-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rr0O2PCI7NPPxHqeWGYYSHNjp9tJy0tIPxHCqpvx2S/4RDTrBg4CRRpHEp8EPHVv P+UC5y9oI9CUsd8dN+uKtg== 0000950135-01-000248.txt : 20010205 0000950135-01-000248.hdr.sgml : 20010205 ACCESSION NUMBER: 0000950135-01-000248 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARQULE INC CENTRAL INDEX KEY: 0001019695 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 043221586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-54796 FILM NUMBER: 1521830 BUSINESS ADDRESS: STREET 1: 19 PRESIDENTIAL WAY CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 6173954100 MAIL ADDRESS: STREET 1: 19 PRESIDENTIAL WAY CITY: WOBURN STATE: MA ZIP: 01801 S-3 1 b38060ais-3.txt ARQULE INC. 1 As filed with the Securities and Exchange Commission on February 1, 2001. Registration No. 333- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ARQULE, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-3221586 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 19 PRESIDENTIAL WAY WOBURN, MASSACHUSETTS 01801 (781) 994-0300 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) DR. STEPHEN A. HILL PRESIDENT AND CHIEF EXECUTIVE OFFICER ARQULE, INC. 19 PRESIDENTIAL WAY WOBURN, MASSACHUSETTS 01801 (781) 994-0300 (Name, address, including zip code, and telephone number, including area code, of agent for service) with copies to: LYNNETTE C. FALLON, ESQ. Palmer & Dodge LLP One Beacon Street Boston, Massachusetts 02108 (617) 573-0100 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.|_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| ---------------------- CALCULATION OF REGISTRATION FEE
========================================================================================================================== Proposed Proposed Title of each class of securities to Amount to be maximum offering maximum aggregate Amount of be registered registered(1) price per unit offering price(2) registration fee(2) - -------------------------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value....... 3,106,622 shares (3) $22.03 $68,438,883 $17,110 ==========================================================================================================================
(1) This registration statement shall also cover any additional shares of common stock which become issuable in connection with the shares registered for sale hereby as a result of any stock dividend, stock split, recapitalization, or other similar transaction effected without the receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of common stock. 2 (2) Estimated solely for the purpose of determining the registration fee and computed pursuant to Rule 457(c), based upon the average of the high and low prices on January 31, 2001 as reported by the Nasdaq National Market. (3) Includes 14,585 shares of common stock issuable upon exercise of warrants. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. THE SHARES OF OUR COMMON STOCK TO BE OFFERED WITH THIS PROSPECTUS MAY NOT BE SOLD UNTIL THIS REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED OR LEGAL. PROSPECTUS ARQULE, INC. 3,106,622 SHARES COMMON STOCK This prospectus relates to 3,106,622 shares of our common stock, $.01 par value, that may be offered and sold from time to time by the selling stockholders listed on pages 9 - 10 of this prospectus in a number of different ways and at various prices. The shares were issued, or will be issuable upon exercise of outstanding warrants assumed by ArQule, to the selling stockholders in connection with our acquisition of Camitro Corporation in January 2001. We will not receive any of the proceeds from the sale of the shares by the selling stockholders. Our common stock is listed for trading on the Nasdaq National Market under the symbol "ARQL". On January 31, 2001, the last reported sale price of the common stock on the Nasdaq National Market was $21.63 per share. You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you different information. You should not assume that the information in this prospectus is accurate as of any date other than the date below. INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF INVESTING IN OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 2. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is__________, 2001 4 TABLE OF CONTENTS Page ---- ArQule, Inc.............................................................1 Risk Factors............................................................2 Use of Proceeds.........................................................8 Recent Developments.....................................................8 The Acquisition.........................................................8 Selling Stockholders....................................................9 Plan of Distribution...................................................10 Legal Matters..........................................................11 Experts................................................................12 Incorporation of Certain Documents By Reference........................12 Where You Can Find More Information....................................12 i 5 ARQULE, INC. ArQule seeks to bridge the gap between genomics and clinical development by applying its proprietary technology platform and world class chemistry capabilities to drug discovery. Recent advances in genomics and the completion of the mapping of the human genome are bringing about a revolution in scientists' understanding of the molecular mechanisms of disease. Genomics has created explosive growth in the number of new biological targets for the development of drugs. Fulfilling the promise of genomics, however, will require similar advances in the technology and systems used to design and test new chemical compounds which interact with these targets. Since these chemical compounds will become the medicines of the future, advances in chemistry technologies hold the key to unlocking the value of genomics. The continued success of the pharmaceutical industry will depend on its ability to significantly reduce the time and cost required to bring a drug to market, to increase the number of candidates entering clinical development, and to improve the success rate of clinical testing. ArQule has built an integrated technology platform incorporating our proprietary automated AMAP Chemistry Operating System, patented processes and world class chemistry capabilities to address these critical needs of drug discovery. ArQule offers a range of products and services tailored to our customers' needs for drug discovery assistance. Our products and services provide solutions for the lead generation, lead qualification and lead optimization components of the drug discovery process. We focus on making the drug discovery process more efficient, less expensive and more likely to result in better clinical candidates. We believe that, while no single technology platform will bridge the gap in the drug discovery process between genomics and the clinic, the integration of multiple emerging technologies will result in major efficiency gains. Our integrated technologies provide the following benefits: - high-throughput, automated production of new chemical compounds using our AMAP Chemistry Operating System; - discrete compounds of known structure, high purity and sufficient quantity for lead optimization; - early availability of information on the relationship between the chemical structure of compounds and their suitability as potential drugs; - compound libraries designed to increase the likelihood of generating marketable drugs; - reduced screening costs by utilizing smaller, more focused libraries of compounds; - cost-efficient profiling of compounds for desirable drug characteristics; and - target validation through proprietary compound libraries which interact with targets. We provide our products and services under collaboration agreements with a number of pharmaceutical companies, including Pfizer, Inc, Bayer AG, American Home Products Corporation, Solvay Pharmaceuticals B.V., Pharmacia Corp., Sankyo Company, Ltd. and Johnson & Johnson, Inc. Our principle executive offices are located at 19 Presidential Way, Woburn, MA 01801, where the phone number is 781-994-0300. 6 RISK FACTORS You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. If any of the following risks actually occurs, our business, results of operations and financial condition could suffer. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks described below may not be exhaustive. It is especially important to keep these risk factors in mind when you read forward-looking statements. These are statements that relate to future periods and include statements about our: - implementation of corporate strategy; - financial performance; - ability to deliver products to our corporate collaborators and to satisfy milestones so that we can earn future payments under our collaboration agreements; - collaborators' ability to develop and commercialize products using our technology and pay us royalties on the sales of those products; - ability to enter into future collaborations with pharmaceutical and biotechnology companies and academic institutions; - product research and development activities and projected expenditures; - cash needs; - plans for sales and marketing; and - results of scientific research. Generally, the words "anticipates," "believes," "expects," "intends," and similar expressions identify such forward-looking statements. Forward-looking statements involve risks and uncertainties, and our actual results could differ materially from the results discussed in the forward-looking statements because of these and other factors. WE ARE AT AN EARLY STAGE OF DEVELOPMENT. From our inception in 1993 to September 30, 2000, we have incurred cumulative losses of approximately $32.3 million. These losses have resulted principally from the costs of our research activities and enhancements to our technology. We have derived our revenue primarily from: - license fees; - payments for product deliveries; - milestone payments; and - research and development funding paid under our agreements with our collaboration partners. 2 7 To date, except for during 1997 and during 2000, these revenues have not generated profits, nor have we realized any revenue from royalties from the sale by any of our collaboration partners of a commercial product developed using our technology. We cannot be certain that we will ever become profitable on a sustainable basis. WE CANNOT GUARANTEE THAT OUR STRATEGY OF USING OUR INTEGRATED COMPOUND DISCOVERY TECHNOLOGIES TO ASSIST IN THE DEVELOPMENT OF NEW DRUGS AND OTHER PRODUCTS WILL EVER BE COMMERCIALLY SUCCESSFUL. Our approach to compound discovery has not yet yielded a commercially successful drug. Our strategy is to use our technology platform to rapidly identify, optimize and obtain financial interest in as many compounds with commercial potential as possible. This approach has not yet yielded any commercially successful drug. In addition, we have recently reoriented our business and technology strategies to offer an integrated compound discovery solution, in addition to combinatorial chemistry products and services. Our new strategy may not be accepted by our potential customers. In particular, we have not proven that we can use our products successfully to assist our customers to conduct lead optimization. Our ability to succeed depends on our potential customers accepting our approach to combinatorial chemistry and integrated compound discovery as an effective tool in the discovery and development of compounds with commercial potential. If we cannot demonstrate that our approach can result in successful products, we may not be able to attract additional customers or to retain our existing customers. Furthermore, Camitro has not launched any of its products; and therefore, we are not certain whether the market will accept such products. If the market does not accept these products or does so at a lower than expected rate, we may not be able to attract new customers to support such products. Because of the specialized nature and high price of our services, our potential customer base is limited, and these potential customers may decide to try to use our approach themselves without our assistance or try other methods. Because we offer specialized assistance in the development of drugs, our potential customer base consists of a limited number of pharmaceutical and biotechnology companies and research institutions. These companies have historically conducted lead compound identification and optimization within their own research departments. Because of the high cost of our products and programs, they may decide to conduct these activities without our assistance. WE DEPEND ON COLLABORATION ARRANGEMENTS WITH THIRD PARTIES FOR OUR REVENUE AND CANNOT BE SURE WHETHER OUR COLLABORATIONS WILL SUCCEED OR WHETHER WE WILL REALIZE MUCH OF THE POTENTIAL REVENUE FROM OUR COLLABORATIONS. We depend on our collaborations for all of our revenues, and we will only realize much of the potential revenue under these collaborations if we meet compound delivery targets, satisfy milestones and earn royalties. Our revenue stream and our business strategy depend largely on the formation of collaborative arrangements with third parties, initially pharmaceutical and biotechnology companies and research institutions. To date, we have entered into many of these arrangements. Much of the potential revenue from our collaborations consists of contingent payments, such as payments for achieving development milestones and royalties payable on sales of drugs developed using our products. We cannot guarantee that these milestones will be achieved or that commercial drugs or other products will be developed on which royalties will be payable. 3 8 Our ability to realize potential revenue from milestones and royalties from our collaborations depends, in large part, on the efforts of our partners, over which we have little control. Much of the revenue from milestones and royalties that we may receive under these collaborations will depend upon our partners' ability to successfully develop, introduce, market and sell new drugs developed using our products. Our products will result in commercialized drugs generating milestone payments and royalties only after, among other things: - significant preclinical and clinical development efforts or the completion of preliminary field trials; - the receipt of the required regulatory approvals; - developing manufacturing capabilities; and - successful marketing efforts. With the exception of certain aspects of preclinical drug development, we do not currently intend to perform any of these activities. Accordingly, we will depend on our partners having the necessary expertise and dedicating sufficient resources to develop and commercialize products. Our collaboration partners may fail to develop or commercialize a compound or product to which they have obtained rights from us, because, among other reasons: - they decide not to devote the necessary resources because of internal constraints or other development priorities; - they decide to pursue a competitive potential drug or compound developed outside of the collaboration; or - they cannot obtain the necessary regulatory approvals. For our strategy to be successful, we must expand the number of our collaborations both by maintaining existing collaborations as well as continuing to enter into new ones. To be successful, we must expand the number of our collaborations both by maintaining existing collaborations, as well as continuing to enter into agreements with new partners to use our technology to develop potential drugs. We may not be able to maintain our existing collaborations or establish new collaborations, and we cannot guarantee that any collaboration will be on commercially acceptable terms. WE MAY NOT SUCCESSFULLY INTEGRATE CERTAIN ASPECTS OF CAMITRO OPERATIONS, AND THE INTEGRATION OF THE BUSINESSES MAY BE COSTLY. On January 29, 2001, we acquired Camitro Corporation, a California corporation, through a wholly owned subsidiary of ours. We have to integrate certain aspects of Camitro's operations into our pre-existing operations. The integration will require significant efforts from each company, including coordinating research and development efforts. Camitro personnel may leave because of the merger. Camitro collaborators, customers, distributors, or suppliers may terminate their arrangements with Camitro or demand new arrangements. Integrating our operations may distract management's attention from the day-to-day business of the combined company. If ArQule is unable to successfully integrate certain aspects of the operations of the two companies or if this integration process costs more than expected, ArQule's future results will be negatively impacted. 4 9 OUR COMPETITORS MAY HAVE GREATER RESOURCES OR RESEARCH AND DEVELOPMENT CAPABILITIES THAN WE HAVE AND WE MAY NOT HAVE THE RESOURCES REQUIRED TO SUCCESSFULLY COMPETE WITH THEM. The drug development business is highly competitive. We compete with many organizations that are engaged in attempting to identify and optimize compounds as potential drugs. Many of these competitors have greater financial and human resources and more experience in research and development than we have. They include: - biotechnology, pharmaceutical, combinatorial chemistry and other companies; - academic and scientific institutions; - governmental agencies; and - public and private research organizations. Historically, pharmaceutical companies have maintained close control over their research activities, including the synthesis, screening and optimization of potential drugs. Many of these companies, which represent a significant potential market for our products and services, have developed or are developing internal combinatorial chemistry and other capabilities to improve productivity. We anticipate that we will face increased competition in the future as new companies enter the market and alternative technologies become available. WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD HURT OUR ABILITY TO COMPETE. We are highly dependent on the principal members of our scientific and management staff. The loss of one or more members of our staff could have a material adverse effect on our business. We do not maintain key person life insurance coverage on the life of any employee. Our success will depend in part on our ability to identify, attract and retain qualified managerial and scientific personnel. We face intense competition for qualified personnel in our industry. We may not be able to continue to attract and retain personnel with the advanced technical qualifications or managerial expertise necessary for the development of our business. WE FACE UNCERTAINTY IN RAISING ADDITIONAL FUNDS THAT MAY BE NECESSARY TO FUND OUR OPERATIONS. Our capital requirements depend on many factors. If our operations do not become profitable on a sustainable basis before we exhaust existing resources, we will need to obtain additional financing, either through public or private financings, including debt or equity financings, or through collaboration or other arrangements with corporate partners. We may not be able to obtain adequate funds for our operations from these sources when needed or on acceptable terms. If we raise additional capital through the sale of equity, or securities convertible into equity, your proportionate ownership in ArQule may be diluted. If we cannot obtain additional financing, we could be forced to delay or scale back our research and development programs. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds by entering into arrangements with collaboration partners or others that may require that we relinquish rights to certain technologies, product candidates, products or potential markets. OUR SUCCESS DEPENDS ON OUR ABILITY TO SCALE UP AND MANAGE OUR GROWTH. Our success depends on the expansion and proper management of our operations. To be cost-effective in our delivery of services and products, we must enhance productivity by further automating 5 10 our processes and technology. We may not succeed in our engineering efforts to further automate these processes. We also must successfully structure and manage multiple collaborative relationships. Further, we may not succeed in managing and meeting the staffing requirements of additional collaborative relationships. WE DEPEND ON PATENTS AND OTHER PROPRIETARY RIGHTS THAT MAY FAIL TO PROTECT OUR BUSINESS. Our success will depend on our ability to obtain and protect patents on our technology and to protect our trade secrets. We cannot be certain that we will receive any additional patents, that the claims of our patents will offer significant protection of our technology, or that our patents will not be challenged, narrowed, invalidated or circumvented. In order to protect or enforce our patent rights, we may initiate patent litigation against third parties, such as infringement suits or interference proceedings. These lawsuits could be expensive, take significant time and divert management's attention from other business concerns. We may also provoke these third parties to assert claims against us. The patent position of biotechnology firms is generally highly uncertain, involves complex legal and factual questions, and has recently been the subject of much litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under many biotechnology patents. In addition, there is a substantial backlog of biotechnology patent applications at the U.S. Patent and Trademark Office, and the approval or rejection of patent applications may take several years. In an effort to protect our trade secrets, we require our employees, consultants and advisors to execute confidentiality agreements. We cannot guarantee, however, that these agreements will provide us with adequate protection against improper use or disclosure of confidential information. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have previous employment or consulting relationships. Also, others may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets. OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS. Others may sue us for infringing on their patent rights. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could adversely affect our business, financial condition and results of operations. In addition, litigation is time consuming and could divert management attention and resources away from our business. If we do not prevail in litigation, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license. Any required license may not be available to us on acceptable terms, or at all. In addition, some licenses may be non-exclusive and, accordingly, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products. OUR COMMON STOCK MAY HAVE A VOLATILE PUBLIC TRADING PRICE AND LOW TRADING VOLUME. The market price of our common stock has been highly volatile and the market for our common stock has experienced significant price and volume fluctuations, some of which are unrelated to our operating performance. Many factors can have a significant adverse effect on our common stock's market price, including: - announcements by us or our competitors of technological innovations or new commercial products; 6 11 - developments concerning our proprietary rights, including patent and litigation matters; - publicity regarding actual or potential results relating to our or our collaborators' products or compounds under development; - an unexpected termination of one of our collaborations; - regulatory developments in the United States and other countries; - general market conditions; and - quarterly fluctuations in our revenues and other financial results. ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS AND DELAWARE LAW MAY ADVERSELY AFFECT OUR STOCK PRICE. Our certificate of incorporation, certain provisions of our by-laws and certain provisions of Delaware law could delay or make more difficult a merger, tender offer or proxy contest involving us. These provisions may have the effect of delaying or preventing a change of control without action by the stockholders and, therefore, could adversely affect the price of our common stock. 7 12 USE OF PROCEEDS We will not receive any of the proceeds from the sale of the shares by the selling stockholders. RECENT DEVELOPMENTS ACADIA Pharmaceuticals On December 18, 2000, we entered into a collaborative drug discovery agreement with ACADIA Pharmaceuticals, Inc. to discover and develop compounds that interact with biological targets in the G-protein coupled receptor family. This agreement supersedes an earlier material transfer and screening agreement dated April 7, 1998. Under the new agreement, we will use our Parallel Track Drug Discovery program to screen and optimize compounds against a significant number of G-protein coupled receptor targets with clinical potential in various therapeutic areas. We will share equally in all downstream value resulting from jointly developed compounds, including future milestone, royalty, and up-front payments resulting from the outlicensing of clinical candidates or later stage compounds developed from the collaboration. In addition, we each have certain rights to compounds that are not selected for joint development. GlaxoSmithKline On November 27, 2000, we entered into a collaboration and license agreement with SmithKline Beecham Corporation (now GlaxoSmithKline). Under the terms of the agreement, GlaxoSmithKline receives access to our Compass Array libraries and Mapping Array libraries for screening primarily in the anti-infective field. In addition, GlaxoSmithKline has committed to submit two drug discovery programs to us during the course of the agreement. We have initiated the first of the two drug discovery programs. GlaxoSmithKline has agreed to pay us development milestones and royalties on sales of products resulting from the collaboration. Solvay Pharmaceuticals On January 23, 2001, we entered into an amended and restated research, development and license agreement with Solvay Pharmaceuticals B.V. (formerly Solvay Duphar B.V.). This agreement supersedes our prior agreement with Solvay Duphar dated November 2, 1995. Under this agreement, Solvay receives access to our new Compass Array libraries and Mapping Array libraries and may continue to access previously received Mapping Array libraries. Solvay has also committed to a minimum number of Directed Array programs during the term of the agreement. In addition, Solvay has agreed to pay us development milestones and royalties on sales of products resulting from the collaboration. THE ACQUISITION On January 29, 2001, we acquired Camitro Corporation pursuant to the terms of an Agreement and Plan of Merger dated as of January 16, 2001 among us, a wholly owned subsidiary of ours, Camitro, and certain stockholders of Camitro. In connection with this acquisition, we issued a total of 3,092,037 shares of our common stock and $1,733,055 in cash in consideration for all the Camitro stock. We also reserved 306,762 shares of our common stock for options and warrants of Camitro which we assumed. Camitro now operates as our wholly owned subsidiary. 8 13 SELLING STOCKHOLDERS The selling stockholders were the former stockholders and a warrant holder of Camitro Corporation. We issued the shares covered by this prospectus to them in connection with the acquisition of Camitro. Pursuant to the merger agreement, we agreed to register for resale the shares issued to the selling stockholders. The following table sets forth the name and number of shares of common stock beneficially owned by the selling stockholders. In the last three years, none of the selling stockholders has held any position or office with, been employed by, or otherwise had a material relationship with, us or any of our predecessors or affiliates other than as stockholders, except as noted below. The shares are being registered to permit public secondary trading of the shares, and the selling stockholders may offer the shares for resale from time to time. See "Plan of Distribution."
Shares Beneficially Owned Shares Beneficially Owned Shares Offered Pursuant or Issuable After the Name of Selling Stockholder(1) Before Offering(2) to This Prospectus(3) Offering(4) - ------------------------------------------------------------------------------------------------------------------------------------ Number Percent Number Percent* ------- ------- ------ -------- Gary L. Neil 5,425 * 5,425 0 * Kenneth Korzekwa 61,036 * 61,036 0 * Jeffrey P. Jones 5,425 * 5,425 0 * Harold E. Selick 189,890 * 189,890 0 * Bob Powell 5,425 * 5,425 0 * David Fram 10,850 * 10,850 0 * The University of Pittsburgh 22,379 * 22,379 0 * Janet Swearson 33,909 * 33,909 0 * Malcolm Rowland 8,477 * 8,477 0 * John Manchester(5) 6,742(6) * 5,510 1,232(6) * Robert Wells 61,036 * 61,036 0 * Kranz & Associates, LLC 346 * 346 0 * Lisa Peterson 61,036 * 61,036 0 * Jie Q. Wu 3,490 * 3,390 100 * Camilla Marie Olson, as Custodian for Catherine Olson under the Uniform Gift To Minors Act (California) 1,898 * 1,898 0 * Camilla Marie Olson, as Custodian for Mark Olson under the Uniform Gift To Minors Act (California) 1,898 * 1,898 0 * Camilla Marie Olson, as Trustee of the Olson Living Trust dated 10/20/93 80,974 * 80,974 0 * Camilla Marie Olson 50,863 * 50,863 0 * Koenrad Wiedhaup 10,850 * 10,850 0 * Lyn Chambers 1,356 * 1,356 0 * JPMorgan H&Q (Chase) 21,701 * 21,701 0 * Asset Management Assoc. 1996, L.P. 301,413 1.5% 301,413 0 * Pidwell Family Trust 12,056 * 12,056 0 * AMA98 Partners, L.P. 43,950 * 43,950 0 * AMA98 Ventures, L.P. 726,210 3.6% 726,210 0 * AMA98 Corporate, L.P. 87,144 * 87,144 0 * AMA98 Investors, L.P. 109,036 * 109,036 0 * CHL Medical Partners L.P. 417,342 2.0% 417,342 0 * Forward Ventures III L.P. 43,591 * 43,591 0 * Forward Ventures Inst. Partners, L.P. 165,079 * 165,079 0 * GIMV NV 417,342 2.0% 417,342 0 * BayStar Capital L.P. 52,167 * 52,167 0 * BayStar International Ltd. 52,167 * 52,167 0 * Pidwell Investments LLC 10,433 * 10,433 0 * GC&H Investments 10,433 * 10,433 0 * Silicon Valley Bank(7) 14,585(8) * 14,585(8) 0 *
9 14 - ------------------ + Indicates shares that are subject to contractual restrictions with us. * Indicates ownership of less than 1%. (1) This registration statement shall also cover any additional shares of common stock which become issuable in connection with the shares registered for sale hereby as a result of any stock dividend, stock split, recapitalization, or other similar transaction effected without receipt of consideration which results in an increase in the number of outstanding shares of common stock. (2) These shares are based on information provided to us by the selling stockholders. (3) Of these shares, 345,280 are subject, on a pro-rata basis among the selling stockholders, to an escrow agreement dated January 29, 2001 with ArQule and the escrow agent, which will expire on March 31, 2002. (4) The numbers in this column assume that the selling stockholders will sell all of the common stock offered for sale under this prospectus. There can be no assurance that the selling stockholders will sell all or any part of the shares offered under this prospectus. (5) Mr. Manchester has been an employee of ArQule since October 1999. (6) Includes 750 shares of common stock issuable to Mr. Manchester upon exercise of outstanding options exercisable within the 60 day period following January 16, 2001. (7) In connection with the acquisition of Camitro Corporation, ArQule has guaranteed a $1.5 million equipment lease line of credit with Silicon Valley Bank, of which approximately $1,336,000 is presently outstanding. (8) This number represents shares issuable upon exercise of warrants that were assumed by ArQule in connection with the acquisition of Camitro. PLAN OF DISTRIBUTION The selling stockholders include their respective pledgees, donees, transferees or other successors-in-interest selling shares received from a selling stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus. A supplement to this prospectus may be filed naming that successor-in-interest prior to consummating a sale hereunder. The selling stockholders may offer the shares of common stock covered by this prospectus from time to time in transactions in the over-the-counter market, on any exchange where the common stock is then listed, with broker- dealers or third-parties other than in the over-the-counter market or on an exchange (including in block sales), in connection with short sales, in privately negotiated transactions, in connection with writing call options or in other hedging arrangements, or in transactions involving a combination of such methods. The selling stockholders may sell their shares at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices, at fixed prices, or a combination of these prices. The selling stockholders shall have the sole and absolute discretion not to accept any 10 15 purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time. The selling stockholders may sell the shares directly to market makers acting as principals and/or broker-dealers as agents for themselves or their customers. If this happens, these broker-dealers may receive compensation in the form of discounts or commissions from the selling stockholders and/or the purchasers of shares for whom these broker-dealers may act as agents or to whom they sell as principal, or both (which compensation to a particular broker might be in excess of customary compensation). We cannot assure that all or any of the shares offered hereby will be issued to, or sold by, the selling stockholders. The selling stockholders and any broker, dealers or agents that participate with the selling stockholder in the distribution of the shares may be deemed to be "underwriters" as such term is defined in the Securities Act of 1933. Any commissions paid or any discounts or concessions allowed to any such persons, and any profits received on the resale of such shares of common stock offered by this prospectus, may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. To the extent required, we will amend or supplement this prospectus to disclose material arrangements regarding the plan of distribution. To comply with the securities laws of certain jurisdictions, the shares offered by this prospectus may need to be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. Under applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in a distribution of the shares of common stock covered by this prospectus may be limited in its ability to engage in market activities with respect to such shares. A selling stockholder, for example, will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations under it, which provisions may limit the timing of purchases and sales of any shares of common stock by that selling stockholder. The foregoing may affect the marketability of the shares offered by this prospectus. We have agreed to pay certain expenses of the offering and issuance of the shares covered by this prospectus, including the printing, legal and accounting expenses we incur and the registration and filing fees imposed by the SEC or the Nasdaq National Market. We will not pay brokerage commissions or taxes associated with sales by the selling stockholders or any legal, accounting and other expenses of the selling stockholders. We have agreed with the selling stockholders, subject to certain conditions, to keep the registration statement of which this prospectus constitutes a part effective until two years from the effective date or, if earlier, such time as all of the shares have been disposed of pursuant to and in accordance with the registration statement. We have agreed to indemnify the selling stockholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Our counsel, Palmer & Dodge LLP, Boston, Massachusetts, will pass on the validity of the shares of common stock offered by this prospectus. Michael E. Lytton, a partner of Palmer & Dodge LLP, is our Secretary. 11 16 EXPERTS The financial statements of ArQule incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 1999, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of Camitro Corporation incorporated in this prospectus by reference to the Current Report on Form 8-K filed with the SEC on February 1, 2001, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" information from other documents that we file with them, which means that we can disclose important information by referring to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the sale of all the shares covered by this prospectus: - Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2000, filed with the SEC on May 11, 2000, August 4, 2000 and on October 20, 2000, respectively. - Annual Report on Form 10-K for the fiscal year ended December 31, 1999, filed with the SEC on March 23, 2000. - Current Report on Form 8-K, filed with the SEC on October 17, 2000. - Current Report on Form 8-K, filed with the SEC on February 1, 2001. - The description of our common stock contained in our Registration Statement on Form 8-A, filed on September 25, 1996 including any amendment or reports filed for the purpose of updating such description. We also incorporate by reference additional documents that may be filed with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the sale of all of the securities covered by this prospectus. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. We will provide to you, without charge, upon your written or oral request, a copy of any or all of the documents that we incorporate by reference, including exhibits. Please direct requests to: ArQule, Inc., 19 Presidential Way, Woburn, MA 01801, Attn: David C. Hastings, (781) 994-0300. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly, and special reports and proxy statements and other information with the SEC. You may read and copy any document that we file at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available on the SEC's Web site at http://www.sec.gov. Copies of certain information filed by us with the Commission are also available on 12 17 our Web site at http://www.arqule.com. Our Web site is not part of this prospectus. Our common stock is listed on the Nasdaq National Market. 13 18 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses in connection with the securities being registered are as follows: SEC registration fee................................... $17,110 Accounting fees and expenses........................... 2,500 Legal fees and expenses................................ 5,000 Printing and photocopying expenses..................... 500 Miscellaneous expenses................................. 390 ------- Total.................................................. $25,500 ======= All of the above figures, except the SEC registration fee, are estimates, and all of the above expenses will be borne by us. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law grants the Company the power to indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, provided, however, no indemnification shall be made in connection with any proceeding brought by or in the right of the Company where the person involved is adjudged to be liable to the Company except to the extent approved by a court. Article V of our Amended and Restated By-laws provides that the Company shall, to extent legally permitted, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was, or has agreed to become, a director or officer of the Company, or is or was serving, or has agreed to serve, at the request of the Company, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise. The indemnification provided for in Article V is expressly not exclusive of any other rights to which those seeking indemnification may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and shall inure to the benefit of the heirs, executors and administrators of such persons. Article V also provides that the Company shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against and incurred by such person in any such capacity. Pursuant to Section 102(b)(7) of the Delaware General Corporation Laws, Section 7 of Article FIFTH of our Restated Certificate eliminates a director's personal liability for monetary damages to the Company and its stockholders for breaches of fiduciary duty as a director, except in circumstances involving a II-1 19 breach of a director's duty of loyalty to the Company or its stockholders, acts or omissions not in good faith, intentional misconduct, knowing violations of the law, self-dealing or the unlawful payment of dividends or repurchase of stock. ITEM 16. EXHIBITS See the Exhibit Index immediately following the signature page. ITEM 17. UNDERTAKINGS The undersigned hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) That insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Woburn, Commonwealth of Massachusetts, on February 1, 2001. ArQule, Inc. By: /s/ STEPHEN A. HILL ----------------------------------- Stephen A. Hill President and Chief Executive Officer POWER OF ATTORNEY We, the undersigned officers and directors of ArQule, Inc., hereby severally constitute and appoint Stephen A. Hill, David C. Hastings, and Lynnette C. Fallon, and each of them singly, our true and lawful attorneys-in-fact, with full power to them in any and all capacities, to sign any amendments to this Registration Statement on Form S-3 (including any post-effective amendments thereto), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact may do or cause to be done by virtue hereof. Witness our hands and common seal on the dates set forth below. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ STEPHEN A. HILL President and Chief Executive Officer February 1, 2001 - ------------------------------ (Principal Executive Officer) Stephen A. Hill /s/ DAVID C. HASTINGS Vice President, Chief Financial Officer and February 1, 2001 - ------------------------------ Treasurer (Principal Financial Officer and David C. Hastings Principal Accounting Officer) /s/ LAURA AVAKIAN Director February 1, 2001 - ------------------------------ Laura Avakian /s/ WERNER CAUTREELS Director February 1, 2001 - ------------------------------ Werner Cautreels /s/ ARIEL ELIA Director February 1, 2001 - ------------------------------ Ariel Elia /s/ L. PATRICK GAGE Director February 1, 2001 - ------------------------------ L. Patrick Gage
II-3 21 /s/ TUAN HA-NGOC Director February 1, 2001 - ------------------------------ Tuan Ha-Ngoc /s/ MICHAEL ROSENBLATT Director February 1, 2001 - ------------------------------ Michael Rosenblatt
II-4 22 Exhibit Index NUMBER DESCRIPTION 4.1 Specimen Common Stock Certificate. Filed as Exhibit 4.1 to our Registration Statement on Form S-1 (File No. 333-11105) and incorporated herein by reference. 4.2 Form of Warrant to Purchase Stock held by Silicon Valley Bank assumed by ArQule as part of the Camitro acquisition. Filed herewith. 5.1 Opinion of Palmer & Dodge LLP. Filed herewith. 23.1 Consent of Counsel (contained in opinion of Palmer & Dodge LLP filed as Exhibit 5.1). 23.2 Consent of PricewaterhouseCoopers LLP. Filed herewith. 23.3 Consent of PricewaterhouseCoopers LLP. Filed herewith. 24 Power of Attorney. Included on signature page to this Registration Statement. II-5 EX-4.2 2 b38060aiex4-2.txt FORM OF WARRANT TO PURCHASE STOCK 1 EXHIBIT 4.2 The following is a form of warrant that ArQule assumed in connection with its acquisition of Camitro Corporation, a California corporation, on January 29, 2001. ArQule has assumed warrants to purchase a total of 14,585 shares of its common stock at an exercise price of $4.70 per share. Silicon Valley Bank is the holder of these warrants. The last of these warrants expire on May 2, 2007. 2 THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. WARRANT TO PURCHASE STOCK Corporation: CAMITRO CORPORATION, a California corporation ------------------- ---------- Number of Shares: Class of Stock: Series B Preferred Initial Exercise Price: $________per share Issue Date: Expiration Date: THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the "Shares") of the corporation (the "Company") at the initial exercise price per Share (the "Warrant Price") all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. ARTICLE 1. EXERCISE. 1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased. 1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3. 1.3 FAIR MARKET VALUE. If the Shares are traded in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company's stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment. The foregoing notwithstanding, if Holder advises the Board of Directors in writing that Holder disagrees with such determination, then the Company and Holder shall promptly agree upon a reputable investment banking firm to undertake such valuation. If the valuation of such investment banking firm is greater than that determined by the 2 3 Board of Directors, then all fees and expenses of such investment banking firm shall be paid by the Company. In all other circumstances, such fees and expenses shall be paid by Holder. 1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired. 1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor. 1.6 ASSUMPTION UPON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY. 1.6.1. "ACQUISITION." For the purpose of this Warrant, "Acquisition" means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company's securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction. 1.6.2. ASSUMPTION OF WARRANT. Upon the closing of any Acquisition the successor entity shall assume the obligations of this Warrant and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly. ARTICLE 2. ADJUSTMENTS TO THE SHARES. 2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company (i) declares or pays a dividend on its common stock (or the Shares if the Shares are securities other than common stock) payable in common stock, or other securities, or (ii) subdivides the outstanding common stock into a greater amount of common stock, or, if the Shares are securities other than common stock, subdivides the Shares in a transaction that increases the amount of common stock into which the Shares are convertible, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred. 2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include 3 4 any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company's Articles of Incorporation upon the closing of a registered public offering of the Company's common stock. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. 2.4 ADJUSTMENTS FOR DILUTING ISSUANCE. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company's Articles (Certificate) of Incorporation. The provisions set forth for the Shares in the Company's Articles (Certificate) of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver effects Holder in the same manner as they effect all other shareholders of the Shares. 2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under this Article against impairment. If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder's rights under this Warrant, the Warrant Price shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged. 2.6 FRACTIONAL SHARES. No fractional shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder an amount computed by multiplying the fractional interest by the fair market value of a full Share. 2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the fact upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price. 4 5 ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY. 3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Holder as follows: (a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 Shares were sold. (b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. (c) The Capitalization table attached hereto is true and correct. 3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of common stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company's securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of the common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given the holders of such registration rights. 3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all notices or other written communications to the shareholders of the Company, (b) within 90 days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) such other financial statements required under and in accordance with any loan documents between Holder and the Company (or if there are no such requirements or if the subject loan(s) no longer are outstanding), then within 45 days after the end of each of the first three quarters of each fiscal year, the Company's quarterly, unaudited financial statements. 5 6 3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be subject to the registration rights set forth in the Company's Investors' Rights Agreement or similar agreement. The provisions set forth in Company's Investors' Rights Agreement or similar agreement relating to the above in effect as of the Issue Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver effects Holder in the same manner as they effect all other shareholders of the Shares. ARTICLE 4. MISCELLANEOUS. 4.1 TERM. This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above. 4.2 LEGENDS. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. 4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144 (f), and the Company is provided with a copy of Holder's notice of proposed sale. 4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares or The Silicon Valley Bank Foundation, or, to any other transferee by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). Unless Company is filing financial information with the SEC pursuant to the Securities Exchange Act of 1933, the 6 7 Company shall have the right to refuse to transfer any portion of this Warrant to any person who directly competes with the Company. 4.5 NOTICES. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such holder from time to time. All notices to be provided under this Warrant shall be sent to the following address: Silicon Valley Bank Attn: Treasury Department HG100 3003 Tasman Drive Santa Clara, CA 95054 4.6 WAIVER. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. 4.7 ATTORNEYS FEES. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys' fees. 4.8 GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law. COMPANY CAMITRO CORPORATION By: /s/ Harold E. Selick ------------------------------------- Name: Harold E. Selick Title: President By: /s/ Janet I. Swearson ------------------------------------- Name: Janet I Swearson Title: Chief Financial Officer, Assistant Secretary 7 8 APPENDIX 1 NOTICE OF EXERCISE ------------------ 1. The undersigned hereby elects to purchase___________shares of the Common/Preferred Series________[Strike one] Stock of CAMITRO CORPORATION pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. or 1. The undersigned hereby elects to convert the attached Warrant into Shares/Cash [Strike one] in the manner specified in the Warrant. This conversion is exercised with respect to __________ of the Shares covered by the Warrant. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: --------------------------------- (Name) --------------------------------- --------------------------------- (Address) 3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws. --------------------------------- (Signature) - -------------------------- (Date) EX-5.1 3 b38060aiex5-1.txt OPINION OF PALMER & DODGE LLP 1 [PALMER & DODGE LLP LETTERHEAD] EXHIBIT 5.1 February 1, 2001 ArQule, Inc. 19 Presidential Way Woburn, Massachusetts 01801 We are rendering this opinion in connection with the Registration Statement on Form S-3 (the "Registration Statement") filed by ArQule, Inc. (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), on or about the date hereof. The Registration Statement relates to 3,106,622 shares of the Company's Common Stock, $.01 par value per share, comprising of (i) 3,092,037 shares of Common Stock currently outstanding (the "Shares") and (ii) 14,585 shares of Common Stock (the "Warrant Shares") issuable upon exercise of warrants to purchase Common Stock (the "Warrants"). We understand that the Shares and the Warrant Shares are to be offered and sold in the manner described in the Registration Statement. We have acted as your counsel in connection with the preparation of the Registration Statement and are familiar with the proceedings taken by the Company in connection with the authorization, issuance and sale of the Shares and the Warrant to the selling stockholders. We have examined all such documents as we consider necessary to enable us to render this opinion. Based on the foregoing, we are of the opinion that upon the issuance and delivery of the Shares to the selling stockholders, the Shares were validly issued, fully paid, and nonassessable, and that upon exercise of the Warrants in accordance with the terms thereof, the Warrant Shares will be validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the prospectus filed as part thereof. Very truly yours, /s/ PALMER & DODGE LLP EX-23.2 4 b38060aiex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.2 Consent of Independent Accountants We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated January 27, 2000 relating to the financial statements, which appears in ArQule's Annual Report on Form 10-K for the year ended December 31, 1999. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PRICEWATERHOUSECOOPERS LLP Boston, Massachusetts February 1, 2001 EX-23.3 5 b38060aiex23-3.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.3 Consent of Independent Accountants We hereby consent to the incorporation by reference in this registration statement on Form S-3 of ArQule, Inc., of our report dated March 24, 2000 relating to the financial statements of Camitro Corporation, which appears in the current report on Form 8-K of ArQule, Inc. We also consent to the reference to us under the heading "Experts" in such registration statement. /s/ PRICEWATERHOUSECOOPERS LLP San Jose, California February 1, 2001 -----END PRIVACY-ENHANCED MESSAGE-----