement. EIS has full legal right,
power and authority to enter into this Agreement and purchase and accept the
Note, and perform its obligations hereunder, which have been duly authorized by
all requisite corporate action. This Agreement and the purchase of the Note are
the valid and binding obligations of EIS, enforceable against them in accordance
with their terms.
(c) No Conflicts. The execution, delivery and performance by
EIS of this Agreement, the purchase and acceptance of the Note and compliance
with provisions hereof by EIS, will not (i) violate any provisions of applicable
law, statute, rule or regulation applicable to EIS or any ruling, written,
injunction, order, judgment or decree of any court, arbitration, administrative
agency of other governmental body applicable to EIS of any of its properties or
assets or (ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time to
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of EIS under the Certificate of Incorporation or
By-laws of EIS or any material contract to which EIS is party, except where such
violation conflict or breach would not, individually or in the aggregate, have a
material adverse effect on EIS.
(d) Approvals. No permit, authorization, consents or approval
of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in connection with the execution,
delivery or performance of this Agreement or the Note (including the funding and
acceptance thereof) by EIS.
(e) Investment Representations. (i) EIS is sophisticated in
transactions of this type and capable of evaluating the merits and risks of the
transactions described herein and in the other Transaction Documents, and has
the capacity to protect its own interests. EIS has not been formed solely for
the purpose of entering into the transactions described herein and therein and
is acquiring the Securities for investment for its own account, not as a nominee
or agent, and not with the view to, or for sale in connection with, any
distribution of any part thereof; provided, that EIS shall be permitted to
convert or exchange such Securities and/or transfer them as permitted herein and
under applicable law.
(ii) Nothing contained in this Section 3(e) shall limit any of
the Company's representations or warranties or limit EIS's recourse in respect
thereof.
(iii) Other than as set forth on Schedule 3(e)(iii), EIS has
not retained any investment banker, broker or finder in connection with the
transactions contemplated by the Transaction Documents; and EIS agrees to
indemnify and hold the Company harmless against any liability, settlement or
expense arising out of, or in connection with, any claim related thereto.
(f) Standstill. EIS shall not, for a period of [****] from the
Closing Date, without
**** REPRESENTS MATERIAL REACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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the prior written approval of the Company's board of directors, (i) acquire any
of the Company's Common Stock (or securities exchangeable, convertible or
exercisable therefor) other as contemplated herein, (ii) enter into any merger,
consolidation or similar transaction with the Company, (iii) otherwise attempt
to influence such board of directors or the Company's stockholders to effect a
merger, consolidation, sale or all or substantially all of its assets or
business or (iv) make any public announcement relating to (i), (ii) or (iii)
above; provided, that the foregoing shall not be applicable in the event that
any person or group not affiliated with EIS (as defined in the regulations under
the Securities Exchange Act of 1934) (A) acquires 5% or greater of the Company's
Common Stock (or any such exchangeable, convertible or exercisable securities)
or (B) otherwise attempts to influence the board of directors of Endorex with
respect to a merger, consolidation, asset sale or similar transaction or (C)
indicates publicly its intention to effect any transaction in (A) or (B).
SECTION 4. Covenants of the Company. (a) Non-Disclosure. From
and after the date hereof, the Company shall not disclose to any person or
entity (other than its directors, officers and agents who need to know such
information in connection with the transactions described herein and the other
Transaction Documents (each of whom shall be informed of this confidentiality
provision) the content of this Agreement or any of the other Transaction
Documents or the substance of the transactions described herein, without the
prior written consent of EIS, except to the extent required by applicable laws
or administrative or judicial process, pursuant to arrangements with financial,
accounting or legal advisors, or in respect of press releases and periodic
publicly-filed reports prepared in good faith by the Company; provided, that the
Company shall provide EIS with a reasonable opportunity to review and approve
such releases or reports.
(b) Board of Directors. For as long as EIS shall own [****] of
the Common Stock, [****], EIS shall be entitled to nominate a director (the "EIS
Director"), and the Company shall use its best efforts to cause the EIS Director
to be elected to the Company's board of directors, including by including the
EIS Director in the management slate of directors at each meeting of
stockholders at which an election of directors occurs.
(c) Fully-diluted Stock Ownership. Notwithstanding any other
provision of this Agreement, in the event that EIS shall have determined that at
any time it (together with its Affiliates, if applicable) holds or has the right
to receive Common Stock (or securities or rights, options or warrants
exercisable, exchangeable or convertible for or into Common Stock) representing
in the aggregate in excess of 19.9% of the Company's outstanding Common Stock
(assuming any such exercise, exchange or conversion, but not the exercise,
exchange or conversion of any other similar securities), EIS shall have the
right, in its sole discretion, rather than acquiring such securities from the
Company, to exchange such number of securities as are necessary to bring its
holdings to below 19.9% of the voting securities of the Company, for non-voting,
no liquidation preference equity securities of the Company (which shall be
reasonably satisfactory to the Company and EIS), which equity securities shall
be entitled to all of the other
**** REPRESENTS MATERIAL REACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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rights and benefits of the Common Stock. In the event that EIS shall undertake
to exercise such right, EIS shall retain the additional right to exchange such
new class of equity security for Common Stock, in its discretion.
(d) Use of Proceeds. The Company shall use the proceeds of the
sale of the Series B Preferred Stock solely for the purpose of meeting its
capitalization and funding requirements to Newco, as described in the Newco
Subscription and Stockholder Agreement dated as of the date hereof.
(e) Further Assurances. From and after the date hereof, each
of the parties hereto agrees to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments, as each may reasonably require
or deem advisable to carry into effect the purposes of the Transaction Documents
or to better to assure and confirm unto each other their respective rights,
powers and remedies hereunder and thereunder.
SECTION 5. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto; provided, that Section 4
of the letter agreement dated December 31, 1997 (the "Letter Agreement") between
Elan Corporation, plc, an Irish limited company and EIS, on the one hand, and
the Company, on the other hand, shall survive the execution and delivery hereof
and be subject to the provisions of Section 6 hereof..
SECTION 6. Survival and Indemnification. (a) Survival Period.
The representations and warranties of the Company contained herein shall survive
for a period of three years after the date hereof.
(b) Indemnification. In addition to all rights and remedies
available to the parties hereunder at law or in equity, the Company and Newco
(each in such capacity, an "Indemnifying Party") shall indemnify EIS, and its
respective affiliates, and EIS' and its respective affiliates' stockholders,
officers, directors, employees, agents, representatives, successors and assigns
(collectively, the "Indemnified Person"), and save and hold EIS harmless from
and against and pay on behalf of or reimburse each such Indemnified Person, as
and when incurred, for any and all loss, liability, demand, claim, action, cause
of action, cost, damage, deficiency, tax, penalty, fine or expense, whether or
not arising out of any claims by or on behalf of such Indemnified Person or any
third party, including interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Losses"), that any such Indemnified Person may
suffer, sustain incur or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on
the part of the Indemnifying Party under Section 2 of this Agreement or
Section 4 of the Letter Agreement; or
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(ii) any nonfulfillment, default or breach of any
covenant or agreement on the part of the Indemnifying Party under
Section 4 of this Agreement.
(c) Maximum Recovery. The maximum recovery of EIS under this
Section 6 shall not exceed [****]. No Indemnified Party shall assert any such
claim unless Losses in respect thereof incurred by any Indemnified Party, when
aggregated with all previous Losses hereunder, equal or exceed [****], and the
obligation of the Indemnifying Party to indemnify shall not apply to the first
[****] of losses to the Indemnified Person.
(d) Exception. Notwithstanding the foregoing, and subject to
the following sentence, upon judicial determination that is final and no longer
appealable, that the act or omission giving rise to the indemnification set
forth above resulted primarily out of or was based primarily upon the
Indemnified Person's negligence (unless such Indemnified Person's negligence was
based upon the Indemnified Person's reliance in good faith upon any of the
representations, warranties, covenants or promises made by the Indemnifying
Party herein), the Indemnifying Party shall not be responsible for any Losses
sought to be indemnified in connection therewith, and the Indemnifying Party
shall be entitled to recover from the Indemnified Person all amounts previously
paid in full or partial satisfaction of such indemnity, together with all costs
and expenses (including reasonable attorneys fees) of the Indemnifying Party
reasonably incurred in connection with the Indemnified Party's claim for
indemnity, together with interest at the rate per annum publicly announced by
Xxxxxx Guaranty Trust Company as its prime rate from the time of payment of such
amounts to the Indemnified Person until repayment to the Indemnifying Party.
(e) Investigation. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 6(b) above,
irrespective of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Indemnified Person or the acceptance of any
certificate or opinion.
(f) Contribution. If the indemnity provided for the this
Section 6 shall be, in whole or in part, unavailable to any Indemnified Person,
due to Section 6(b) being declared unenforceable by a court of competent
jurisdiction based upon reasons of public policy, so that Section 6(b) shall be
insufficient to hold each such Indemnified Person harmless from Losses which
would otherwise be indemnified hereunder, then the Indemnifying Party and the
Indemnified Person shall each contribute to the amount paid or payable for such
Loss in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Person on the other, but also the relative fault of the Indemnifying Party and
be in addition to any liability that the Indemnifying Party may otherwise have.
Subject to Section 6(h) hereunder, the indemnity, contribution and expense
reimbursement obligations that the Indemnifying Party has under this Section 6
shall survive the expiration of the Transaction Documents. The parties hereto
further agree that the indemnification and reimbursement commitments set forth
in this Agreement shall apply whether or not the
**** REPRESENTS MATERIAL REACTED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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Indemnified Person is a formal part to any such lawsuit, claims or other
proceedings.
(g) Limitation. No claim shall be brought by an Indemnified
Person in respect of any misrepresentation or breach of warranty under this
Agreement after three years from and after the date hereof unless written notice
thereof shall have been provided prior to such three-year period, in which case
such surviving claims shall be limited to those in such notice; and any claim
for nonfulfillment, default or breach of any covenant shall be brought within
one year of the date of that such Indemnified Person became aware or should have
become aware of the nonfulfillment, default or breach, unless written notice
thereof shall have been provided prior to such one-year period, in which case
such surviving claims shall be limited to those in such notice. Except as set
forth in the previous sentence and in Section 6(c) above, this Section 6 is not
intended to limit the rights or remedies otherwise available to any party hereto
with respect to this Agreement or the Transaction Documents.
SECTION 7. Notices. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered or
if sent by nationally-recognized overnight courier or by registered or certified
airmail, return receipt requested and postage prepaid, or by facsimile
transmission, addressed as follows:
(i) if to the Company, to:
Endorex Corp.
000 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxx
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
(ii) if to EIS, to:
Elan International Services, Ltd.
000 Xx. Xxxxx Xxxxx
Xxxxxx Xxxxxx XX00
Bermuda
Facsimile: (000) 000-0000
Attention: President
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with a copy to:
Xxxxx Xxxxxxxxxxxx Xxxxxxxxxxx & XxXxxxxxx LLC
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 7. Any such notice or communication shall be deemed to have been
received (i) in the case of personal delivery or facsimile transmission, on the
date of such delivery, (ii) in the case of nationally-recognized overnight
courier, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
SECTION 8. Amendments. This Agreement may not be modified or
amended, or any of the provisions hereof waived, except by written agreement of
the Company and EIS.
SECTION 9. Counterparts and Facsimile. The Transaction
Documents may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.
SECTION 10. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of the Agreement.
SECTION 11. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of laws.
SECTION 12. Expenses. Each of the parties shall be responsible
for its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 13. Public Releases; Etc. The parties shall reasonably
agree in writing upon the contents of any press release or releases and other
public disclosure in respect of the transactions contemplated hereby, and no
such press release or disclosure shall be made except as so agreed, except as
may otherwise be required by applicable law or judicial or administrative
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process or pursuant to arrangements with financial, accounting or legal avisors.
SECTION 14. Schedules, etc. All statements contained in any
exhibit or schedule delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, are an integral part of
this Agreement and shall be deemed representations and warranties hereunder.
SECTION 15. Assignments. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement,
the other Transaction Documents, and the Securities may be transferred by EIS to
affiliates and subsidiaries without restriction; provided, however, that EIS
shall remain liable for its obligations hereunder after any such assignment.
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
ENDOREX CORP.
By:/s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive Officer
ELAN INTERNATIONAL SERVICES, LTD.
By:/s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: President & CEO
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