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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARQULE, INC.
CAMITRO ACQUISITION CORPORATION
AND
CAMITRO CORPORATION
AND
THE PRINCIPAL STOCKHOLDERS OF
CAMITRO CORPORATION NAMED HEREIN
DATED AS OF JANUARY 16, 2001
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ARTICLE I THE MERGER.................................................................................1
1.1 The Merger.....................................................................................1
1.2 Effective Time; Closing........................................................................1
1.3 Effect of the Merger...........................................................................2
1.4 Articles of Organization; Bylaws...............................................................2
1.5 Directors and Officers.........................................................................2
1.6 Effect on Capital Stock........................................................................2
1.7 Surrender of Certificates......................................................................4
1.8 No Further Ownership Rights in Camitro Stock...................................................5
1.9 Restricted Shares..............................................................................5
1.10 Dissenting Shares..............................................................................5
1.11 Lost, Stolen or Destroyed Certificates.........................................................5
1.12 Tax Consequences...............................................................................6
1.13 Taking of Necessary Action; Further Action.....................................................6
1.14 Escrow of Merger Shares........................................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CAMITRO..................................................6
2.1 Organization of Camitro........................................................................6
2.2 Camitro Capital Structure......................................................................7
2.3 Obligations With Respect to Capital Stock......................................................7
2.4 Authority......................................................................................8
2.5 Camitro Financial Statements...................................................................9
2.6 Absence of Certain Changes or Events...........................................................9
2.7 Taxes.........................................................................................10
2.8 Title to Properties; Absence of Liens and Encumbrances........................................13
2.9 Intellectual Property.........................................................................13
2.10 Compliance; Permits; Restrictions.............................................................14
2.11 Litigation....................................................................................14
2.12 Brokers' and Finders' Fees....................................................................15
2.13 Employee Benefits.............................................................................15
2.14 Employment Matters............................................................................16
2.15 Environmental Matters.........................................................................16
2.16 Agreements, Contracts and Commitments.........................................................17
2.17 Disclosure....................................................................................17
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS..............................18
3.1 Title to Shares...............................................................................18
3.2 Authority to Execute and Perform Agreements...................................................18
3.3 No Breach.....................................................................................18
3.4 Brokerage.....................................................................................18
3.5 Investment Representations....................................................................18
3.6 Restrictions on Transfer......................................................................19
3.7 Investigation.................................................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ARQULE AND MERGER SUB...................................19
4.1 Organization of ArQule........................................................................19
4.2 ArQule Capital Structure......................................................................20
4.3 Authority.....................................................................................20
4.4 SEC Filings; ArQule Financial Statements......................................................21
4.5 Absence of Certain Changes or Events..........................................................22
4.6 Litigation....................................................................................22
4.7 Interim Operations of Merger Sub..............................................................22
4.8 Brokers' and Finders' Fee.....................................................................22
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................22
5.1 Conduct of Business by Camitro................................................................22
5.2 Certain Actions by Camitro....................................................................22
5.3 Certain Action by the Principal Stockholders..................................................24
ARTICLE VI ADDITIONAL AGREEMENTS.....................................................................24
6.1 Access to Information; Confidentiality........................................................24
6.2 Agreement Not to Entertain Other Offers.......................................................24
6.3 Public Disclosure.............................................................................25
6.4 Legal Requirements............................................................................25
6.5 Camitro Stock Options and Warrants............................................................25
6.6 Camitro Employee Plans........................................................................26
6.7 ArQule Form S-8...............................................................................26
6.8 NNM Listing...................................................................................26
6.9 Registration Rights...........................................................................26
6.10 Transfer Taxes................................................................................26
6.11 Fees and Expenses.............................................................................27
6.12 Stockholder Meeting...........................................................................27
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6.13 Notification of Certain Matters...............................................................27
6.14 Best Efforts and Further Assurances...........................................................27
6.15 Disclaimer Regarding Tax Status...............................................................28
6.16 Voting of Camitro Stock.......................................................................28
6.17 Certain Tax Matters...........................................................................28
6.18 Transaction Restructuring for Tax Purposes....................................................28
6.19 Post-Closing Camitro Employee Matters.........................................................28
6.20 Executive Compensation........................................................................29
6.21 Assignment and Assumption of Camitro Lease....................................................29
ARTICLE VII CONDITIONS TO THE MERGER..................................................................29
7.1 Conditions to Obligations of Each Party to Effect the Merger..................................29
7.2 Additional Conditions to Obligations of Camitro and the Principal Stockholders................29
7.3 Additional Conditions to the Obligations of ArQule and Merger Sub.............................30
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.........................................................32
8.1 Termination...................................................................................32
8.2 Bridge Loan...................................................................................32
8.3 Notice of Termination; Effect of Termination..................................................33
8.4 Fees and Expenses.............................................................................33
8.5 Amendment.....................................................................................33
8.6 Extension; Waiver.............................................................................33
ARTICLE IX INDEMNIFICATION...........................................................................33
9.1 Survival......................................................................................33
9.2 Obligation of the Stockholders of Camitro to Indemnify........................................34
9.3 Obligation of ArQule to Indemnify.............................................................34
9.4 Limitations on Indemnification................................................................34
9.5 Notice and Defense of Claims..................................................................35
9.6 Submission to Jurisdiction....................................................................35
ARTICLE X GENERAL PROVISIONS........................................................................36
10.1 Notices.......................................................................................36
10.2 Interpretation................................................................................37
10.3 Counterparts..................................................................................37
10.4 Entire Agreement..............................................................................37
10.5 Severability..................................................................................37
10.6 Other Remedies; Specific Performance..........................................................37
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10.7 Governing Law.................................................................................37
10.8 Rules of Construction.........................................................................38
10.9 Assignment....................................................................................38
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of January 16,
2001 is by and among ArQule, Inc. ("ARQULE"), a Delaware corporation, Camitro
Acquisition Corporation ("MERGER SUB"), a Delaware corporation and a wholly
owned subsidiary of ArQule, Camitro Corporation ("CAMITRO"), a California
corporation, and the stockholders of Camitro identified on the signature pages
hereto (collectively, the "PRINCIPAL STOCKHOLDERS").
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL") and the
California General Corporation Law (the "CGCL"), ArQule and Camitro will enter
into a business combination transaction pursuant to which Merger Sub will merge
with and into Camitro (the "MERGER").
B. ArQule, Camitro, Merger Sub and the Principal Stockholders desire to
make certain representations and warranties and other agreements in connection
with the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the CGCL and the DGCL, Merger Sub shall be merged with
and into Camitro, the separate corporate existence of Merger Sub shall cease and
Camitro shall continue as the surviving corporation (the "SURVIVING
CORPORATION").
1.2 EFFECTIVE TIME; CLOSING. The closing of the Merger (the "CLOSING")
shall take place at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VII, or at such other time, date, and location
as the parties hereto agree in writing (the "CLOSING DATE"). At the Closing, the
parties shall deliver to each other the various certificates and instruments
required under Article VII, as well as the other deliveries to be made at
Closing pursuant to this Agreement. As soon as practicable thereafter, the
parties shall cause the Merger to be consummated by executing and filing
Articles of Merger and Certificate of Merger (the "MERGER ARTICLES") with the
Secretaries of State of California and Delaware in accordance with the relevant
provisions of the DGCL and the CGCL, respectively (the time of the later
acceptance of either such filing (or such later time as may be agreed in writing
by the parties and specified in the Merger Articles) being the "EFFECTIVE
TIME"). Unless the context otherwise requires, the term "AGREEMENT" as used
herein refers collectively to this Agreement and the Merger Articles.
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1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the CGCL
and the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Camitro and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Camitro and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF ORGANIZATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of Camitro,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation. The purposes of the Surviving
Corporation shall be the purposes of Camitro, as in effect immediately prior to
the Effective Time.
(b) The Bylaws of Camitro, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Camitro immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, to
serve until their successors are duly elected or appointed or qualified.
1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Camitro or the holders
of any of the following securities, the following actions shall occur with
respect to the capital stock of Camitro and Merger Sub:
(a) CONVERSION OF CAMITRO STOCK. All shares of Common Stock of
Camitro (the "CAMITRO COMMON STOCK"), all shares of Series A Preferred Stock of
Camitro (the "Camitro Series A Preferred Stock") and all shares of Series B
Preferred Stock of Camitro (the "CAMITRO SERIES B PREFERRED STOCK," and together
with Camitro Series A Preferred Stock and Camitro Series B Preferred Stock, the
"CAMITRO STOCK"), issued and outstanding immediately before the Effective Time
(other than any shares of Camitro Stock to be canceled pursuant to Section
1.6(c) if any, and shares of Camitro Stock held by a stockholder who has
properly exercised dissenters' rights in accordance with Section 1300 of the
CGCL, which shall be treated in accordance with Section 1.10) will be canceled
and extinguished and automatically converted (subject to Section 1.6(e)) into
the right to receive the following shares and, subject to provisions of Section
1.6(b), cash (together, the "MERGER CONSIDERATION"):
(i) A number of shares (the "MERGER SHARES") of Common Stock,
par value $.01 per share, of ArQule (the "ARQULE COMMON STOCK") determined
by multiplying the number of shares of Camitro Stock held by each such
holder by the Stock Conversion Factor (as defined below); and
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(ii) an amount in cash for each share of Camitro Stock held by
each such holder determined by dividing the Merger Cash (as defined
herein), if any, determined pursuant to Section 1.6(b) by the number of
shares of Camitro Common Stock either outstanding or issuable on conversion
of the Camitro Series A Preferred Stock and the Camitro Series B Preferred
Stock immediately prior to the Effective Time, but excluding shares of
Camitro Stock canceled pursuant to Section 1.6(c);
such Merger Consideration to be allocated among the holders of shares of Camitro
Stock on a pro rata basis, subject to the provisions of Sections 1.9 and 1.14;
notwithstanding anything to the contrary contained herein, if the Per Share
Value (as defined in Section 6.5(b)) is less than $3.10, then the Merger
Consideration shall be allocated as set forth in Section 3 of the Articles of
Incorporation of Camitro and the Camitro Stock shall be canceled and
extinguished and automatically converted into the right to receive the Merger
Consideration.
(iii) "Stock Conversion Factor" means the quotient obtained by
dividing (i) 3,390,000 less the aggregate number of shares of ArQule Common
Stock reserved for issuance under Section 1.6(d) and 6.5(a) hereof by (ii)
the number of shares of Camitro Common Stock either outstanding or issuable
on conversion of outstanding shares of Camitro Series A Preferred Stock and
Camitro Series B Preferred Stock immediately prior to the Effective Time,
but excluding shares of Camitro Stock canceled pursuant to Section 1.6(c),
if any, and excluding shares of Camitro Stock reserved for issuance to the
University of Pittsburgh pursuant to Section 7.3(k).
(b) MERGER CASH. If the product of the Market Value (as defined
herein) multiplied by 3,390,000 shares of ArQule Common Stock is less than
$95,000,000, then the Merger Consideration shall include a cash payment, not to
exceed $10,000,000, equal to the excess of $95,000,000 over such product (the
"MERGER CASH"). For purposes of this Agreement, "MARKET VALUE" of ArQule Common
Stock means the average of the closing prices of ArQule Common Stock as reported
on the Nasdaq National Market for the ten (10) consecutive trading days ending
on the day prior to the date of the Camitro stockholder meeting scheduled
pursuant to Section 6.12.
(c) CANCELLATION OF CERTAIN SHARES. Each share of Camitro Stock held
in the treasury of Camitro, if any, owned by Merger Sub, ArQule or any direct or
indirect wholly owned subsidiary of Camitro or of ArQule immediately before the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) STOCK OPTIONS AND WARRANTS. At the Effective Time, all options to
purchase Camitro Common Stock then outstanding under Camitro's 1999 Stock Option
Plan (the "CAMITRO STOCK PLAN") and all warrants to purchase Camitro Series B
Preferred Stock then outstanding shall be assumed by ArQule in accordance with
Section 6.5 hereof.
(e) FRACTIONAL SHARES. No fraction of a share of ArQule Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Camitro Stock who would otherwise be entitled to a fraction of a share
of ArQule Common Stock (after aggregating all fractional shares of ArQule Common
Stock to be received by such holder) shall receive from ArQule an amount of cash
(rounded to the nearest whole cent) equal to the product of such
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fraction, multiplied by the closing price per share of ArQule Common Stock on
the last trading day before the Closing Date, as reported on the Nasdaq National
Market.
(f) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation. Each stock certificate evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
1.7 SURRENDER OF CERTIFICATES.
(a) DELIVERY OF CAMITRO STOCK. At the Closing, each Stockholder shall
surrender and deliver to ArQule certificates (the "CERTIFICATES") representing
all of such holder's ownership of Camitro Stock.
(b) DELIVERY OF MERGER CASH. At the Closing, ArQule shall deliver to
the holders of shares of Camitro Stock the Merger Cash, if any, to be allocated
among the holders of shares of Camitro Stock in accordance with SCHEDULE 1 by
wire transfer to an account designated by the holders.
(c) DELIVERY OF MERGER SHARES. As soon as practicable after the
Effective Time, subject to Sections 1.9 and 1.14, ArQule shall cause its
transfer agent to mail to each holder of shares of Camitro Stock who has
delivered his, her or its Certificate(s) pursuant to Section 1.7(a) a
certificate representing that number of Merger Shares into which such shares of
Camitro Stock theretofore held by such stockholder shall have been converted
pursuant to the provisions of this Agreement.
(d) EFFECT OF FAILURE TO DELIVER CAMITRO STOCK. Until surrendered in
accordance with the provisions of this Section, each Certificate representing
Camitro Stock held by a stockholder shall be deemed from and after the Effective
Time, for all corporate purposes, to evidence only ownership of the number of
full shares of ArQule Common Stock into which such shares of Camitro Stock shall
have been so converted and the right to receive a proportionate amount of Merger
Cash, if any, and any cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6(e).
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to ArQule Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of ArQule Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder thereof certificates representing whole shares of ArQule Common Stock
issued in exchange therefor, without interest, along with the amount of
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of ArQule Common Stock, a
proportionate amount of Merger Cash, if any, and cash in lieu of any fractional
shares in accordance with Section 1.6(e).
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(f) TRANSFERS OF OWNERSHIP. If any certificate for shares of ArQule
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed,
accompanied by any documents required to evidence and effect such transfer and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to ArQule or any agent designated by it any applicable
transfer taxes required by reason of the issuance of a certificate for shares of
ArQule Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or shall provide evidence that any applicable transfer
taxes have been paid.
1.8 NO FURTHER OWNERSHIP RIGHTS IN CAMITRO STOCK. All Merger Shares issued
and Merger Cash paid upon the surrender for exchange of shares of Camitro Stock
in accordance with the terms hereof (including any cash paid in respect thereof
pursuant to Section 1.6(e)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Camitro Stock, and there
shall be no further registration of transfers on the records of the Surviving
Corporation of shares of Camitro Stock that were outstanding immediately prior
to the Effective Time. If after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 RESTRICTED SHARES. The number of Merger Shares designated as
"RESTRICTED SHARES" on SCHEDULE 1 shall continue to be subject to the
restrictions set forth in the Restricted Stock Purchase Agreements between
Camitro and the holder of such Restricted Shares, subject to changes consistent
with this Agreement. The Restricted Shares shall be deemed outstanding as of the
Effective Time, but shall be subject to forfeiture as set forth in such
Restricted Stock Purchase Agreement.
1.10 DISSENTING SHARES.
(a) Shares of Camitro Stock held by a stockholder who has properly
exercised dissenters' rights with respect thereto in accordance with Sections
1300-1303 of the CGCL (collectively, the "DISSENTING SHARES") shall not be
converted into Merger Consideration. From and after the Effective Time, a
stockholder who has properly exercised such dissenters' rights shall no longer
retain any rights of a stockholder of Camitro or the Surviving Corporation,
except those provided under the CGCL.
(b) Camitro shall give ArQule (i) prompt notice of any written
demands under Section 1301 of the CGCL with respect to any shares of Camitro
Stock, any withdrawal of any such demands and any other instruments served
pursuant to the CGCL and received by Camitro and (ii) the right to participate
in all negotiations and proceedings with respect to any demands under Section
1301 with respect to any shares of Camitro Stock. Camitro shall cooperate with
ArQule concerning such demands, and shall not, except with the prior written
consent of ArQule, voluntarily make any payment with respect to, or offer to
settle or settle, any such demands. Camitro shall be responsible for all
payments with respect to Dissenting Shares.
1.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificate
shall have been lost, stolen or destroyed, ArQule shall direct its transfer
agent to issue in exchange for such lost, stolen or destroyed Certificate, upon
the making of an affidavit of that fact by the holder
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thereof, such shares of ArQule Common Stock, Merger Cash, if any, and cash for
fractional shares, if any, as may be required pursuant to Section 1.6(e);
provided, however, that ArQule may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against ArQule or the transfer
agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.12 TAX CONSEQUENCES. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368 of the Code.
The parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Camitro and Merger Sub, the officers and directors of Camitro
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is consistent with this Agreement.
1.14 ESCROW OF MERGER SHARES. At the Effective Time, ArQule shall deposit a
number of Merger Shares having a Market Value (as defined in Section 1.6(b))
equal to ten percent (10%) of the sum of (i) the product of 3,390,000 multiplied
by the Market Value, plus (ii) the amount of Merger Cash, if any, with an escrow
agent reasonably satisfactory to Camitro to be held and disbursed by such agent
in accordance with the form of escrow agreement (the "ESCROW AGREEMENT")
attached hereto as Exhibit A.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CAMITRO
Camitro represents and warrants to ArQule and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure schedule supplied
by Camitro to ArQule (the "CAMITRO DISCLOSURE SCHEDULE"), the section references
of which correspond to the sections and subsections of this Agreement to which
they relate, as follows:
2.1 ORGANIZATION OF CAMITRO. Camitro is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
has the requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted and as proposed by Camitro to be
conducted, and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Camitro Material Adverse Effect (as defined below). Camitro has no
Subsidiaries (as defined below). Camitro has delivered or made available a true
and correct copy of the Restated Articles of Incorporation (the "RESTATED
ARTICLES") and Bylaws of Camitro, each as amended to date, to ArQule. The minute
books of Camitro made available to ArQule contain an accurate record of all
actions taken in all meetings of directors (or committees thereof) and
stockholders or by written consent. The term "CAMITRO MATERIAL ADVERSE EFFECT"
means, for
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purposes of this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets), financial
condition, results of operations or prospects of Camitro or the Surviving
Corporation; provided, however, that any event, violation, inaccuracy,
circumstance, or other matter occurring after the date of this Agreement that
results from or relates to the taking of any action contemplated or permitted by
this Agreement or the announcement or pendency of the Merger shall be
disregarded. "SUBSIDIARY" means, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least 50% of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization are directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
2.2 CAMITRO CAPITAL STRUCTURE. The authorized capital stock of Camitro
consists of 15,900,000 shares of Common Stock, of which 2,260,339 shares are
issued and outstanding as of the date hereof, and 10,200,000 shares of Preferred
Stock of which (i) 2,500,000 shares have been designated Series A Preferred
Stock, of which 2,266,666 shares are issued and outstanding as of the date
hereof and (ii) 7,700,000 shares have been designated Series B Preferred Stock,
of which 6,615,383 shares are issued and outstanding as of the date hereof. The
outstanding shares of Camitro Stock are held of record and beneficially by the
persons and in the amounts set forth on SCHEDULE 1. All outstanding shares of
Camitro Stock are duly authorized, validly issued, fully paid and non-assessable
and are not subject to preemptive or similar rights created by statute, the
Restated Articles or Bylaws of Camitro or any agreement or document to which
Camitro is a party or by which it is bound. As of the date hereof, (i) an
aggregate of 8,882,049 shares of Camitro Common Stock were reserved for issuance
upon conversion of all outstanding shares of Camitro Series A Preferred Stock
and Camitro Series B Preferred Stock, (ii) an aggregate of 2,270,000 shares of
Camitro Common Stock, were reserved for issuance to employees, consultants, and
non-employee directors pursuant to the Camitro Stock Plan, under which options
were outstanding for an aggregate of 1,055,500 shares, net of exercises and
cancellations, (iii) an aggregate of 225,762 shares of Camitro Series B
Preferred Stock, net of exercises or conversions, were reserved for issuance
under all outstanding warrants to purchase shares of Camitro Series B Preferred
Stock, and (iv) an aggregate of 225,762 shares of Camitro Common Stock, net of
exercises or conversions, were reserved for issuance upon conversion of the
shares of Camitro Series B Preferred Stock issued upon exercise of outstanding
warrants to purchase Camitro Series B Preferred Stock. All shares of Camitro
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. The Camitro Disclosure
Schedule lists, as of the date hereof, each outstanding option to acquire shares
of Camitro Common Stock under the Camitro Stock Plan and each outstanding
warrant, and the name of the holder of such option and warrant, the number of
shares subject to such option and warrant, the exercise or conversion price of
such option and warrant, and the vesting schedules for such option or
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warrant. Except for the shares described in Section 2.2 and the options and
warrants described in this Section 2.3, there are no equity securities of any
class of Camitro, or any securities exchangeable or convertible into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding, there are no calls, rights (including preemptive rights),
commitments or agreements of any character to which Camitro is a party or by
which it is bound obligating Camitro to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock of
Camitro or obligating Camitro to grant, extend, accelerate the vesting of or
enter into any such option, warrant, equity security, call, right, commitment or
agreement. There are no registration rights and, to the knowledge of Camitro,
there are no voting trusts, proxies or other agreements or understandings, with
respect to any equity security of any class of Camitro.
2.4 AUTHORITY.
(a) Camitro has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Board of Directors. This Agreement has been
duly executed and delivered by Camitro and, assuming the due authorization,
execution and delivery by ArQule and Merger Sub, this Agreement constitutes the
valid and binding obligation of Camitro, enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general principles of equity. The
execution and delivery of this Agreement by Camitro does not, and the
performance of this Agreement by Camitro will not, (i) conflict with or violate
the Restated Articles or Bylaws of Camitro, (ii) subject to compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Camitro or by
which any of its properties is bound, or (iii) result in any breach of or
constitute a default under, or impair the rights of Camitro or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Camitro
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Camitro is
a party or by which Camitro or its properties are bound or affected, except,
with respect to clauses (ii) and (iii), for any such conflicts, violations,
defaults or other occurrences that would not, individually or in the aggregate,
have a Camitro Material Adverse Effect.
(b) Each consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental or regulatory body or authority or
instrumentality ("GOVERNMENTAL ENTITY") required by or with respect to Camitro
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby has been obtained, except
for (i) the filing of the Merger Articles with the Secretaries of State of
California and Delaware, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and (iii)
such other consents, authorizations, filings, approvals and registrations that,
if not
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obtained or made, would not, individually or in the aggregate, have a Camitro
Material Adverse Effect or a material adverse effect on the ability of the
parties to consummate the Merger.
2.5 CAMITRO FINANCIAL STATEMENTS. Camitro has previously delivered to
ArQule the audited financial statements of Camitro for the year ended December
31, 1999 (including the footnotes thereto), and the unaudited financial
statements of Camitro for the nine months ended September 30, 2000 (the "CAMITRO
INTERIM FINANCIAL STATEMENTS") (collectively, the "Camitro Financial
Statements"). The Camitro Financial Statements have been prepared from, and are
in accordance with, the books and records of Camitro and present fairly the
financial position and the results of operations of Camitro as of the dates and
for the periods indicated, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved except as otherwise stated therein, and except that the Camitro Interim
Financial Statements may not contain footnotes and are subject to normal and
recurring year-end adjustments. Camitro has no liabilities (absolute, accrued,
contingent or otherwise), whether or not of a nature required to be disclosed on
a balance sheet or in the related notes to the financial statements prepared in
accordance with GAAP, that are, individually or in the aggregate, material to
the business, results of operations or financial condition of Camitro, except
liabilities (i) provided for in the Camitro Financial Statements, (ii) incurred
since September 30, 2000 in the ordinary course of business consistent with past
practices, or (iii) incurred in connection with the transactions contemplated
hereby.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 2000, there
has not occurred any Camitro Material Adverse Effect and there has not been,
occurred or arisen any:
(a) amendments or changes to the Restated Articles or Bylaws of
Camitro;
(b) individual capital expenditure or commitment, or series of
related capital expenditure or commitments, by Camitro exceeding $25,000;
(c) destruction of, damage to or loss of any assets material to the
business of Camitro (whether or not covered by insurance);
(d) to the best of Camitro's knowledge, any communication to Camitro
as to a material adverse change in a material business relationship, including
without limitation any cancellation or termination or notice of cancellation or
termination of any material business relationship or a material portion of such
relationship with Camitro or any notice of material decrease or planned decrease
in the usage or purchase of the products or services of Camitro by any such
entity from that reasonably expected by Camitro as of the date of this
Agreement;
(e) labor trouble or claim of wrongful discharge (except for such
claims as would not reasonably be expected to result in potential damages
greater than $50,000) or other unlawful labor practice or action that would have
a Camitro Material Adverse Effect;
(f) material change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Camitro;
(g) material revaluation by Camitro of any of its assets;
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(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of Camitro, or any direct or
indirect redemption, purchase or other acquisition by Camitro of any of its
capital stock;
(i) increase in the salary or other compensation, other than in the
ordinary course of business and consistent with past practices, payable or to
become payable to any of its (i) officers or directors or (ii) employees or
advisors who earn the top 20% of compensation paid by Camitro, declaration,
payment or commitment or obligation of any kind for the payment of a bonus or
other additional salary or compensation to any such person or grant or amendment
of any stock option or other agreement pertaining to any such person;
(j) sale, lease, license or other disposition of any material amount
of the assets or properties of Camitro;
(k) amendment or termination of any material contract, agreement or
license to which Camitro is a party or by which it is bound, except for
amendments or terminations described in Section 2.6(d);
(l) loan by Camitro to any person or entity, incurring by Camitro of
any indebtedness (except for indebtedness in amounts described in Section
2.16(a)(iv) of the Camitro Disclosure Schedule incurred under existing credit
lines or arrangements set forth in Section 2.16(a)(iv) of the Camitro Disclosure
Schedule), guaranteeing by Camitro of any indebtedness, issuance or sale of any
debt securities of Camitro or guaranteeing of any debt securities of others,
except for advances to employees for travel and business expenses and endorsing
of checks payable to Camitro in the ordinary course of business, consistent with
past practices;
(m) waiver or release of any material right or claim of Camitro,
including any write-off or other compromise of any account receivable of Camitro
other than in the ordinary course of business and consistent with past
practices;
(n) change in pricing or royalties set or charged by Camitro to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Camitro Intellectual Property (as defined herein) to Camitro other
than in the ordinary course of business and consistent with past practices;
(o) other transaction by Camitro except in the ordinary course of
business as conducted on September 30, 2000 and consistent with past practices;
or
(p) commitment, understanding or agreement by Camitro or any officer
or employee thereof to do any of the things described in the preceding clauses
(a) through (o) (other than this Agreement).
2.7 TAXES.
(a) All Tax Returns (as defined below) required to be filed on or
before the date hereof by or with respect to Camitro have been filed within the
time and in the manner prescribed by law. All such Tax Returns are true,
correct, and complete in all material respects; provided, however, that no
representation is made herein as to the availability for periods after
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the date that includes the Effective Time (the "EFFECTIVE DATE") to ArQule under
Sections 382, 383, or 384 of the Code of Camitro's net operating losses,
built-in losses, or tax credits shown on such Tax Returns. All Taxes owed by
Camitro for the periods covered by such Tax Returns, whether or not shown on any
Tax Return, have been paid. Camitro is not currently the beneficiary of any
extension of time within which to file any Tax Return. Camitro files Tax Returns
in all jurisdictions where it is required to so file, and no claim has ever been
made in writing by any taxing authority in any other jurisdiction that Camitro
is or may be subject to taxation by that jurisdiction.
(b) There are no liens or other encumbrances with respect to Taxes
upon any of the assets or properties of Camitro, other than with respect to
Taxes not yet due and payable.
(c) No deficiency for any Taxes has been proposed in writing against
Camitro, which deficiency has not been paid in full, and Camitro does not know
of any basis upon which any such Tax deficiency could reasonably be expected to
be asserted. No issue relating to Camitro or involving any Tax for which Camitro
might be liable has been resolved in favor of any taxing authority in any audit
or examination which, by application of the same principles, could reasonably be
expected to result in a deficiency for Taxes of Camitro for any other period.
(d) Section 2.7(d) of the Camitro Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to
Camitro for taxable periods ended on or after December 31, 1995, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Except as set forth in Section 2.7(d), there
are no outstanding agreements, waivers or arrangements extending the statutory
period of limitation applicable to any claim for, or the period for the
collection or assessment of, Taxes due from or with respect to Camitro for any
taxable period, and no power of attorney granted by or with respect to Camitro
relating to Taxes is currently in force. Camitro has delivered to ArQule true,
complete and correct copies of all Tax Returns, audit reports, and statements of
deficiencies for each of the last three taxable years filed by or issued to or
with respect to Camitro (or, insofar as such items relate to Camitro, by or to
any affiliated, consolidated, combined, or unitary group of which Camitro was
then a member).
(e) The unpaid Taxes of Camitro for all taxable periods (or portions
thereof) ending on or prior to the Effective Date (i) did not, as of September
30, 2000, exceed the reserve for tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face (rather than in any notes thereof) of the balance
sheet included in the Camitro Interim Financial Statements and (ii) will not, as
of the Effective Date, exceed such reserve as adjusted to reflect the ordinary
operations of Camitro after September 30, 2000 and through the Effective Date in
accordance with the past customs and practice of Camitro in filing its Tax
Returns.
(f) Camitro is not a "consenting corporation" within the meaning of
Section 341(f) of the Code, and no consent to the application of Section
341(f)(2) of the Code (or any predecessor provision) has been made or filed by
or with respect to Camitro or any of its assets or properties. None of the
assets or properties of Camitro are or will be required to be treated as being
(i) owned by any other person pursuant to the provisions of Section 168(f)(8) of
the
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Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property within
the meaning of Section 168(h)(1) of the Code. Camitro has not agreed, nor is it
required, to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
(g) Camitro has not been and is not currently in violation (or, with
or without notice or lapse of time or both, would be in violation) of any
applicable law or regulation relating to the payment, collection, or withholding
of Taxes, or the remittance thereof, and all withholding and payroll Tax
requirements required to be complied with by Camitro up to and including the
date hereof have been satisfied.
(h) Camitro is not and has never been (i) a member of any affiliated
group filing or required to file a consolidated, combined, or unitary Tax Return
or (ii) a party to or bound by, nor does it have or has it ever had any
obligation under, any Tax sharing agreement or similar contract or arrangement.
Camitro does not have any liability for the Taxes of any other person under
Treasury Regulation ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(i) Camitro has not distributed to its stockholders or security
holders stock or securities of a controlled corporation in a transaction to
which Section 355 of the Code applies (x) in the two years prior to the date of
this Agreement or (y) in a distribution which could otherwise constitute part of
a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) that includes the transactions contemplated by this
Agreement, nor was Camitro the subject of any such distribution pursuant to any
transaction with respect to which Camitro has agreed to or is otherwise
obligated to, indemnify any person for any tax resulting from or attributable to
such transaction.
(j) Camitro is not a party to any contract or agreement, plan, or
arrangement concerning any person that, individually or collectively with other
similar agreements, could give rise to the payment of any amount that would not
be deductible by Camitro by reason of Section 280G of the Code or would be
subject to the limitations in Section 162 of the Code.
(k) Camitro is not and has not been during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
(l) Camitro has not used the installment method to defer any material
liability for Taxes to any taxable period ending after the Closing Date.
(m) No stockholder holds shares of Camitro Stock which are subject to
a substantial risk of forfeiture (within the meaning of Section 83 of the Code)
with respect to which a valid election under Section 83(b) of the Code has not
been made.
(n) As used in this Agreement, (i) "TAX RETURN" means any return,
declaration, report, claim for refund, information return, or statement, and any
schedule, attachment, or amendment thereto, including without limitation any
consolidated, combined or unitary return or other document (including any
related or supporting information), filed or required to be filed by any taxing
authority in connection with the determination, assessment,
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collection, imposition, payment, refund or credit of any federal, state, local
or foreign Tax or the administration of the laws relating to any Tax, and (ii)
"TAX" or "TAXES" means any and all taxes, charges, fees, levies, deficiencies or
other assessments of whatever kind or nature including, without limitation, all
net income, gross income, profits, gross receipts, excise, real or personal
property, sales, ad valorem, withholding, social security, retirement, excise,
employment, unemployment, minimum estimated, severance, stamp, property,
occupation, environmental, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other taxes, customs
duty, fees assessments or charges of any kind whatsoever, imposed by any taxing
authority, including any liability therefor as a transferee under Section 6901
of the Code or any similar provision of applicable law, as a result of Treasury
Regulation ss.1.1502-6 or any similar provision of applicable law, or as a
result of any Tax sharing or similar agreement, together with any interest,
penalties or additions to tax relating thereof.
2.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Camitro does not own any real property. Section 2.8(a) of the
Camitro Disclosure Schedule lists all real property leases to which Camitro is a
party and each amendment thereto. All such current leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).
(b) Camitro has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, and such properties and assets, as well as all other properties and
assets of Camitro, whether tangible or intangible, are free and clear of any
liens, except as reflected in the Camitro Financial Statements or in Section
2.8(b) of the Camitro Disclosure Schedule and except for liens for taxes not yet
due and payable and such imperfections of title and encumbrances, if any, that
are not material in character, amount or extent, and that do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
2.9 INTELLECTUAL PROPERTY.
(a) To the best of Camitro's knowledge, Camitro owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents, trade
secrets, trademarks (both registered and unregistered), trade names, service
marks, copyrights, and any applications therefor, schematics, technology,
know-how, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material that are required or necessary for the conduct of business of Camitro
as currently conducted including current products under development
(collectively, the "CAMITRO INTELLECTUAL PROPERTY").
(b) The Camitro Disclosure Schedule sets forth a list of all federal,
state and foreign patents, registered copyrights, registered and unregistered
trademarks, and any applications therefor included in the Camitro Intellectual
Property, and specifies, where applicable, the jurisdictions in which each such
item of Camitro Intellectual Property has been
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issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. The Camitro
Disclosure Schedule sets forth a list of all licenses, sublicenses and other
agreements to which Camitro is a party and pursuant to which Camitro or any
other person is authorized to use or license the use of any (i) Camitro
Intellectual Property and (ii) third party patents, copyrights, trademarks, and
applications for registration thereof. The execution and delivery of this
Agreement by Camitro, and the consummation of the transactions contemplated
hereby, will not cause Camitro to be in violation or default under any such
license, sublicense or agreement, nor entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement.
(c) No claims have been asserted in writing or are, to Camitro's
knowledge, threatened by any person, to the effect that the practice of the
Camitro Intellectual Property or the manufacture, sale, licensing or use of any
of Camitro's current products, including current products under development,
infringes on any copyright, patent, trademark, service xxxx, trade secret or
other proprietary right of any third party. To Camitro's knowledge, Camitro has
not infringed, and the business of Camitro does not infringe, any copyright,
patent, trade secret or other proprietary right of any third party. To Camitro's
knowledge, there is no unauthorized use, infringement or misappropriation of any
of Camitro Intellectual Property by any third party, including any employee or
former employee of Camitro. To the best of Camitro's knowledge, no Camitro
Intellectual Property or product of Camitro is subject to any outstanding
decree, order, judgment or stipulation restricting in any manner the licensing
thereof by Camitro. Camitro has entered into valid and binding confidentiality,
non-disclosure and assignment of inventions agreements with all current and
former employees. Camitro has also entered into confidentiality agreements with
all current and former consultants, vendors, collaborators and other third
parties with access to non-public information regarding the Camitro Intellectual
Property. Such forms of agreements are attached to Section 2.9(c) of the Camitro
Disclosure Schedule.
2.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(a) Camitro is not in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Camitro or by which any of
its properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Camitro is a party or by which Camitro or any
of its properties is bound or affected which would cause a Camitro Material
Adverse Effect.
(b) Camitro holds all consents, permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are material
to the operation of the business of Camitro (collectively, the "CAMITRO
PERMITS"). Camitro is in compliance with the terms of Camitro Permits, except
where the failure to so comply, individually or in the aggregate, would not have
a Camitro Material Adverse Effect.
2.11 LITIGATION. There is no action, suit or proceeding of any nature
pending or, to Camitro's knowledge, threatened against Camitro or any of its
properties, assets, securities, officers or directors, in their respective
capacities as such. To Camitro's knowledge, there is no investigation pending or
threatened against Camitro, its properties or any of its officers or
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directors by or before any Governmental Entity that would have a Camitro
Material Adverse Effect or would prevent Camitro from consummating the
transactions contemplated hereby.
2.12 BROKERS' AND FINDERS' FEES. Camitro has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13 EMPLOYEE BENEFITS. Section 2.13 of the Camitro Disclosure Schedule
sets forth a correct and complete list of all pension, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and similar plans, programs or arrangements,
including without limitation all employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") with respect to which Camitro is the "PLAN SPONSOR" within the meaning
of Section 3(16)(B) of ERISA, or in which Camitro participates (the "CAMITRO
PLANS"). Camitro has never maintained or contributed to a defined benefit
pension plan that is subject to Title IV of ERISA. Camitro has never maintained
or contributed to any "MULTIEMPLOYER PLAN" as defined in Section 4001(a)(3) of
ERISA, and Camitro has not incurred any material liability under Sections 4062,
4063 or 4201 of ERISA. Except as set forth in Section 2.13 of the Camitro
Disclosure Schedule, each master prototype plan upon which each of the Camitro
Plans is based and which is intended to be qualified under Section 401(a) or
501(c)(9) of the Code, has received or is the subject of a favorable
determination letter from the Internal Revenue Service; and nothing has occurred
since the date of such favorable determination letter that would adversely
affect the qualification of such prototype or plan. Except as set forth on
Section 2.13 of the Camitro Disclosure Schedule, each Camitro Plan has been
administered in all material respects in accordance with the terms of such
Camitro Plan and the provisions of any and all applicable statutes, orders or
governmental rules or regulations, including without limitation ERISA and the
Code. Except as set forth on Section 2.13 of the Camitro Disclosure Schedule, to
the knowledge of Camitro, nothing has been done or omitted to be done with
respect to any Camitro Plan which is intended to comply with Section 401(a) of
the Code that could be reasonably expected to adversely affect the qualified
status of such Camitro Plan or result in any material liability on the part of
Camitro including, without limitation, under Title I of ERISA or Section 4975 of
the Code. All material reports, returns, notices and documents required to be
filed with respect to all Camitro Plans, including without limitation annual
reports on Form 5500 (as applicable), have been timely filed. Except as set
forth on Section 2.13 of the Camitro Disclosure Schedule, all material
contributions required by law or the terms of any Camitro Plan have been made.
Except as set forth on Section 2.13 of the Camitro Disclosure Schedule, all
material claims for welfare benefits incurred by employees of Camitro on or
before the Closing are or will be fully covered by third-party insurance
policies or programs. Except for continuation of health coverage to the extent
required under Section 4980B of the Code or as otherwise set forth in this
Agreement, there are no obligations under any Camitro Plan providing group
health expense reimbursements benefits after termination of employment. Complete
copies of the following documents with respect to each Camitro Plan (as
applicable) have been delivered or made available to ArQule: (i) each relevant
Camitro Plan document and subsequent amendment thereto; (ii) each trust
agreement, group annuity contract, insurance policy or contract relating to a
Camitro Plan; (iii) each Form 5500 series annual report with each required
schedule and attachment for each of the three (3) most recent plan years for
which the time for filing and report has passed (or for such shorter period of
time that such Camitro Plan has been in effect); (iv) the most recent IRS
determination
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opinion or notification letter, if any, for each Camitro Plan which is intended
to comply with the requirements of Section 401(a) of the Code; and (v) the most
recent summary plan description and each summary of material modification
thereto. For purposes of this Section 2.13, references to Camitro include
Camitro and its ERISA Affiliates. An "ERISA AFFILIATE" of Camitro means any
trade or business (whether or not incorporated) that together with Camitro would
have been deemed a "single employer" within the meaning of Sections 414(b), (c),
and (m) of the Code at any time within the five-year period ending on the
Closing Date.
2.14 EMPLOYMENT MATTERS.
(a) COMPLIANCE. Camitro (i) is in compliance in all material respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(b) LABOR. No work stoppage or labor strike against Camitro is
pending or, to the knowledge of Camitro, threatened. Camitro has not engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act that would, individually or in the aggregate, directly or indirectly have a
Camitro Material Adverse Effect. Camitro is not presently, nor has it been in
the past, a party to, or bound by, (i) any collective bargaining agreement or
union contract with respect to employees and no collective bargaining agreement
is being negotiated by Camitro or (ii) any statutory works council or other
agreement, statute, rule or regulation that mandates employee approval,
participation, consultation or consent with regard to the transactions
contemplated hereby.
(c) EMPLOYEES. To Camitro's knowledge, no employee of Camitro (i) has
an employment agreement, (ii) is in violation of any term of any patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
Camitro because of the nature of the business conducted or presently proposed to
be conducted by Camitro or to the use of trade secrets or proprietary
information of others or (iii) has given notice to Camitro, nor is Camitro
otherwise aware, that any executive officer intends to terminate his or her
employment with Camitro.
2.15 ENVIRONMENTAL MATTERS. Camitro has complied in all material respects
with all applicable laws and regulations relating to the environment or
occupational health and safety. There is no pending or, to the knowledge of
Camitro, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any such violation of law by
Camitro. There have been no releases by Camitro, or to Camitro's knowledge, by
others, of any chemicals, pollutants, contaminants, or hazardous substances into
the environment at any parcel
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of real property or any facility formerly or currently owned, leased, operated
or controlled by Camitro.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) CERTAIN MATERIAL CONTRACTS. Camitro is not a party to or bound
by:
(i) any agreement under which Camitro is restricted from
selling, licensing, or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or in
any segment of the market, and Camitro has not granted any exclusive rights
with respect to any of its products to any other person;
(ii) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $50,000 and not
cancelable without penalty;
(iii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any corporation,
partnership, joint venture or other business enterprise;
(iv) any mortgages, indentures, loans or credit agreements,
security agreements relating to an amount of assets or other agreements or
instruments relating to the borrowing of money or extension of credit; or
(v) any other agreement, contract or commitment (excluding real
and personal property leases) which requires annual payments by Camitro
under any such agreement, contract or commitment of $50,000 or more in the
aggregate and is not cancelable within thirty (30) days without penalty.
(b) NO BREACHES. Neither Camitro nor, to Camitro's knowledge, any
other party has breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract or commitment to which Camitro is a party or by which it
is bound in such a manner as would permit any other party to cancel or terminate
any such agreement, contract or commitment or to seek damages, which in either
case would have a Camitro Material Adverse Effect.
2.17 DISCLOSURE. The representations and warranties of Camitro contained in
this Agreement do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state any material fact necessary to make such
representations, warranties and statements, in light of the circumstances under
which they are made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDERS
Each Principal Stockholder severally represents and warrants to ArQule and
Merger Sub, subject to the exceptions specifically disclosed in writing in the
disclosure schedule supplied by the Principal Stockholders to ArQule (the
"PRINCIPAL STOCKHOLDERS DISCLOSURE SCHEDULE"), the section references of which
correspond to the sections and subsections of this Agreement to which they
relate, as follows:
3.1 TITLE TO SHARES. Such Principal Stockholder is the true and lawful
owner of, and has good title to, the shares of Camitro Stock set forth opposite
his, her or its name on SCHEDULE 1, free and clear of any liens. There are no
shareholder agreements, voting trusts, proxies or other agreements or
understandings with respect to the outstanding shares of Camitro Stock to which
such Principal Stockholder is a party.
3.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Such Principal
Stockholder has full legal right and power and all authority to enter into,
execute and deliver this Agreement and to perform in full his, her or its
respective obligations hereunder. This Agreement has been duly executed and
delivered and is the valid and binding obligation of such Principal Stockholder,
enforceable against such Principal Stockholder in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
3.3 NO BREACH. The execution and delivery by such Principal Stockholder of
this Agreement does not, and the performance of this Agreement will not result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, any instrument, contract or other
agreement to which such Principal Stockholder is a party or to which such
Principal Stockholder or his, her or its shares of Camitro Stock may be bound or
subject, or conflict with or violate any statute, law, ordinance or regulation
of any jurisdiction or any order, judgment, injunction, award or decree or other
requirement of any court, arbitrator or governmental or regulatory body binding
upon such Principal Stockholder or such Principal Stockholder's shares of
Camitro Stock.
3.4 BROKERAGE. There are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection herewith based on any
agreement, arrangement or understanding with such Principal Stockholder or any
action taken by such Principal Stockholder, the liability for which is or will
be borne by Camitro or ArQule.
3.5 INVESTMENT REPRESENTATIONS. Each Principal Stockholder has such
knowledge and experience in financial and business matters that he, she, or it
is capable of evaluating the merits and risks of an investment in shares of the
ArQule Common Stock. Each Principal Stockholder is acquiring the Merger Shares
for the Principal Stockholder's own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing the Merger Shares. Each Principal Stockholder
acknowledges that the Merger Shares are restricted securities that are
unregistered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"); that the each Principal Stockholder
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must hold the Merger Shares indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available;
and that the registration rights set forth in SCHEDULE 2 constitute the only
obligation of ArQule to register the Merger Shares.
3.6 RESTRICTIONS ON TRANSFER. The Principal Stockholder will not sell,
transfer, distribute or otherwise dispose of the Merger Shares except (i)
pursuant to an effective registration statement under the Securities Act as then
in effect covering the Merger Shares and proposed distribution or (ii) upon
first furnishing to ArQule an opinion of counsel satisfactory to it stating that
the proposed disposition is not in violation of the registration requirements of
the Securities Act and such undertakings and agreements with ArQule by the
proposed transferee as ArQule may reasonably require to ensure compliance with
the Securities Act. Each Principal Stockholder acknowledges that each
certificate representing the Merger Shares will bear a legend substantially in
the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS AND UNTIL (I) THE SHARES ARE REGISTERED UNDER SUCH ACT OR (II) AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
REGISTRATION UNDER SUCH ACT IS NOT REQUIRED, AND SUCH UNDERTAKINGS AS THE
ISSUER MAY REASONABLY REQUIRE TO ENSURE COMPLIANCE WITH SUCH ACT AS
AMENDED, ARE FURNISHED.
3.7 INVESTIGATION. Each Principal Stockholder has been furnished with, and
has had an opportunity to read, this Agreement and all materials relating to the
business, finances, operations, and prospects of ArQule that have been
reasonably requested by it, including but not limited to the reports filed by
ArQule with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended. Each Principal Stockholder understands that
the Merger Shares are being or will be issued for exchange for Camitro Stock
without any particular offering or disclosure document, but acknowledges that
the Principal Stockholder has been given ample opportunity to ask questions and
request information of and receive answers from ArQule officials concerning the
business, finances and operations of ArQule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ARQULE AND MERGER SUB
ArQule and Merger Sub represent and warrant to Camitro, subject to the
exceptions specifically disclosed in the disclosure schedule, if any, supplied
by ArQule to Camitro (the "ARQULE DISCLOSURE SCHEDULE"), the section references
of which correspond to the sections and subsections of this Agreement to which
they relate, or (other than with respect to Sections 4.1, 4.2, 4.3 and 4.7) to
the extent disclosed in ArQule's SEC Reports (as defined below), as follows:
4.1 ORGANIZATION OF ARQULE. ArQule, Merger Sub and each of the significant
Subsidiaries of ArQule is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the requisite corporate or similar power to
own, lease and operate its property and to carry on its
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business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation or other
legal entity in each jurisdiction in which the failure to be so qualified would
have a ArQule Material Adverse Effect (as defined below). The term "ARQULE
MATERIAL ADVERSE EFFECT" means, for purposes of this Agreement, any change,
event or effect that is, or that would reasonably be expected to be, materially
adverse to the business, assets (including intangible assets), financial
condition, results of operations or prospects of ArQule and its Subsidiaries
taken as a whole; provided, however, that (i) an adverse change in or effect on
the market price of ArQule Common Stock shall not be deemed to constitute an
"ArQule Material Adverse Effect" and (ii) any event, violation, inaccuracy,
circumstance, or other matter occurring after the date of this Agreement that
results from or relates to the taking of any action contemplated or permitted by
this Agreement or the announcement or pendency of the Merger shall be
disregarded.
4.2 ARQULE CAPITAL STRUCTURE. The authorized capital stock of ArQule
consists of 30,000,000 shares of Common Stock, par value $.01 per share, of
which there were 17,074,252 shares issued and outstanding as of January 11,
2001, and 1,000,000 shares of Preferred Stock, par value $.01 per share, of
which no shares are issued or outstanding. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, par value $.01 per share,
all of which, as of the date hereof, are issued and outstanding and are held by
ArQule. All of the Merger Shares will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights created by statute, the Amended and
Restated Certificate of Incorporation or Amended and Restated Bylaws of ArQule
or any agreement or document to which ArQule is a party or by which it is bound.
4.3 AUTHORITY.
(a) Each of ArQule and Merger Sub has all requisite corporate power
and authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of ArQule and Merger
Sub. This Agreement has been duly executed and delivered by each of ArQule and
Merger Sub and, assuming the due authorization, execution and delivery of this
Agreement by the other parties thereto, this Agreement constitutes the valid and
binding obligations of each of ArQule and Merger Sub, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general principles of equity. The
execution and delivery of this Agreement by each of ArQule and Merger Sub do
not, and the performance of this Agreement by each of ArQule and Merger Sub will
not, (i) conflict with or violate the Amended and Restated Certificate of
Incorporation or Amended and Restated Bylaws of ArQule or Certificate of
Incorporation and Bylaws of Merger Sub, (ii) subject to compliance with the
requirements set forth in Section 4.3(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to ArQule or its
Subsidiaries or by which any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair ArQule's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of ArQule or any of its Subsidiaries
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(including Merger Sub) pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which ArQule or any of its Subsidiaries is a party or by which
ArQule or any of its Subsidiaries or its or any of their respective properties
are bound or affected, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, defaults or other occurrences that would not,
individually or in the aggregate, have an ArQule Material Adverse Effect. The
ArQule Disclosure Schedule lists all material consents, waivers and approvals
under any of ArQule's or any of its Subsidiaries' agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby, all of which have been obtained except
for those the absence of which, individually or in the aggregate, would not have
an ArQule Material Adverse Effect.
(b) Each consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity required by or
with respect to ArQule or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or thereby has been obtained, except for (i) the filing of the Merger
Articles with the Secretaries of State of California and Delaware, (ii) the
notification to the Nasdaq Stock Market of the listing of the ArQule Common
Stock issuable pursuant to Section 1.6, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign country
and (iv) such other consents, authorizations, filings, approvals and
registrations that, if not obtained or made, would not, individually or in the
aggregate, have a ArQule Material Adverse Effect or a material adverse effect on
the ability of ArQule or Merger Sub to consummate the Merger.
4.4 SEC FILINGS; ARQULE FINANCIAL STATEMENTS.
(a) ArQule has made available to Camitro and the Principal
Stockholders all forms, reports and documents required to be filed with the
Securities and Exchange Commission ("SEC") since December 31, 1999 (the "ARQULE
SEC REPORTS") in the form filed with the SEC. As of their respective dates, the
ArQule SEC Reports (i) were prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such ArQule SEC Reports, (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (iii) were timely filed with respect to SEC rules. None of
ArQule's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the ArQule SEC Reports (the
"ARQULE FINANCIALS") (x) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (z) fairly presented, in all material
respects, the consolidated financial
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position of ArQule and its Subsidiaries as of the respective dates thereof and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not, or are not
expected to be, material in amount.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 2000 to the
date of this Agreement, except as disclosed in ArQule's Form 10-Q for the
quarter ended September 30, 2000, there has not occurred any ArQule Material
Adverse Effect.
4.6 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which ArQule or its Subsidiary has received
any notice of assertion nor, to ArQule's knowledge, is there a threatened
action, suit, proceeding, claim, arbitration or investigation against ArQule or
its Subsidiary that would have a ArQule Material Adverse Effect or that in any
manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
4.7 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
4.8 BROKERS' AND FINDERS' FEES. Neither ArQule nor its Subsidiary has
incurred, nor will ArQule nor its Subsidiary incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS BY CAMITRO. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing Date, Camitro agrees, except as
otherwise contemplated by this Agreement, or to the extent that ArQule shall
otherwise consent in writing, to carry on its business diligently and in
accordance with good commercial practice and to carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and use its commercially reasonable efforts consistent with
past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings.
5.2 CERTAIN ACTIONS BY CAMITRO. In addition, notwithstanding Section 5.1
above and Schedule 5.2, without the prior written consent of ArQule, Camitro
shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
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(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to ArQule, or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Camitro Intellectual
Property, or enter into grants to future patent rights;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(f) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares;
(g) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities;
(h) Cause, permit or propose any amendments to its Restated Articles
or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any material amount of assets;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets that are material, individually or in the aggregate, to the
business of Camitro;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire debt securities of Camitro or guarantee any debt securities of others;
(l) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of (i) its officers or (ii) its employees who earn the top 20% of compensation
paid by Camitro;
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(m) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
payment, discharge or satisfaction in the ordinary course of business;
(n) Make any individual capital expenditure or commitment, or series
of related capital expenditures or commitments, outside the ordinary course of
business exceeding $25,000;
(o) Commence any legal action that could expose Camitro or the
Surviving Corporation directly or indirectly to any material liability as a
result of any counterclaim or cross-claim or otherwise; or
(p) Agree in writing or otherwise to take any of the actions
described in this Section 5.2.
5.3 CERTAIN ACTION BY THE PRINCIPAL STOCKHOLDERS. Each Principal
Stockholder agrees, except as may be specifically required by court order, not
to transfer, sell, exchange, pledge or otherwise dispose of or encumber any of
its Camitro Stock, or to make any offer or agreement relating thereto.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Each party will afford the other party and its accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of the other party during the
period prior to the Closing Date to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of such party, as the other party may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 6.1 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
(b) The parties acknowledge that Camitro and ArQule have previously
executed a Confidentiality Agreement, dated November 10, 1999 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms, except as is necessary to
comply with the terms of this Agreement.
6.2 AGREEMENT NOT TO ENTERTAIN OTHER OFFERS. From and after the date of
this Agreement until the earlier of the Closing Date or termination of this
Agreement pursuant to its terms, Camitro will not, and will instruct its
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit any proposal relating to
the acquisition or licensing by another party of all or any portion of the
capital stock of Camitro or the assets of its business; (ii) engage in any
discussions or negotiations with any other party regarding any such acquisition
or licensing transaction, or otherwise encourage or facilitate any efforts by
any other party to engage in such an acquisition or such licensing
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transaction; (iii) sell, transfer, license or dispose of all or any portion of
the capital stock of Camitro or its assets; or (iv) directly or indirectly,
commence negotiations or discussions with any other party for the sole purpose
of obtaining financing for Camitro.
6.3 PUBLIC DISCLOSURE. ArQule and Camitro will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger or this Agreement and will not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with the Nasdaq National Market.
6.4 LEGAL REQUIREMENTS. ArQule will use its commercially reasonable
efforts to take such steps as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable to the issuance of
ArQule Common Stock pursuant hereto.
6.5 CAMITRO STOCK OPTIONS AND WARRANTS.
(a) At the Effective Time, each outstanding option to purchase shares
of Camitro Common Stock (each an "CAMITRO STOCK OPTION") under the Camitro Stock
Plan, whether or not exercisable, and each outstanding warrant to purchase
shares of Camitro Series B Preferred Stock (each "CAMITRO WARRANT"), whether or
not exercisable, will be assumed by ArQule, respectively, as provided in this
Section 6.5. Each Camitro Stock Option and Camitro Warrant so assumed by ArQule
under this Agreement will continue to have, and be subject to, the same terms
and conditions, including vesting schedule, set forth in the Camitro Stock Plan
or Camitro Stock Option and such Camitro Warrant, as the case may be,
immediately before the Effective Time, except that (i) each Camitro Stock Option
and Camitro Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of ArQule Common
Stock equal to the product of the number of shares of Camitro Common Stock or
Camitro Series B Preferred Stock, as applicable, that were issuable upon
exercise of such Camitro Stock Option or Camitro Warrant immediately before the
Effective Time multiplied by the Option Conversion Factor (as defined below),
rounded down to the nearest whole number of shares of ArQule Common Stock, and
(ii) the per share exercise price for the shares of ArQule Common Stock issuable
upon exercise of such assumed Camitro Stock Option or Camitro Warrant will be
equal to the quotient determined by dividing the exercise price per share of
Camitro Common Stock or Camitro Series B Preferred Stock, as applicable, at
which such Camitro Stock Option or Camitro Warrant was exercisable immediately
before the Effective Time by Option Conversion Factor, rounded up to the nearest
whole cent. After the Effective Time, ArQule will issue to each holder of an
outstanding Camitro Stock Option or Camitro Warrant a notice describing the
foregoing assumption of such Camitro Stock Option or Camitro Warrant by ArQule.
(b) "Option Conversion Factor" means the quotient obtained by
dividing (i) the Per Share Value (as defined below) by (ii) the Market Value.
"Per Share Value" equals the quotient obtained by dividing (i) the sum of (a)
the product of 3,390,000 multiplied by the Market Value plus (b) Merger Cash, if
any, by (ii) the total number of shares of Camitro Stock either outstanding or
issuable on (a) conversion of outstanding shares of Camitro Series A Preferred
Stock and shares of Camitro Series B Preferred Stock and (b) exercise of
outstanding Camitro Stock Options and Camitro Warrants immediately prior to the
Effective Time, and
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excluding shares of Camitro Stock reserved for issuance to the University of
Pittsburgh pursuant to Section 7.3(k).
(c) It is the intention of the parties that Camitro Stock Options
assumed by ArQule qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent Camitro Stock
Options qualified as incentive stock options immediately prior to the Effective
Time; and that notwithstanding anything contained in Section 1.6(d) or Section
6.5(a) hereof, or any other provision of this Agreement, the exercise price, the
number of shares purchasable and the terms and conditions applicable to any
Camitro Stock Options shall be determined so as to comply with Sections 422 and
424 of the Code and the regulations promulgated thereunder.
(d) ArQule will reserve sufficient shares of ArQule Common Stock for
issuance under Section 1.6(d) and Section 6.5(a) hereof.
6.6 CAMITRO EMPLOYEE PLANS. From and after the Effective Time, and subject
to applicable law, ArQule shall either continue Camitro's welfare benefit plans
as in effect at the Effective Time or provide to employees who were employees of
Camitro at the Effective Time those welfare benefits provided to similarly
situated employees of ArQule. From and after the Effective Time, employees who
were employees of Camitro at the Effective Time shall, to the extent permitted
by applicable law, receive credit for service with Camitro (or other service
credited under Camitro's plans) for purposes of eligibility, vesting and benefit
levels (other than benefit accruals under any defined benefit pension plan)
under the ArQule welfare benefit and 401(k) plans, and all preexisting
conditions to which any such employees are subject shall be waived, and credit
toward deductibles shall be carried over, under ArQule's welfare benefit plans
to the extent permitted under the applicable plans. Nothing in this Agreement
shall be interpreted as preventing ArQule from amending, modifying or
terminating any Camitro or ArQule Employee Plan in accordance with its terms.
6.7 ARQULE FORM S-8. To the extent necessary to avoid issuance of
"restricted securities," ArQule agrees to file a registration statement on Form
S-8 for the shares of ArQule Common Stock issuable with respect to the assumed
Camitro Stock Options as promptly as practical after the Closing Date but no
later than February 13, 2001 and shall keep such registration statement
effective for so long as any such Options remain outstanding.
6.8 NNM LISTING. ArQule shall use its best efforts to cause the Merger
Shares to be approved for quotation on the Nasdaq National Market, subject to
official notice of issuance.
6.9 REGISTRATION RIGHTS. After the Effective Time, ArQule shall, pursuant
to the terms set forth in SCHEDULE 2 relating to registration rights, register
for resale all Merger Shares held by Camitro stockholders.
6.10 TRANSFER TAXES. All transfer, documentary, sales, use, stamp,
registration, and other such Taxes and fees (including any penalties and
interest) incurred in connection with the consummation of the transactions
contemplated by this Agreement ("TRANSFER TAXES") shall be paid by the
stockholders of Camitro when due, and the stockholders of Camitro will, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer,
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documentary, sales, use, stamp, registration (other than as set forth in
Schedule 2), and other Taxes and fees, and, if, required by applicable law,
ArQule and Camitro will, and will cause its affiliates to, join in the execution
of any such Tax Returns and other documentation.
6.11 FEES AND EXPENSES. Subject to Section 8.4, whether or not the Merger
is consummated, the Principal Stockholders shall bear their expenses and each of
Camitro and ArQule shall bear its respective expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
transactions contemplated hereby. Camitro represents and warrants that its good
faith estimate of the fees and expenses of its legal counsel, financial advisors
and accountants to be incurred in connection with this transaction are as set
forth on the Camitro Disclosure Schedule. If the Merger is consummated, the
Surviving Corporation, as the successor to Camitro, shall be liable for all
unpaid expenses of Camitro.
6.12 STOCKHOLDER MEETING. Camitro, acting through its board of directors,
shall, in accordance with applicable law and the Restated Articles and its
Bylaws, as soon as practicable after the execution of this Agreement but no
later than ten (10) days from such date,
(a) duly hold a meeting of its stockholders for the purpose of
considering and acting on this Agreement and approving the acceleration of
vesting of certain stock options and the cancellation of Camitro's right to
repurchase certain stock;
(b) include in the notice of the stockholders' meeting sent to the
Camitro stockholders the recommendation of its board of directors that the
stockholders of Camitro vote in favor of the approval and adoption of this
Agreement; and
(c) use all best efforts (A) to cause the notice of the stockholders'
meeting to be mailed to its stockholders at the earliest practicable time after
the execution of this Agreement and (B) to obtain the necessary approvals of its
stockholders of this Agreement, the Merger and the transactions contemplated
hereby.
6.13 NOTIFICATION OF CERTAIN MATTERS. ArQule and Merger Sub will give
prompt notice to Camitro, and Camitro will give prompt notice to ArQule, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Closing Date, or (b) any
material failure of ArQule and Merger Sub or Camitro, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this Section will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the conditions to such party's
obligation to consummate the Merger.
6.14 BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of ArQule and Camitro under this Agreement, each of the parties
to this Agreement will use its best efforts to effectuate the Merger and the
other transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to closing under this Agreement. Each party hereto, at the
reasonable request of another party hereto, will execute and deliver such other
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instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the transactions
contemplated hereby.
6.15 DISCLAIMER REGARDING TAX STATUS. Camitro and each of the Principal
Stockholders hereby explicitly acknowledge and agree that neither ArQule nor
Xxxxxx & Dodge LLP, counsel to ArQule, are making or have made any
representation or warranty whatsoever to Camitro or any of the stockholders
regarding the tax impact of the Merger on Camitro or its stockholders or the
status of the Merger as a tax free reorganization under the Code. Camitro and
the Principal Stockholders are relying on their own independent legal advice for
such purposes.
6.16 VOTING OF CAMITRO STOCK. Until this Agreement has been terminated
under Section 8, each Principal Stockholder agrees to vote all shares of Camitro
Stock held by it in favor of the approval of this Agreement and the transactions
contemplated hereby and not to exercise any dissenters' rights it may have under
Sections 1300-1303 of the CGCL. Each Principal Stockholder hereby grants to
ArQule for a period commencing on the date hereof and continuing so long as this
Agreement is in effect an irrevocable proxy, which is coupled with an interest,
to vote such shares of Camitro Stock held by it to approve this Agreement and
the transactions contemplated hereby.
6.17 CERTAIN TAX MATTERS.
(a) Both ArQule and Camitro will use its best efforts to cause the
Merger as set forth in this Agreement to constitute a reorganization within the
meaning of Section 368(a) of the Code.
(b) On or prior to the Closing Date, both ArQule and Camitro shall
execute and deliver to Xxxxxx Godward LLP, tax representation letters in
customary form, dated as of the Closing Date, containing such representations as
may be requested by such counsel for the purpose of rendering the opinion
referenced in Section 7.2(g). Camitro will use its best efforts to cause Xxxxxx
Godward LLP to deliver the tax opinion referenced in Section 7.2(g). In
rendering such tax opinion, Xxxxxx Godward LLP shall be entitled to rely on the
tax representation letters described in this Section 6.17(b).
6.18 TRANSACTION RESTRUCTURING FOR TAX PURPOSES. If the Merger is not
consummated because a tax opinion is not rendered in accordance with Section
7.2(g), the parties hereto agree to negotiate in good faith to structure the
transaction, to the extent possible, as a tax-free reorganization for U.S.
federal tax purposes.
6.19 POST-CLOSING CAMITRO EMPLOYEE MATTERS. After the Closing Date, Xxxxxx
X. Xxxxxx, the Chief Executive Officer of Camitro, with the approval of ArQule
not to be unreasonably withheld, shall have the authority to determine the
necessity of certain positions within Camitro. In the event that Xx. Xxxxxx
determines that certain positions are no longer necessary, he may terminate such
employees in exchange for payment of limited severance and acceleration of
vesting of such employees' stock options, subject to the approval of ArQule's
Compensation Committee.
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6.20 EXECUTIVE COMPENSATION. ArQule shall provide each of the executives
listed on Schedule 3 the compensation, benefits and severance contained in
Schedule 5, provided that such executives have executed immediately before the
Closing Date a letter of employment with ArQule or Merger Sub with substantially
the same terms and conditions as set forth in Schedule 5.
6.21 ASSIGNMENT AND ASSUMPTION OF CAMITRO LEASE. At the Effective Time, all
rights and obligations under the Camitro Lease (as defined below) shall be
assigned to ArQule and ArQule shall assume all rights and obligations thereunder
pursuant to Section 12.2 of the Camitro Lease and ArQule shall send notice of
such assignment and assumption to Lessor (as defined in the Camitro Lease). The
"Camitro Lease" shall mean the Standard Office Lease (the "Lease") dated
February 4, 1999 by and between WVP Income Plus 3 and Camitro and the Lease
Addendum to the Lease.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) APPROVALS. All required approvals of the stockholders of Camitro
and all necessary consents and approvals referred to in the corresponding
sections of each party's Disclosure Schedule shall have been obtained.
(b) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CAMITRO AND THE PRINCIPAL
STOCKHOLDERS. The obligations of Camitro and the Principal Stockholders to
consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of ArQule and Merger Sub contained in this Agreement shall be true
and correct on and as of the Closing Date, except for changes contemplated by
this Agreement and except for those representations and warranties that address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Closing Date, except, in all such cases, where the failure to be so true and
correct would not have a ArQule Material Adverse Effect; and Camitro shall have
received a certificate to such effect signed on behalf of ArQule by the Chief
Executive Officer or Chief Financial Officer of ArQule.
(b) AGREEMENTS AND COVENANTS. ArQule and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by
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this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Camitro shall have received a certificate to such effect
signed on behalf of ArQule by the Chief Executive Officer or Chief Financial
Officer of ArQule.
(c) LEGAL OPINION. Camitro shall have received a legal opinion from
Xxxxxx & Dodge LLP, counsel to ArQule, in form reasonably satisfactory to Xxxxxx
Godward LLP, counsel to Camitro, as to the matters set forth in Exhibit B
hereto.
(d) MERGER DOCUMENTS. Merger Sub shall have executed and delivered
the Merger Articles referred to in Section 1.2.
(e) ESCROW AGREEMENT. The Escrow Agreement, substantially in the form
attached hereto as Exhibit A, shall have been executed and delivered by all
parties thereto.
(f) NASDAQ. ArQule shall have filed all necessary applications with
the Nasdaq National Market with respect to the Merger Shares.
(g) OPINION. Camitro shall have received an opinion from Xxxxxx
Godward LLP, in a form reasonably satisfactory to Camitro, dated the Closing
Date, to the effect that the Merger will constitute a reorganization for federal
income tax purposes within the meaning of Section 368(a) of the Code provided
that if Xxxxxx Godward LLP does not render such opinion, this condition shall
nonetheless be deemed satisfied if Xxxxxx & Dodge LLP renders such opinion to
Camitro.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ARQULE AND MERGER SUB. The
obligations of ArQule and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
ArQule:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Camitro (other than the representation in Section 2.6(d)) and the
Principal Stockholders contained in this Agreement shall be true and correct on
and as of the Closing Date, except for changes contemplated by this Agreement
and except for those representations and warranties that address matters only as
of a particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Closing Date,
except, in all such cases, where the failure to be so true and correct would not
have an Camitro Material Adverse Effect; and ArQule and Merger Sub shall have
received a certificate to such effect signed on behalf of Camitro by the Chief
Executive Officer of Camitro and by each of the Principal Stockholders.
(b) AGREEMENTS AND COVENANTS. Camitro and the Principal Stockholders
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing Date, and the ArQule shall have received a
certificate to such effect signed on behalf of Camitro by the Chief Executive
Officer of Camitro and by each of the Principal Stockholders.
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(c) LEGAL OPINION. ArQule shall have received a legal opinion from
Xxxxxx Godward LLP, counsel to Camitro, in form reasonably satisfactory to
Xxxxxx & Dodge LLP, counsel to ArQule, as to the matters set forth in Exhibit C
hereto.
(d) CORPORATE CERTIFICATES. Camitro shall have delivered a copy of
the Restated Articles of Camitro, as in effect immediately prior to the Closing
Date, certified by the California Secretary of State and a certificate, as of
the most recent practicable date, of the California Secretary of State as to
Camitro's corporate good standing.
(e) SECRETARY'S CERTIFICATE. Camitro shall have delivered a
certificate of the Secretary of Camitro, dated as of the Closing Date,
certifying as to (i) the incumbency of officers of Camitro executing documents
executed and delivered in connection herewith, (ii) a copy of the Bylaws of
Camitro, as in effect from the date this Agreement was approved by the Board of
Directors of Camitro until the Closing Date, (iii) a copy of the resolutions of
the Board of Directors of Camitro authorizing and approving the applicable
matters contemplated hereunder and (iv) a copy of the resolutions of the
stockholders of Camitro adopting this Agreement.
(f) CERTIFICATE OF MERGER. Camitro shall have executed and delivered
the Merger Articles referred to in Section 1.2.
(g) FIRPTA CERTIFICATE. A certification from Camitro, dated no more
than thirty (30) days prior to the Effective Time and signed by a responsible
corporate officer of Camitro, that Camitro is not, and has not been at any time
during the five years preceding the date of such certification, a United States
real property holding company, as defined in Section 897(c)(2) of the Code, and
(b) proof reasonably satisfactory to ArQule that Camitro has provided notice of
such certification to the IRS in accordance with the provisions of Treasury
Regulations ss.1.897-2(h)(2).
(h) DISSENTING SHARES. No more than 5% of holders of Camitro Stock
shall have exercised dissenters' rights as described in Section 1.10.
(i) ESCROW AGREEMENT. The Escrow Agreement, substantially in the form
attached hereto as Exhibit A, shall have been executed and delivered by all
parties thereto.
(j) SETTLEMENT OF H&Q LIABILITY. Camitro shall have paid all
outstanding amounts owed to Xxxxxxxxx & Xxxxx.
(k) UNIVERSITY OF PITTSBURGH. Camitro shall have amended Section
4.1(a)(iii) of the License Agreement with the University of Pittsburgh - of the
Commonwealth System of Higher Education dated April 1, 1999 (the "License
Agreement") removing the contingent issuance of 35,000 shares of Camitro Common
Stock and Camitro shall have issued 32,500 shares of Camitro Common Stock to the
University of Pittsburgh in satisfaction of its obligations under the License
Agreement.
(l) OPINION. Camitro shall have received an opinion as referenced in
Section 7.2(g).
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger:
(a) by mutual written consent duly authorized by the Boards of
Directors of ArQule and Camitro;
(b) by the Board of Directors of Camitro upon written notice to
ArQule if ArQule or Merger Sub has materially breached any representation,
warranty, covenant or agreement contained herein applicable to either of them
and has not cured such breach within ten (10) business days of receipt of
written notice from Camitro or by the Closing Date, if earlier;
(c) by ArQule upon written notice to Camitro if Camitro or the
Principal Stockholders have materially breached any representation, warranty,
covenant or agreement contained herein applicable to it and have not cured such
breach within ten (10) business days of receipt of written notice from ArQule or
by the Closing Date, if earlier;
(d) by any party if any court of competent jurisdiction or
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree or ruling shall have become final and nonappealable; and
(e) by any party if the Merger shall not have been consummated by
February 28, 2001 for any reason; provided, however, that the right to terminate
this Agreement under this Section 8.1(e) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date if such action or failure
to act constitutes a willful and material breach of this Agreement and provided
further, that if (i) ArQule in its sole discretion commits to funding the
operations of Camitro for a period not to exceed two months and not to exceed
$2,000,000 and (ii) ArQule continues to make such payments, then Camitro shall
not have the right to terminate this Agreement pursuant to this Section 8.1(e),
however, ArQule shall continue to have the right to terminate this Agreement.
(f) by Camitro if Camitro has met the provisions of Section 8.1(e)
and either (i) the Merger shall not have been consummated by April 30, 2001 for
any reason, or (ii) the Merger shall not have been consummated and ArQule has
ceased to fund the operations of Camitro pursuant to this Section 8.1(f).
8.2 BRIDGE LOAN. If Camitro has terminated this Agreement pursuant to
either Section 8.1(e) or Section 8.1(f) or ArQule has terminated pursuant to
Section 8.1(e), then ArQule will be obligated to provide a bridge loan to
Camitro in the amount of $2,000,000. The principal and interest shall be convert
into shares of preferred stock in Camitro's next round of equity financing on
the same terms and conditions as the other purchasers in the financing and at
the same price per share paid by the other purchasers in the financing. The
bridge loan shall be due and payable within one year of issuance and shall bear
interest at an annual rate of 6%.
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8.3 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 8.1 above (except Section 8.1(d)) will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 8.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 8.3, Section 8.2, Section 8.4 and
Article X (General Provisions), each of which shall survive the termination of
this Agreement, and (ii) nothing herein shall relieve any party from liability
for any willful breach of this Agreement. No termination of this Agreement shall
affect the obligations of the parties contained in the Confidentiality
Agreement, all of which obligations shall survive termination of this Agreement
in accordance with their terms.
8.4 FEES AND EXPENSES. In the event that Camitro has terminated this
Agreement pursuant to Section 8.1(b) or ArQule has terminated this Agreement
other than as permitted pursuant to Section 8.1, ArQule shall pay Camitro, in
cash, within a mutually agreed time frame (but no longer than six months from
notice of termination) payments totaling $5,000,000; provided however, that such
payments to Camitro would be applied against services rendered by Camitro to
ArQule pursuant to a mutually agreed to services agreement. In the event that
ArQule has terminated this Agreement pursuant to Section 8.1(c) or Camitro has
terminated other than as permitted pursuant to Section 8.1, Camitro shall
reimburse ArQule, in cash, within a mutually agreed time frame (but no longer
than six months of receipt of written notice of termination), the amount of
reasonable fees and expenses incurred by ArQule in connection with the
preparation, execution and performance of this Agreement, including reasonable
fees and expenses of counsel.
8.5 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
8.6 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL. Notwithstanding any right of any party to fully investigate
the affairs of the other party and notwithstanding any knowledge of facts
determined or determinable by such party pursuant to such investigation or right
of investigation, each party has the right to rely fully upon the
representations, warranties, covenants and agreements of each other party in
this Agreement or in any certificate, financial statement or other document
delivered by any party pursuant hereto. All such representations, warranties,
covenants and agreements shall survive
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the execution and delivery hereof and the Closing hereunder, subject to the
limitations set forth in Section 9.4. No person shall have a right to recovery
against any party (or any officer, director, employee or agent of a party) other
than through the exercise of the indemnification rights set forth in Section
9.2, which shall constitute the sole and exclusive remedy after the Closing Date
for any breach by a party of any representation, warranty or covenant contained
herein or in any certificate or other instrument delivered pursuant hereto,
other than a fraudulent or intentional breach.
9.2 OBLIGATION OF THE STOCKHOLDERS OF CAMITRO TO INDEMNIFY. After the
Effective Time, the stockholders of Camitro shall, jointly and severally,
indemnify and hold harmless ArQule and the Surviving Corporation (and their
respective directors, officers, employees, agents, affiliates and assigns) from
and against all losses, liabilities, damages, deficiencies, costs or expenses,
including interest and penalties imposed or assessed by any judicial or
administrative body and reasonable attorneys' fees, whether or not arising out
of third-party claims and including all amounts paid in investigation, defense
or settlement of the foregoing pursuant to this Article IX ("LOSSES") based
upon, arising out of or otherwise in respect of any breach of any
representation, warranty or covenant of Camitro or the Principal Stockholders
contained herein or in any certificate delivered pursuant hereto.
9.3 OBLIGATION OF ARQULE TO INDEMNIFY. After the Effective Time, ArQule
agrees to indemnify and hold harmless the holders of the Camitro Stock
outstanding immediately prior to the Effective Time (and their respective
directors, officers, employees, agents, affiliates and assigns) from and against
any Losses based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representation, warranty or covenant of ArQule contained
herein or in any certificate delivered pursuant hereto.
9.4 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing, the
right to indemnification under this Article IX shall be subject to the following
terms:
(a) Except with respect to claims previously made but not then
resolved, no indemnification shall be payable pursuant to Section 9.2 or Section
9.3 after March 31, 2002.
(b) No indemnification shall be payable by a party pursuant to
Section 9.2 or 9.3 until the total of all Losses with respect to matters covered
by the respective section exceeds $250,000, whereupon indemnification will be
payable for the entire amount of such Losses.
(c) All indemnification claims under Section 9.2 shall be satisfied
only from the Merger Shares escrowed pursuant to Section 1.14 (the "ESCROW
ACCOUNT") and no person shall have any right to recovery from any person who was
a holder of Camitro Stock immediately before the Effective Time. All
indemnification claims under Section 9.3 shall be satisfied only to the extent
of the Market Value (as defined in Section 1.6(b)) of the Escrow Account.
(d) The limitations of Sections 9.4(a), (b), and (c) shall not apply
in the case of a fraudulent or intentional misrepresentation or breach by any
party, but no Camitro stockholder shall be liable for any such misrepresentation
or breach under Article III by any other Camitro stockholder.
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9.5 NOTICE AND DEFENSE OF CLAIMS. Less than ten (10) days after receipt of
notice of any claim or legal proceeding by a third party with respect to which a
party may seek indemnification hereunder, the receiving party shall give written
notice thereof to the indemnifying party (which, in the case of claims under
Section 9.2, shall be the Shareholder Representative (as defined in the Escrow
Agreement)), but such notification shall not be a condition to indemnification
hereunder except to the extent of actual prejudice to the indemnifying party.
The notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted. If within 30 days after receiving such notice from the receiving party
the indemnifying party gives written notice to the indemnified party stating
that it intends to defend against such claim, liability or expense at its own
cost and expense, then defense of such matter, including selection of counsel
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld), shall be by the indemnifying party and the indemnified
party shall make no payment on such claim, liability or expense as long as the
indemnifying party is conducting a good faith and diligent defense. The
indemnifying party shall not settle or compromise any such claim or liability
without the prior approval of the indemnified party, which shall not be
unreasonably withheld. Notwithstanding the foregoing, the indemnified party
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named parties
to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of such claim, liability or expense
with counsel selected by the indemnified party, and shall have the right to
compromise or settle the same exercising reasonable business judgment. The
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
9.6 SUBMISSION TO JURISDICTION. Each party hereby (a) submits to the
jurisdiction of any state or federal court sitting in the Commonwealth of
Massachusetts in any action or proceeding arising out of or relating to this
Agreement and (b) agrees that all claims in respect of such action or proceeding
may be heard and determined in any such court. Each party hereby waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety or other security that might be required of
the other party with respect thereto. Each party hereto shall accept service
made on him or it by sending or delivering a copy of the process to such party
at the address and in the manner provided for the giving of notices in this
Agreement. Nothing in this Section 9.6, however, shall affect the right of
either party to serve legal process in any other manner permitted by law.
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ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to ArQule or Merger Sub, to:
ArQule, Inc.
00 Xxxxxxxxxxxx Xxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy at the same address to the attention of the General
Counsel, and with a copy to:
Xxxxxx & Dodge LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Camitro, to:
Camitro Corporation
0000 Xxxxxxxx Xxx.
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President & CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Cooley Godward, LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esquire
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Principal Stockholders, to the addresses provided on
SCHEDULE 4 hereto.
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10.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the Subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 ENTIRE AGREEMENT. This Agreement and the Schedules and exhibits
hereto, including the Camitro Disclosure Schedule, the Principal Stockholders
Disclosure Schedule and the ArQule Disclosure Schedule, (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement between the parties shall continue in full force
and effect until the Closing and shall survive any termination of this
Agreement; and (b) are not intended to confer upon any other person any rights
or remedies hereunder, except as set forth herein.
10.5 SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof, except that the
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procedures to be taken hereunder to effect the Merger shall also be governed, to
the extent applicable, by the California General Corporation Law and the
Delaware General Corporation Law.
10.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, ArQule, Merger Sub, Camitro and each of the Principal
Stockholders have caused this Agreement to be signed as an instrument under seal
by themselves or their duly authorized respective officers, all as of the date
first written above.
ARQULE, INC.
By /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President & CEO
CAMITRO CORPORATION
By /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
CAMITRO ACQUISITION CORPORATION
By /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
THE PRINCIPAL STOCKHOLDERS
COMMON STOCKHOLDERS
/s/ Xxxxxx X. Xxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Camilla Xxxxx Xxxxx
---------------------------------------------
Camilla Xxxxx Xxxxx
-i-
45
XXXXX LIVING TRUST DATED 10/20/93
By /s/ Camilla Xxxxx Xxxxx
-------------------------------------------
Name: Camilla Xxxxx Xxxxx
Title: Trustee
/s/ Xxxx Xxxxxxxx
---------------------------------------------
Xxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
---------------------------------------------
Xxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
---------------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxx
---------------------------------------------
Xxxxxx Xxxxx
SERIES A PREFERRED STOCKHOLDERS
ASSET MANAGEMENT ASSOCIATES 1996, L.P.
By: AMC Partners '96, L.P., its
General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: General Partner
-ii-
46
AMA98 PARTNERS, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 VENTURES, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 CORPORATE, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 INVESTORS, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
-iii-
47
SERIES B PREFERRED STOCKHOLDERS
AMA98 PARTNERS, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 VENTURES, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 CORPORATE, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
AMA98 INVESTORS, L.P.
By: Alloy Ventures 1998, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
-iv-
00
XXX MEDICAL PARTNERS, L.P.
By: Xxxxxxxxx Xxxx and Xxxxxx,
its General Partner
By /s/ Xxxxxxx Xxxx
-------------------------------------------
Name: Xxxxxxx Xxxx
Title: Executive Vice President
FORWARD VENTURES III L.P.
By: Forward III Associates, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
FORWARD VENTURES III INSTITUTIONAL PARTNERS
L.P.
By: Forward III Associates, LLC,
its General Partner
By /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
GIMV NV
By /s/ X. Xxxxxxx
-------------------------------------------
Name: X. Xxxxxxx
Title: Vice President
And
By /s/ Xxxx Xxxxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Vice President
-v-
