Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
June 6, 2008
among
INNOVIVE PHARMACEUTICALS, INC.,
CYTRX CORPORATION,
CYTRX MERGER SUBSIDIARY, INC.
and
STEVEN KELLY
(As the Stockholder Representative)
TABLE OF CONTENTS
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Page
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§ ARTICLE I
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THE MERGER; CLOSING
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1
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SECTION 1.01 The Merger
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1
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SECTION 1.02 Effective Time
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1
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SECTION 1.03 Effects of the Merger
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2
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SECTION 1.04 Conversion of Shares
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2
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SECTION 1.05 Dissenting Shares
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2
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SECTION 1.06 Payment of Merger Consideration
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3
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SECTION 1.07 Treatment of Company Stock Options
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5
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SECTION 1.08 Treatment of Company Warrants
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6
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SECTION 1.09 The Closing
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6
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ARTICLE II
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THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS
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6
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SECTION 2.01 Certificate of Incorporation
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6
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SECTION 2.02 Bylaws
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6
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SECTION 2.03 Directors and Officers
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6
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ARTICLE III
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EARNOUT MERGER CONSIDERATION
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7
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SECTION 3.01 Net Sales; Determination of Earnout
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7
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SECTION 3.02 Payment
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8
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SECTION 3.03 Transfer of the Surviving Corporation
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9
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SECTION 3.04 Earnout Rights Not Transferable
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9
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF CYTRX AND MERGER SUBSIDIARY
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9
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SECTION 4.01 Organization and Qualification
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10
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SECTION 4.02 Capitalization
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10
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SECTION 4.03 Authority; Non-Contravention; Approvals
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11
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SECTION 4.04 Reports and Financial Statements
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12
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SECTION 4.05 Proxy Statement/Prospectus
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13
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SECTION 4.06 No Violation of Law
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13
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SECTION 4.07 Material Contracts; Compliance with Contracts
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13
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SECTION 4.08 Brokers and Finders
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13
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SECTION 4.09 No Prior Activities of Merger Subsidiary
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13
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SECTION 4.10 Litigation; Government Investigations
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14
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SECTION 4.11 Taxes
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14
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ARTICLE V
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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15
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SECTION 5.01 Organization and Qualification
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15
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SECTION 5.02 Capitalization
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15
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SECTION 5.03 Authority; Non-Contravention; Approvals
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16
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SECTION 5.04 Reports and Financial Statements
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17
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i
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Page
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SECTION 5.05 Sarbanes-Oxley Act; Internal Accounting Controls
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18
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SECTION 5.06 Liabilities
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18
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SECTION 5.07 Absence of Certain Changes or Events
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19
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SECTION 5.08 Litigation; Government Investigations
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19
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SECTION 5.09 Proxy Statement/Prospectus
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19
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SECTION 5.10 No Violation of Law
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19
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SECTION 5.11 Material Contracts; Compliance with Contracts
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20
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SECTION 5.12 Taxes
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20
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SECTION 5.13 Employee Benefit Plans; ERISA; Employment Agreements
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21
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SECTION 5.14 Labor Controversies
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23
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SECTION 5.15 Environmental Matters
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23
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SECTION 5.16 Title to Assets
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23
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SECTION 5.17 Company Stockholders Approval
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23
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SECTION 5.18 Intellectual Property
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23
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SECTION 5.19 Insurance
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27
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SECTION 5.20 Certain Payments
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27
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SECTION 5.21 Brokers and Finders
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27
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SECTION 5.22 Opinion of Financial Advisor
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27
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ARTICLE VI
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COVENANTS
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28
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SECTION 6.01 Conduct of Business by the Company Pending the Merger
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28
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SECTION 6.02 Conduct of Business by CytRx Pending the Merger
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30
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SECTION 6.03 Acquisition Proposals
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31
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SECTION 6.04 Access to Information; Confidentiality
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33
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SECTION 6.05 Notices of Certain Events
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35
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SECTION 6.06 Merger Subsidiary
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35
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SECTION 6.07 Meeting of the Companys Stockholders
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35
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SECTION 6.08 Registration Statement
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36
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SECTION 6.09 Public Announcements
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37
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SECTION 6.10 Expenses and Fees
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37
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SECTION 6.11 Agreement to Cooperate
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37
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SECTION 6.12 Directors and Officers Indemnification
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37
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SECTION 6.13 Loan and Security Agreement
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39
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SECTION 6.14 Exemption From Liability Under Section 16(b)
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39
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SECTION 6.15 Resignation of Officers
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39
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SECTION 6.16 Office Lease
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39
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ARTICLE VII
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CONDITIONS TO THE MERGER
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40
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SECTION 7.01 Conditions to the Obligations of Each Party
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40
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SECTION 7.02 Conditions to Obligation of the Company to Effect the
Merger
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40
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ii
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Page
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SECTION 7.03 Conditions to Obligations of CytRx and Subsidiary to
Effect the Merger
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41
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ARTICLE VIII
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TERMINATION
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42
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SECTION 8.01 Termination
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42
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SECTION 8.02 Termination Fee
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43
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SECTION 8.03 Effect of Termination
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43
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ARTICLE IX
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OFFSET
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44
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SECTION 9.01 Survival
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44
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SECTION 9.02 Offset
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44
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SECTION 9.03 Offset Claims
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45
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SECTION 9.04 Resolution of Conflicts
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45
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SECTION 9.05 Stockholder Representative
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46
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ARTICLE X
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MISCELLANEOUS
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47
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SECTION 10.01 Non-Survival of Representations and Warranties
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47
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SECTION 10.02 Notices
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47
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SECTION 10.03 Interpretation
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49
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SECTION 10.04 Assignment; Governing Law; Forum
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49
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SECTION 10.05 Counterparts
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50
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SECTION 10.06 Amendments; No Waivers
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50
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SECTION 10.07 Entire Agreement
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50
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SECTION 10.08 Severability
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50
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SECTION 10.09 Specific Performance
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50
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iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this
Agreement
) entered into on June 6, 2008, by and
among INNOVIVE PHARMACEUTICALS, INC., a Delaware corporation (the
Company
), CYTRX
CORPORATION, a Delaware corporation (
CytRx
), CYTRX MERGER SUBSIDIARY, INC., a Delaware
corporation (
Merger Subsidiary
), and STEVEN KELLY, as the Stockholder Representative (as
defined in Section 9.05).
WHEREAS, the respective Boards of Directors of the Company, CytRx and Merger Subsidiary have
determined that this Agreement and the transactions contemplated hereby, including the Merger (as
defined below), are advisable and in the best interests of their respective stockholders, and have
approved the merger of Merger Subsidiary with and into the Company on the terms and subject to the
conditions set forth in this Agreement (the
Merger
); and
WHEREAS, in connection with the Merger, the parties desire to make certain representations,
warranties, covenants and agreements and prescribe certain conditions to the Merger, as provided
herein; and
WHEREAS, as an inducement to CytRx and Merger Subsidiary to enter into this Agreement, certain
stockholders of the Company have concurrently herewith entered into a Support Agreement in
substantially the form attached hereto as
Exhibit A
, pursuant to which, among other things,
such stockholders have agreed to vote the shares of Company Common Stock (as defined below) owned
by them in favor of the approval and adoption of this Agreement and the approval of the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING
SECTION 1.01
The Merger
. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02) Merger Subsidiary shall be merged
with and into the Company in accordance with the Delaware General Corporation Law (the
DGCL
). Upon the Merger, the separate existence of Merger Subsidiary shall cease and the
Company shall continue as the surviving corporation (the
Surviving Corporation
) and shall
continue its existence under the DGCL. CytRx, in its capacity as the sole stockholder of Merger
Subsidiary, hereby approves of the Merger and this Agreement.
SECTION 1.02
Effective Time
. Unless this Agreement is earlier terminated pursuant to
the terms hereof, the Merger shall become effective at or following the Closing (as defined in
Section 1.09) upon the filing with the Secretary of State of the State of Delaware (the
Secretary of State
) of a certificate of merger in accordance with the requirements of the
DGCL (the
Certificate of Merger
). When used in this Agreement, the term
Effective
Time
means the date and time at which the Certificate of Merger is accepted by the Secretary
of State for filing, or such later time as shall be set forth in the Certificate of Merger.
SECTION 1.03
Effects of the Merger
. The Merger shall have the effects provided for in
this Agreement and in Section 259 of the DGCL.
SECTION 1.04
Conversion of Shares
. At the Effective Time, by virtue of the Merger and
without any action on the part of the parties or the holders of any of the following securities:
(a) each issued and outstanding share of capital stock of Merger Subsidiary shall be converted
into one validly issued, fully paid and nonassessable share of common stock of the Surviving
Corporation;
(b) each issued and outstanding share of the common stock, par value $0.001 per share, of the
Company (
Company Common Stock
) owned by the Company as treasury stock, or owned by any
wholly owned subsidiary of the Company or by CytRx, Merger Subsidiary or any other subsidiary of
CytRx, shall automatically be cancelled and retired and shall cease to exist, and no payment or
consideration shall be made with respect thereto; and
(c) each issued and outstanding share of Company Common Stock other than shares of Company
Common Stock referred to in paragraph (b) above and other than any Dissenting Shares (as defined in
Section 1.05) shall be converted into the right to receive, as provided herein, an amount equal to
the quotient determined by dividing (i) the sum of (1) $3,000,000, less the consideration, if any,
paid or payable upon the termination pursuant to Section 1.07 of all outstanding Company Options
(as defined in Section 5.02) (the
Initial Merger Consideration
) and (2) the Earnout
Merger Consideration (determined as provided in Section 3.01), if any, by (ii) the fully diluted
shares (as defined below) of Company Common Stock immediately prior to the Effective Time (such
amount per fully diluted share of Company Common Stock, the
Merger Consideration
). For
purposes of this Agreement, the term
fully diluted shares
means the sum of (i) all issued
and outstanding shares (including any Dissenting Shares) of Company Common Stock and (ii) all
shares of Company Common Stock issuable upon the exercise, in full, of all outstanding Company
Warrants (as defined in Section 5.02) that will remain outstanding following the Effective Time as
provided in Section 5.02. At the Effective Time, all issued and outstanding shares of Company
Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the right to receive the
Merger Consideration, without interest. The holders of shares of Company Common Stock immediately
prior to the Effective Time are sometimes collectively referred to herein as the
Company
Stockholders
.
SECTION 1.05
Dissenting Shares
.
(a) For purposes of this Agreement,
Dissenting Shares
means shares of the Company
Common Stock held immediately prior to the Effective Time by a stockholder who did not vote in
favor of the Merger (or consent thereto in writing) and with respect to which demand to the Company
for purchase of such shares is duly made and perfected in accordance with Section 262 of the DGCL
and not subsequently and effectively withdrawn or forfeited. Notwithstanding the provisions of
Section 1.04(c) or any other provision of this Agreement to the contrary, Dissenting Shares shall
not be converted into or be exchangeable for the right to
2
receive the Merger Consideration at or after the Effective Time, but shall entitle the holder
thereof to receive such consideration as may be determined to be due to holders pursuant to the
DGCL, unless and until the holder of such Dissenting Shares withdraws his or her demand for such
appraisal in accordance with the DGCL or becomes ineligible for such appraisal. If a holder of
Dissenting Shares shall withdraw his or her demand for such appraisal or shall become ineligible
for such appraisal (through failure to perfect or otherwise), then, as of the Effective Time or the
occurrence of such event, whichever last occurs, such holders Dissenting Shares shall
automatically be converted into and represent the right to receive the Merger Consideration,
without interest, as provided in Section 1.04(c) and in accordance with the DGCL.
(b) The Company shall give CytRx (i) prompt notice of any demands received by the Company for
appraisal of shares of Company Common Stock and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company shall not, without
the prior written consent of CytRx, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
SECTION 1.06
Payment of Merger Consideration
.
(a) The Initial Merger Consideration shall be payable in fully paid and non-assessable shares
of the common stock, $0.001 par value per share, of CytRx (
CytRx Common Stock
), which
shall be valued for this purpose at $0.94 per share (the
Initial Merger Consideration
Price
).
(b) Prior to the Effective Time, CytRx shall appoint an agent reasonably satisfactory to the
Company to act as agent (the
Disbursing Agent
) for the payment of the Initial Merger
Consideration upon surrender of certificates representing shares of Company Common Stock. At or
prior to the Effective Time, CytRx shall deposit or cause to be deposited with the Disbursing Agent
in trust for the benefit of the Company Stockholders certificates representing shares of CytRx
Common Stock sufficient to pay the Initial Merger Consideration.
(c) The Earnout Merger Consideration, if any, shall be payable as provided in Section 3.02.
The provisions of this Section 1.06 also shall apply to the payment of any Earnout Merger
Consideration.
(d) Promptly after the Effective Time, the Surviving Corporation shall cause the Disbursing
Agent to mail to each individual, corporation, limited liability company, partnership, association,
joint venture, unincorporated organization, trust or any other entity, including a governmental
authority (each, a
person
), who was a record holder as of the Effective Time of an
outstanding certificate or certificates which immediately prior to the Effective Time represented
shares of Company Common Stock (the
Certificates
) or of uncertificated shares of Company
Common Stock in book-entry form (
Book-Entry Shares
), and whose shares were converted into
the right to receive the Initial Merger Consideration pursuant to Section 1.04(c), a form of letter
of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to the Disbursing Agent,
and which shall be in such form and shall have such other customary provisions as CytRx may
reasonably specify) and instructions for use in effecting the surrender of the Certificates or
Book-Entry Shares in exchange for payment of the Initial Merger
3
Consideration. Upon surrender to the Disbursing Agent of a Certificate, together with such
letter of transmittal duly executed and such other documents as may be reasonably required by the
Disbursing Agent, the holder of such Certificate or Book-Entry Share shall be paid promptly in
exchange therefor the Initial Merger Consideration and such Certificate or Book-Entry Share shall
forthwith be canceled. If payment is to be made to a person other than the person in whose name
the Certificate or Book-Entry Share surrendered is registered, it shall be a condition of payment
that the Certificate so surrendered be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment pay any transfer or other taxes required by
reason of the payment of the Initial Merger Consideration to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 1.06, each Certificate or Book-Entry Share (other than Certificates or
Book-Entry Shares representing shares of Company Common Stock owned by any subsidiary of the
Company, CytRx, Merger Subsidiary or any other subsidiary of CytRx and shares of Company Common
Stock held in the treasury of the Company, which shall have been canceled as provided in
Section 1.04(b), and other than Certificates or Book-Entry Shares representing Dissenting Shares)
shall represent for all purposes only the right to receive, as and when payable hereunder, the
Merger Consideration multiplied by the number of shares of Company Common Stock evidenced by such
Certificate or the number of Book-Entry Shares, without any interest thereon.
(e) From and after the Effective Time, there shall be no registration of transfers of shares
of Company Common Stock which were outstanding immediately prior to the Effective Time on the stock
transfer books of the Surviving Corporation. From and after the Effective Time, the holders of
shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except as otherwise provided in
this Agreement or by applicable law. All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Article I shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of Company Common Stock previously
represented by such Certificates. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, such Certificates shall be cancelled and exchanged as
provided in this Article I. At the close of business on the day of the Effective Time, the stock
ledger of the Company shall be closed.
(f) If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and,
if reasonably required by the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as CytRx may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Disbursing Agent will pay, in exchange for such lost, stolen
or destroyed Certificate, the Initial Merger Consideration to be paid in respect of the shares of
Company Common Stock formerly represented by such Certificate, as contemplated by this Article I.
(g) No certificate or scrip representing fractional shares of CytRx Common Stock shall be
issued as part of the Initial Merger Consideration upon the surrender of the Certificates. In lieu
thereof, each Company Stockholder otherwise entitled to a fraction of a share of CytRx Common Stock
shall be entitled to receive an amount of cash (without interest) determined by
4
multiplying the Initial Merger Consideration Price by the fractional share interest to which
such holder would otherwise be entitled, less any applicable tax withholding. If a Company
Stockholder surrenders more than one Certificate, any fractions of a share of CytRx Common Stock
shall be aggregated for purposes of determining whether such Company Stockholder is entitled to a
fraction of a share.
(h) At any time after six months after the Effective Time, CytRx shall be entitled to require
the Disbursing Agent to deliver to it any Merger Consideration which had been deposited by CytRx
with the Disbursing Agent and not disbursed in exchange for Certificates (including all interest
and other income received by the Disbursing Agent in respect of such Merger Consideration).
Thereafter, holders of shares of Company Common Stock shall look only to CytRx (subject to the
terms of this Agreement and abandoned property, escheat and other similar laws) as general
creditors thereof with respect to any Merger Consideration that may be payable, without interest,
upon surrender of the Certificates held by them. If any Certificates shall not have been
surrendered prior to two years after the Effective Time (or immediately prior to such time on which
any payment in respect thereof would otherwise escheat or become the property of any governmental
unit or agency), the payment in respect of such Certificates shall, to the extent permitted by
applicable law, become the property of CytRx, free and clear of all claims or interest of any
person previously entitled thereto. Notwithstanding the foregoing, none of CytRx, the Company, the
Surviving Corporation nor the Disbursing Agent shall be liable to any holder of a share of Company
Common Stock for any Merger Consideration delivered in respect of such share of Company Common
Stock to a public official pursuant to any abandoned property, escheat or other similar law.
(i) CytRx, the Surviving Corporation and the Disbursing Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable to a holder of shares of Company Common
Stock pursuant to this Agreement such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the
Code
), or under any provision of state,
local or foreign tax law. To the extent amounts are so withheld and paid over to the appropriate
taxing authority, the withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such deduction and withholding was made.
SECTION 1.07
Treatment of Company Stock Options
. At or prior to the Closing, the
administrator of the Company Stock Plans (as defined below) shall have resolved under the Company
Stock Plans to determine that each unexercised Company Option (as defined in Section 5.02) granted
pursuant to the Company Stock Plans shall terminate immediately prior to the Effective Time, with
any consideration due to the holders thereof being paid at such time, and the Company will take all
necessary and appropriate action to effect the termination of all Company Options (including, but
not limited to, the giving of any notice required under any agreement relating to Company Options).
For purposes of this Agreement, the term
Company Stock Plans
means, collectively, the
Companys 2004 Stock Option Plan, 2007 Stock Option Plan and each other stock option, stock
appreciation rights or other equity incentive plan maintained or assumed by the Company at any
time.
5
SECTION 1.08
Treatment of Company Warrants
. Effective immediately prior to the
Effective Time, all unexercised Company Warrants (as defined in Section 5.02) shall, by their terms
and without any action of the Company, either (a) be canceled, without any consideration to the
holders thereof, and be of no further force or effect or (b) remain outstanding in accordance with
the terms thereof and the holders thereof shall thereafter have the right to purchase and receive
(in lieu of the shares of Company Common Stock) the Merger Consideration payable with respect to or
in exchange for the number of shares of Company Common Stock purchasable immediately prior to the
Effective Time upon the exercise thereof. If and to the extent Company Warrants outstanding at the
Effective Time are subsequently cancelled, or terminate, without being exercised in full, all
Merger Consideration otherwise payable with respect to such cancelled or terminated Company
Warrants shall thereupon become the property of CytRx. The holders of Company Warrants immediately
prior to or at any time after the Effective Time are sometimes collectively referred to herein as
the
Company Warrant Holders
. CytRx shall cause the Surviving Corporation to comply with
any provisions of Company Warrants regarding the issuance of replacement warrants in exchange for
the surrender of Company Warrants that, by their terms, remain outstanding following the Effective
Time.
SECTION 1.09
The Closing
. The consummation of the transactions contemplated by this
Agreement (the
Closing
) shall take place at the offices of TroyGould PC, 1801 Century
Park East, 16
th
Floor, Los Angeles, California 90067, commencing at 9:00 A.M., local
time, on the second business day following the satisfaction or waiver of all conditions set forth
in Article VII or such other place and date as the parties may mutually determine (the
Closing
Date
). As soon as practicable following the Closing, the Company and Merger Subsidiary shall
file with the Secretary of State the duly executed Certificate of Merger and such other documents
as may be required by the DGCL, and the parties shall take all such other and further actions as
may be required by law to make the Merger effective.
ARTICLE II
THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS
SECTION 2.01
Certificate of Incorporation
. The Certificate of Incorporation of Merger
Subsidiary in effect at the Effective Time shall be the certificate of incorporation of the
Surviving Corporation, except that the name of the Surviving Corporation shall be changed to CytRx
Oncology Corporation, unless and until amended in accordance with applicable law and the terms of
this Agreement.
SECTION 2.02
Bylaws
. The Bylaws of Merger Subsidiary in effect at the Effective Time
shall be the bylaws of the Surviving Corporation, unless and until amended in accordance with
applicable law.
SECTION 2.03
Directors and Officers
. The directors of Merger Subsidiary immediately
prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective
Time. The officers identified in the Certificate of Merger shall be the officers of the Surviving
Corporation as of the Effective Time, subject to the right of the Board of Directors of the
Surviving Corporation to appoint or replace officers.
6
ARTICLE III
EARNOUT MERGER CONSIDERATION
SECTION 3.01
Net Sales; Determination of Earnout
.
(a) For purposes of this Agreement, the following capitalized terms shall have the meanings
indicated:
(i)
Company License Agreements
has the meaning set forth in Section 3.01(a) of the
Company Disclosure Schedule (as defined in Article V);
(ii)
Earnout Merger Consideration
means the amounts set forth in the following table
corresponding to the Surviving Corporations achievement of Net Sales (as defined below) indicated:
|
|
|
|
|
Net Sales
|
|
Earnout Merger Consideration
|
$ 2,000,000
|
|
$
|
2,000,000
|
|
$15,000,000
|
|
$
|
5,000,000
|
|
$30,000,000
|
|
$
|
5,000,000
|
|
$40,000,000
|
|
$
|
6,253,462
|
|
provided, that the final payment of the Earnout Merger Consideration (
i.e
., $6,253,462
payment corresponding to Net Sales of $40,000,000), shall be increased by the excess, if any, of
(1) the Estimated Net Liabilities (as defined in Section 5.06(b)) of the Company as of the date of
this Agreement over (2) the actual Net Liabilities (as defined in Section 5.06(b) but excluding up
to $97,785 that may become due and payable to Davos Chemical Corporation) of the Company as of such
date.
(iii)
Earnout Period
means the period commencing upon the Effective Time and ending
on the earlier of (1) the end of the first calendar year in which Net Sales equal or exceed
$40,000,000 and (2) the expiration of the last of the patents licensed under the Company License
Agreements;
(iv)
Net Sales
means the sum of all net sales as defined in the Company License
Agreements;
(v)
Market Price
means, for any date: (i) if the CytRx Common Stock is then listed
or quoted on a Trading Market (as defined below), the last sale price of the CytRx Common Stock on
such date (or the nearest preceding Trading Day (as defined below) if such date is not a Trading
Day) on the Trading Market on which the Common Stock is then listed or quoted for trading as
reported by Bloomberg L.P.; or (ii) if CytRx Common Stock is not then quoted for trading on a
Trading Market and if prices for CytRx Common Stock are then reported in the Pink Sheets
published by Pink Sheets, LLC (or a similar organization or agency
7
succeeding to its functions of reporting prices), the most recent bid price per share of CytRx
Common Stock so reported; or (iii) in all other cases, the fair market value of a share of CytRx
Common Stock as determined in good faith by the Board of Directors of CytRx;
(vi)
Trading Day
means a day on which the principal Trading Market is open for
business; and
(vii)
Trading Market
means the following exchanges or markets on which the CytRx
Common Stock is listed or quoted for trading on the date in question: The Nasdaq Capital Market;
The Nasdaq Global Market; the Nasdaq Global Select Market; the American Stock Exchange; the New
York Stock Exchange; or the OTC Bulletin Board.
(b) Subject to the achievement of Net Sales as set forth in paragraph (a) above and to CytRxs
offset rights under Article IX, CytRx shall pay the related Earnout Merger Consideration as
provided in Section 3.02.
SECTION 3.02
Payment
.
(a) If, in a calendar year during the Earnout Period, the Surviving Corporation achieves Net
Sales for such year in one or more of the amounts specified in Section 3.01(a), CytRx shall
promptly, and in no event later than 90 days following the end of such year, pay and deliver to the
Stockholder Representative, on behalf of the Company Stockholders, and reserve on behalf of the
Company Warrant Holders the relevant Earnout Merger Consideration pursuant to Section 3.01(a). For
clarity, the Earnout Merger Consideration shall be payable only with respect to the first year
during the Earnout Period in which Net Sales as specified in Section 3.01(a) are achieved. For
further clarity, the Relevant Earnout Merger Consideration shall be payable with respect to each
level of Net Sales specified in Section 3.01(a) first achieved during such year. By way of example
only, if, in the first calendar year during the Earnout Period for which Net Sales were at least
$2,000,000, the Surviving Corporation achieves Net Sales of $17,000,000, the Earnout Merger
Consideration payable by CytRx would be $7,000,000 (
i.e
., $2,000,000 + $5,000,000). In
this example, no further Earnout Merger Consideration would be payable unless and until Net Sales
for any calendar year equaled or exceeded $30,000,000.
(b) Subject to the Equity Conditions (as defined below) and share limitation described below,
the Earnout Merger Consideration, if any, shall be payable in shares of CytRx Common Stock valued
for this purpose at the average of the daily Market Price during the ten-Trading Day period ending
on the second Trading Day prior to CytRxs payment of the Earnout Consideration or, in CytRxs
discretion, in cash, or by any combination of shares of CytRx Common Stock and cash. For purposes
of this Agreement, the term
Equity Conditions
means, at the time of payment of any
Earnout Merger Consideration, (i) CytRx Common Stock is listed for trading on a Trading Market and
all of the shares issuable in payment of such Earnout Merger Consideration are listed or quoted for
trading on such Trading Market, (ii) the shares of CytRx Common Stock comprising the Earnout Merger
Consideration are registered, if necessary, under the Securities Act pursuant to an effective
registration statement or otherwise will be freely tradeable upon issuance thereof, and (iii) there
are sufficient authorized but unissued and otherwise unreserved shares of CytRx Common Stock for
the issuance of all of the shares issuable in payment of such Earnout Merger Consideration.
Notwithstanding the foregoing or
8
any other provision of this Agreement, the maximum number of shares of CytRx Common Stock
issued in payment of the Merger Consideration shall not exceed 18,145,013 (subject to adjustment
for reverse and forward stock splits, stock dividends, stock combinations and like events with
respect to CytRx Common Stock), unless such issuance shall have been approved by the requisite vote
or consent of CytRx stockholders under applicable Trading Market listing standards. In the event
that the Equity Conditions shall not have been satisfied, or if payment in shares of CytRx Common
Stock of any Earnout Merger Consideration would cause such share limitation to be exceeded, CytRx
shall, to the extent necessary, instead pay such Earnout Merger Consideration in cash.
(c) No certificate or scrip representing fractional shares of CytRx Common Stock shall be
issued as part of the Earnout Merger Consideration. In lieu thereof, each Company Stockholder
otherwise entitled to a fraction of a share of CytRx Common Stock shall be entitled to receive an
amount of cash (without interest) determined by multiplying the Market Price for purposes of the
payment of such Earnout Merger Consideration by the fractional share interest to which such holder
would otherwise be entitled, less any applicable tax withholding. If a Company Stockholder
surrenders more than one Certificate, any fractions of a share of CytRx Common Stock shall be
aggregated for purposes of determining whether such Company Stockholder is entitled to a fraction
of a share.
(d) CytRx shall afford the Stockholder Representative and his advisers and representatives,
upon request, reasonable access to the books and records of the Surviving Corporation for purposes
relating to the determination of Net Sales, provided that such access shall be limited to that
portion of the books and records that relate to the calculation of Net Sales and provided further
that prior to granting such access, the Stockholder Representative shall have entered into a
confidentiality agreement on terms and conditions reasonably satisfactory to CytRx. If the
Stockholder Representative disputes any Net Sales determination by CytRx, either party may make a
demand for formal resolution in the manner provided in Section 9.04.
SECTION 3.03
Transfer of the Surviving Corporation
. No sale or transfer by CytRx of
any beneficial ownership in the Surviving Corporation shall relieve CytRx of its obligations with
respect to this Agreement, unless the purchaser of such interest shall agree in writing to assume
all of CytRxs obligations hereunder and to be bound by all of the terms and conditions of this
Agreement (in which event, the term
CytRx
shall thereafter include such purchaser).
SECTION 3.04
Earnout Rights Not Transferable
. No person may sell, exchange, transfer
or otherwise dispose of his, her or its right to receive the Earnout Merger Consideration, if any,
other than by operation of law. Any transfer or purported transfer in violation of this
Section 3.04 shall be null and voice
ab initio
and shall not be recognized by CytRx.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CYTRX AND MERGER SUBSIDIARY
CytRx and Merger Subsidiary, jointly and severally, represent and warrant to the Company that,
except as set forth in (i) the CytRx SEC Reports (as defined in Section 4.04) filed
9
with the Securities and Exchange Commission (the
SEC
) prior to the date hereof or
(ii) the disclosure schedule delivered to the Company by CytRx concurrently herewith (the
CytRx Disclosure Schedule
), which shall be arranged in sections corresponding to the
numbered sections of this Article IV, it being agreed that disclosure of any item on the CytRx
Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if
the relevance of such item is reasonably apparent from the face of the CytRx Disclosure Schedule:
SECTION 4.01
Organization and Qualification
. Each of CytRx and Merger Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted. Each of CytRx and Merger
Subsidiary is duly qualified and licensed to transact business and is in good standing (with
respect to jurisdictions that recognize such concept) in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified, licensed and in good standing
would not reasonably be expected to have a CytRx Material Adverse Effect (as hereinafter defined).
In this Agreement, the term
CytRx Material Adverse Effect
means any change, event,
circumstance, development or occurrence (other than an effect arising out of or resulting from the
entering into or the public announcement or disclosure of this Agreement and the transactions
contemplated hereby) that, individually or in the aggregate, (i) has a material adverse effect on
the business, financial condition or ongoing operations of CytRx or (ii) has a material adverse
effect on CytRxs ability to consummate the Merger; provided, that no change, event, circumstance,
development or occurrence regarding the clinical hold placed by the U.S. Food and Drug
Administration on Cytrxs Phase II clinical trial as described in the CytRx SEC reports shall
constitute or be considered a material adverse effect. True, accurate and complete copies of
CytRxs Amended and Restated Certificate of Incorporation and Bylaws and Merger Subsidiarys
Certificate of Incorporation and Bylaws, in each case, as in effect on the date hereof, including
all amendments thereto, have heretofore been made available to the Company.
SECTION 4.02
Capitalization
.
(a) The authorized capital stock of CytRx consists of 150,000,000 shares of CytRx Common Stock
and 5,000,000 shares of preferred stock, par value $0.01 per share (
CytRx Preferred
Stock
). As of May 30, 2008, (i) 90,770,453 shares of CytRx Common Stock were issued and
outstanding (exclusive of 633,816 shares held in treasury), all of which shares were duly
authorized, validly issued, fully paid, nonassessable and free of preemptive rights, (ii) 15,000
shares of CytRx Preferred Stock were designated as Series A Junior Participation Preferred Stock,
(iii) no shares of CytRx Preferred Stock were issued and outstanding, and (iv) 17,583,203 shares of
CytRx Common Stock were reserved for issuance upon exercise of outstanding stock options and
warrants (the
CytRx Options and Warrants
).
(b) The shares of CytRx Common Stock to be issued pursuant to the Merger, when issued and
delivered in accordance with this Agreement, will be duly authorized, validly issued, fully paid
and non-assessable and issued in compliance with federal and state securities laws.
(c) Except for the CytRx Options and Warrants, there are no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions, arrangements,
10
rights or warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or other anti-takeover
agreement, obligating CytRx or any subsidiary of CytRx to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of CytRx or obligating CytRx or
any subsidiary of CytRx to grant, extend or enter into any such agreement or commitment. There are
no outstanding stock appreciation rights or similar derivative securities or rights of CytRx or any
of its subsidiaries. There are no voting trusts, irrevocable proxies or other agreements or
understandings to which CytRx or any subsidiary of CytRx is a party or is bound with respect to the
voting of any shares of CytRx Common Stock.
SECTION 4.03
Authority; Non-Contravention; Approvals
.
(a) Each of CytRx and Merger Subsidiary has the requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder 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 and approved by the
respective Boards of Directors of CytRx and Merger Subsidiary. No other corporate proceedings on
the part of CytRx or Merger Subsidiary are necessary to authorize the execution, delivery and
performance of this Agreement or the consummation by CytRx and Merger Subsidiary of the
transactions contemplated hereby. This Agreement has been duly executed and delivered by each of
CytRx and Merger Subsidiary, and, assuming the due authorization, execution and delivery hereof by
the Company, constitutes a valid and legally binding agreement of each of CytRx and Merger
Subsidiary, enforceable against CytRx and Merger Subsidiary in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors rights and remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in equity).
(b) The respective Boards of Directors of CytRx and Merger Subsidiary, at meetings duly called
and held, have unanimously approved this Agreement and the Merger. CytRx, in its capacity as the
sole stockholder of Merger Subsidiary, hereby approves of this Agreement and the Merger.
(c) The execution, delivery and performance of this Agreement by each of CytRx and Merger
Subsidiary and the consummation of the Merger and the transactions contemplated hereby do not and
will not violate, conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or result in a right of
termination or acceleration under, contractually require any offer to purchase or any prepayment of
any debt, or result in the creation of any lien, security interest or encumbrance upon any of the
properties or assets of CytRx or any subsidiary (as defined below) of CytRx under any of the terms,
conditions or provisions of (i) the respective Certificates of Incorporation or the respective
Bylaws of CytRx and Merger Subsidiary, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or governmental authority
applicable to CytRx or any CytRx subsidiary or any of their respective properties or assets,
subject, in the case of consummation, to obtaining (prior to the Effective
11
Time) the CytRx Required Statutory Approvals (as defined in Section 4.03(d)), or (iii) any
contract, agreement, commitment or understanding (each, a
contract
) to which CytRx or any
CytRx subsidiary is now a party or by which CytRx or any CytRx subsidiary or any of their
respective properties or assets may be bound or affected, other than, in the case of clauses
(ii) and (iii) of this paragraph (c), such violations, conflicts, breaches, defaults, terminations,
accelerations, contractual requirements or creations of liens, security interests or encumbrances
that would not reasonably be expected, individually or in the aggregate, to have a CytRx Material
Adverse Effect and would not prevent or materially delay the consummation of the Merger. For
purposes of this Agreement, the term subsidiary means, with respect to any person, any
corporation or other entity of which such person owns, directly or indirectly, more than 50% of the
capital stock or other equity interests generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(d) Except for (i) the filing with the Securities and Exchange Commission (the
SEC
)
of a Registration Statement on Form S-4 under the Securities Act by CytRx with respect to the
Merger (the
Registration Statement
) and applicable filings pursuant to the Securities
Exchange Act of 1934, as amended (the
Exchange Act
), and (ii) the filing of the
Certificate of Merger with the Secretary of State in connection with the Merger (collectively, the
CytRx Required Statutory Approvals
), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by CytRx or Merger
Subsidiary or the consummation by CytRx or Merger Subsidiary of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not reasonably be expected,
individually or in the aggregate, to have a CytRx Material Adverse Effect and would not prevent or
materially delay the consummation of the Merger.
SECTION 4.04
Reports and Financial Statements
.
(a) Since January 1, 2007, CytRx has filed with the SEC all material forms, statements,
reports and documents, including all exhibits, post-effective amendments and supplements thereto
(the
CytRx SEC Reports
), required to be filed by it under each of the Securities Act of
1933, as amended (the
Securities Act
), the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied when filed, or amended, in
all material respects with all applicable requirements of the appropriate act and the rules and
regulations thereunder. As of their respective dates, the CytRx SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequent Company SEC Report filed with
the SEC prior to the date hereof.
(b) The financial statements of CytRx included in the CytRx SEC Reports (collectively, the
CytRx Financial Statements
) were prepared in accordance with generally accepted
accounting principles (except, with respect to any unaudited financial statements, as permitted by
applicable SEC rules or requirements) applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects the financial position
of CytRx as of the dates thereof and the results of operations and changes in financial
12
position of CytRx for the periods then ended (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments).
SECTION 4.05
Proxy Statement/Prospectus
.
None of the information to be supplied by
CytRx or Merger Subsidiary for inclusion in the Proxy Statement/Prospectus (as defined in
Section 5.03(d)) will, at the time of the mailing thereof or any amendments or supplements thereto,
or at the time of the meeting of stockholders of the Company to be held in connection with the
transactions contemplated by this Agreement, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not misleading. The
Registration Statement will comply, as of its effective date, as to form in all material respects
with all applicable laws, including the provisions of the Securities Act and the rules and
regulations promulgated thereunder, except that no representation is made by CytRx with respect to
information supplied by the Company for inclusion therein.
SECTION 4.06
No Violation of Law
. Neither CytRx nor Merger Subsidiary is in violation
of or has been given written (or, to the knowledge of CytRx and Merger Subsidiary, oral) notice of
any violation of any law, statute, order, rule, regulation, ordinance or judgment of any
governmental or regulatory body or authority, except for violations which would not reasonably be
expected, individually or in the aggregate, to have a CytRx Material Adverse Effect. Neither CytRx
nor any CytRx subsidiary is in violation of the terms of any permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted, except for delays in filing reports
or violations which would not reasonably be expected, individually or in the aggregate, to have a
CytRx Material Adverse Effect.
SECTION 4.07
Material Contracts; Compliance with Contracts
. The CytRx SEC Reports
include a list of each contract to which CytRx or any CytRx subsidiary is a party or by which CytRx
or any CytRx subsidiary or their respective assets are bound or affected as of the date hereof
which is required to be disclosed in the CytRx SEC Reports (each, a
CytRx Material
Contract
). With respect to each CytRx Material Contract (i) the CytRx Material Contract is
legal, valid, binding and enforceable and in full force and effect with respect to CytRx or any
CytRx subsidiary, subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and
(ii) neither CytRx nor any CytRx subsidiary is in material breach or violation of or in material
default in the performance or observance of any term or provision of, and, to the knowledge of
CytRx, no event has occurred which, with lapse of time or action by a third party, would result in
a default under, the Material Contract.
SECTION 4.08
Brokers and Finders
. CytRx has not entered into any contract with any
person that may result in the obligation of CytRx to pay any investment banking fees, finders fees
or brokerage fees in connection with the transactions contemplated hereby.
SECTION 4.09
No Prior Activities of Merger Subsidiary
. Except for obligations
incurred in connection with its incorporation or organization and the negotiation, execution and
13
consummation of this Agreement and the transactions contemplated hereby, Merger Subsidiary has
neither incurred any obligation or liability nor engaged in any business or activity of any type or
kind whatsoever or entered into any agreement or arrangement with any person.
SECTION 4.10
Litigation; Government Investigations
. There are no material claims,
suits, actions, proceedings, arbitrations or other actions pending or, to the knowledge of CytRx,
threatened against, relating to or affecting CytRx or any CytRx subsidiary, before any court,
governmental department, commission, agency, instrumentality or authority, or any arbitrator. No
material investigation or review by any governmental or regulatory body or authority is pending or,
to the knowledge of CytRx, threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same. Neither CytRx nor any CytRx subsidiary is subject to
any judgment, decree, injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator, or any settlement agreement or
stipulation, which as of the date hereof prohibits the consummation of the transactions
contemplated hereby or would reasonably be expected, individually or in the aggregate, to have a
CytRx Material Adverse Effect.
SECTION 4.11
Taxes
.
(a) CytRx and each CytRx subsidiary has timely (i) filed with the appropriate governmental
authorities all material Tax Returns (as defined in Section 5.12) required to be filed by it, and
such Tax Returns are true, correct and complete in all material respects, and (ii) paid in full or
reserved in accordance with generally accepted accounting principles on the CytRx Financial
Statements all material Taxes (as defined in Section 5.12) required to be paid. Neither CytRx nor
any CytRx subsidiary has requested an extension of time within which to file a material Tax Return,
which has not been since filed, except that CytRx has requested an extension of time within which
to file its federal and California and Massachusetts state income tax returns for 2007 and such Tax
Returns have not yet been filed. There are no liens for Taxes upon any property or asset of CytRx
or any CytRx subsidiary, other than liens for Taxes not yet due and payable or Taxes contested in
good faith by appropriate proceedings or that are otherwise not material and reserved against in
accordance with generally accepted accounting principles. No deficiency with respect to Taxes has
been proposed, asserted or assessed in writing against CytRx or any CytRx subsidiary, which has not
been fully paid or adequately reserved or reflected in the CytRx SEC Reports, and there are no
material unresolved issues of law or fact arising out of a written notice of a deficiency, proposed
deficiency or assessment from the Internal Revenue Service or any other governmental taxing
authority with respect to Taxes of CytRx or any CytRx subsidiary. Neither CytRx nor any CytRx
subsidiary has agreed to an extension of time with respect to a Tax deficiency, other than
extensions which are no longer in effect. Neither CytRx nor any CytRx subsidiary is a party to any
agreement providing for the allocation or sharing of Taxes with any entity other than agreements
the consequences of which are fully and adequately reserved for in the CytRx Financial Statements.
Neither CytRx nor any CytRx subsidiary has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the five-year period ending on the date hereof.
(b) CytRx and each CytRx subsidiary has withheld or collected and has paid over to the
appropriate governmental entities (or are properly holding for such payment) all Taxes
14
required to be collected or withheld, including with respect to amounts paid or owed to any
employee, independent contractor, stockholder, or other third party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to CytRx and Merger Subsidiary that, except as set forth
in (i) the Company SEC Reports (as defined in Section 5.04) filed with the SEC prior to the date
hereof and (ii) the disclosure schedule delivered to CytRx by the Company concurrently herewith
(the
Company Disclosure Schedule
), which shall be arranged in sections corresponding to
the numbered sections of this Article V, it being agreed that disclosure of any item on the Company
Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if
the relevance of such item is reasonably apparent from the face of the Company Disclosure Schedule:
SECTION 5.01
Organization and Qualification
. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its assets and properties and
to carry on its business as it is now being conducted. The Company is duly qualified and licensed
to transact business and is in good standing (with respect to jurisdictions that recognize such
concept) in each jurisdiction in which the properties owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where the failure to be
so organized, existing, qualified, licensed and in good standing would not reasonably be expected
to have a Company Material Adverse Effect (as hereinafter defined). In this Agreement, the term
Company Material Adverse Effect
means any change, event, circumstance, development or
occurrence (other than an effect arising out of or resulting from the entering into or the public
announcement or disclosure of this Agreement and the transactions contemplated hereby) that,
individually or in the aggregate, (i) has a material adverse effect on the business, financial
condition or ongoing operations of the Company, or (ii) has a material adverse effect on the
Companys ability to consummate the Merger. True, accurate and complete copies of the Companys
Certificate of Incorporation and Bylaws, in each case, as in effect on the date hereof, including
all amendments thereto, have heretofore been made available to CytRx.
SECTION 5.02
Capitalization
.
(a) The authorized capital stock of the Company consists of 75,000,000 shares of Company
Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share (
Company
Preferred Stock
). As of May 30, 2008, (i) 14,610,003 shares of Company Common Stock were
issued and outstanding, all of which shares were duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, (ii) no shares of Company Preferred Stock were issued
and outstanding, (iii) 1,689,101 shares of Company Common Stock were reserved for issuance upon
exercise of outstanding stock options (the
Company Options
), and (iv) 3,559,309 shares of
Company Common Stock were reserved for issuance upon exercise of outstanding Warrants (the
Company Warrants
). The outstanding shares of Company Common Stock, the Company Options
and the Company Warrants were issued in compliance with all
15
applicable securities laws. Since May 30, 2008, except as permitted by this Agreement, (i) no
shares of capital stock of the Company have been issued and (ii) no options, warrants or securities
convertible into, or commitments with respect to the issuance of, shares of capital stock of the
Company have been issued, granted or made.
(b) Section 5.02(b) of the Company Disclosure Schedule sets forth a complete and accurate list
of all Company Stock Plans and all holders of Company Options and Company Warrants, indicating with
respect to each Company Option and Company Warrant, the number of shares of Company Common Stock
subject to such Company Option and Company Warrant, the exercise price, the date of grant, and the
expiration date thereof. The Company has delivered or made available to CytRx accurate and
complete copies of all Company Stock Plans, the standard forms of stock option agreement and
warrant agreement evidencing Company Options and Company Warrants, and any stock option agreements
and warrant agreements evidencing a Company Option or a Company Warrant that deviates in any
material manner from the Companys standard forms of stock option agreement and warrant agreement.
(c) Except for Company Options and Company Warrants, there are no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding security, instrument
or other agreement and also including any rights plan or other anti-takeover agreement, obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares
of the capital stock of the Company or obligating the Company to grant, extend or enter into any
such agreement or commitment. There are no outstanding stock appreciation rights or similar
derivative securities or rights of the Company. There are no voting trusts, irrevocable proxies or
other agreements or understandings to which the Company is a party or is bound with respect to the
voting of any shares of capital stock of the Company.
(d) The Company has no subsidiaries.
SECTION 5.03
Authority; Non-Contravention; Approvals
.
(a) The Company has the requisite corporate power and authority to enter into this Agreement
and, subject to the Company Stockholders Approval (as defined in Section 5.17), to perform its
obligations hereunder 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 and approved by the Board of Directors of the Company. No other corporate
proceedings on the part of the Company are necessary to authorize the execution, delivery and
performance of this Agreement or, except for the Company Stockholders Approval, the consummation
by the Company of the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming with respect to this Agreement the due authorization,
execution and delivery hereof by CytRx and Merger Subsidiary, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors rights and remedies generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in equity).
16
(b) The Company Board of Directors, at a meeting duly called and held, has unanimously (i)
approved and declared advisable this Agreement and the Merger, and (ii) resolved to recommend that
stockholders of the Company adopt this Agreement and approve the Merger.
(c) The execution, delivery and performance of this Agreement by the Company and the
consummation of the Merger and the transactions contemplated hereby do not and will not violate,
conflict with or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right of termination or
acceleration under, contractually require any offer to purchase or any prepayment of any debt, or
result in the creation of any lien, security interest or encumbrance upon any of the properties or
assets of the Company under any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or the Bylaws of the Company, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, subject, in the case of consummation,
to obtaining (prior to the Effective Time) the Company Required Statutory Approvals (as defined in
Section 5.03(d)) and the Company Stockholders Approval, or (iii) any Contract to which the Company
is now a party or by which the Company or any of its properties or assets may be bound or affected,
other than, in the case of clauses (ii) and (iii) of this paragraph (b), such violations,
conflicts, breaches, defaults, terminations, accelerations, contractual requirements or creations
of liens, security interests or encumbrances that would not reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect and would not prevent or materially
delay the consummation of the Merger.
(d) Except for (i) the filing with the SEC of the Companys proxy statement relating to the
Company Stockholders Meeting (as defined in Section 6.07), which also shall constitute the
prospectus of CytRx with respect to the shares of CytRx Common Stock to be issued as part of the
Merger Consideration (the
Proxy Statement/Prospectus
), and other applicable filings
pursuant to the Exchange Act, and) the filing of the Certificate of Merger with the Secretary of
State in connection with the Merger (collectively, the
Company Required Statutory
Approvals
), and no declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the case may be, would not
reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect
and would not prevent or materially delay the consummation of the Merger.
SECTION 5.04
Reports and Financial Statements
.
(a) Since January 1, 2007, the Company has filed with the SEC all material forms, statements,
reports and documents, including all exhibits, post-effective amendments and supplements thereto
(the
Company SEC Reports
), required to be filed by it under each of the Securities Act,
the Exchange Act and the respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed, or amended, in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder. As of
17
their respective dates, the Company SEC Reports filed did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading,
except to the extent corrected by a subsequently filed Company SEC Report filed with the SEC prior
to the date hereof.
(b) The financial statements of the Company included in the Companys SEC Reports
(collectively, the
Company Financial Statements
) were prepared in accordance with
generally accepted accounting principles (except, with respect to any unaudited financial
statements, as permitted by applicable SEC rules or requirements) applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the results of
operations and changes in financial position of the Company for the periods then ended (subject in
the case of any unaudited interim financial statements, to normal year-end adjustments).
SECTION 5.05
Sarbanes-Oxley Act; Internal Accounting Controls
. The Company is in
material compliance with all applicable provisions of the Sarbanes-Oxley Act of 2002. The Company
maintains a system of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with managements general or specific authorizations,
(ii) access to assets is permitted only in accordance with managements general or specific
authorization, and (iii) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any differences.
The Companys certifying officers have evaluated the effectiveness of its controls and procedures
as of the date (such date, the
Evaluation Date
) prior to the filing date of the most
recently filed periodic report under the Exchange Act. The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant changes in the
Companys internal controls or, to the Companys knowledge, in other factors that could adversely
affect the Companys internal controls.
SECTION 5.06
Liabilities
.
(a) The Company had at March 31, 2008, and has incurred since that date and as of the date
hereof, no liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any
nature, except (a) liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto or (ii) which were
incurred after March 31, 2008 in the ordinary course of business and consistent with past
practices, (b) liabilities, obligations or contingencies which (i) would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse Effect, or (ii) have
been discharged or paid in full prior to the date hereof in the ordinary course of business, and
(c) liabilities, obligations and contingencies which are of a nature not required to be reflected
in the financial statements of the Company prepared in accordance with generally accepted
accounting principles consistently applied.
(b) Section 5.06(b) of the Company Disclosure Schedule sets forth the Companys best estimate
of the Net Liabilities (as defined below) of the Company as of the date of this
18
Agreement (the
Estimated Net Liabilities
). For purposes of this Agreement, the term
Net Liabilities
means Liabilities (as defined below) less the sum of all cash and
equivalents and deposits of the Company. For purposes of this Agreement, the term
Liabilities
means all direct and indirect liabilities, indebtedness, obligations,
commitments, claims, deficiencies, expenses, deferred income, guaranties and endorsements of any
type, whether known, unknown, accrued, absolute, contingent, matured or unmatured, of the sort
which would be reflected on a balance sheet of the Company prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the Company Financial Statements.
SECTION 5.07
Absence of Certain Changes or Events
. Since December 31, 2007,
(a) except with respect to the transactions contemplated by this Agreement, the Company has carried
on and operated its businesses in all material respects in the ordinary course of business and (b)
there have not been any changes, events, circumstances, developments or occurrences that would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.08
Litigation; Government Investigations
. There are no material claims,
suits, actions, proceedings, arbitrations or other actions pending or, to the knowledge of the
Company, threatened against, relating to or affecting the Company, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator. No material
investigation or review by any governmental or regulatory body or authority is pending or, to the
knowledge of the Company, threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same. The Company is not subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator, or any settlement agreement or stipulation, which
as of the date hereof prohibits the consummation of the transactions contemplated hereby or would
reasonably be expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
SECTION 5.09
Proxy Statement/Prospectus
. None of the information to be supplied by
the Company or its stockholders for inclusion in the Proxy Statement/Prospectus will, at the time
of the mailing thereof or any amendments or supplements thereto, or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply, as of its mailing date, as to form in all material respects with
all applicable laws, including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company with respect to
information supplied by CytRx or Merger Subsidiary for inclusion therein.
SECTION 5.10
No Violation of Law
. The Company is not in violation of and has not been
given written (or, to the knowledge of the Company, oral) notice of any violation of any law,
statute, order, rule, regulation, ordinance or judgment of any governmental or regulatory body or
authority, except for violations which would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. The Company is not in violation of the terms
of any permits, licenses, franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
19
presently conducted, except for delays in filing reports or violations which would not
reasonably be expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
SECTION 5.11
Material Contracts; Compliance with Contracts
.
(a) The Company SEC Reports include a list of each contract, agreement, license, arrangement
or understanding to which the Company is a party or by which the Company or its assets are bound or
affected as of the date hereof (each, a
Material Contract
):
(i) which is required to be disclosed in the Company SEC Reports;
(ii) pursuant to which payments are required or acceleration of benefits is required upon a
change of control of the Company or similar event;
(iii) which is material to the Companys assets, including the Company Intellectual Property
and Company Technology (as those terms are defined in Section 5.18), or business and which requires
the consent or waiver of a third party prior to the Company consummating the transactions
contemplated hereby; or
(iv) which relates to (A) any acquisition by or from the Company, or any grant by or to the
Company, of any right, title or interest in, under or to any Intellectual Property (as defined in
Section 5.18), including Intellectual Property Licenses (as defined in Section 5.18), contracts,
agreements, arrangements or understandings or (B) any covenant not to sue granted by the Company to
any person or granted by any person to the Company for the benefit of the Company, with respect to
any Intellectual Property, all of which Intellectual Property in clauses (A) and (B) is material to
the Company, other than standardized nonexclusive licenses obtained by the Company in the ordinary
course of business.
(b) With respect to each Material Contract (i) the Material Contract is legal, valid, binding
and enforceable and in full force and effect with respect to the Company, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors rights and
remedies generally, and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and (ii) the Company is not in material
breach or violation of or in material default in the performance or observance of any term or
provision of, and, to the knowledge of the Company, no event has occurred which, with lapse of time
or action by a third party, would result in a default under, the Material Contract.
SECTION 5.12
Taxes
.
(a) The Company has timely (i) filed with the appropriate governmental authorities all
material Tax Returns (as defined below) required to be filed by it, and such Tax Returns are true,
correct and complete in all material respects, and (ii) paid in full or reserved in accordance with
generally accepted accounting principles on the Company Financial Statements all material Taxes (as
defined below) required to be paid. The Company has not requested an extension of time within
which to file a material Tax Return, which has not been since filed. There are no liens for Taxes
upon any property or asset of the Company, other than liens for Taxes not yet due
20
and payable or Taxes contested in good faith by appropriate proceedings or that are otherwise
not material and reserved against in accordance with generally accepted accounting principles. No
deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the
Company, which has not been fully paid or adequately reserved or reflected in the Company SEC
Reports, and there are no material unresolved issues of law or fact arising out of a written notice
of a deficiency, proposed deficiency or assessment from the Internal Revenue Service or any other
governmental taxing authority with respect to Taxes of the Company. The Company has not agreed to
an extension of time with respect to a Tax deficiency, other than extensions which are no longer in
effect. The Company is not a party to any agreement providing for the allocation or sharing of
Taxes with any entity other than agreements the consequences of which are fully and adequately
reserved for in the Company Financial Statements. The Company has not been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during the five-year
period ending on the date hereof.
(b) The Company has withheld or collected and has paid over to the appropriate governmental
entities (or are properly holding for such payment) all Taxes required to be collected or withheld,
including with respect to amounts paid or owed to any employee, independent contractor,
stockholder, or other third party.
(c) For purposes of this Agreement,
Tax
(including, with correlative meaning, the
terms
Taxes
) means all federal, state, local and foreign taxes, charges, fees, imposts,
levies or other assessments, including all net income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, communications services, severance, stamp, payroll,
sales, employment, unemployment, disability, social security, occupation, use, property,
withholding, excise, production, value added, occupancy, capital, ad valorem, transfer, inventory,
license, customs duties, fees, assessments and charges of any kind whatsoever and other taxes,
duties or assessments of any nature whatsoever, together with all interest, penalties, fines and
additions imposed with respect to such amounts and any interest in respect of such penalties and
additions, and includes any liability for Taxes of another person by contract, as a transferee or
successor, under Treas. Reg. Section 1.1502-6 or analogous state, local or foreign law provision or
otherwise, and
Tax Return
means any return, report, claim for refund, estimate,
information return or statement or other similar document (including attached schedules) relating
to or required to be filed with respect to any Tax, including, any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 5.13
Employee Benefit Plans; ERISA; Employment Agreements
.
(a) The Company SEC Reports set forth or refer to each employee or director benefit plan,
arrangement or agreement (other than immaterial plans, arrangements or agreements), including any
(i) employment agreement or indemnification agreement, as well as (ii) any employee welfare benefit
plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended (
ERISA
), any employee pension benefit plan within the meaning of Section 3(2) of
ERISA (whether or not such plan is subject to ERISA), or bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit
plan, program or agreement (excluding any multi-employer plans as defined in Section 3(37) of ERISA
(a
Multi-employer Plan
)) and any multiple employer plan within the meaning of Section
413(c) of the Code) that is sponsored,
21
maintained or contributed to by the Company or by any trade or business, whether or not
incorporated, all of which together with the Company would be deemed a
single employer
within the meaning of Section 4001 of ERISA, or with respect to which the Company or any such trade
or business has any liability (the
Company Plans
).
(b) (i) There have been no prohibited transactions within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code with respect to any of the Company Plans that could result in
penalties, taxes or liabilities which would reasonably be expected to have a Company Material
Adverse Effect, (ii) no Company Plan is subject to Title IV of ERISA, (iii) each of the Company
Plans has been operated and administered in accordance with applicable laws during the period of
time covered by the applicable statute of limitations, except for failures to comply which would
not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse
Effect, (iv) each of the Company Plans which is intended to be
qualified
within the
meaning of Section 401(a) of the Code has been the subject of a favorable determination letter from
the IRS or other IRS letter to the same effect and such letter has not been revoked by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a failure to amend, except
that it may be necessary to make additional amendments retroactively to maintain the
qualified
status of such Company Plans, and the period for making any such necessary
retroactive amendments has not expired, (v) to the knowledge of the Company, there are no pending
or threatened claims involving any of the Company Plans other than claims for benefits in the
ordinary course or claims which would not reasonably be expected, individually or in the aggregate,
to have a Company Material Adverse Effect, (vi) no Company Plan provides post-retirement medical
benefits to employees or directors of the Company beyond their retirement or other termination of
service, other than coverage mandated by applicable law, (vii) all material contributions or other
amounts payable by the Company as of the date hereof with respect to each Company Plan in respect
of current or prior plan years have been paid or accrued in accordance with generally accepted
accounting principles, (viii) with respect to each Multi-employer Plan contributed to by the
Company, to the knowledge of the Company, as of the date hereof, the Company has not received any
notification that any such Multi-employer Plan is in reorganization, has been terminated or is
insolvent, (ix) the Company has complied in all respects with the Worker Adjustment and Retraining
Notification Act, except for failures which would not reasonably be expected, individually or in
the aggregate, to have a Company Material Adverse Effect, and (x) no act, omission or transaction
has occurred with respect to any Company Plan that has resulted or could result in any liability of
the Company under Section 409, 502(c) or 502(l) of ERISA or Chapter 43 of Subtitle (A) of the Code,
except for liabilities which would not reasonably be expected, individually or in the aggregate, to
have a Company Material Adverse Effect.
(c) Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, or could reasonably be expected to, (i) result in any
material payment (including severance or
excess parachute payment
(within the meaning of
Section 280G of the Code)) becoming due to any director or employee of the Company under any
Company Plan or any Material Contract, (ii) materially increase any benefits otherwise payable
under any Company Plan or (iii) result in any acceleration of the time of payment or vesting of any
such benefits.
22
(d) The Company is not a party to or bound by any employment, consulting, termination,
severance or similar agreement with any individual officer, director or employee of the Company or
any agreement pursuant to which any such person is entitled to receive any benefits from the
Company upon the occurrence of a change in control of the Company or similar event.
SECTION 5.14
Labor Controversies. [Intentionally Omitted]
SECTION 5.15
Environmental Matters. [Intentionally Omitted]
SECTION 5.16
Title to Assets
. The Company has good title to all its leasehold
interests and other properties, as reflected in the most recent balance sheet included in the
Company Financial Statements, except for properties and assets that have been disposed of in the
ordinary course of business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) liens for current
Taxes, payments of which are not yet delinquent or are being disputed in good faith by appropriate
proceedings and (ii) such imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from the value, or
interfere with the present use of the property subject thereto or affected thereby, or otherwise
impair the Companys assets, business or operations. With respect to real property leased by the
Company, the Company is entitled to and has exclusive possession of such leased properties, and the
leased properties are not subject to any other legally binding lease, tenancy, license or easement
of any kind that materially interferes with the Companys use of the leased properties as currently
used. To the knowledge of the Company, all leases under which the Company leases any real or
personal property are in good standing, valid and effective in accordance with their respective
terms, and, to the knowledge of the Company, there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a default other than
failures to be in good standing, valid and effective and defaults under such leases which would not
reasonably be expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
SECTION 5.17
Company Stockholders Approval
. The only vote or approval of the holders
of any class or series of capital stock of the Company required for approval of this Agreement or
the Merger is the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon (the
Company Stockholders Approval
).
There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote.
SECTION 5.18
Intellectual Property
.
(a) As used in this Agreement, the following capitalized terms have the meanings indicated
below.
(i)
Company Intellectual Property
means all Intellectual Property (as defined below)
used in or necessary for the conduct of the business of the Company, or owned or held for use by
the Company;
23
(ii)
Company Technology
means all Technology (as defined below) used in or necessary
for the conduct of the business of the Company, or owned or held for use by the Company;
(iii)
Intellectual Property
means all intellectual property rights and related
priority rights, arising from or in respect of the following, whether protected, created or arising
under the laws of the United States or any other jurisdiction or under any international
convention, including: (A) all patents and patent applications worldwide, including all
continuations, divisionals, continuations-in-part and provisionals and patents issuing thereon, and
all reissues, reexaminations, substitutions, renewals and extensions thereof (collectively,
Patents
); (B) all trademarks, service marks, trade names, trade dress, logos, corporate
names and other source or business identifiers, together with the goodwill associated with any of
the foregoing, and all applications, registrations, renewals and extensions thereof (collectively,
Marks
); (C) all Internet domain names; (D) all copyrights, works of authorship and moral
rights, and all registrations, applications, renewals, extensions and reversions thereof
(collectively,
Copyrights
); (E) all Registrations (as defined below); and (F) all
confidential and proprietary information or non-public discoveries, concepts, ideas, research and
development, technology, know-how, formulae, inventions, trade secrets, compositions, processes,
techniques, technical data and information, procedures, designs, drawings, specifications,
databases, customer lists, supplier lists, pricing and cost information, and business and marketing
plans and proposals, in each case excluding any rights in respect of any of the foregoing that
comprise or are protected by Patents (collectively,
Trade Secrets
);
(iv)
Intellectual Property License
means (A) any grant by the Company to another
person of any license, sublicense, right, permission, consent or non-assertion relating to or under
any Company Intellectual Property and/or Company Technology; and (B) any grant by another person to
the Company of any license, sublicense, right, permission, consent or non-assertion relating to or
under any Intellectual Property and/or Technology, including the Company License Agreements;
(v)
Registrations
means any and all applications, registrations, licenses,
authorizations and approvals submitted to the FDA or to an analogous regulatory authority anywhere
outside of the U.S. (
Ex-U.S. Authority
), all material correspondence submitted to or
received from the FDA or an Ex-U.S. Authority (including material minutes and official contact
reports relating to any communications with the FDA or Ex-U.S. Authority) and all material
supporting documentation and all clinical studies and material tests relating to Company
Intellectual Property, and all material data contained in any of the foregoing, including any of
the following filed with the FDA or Ex-U.S. Authority, including all analogous submissions filed
outside of the U.S.: (A) all INDs and NDAs filed with the FDA; and (B) all marketing
authorizations, regulatory drug lists, adverse event files, complaint files and material
manufacturing records generated under or in connection with Company Intellectual Property that are
held or beneficially owned by the Company, which are set forth in Section 5.18(b) of the Company
Disclosure Schedule, as well as the information contained therein together with the pertaining
registration dossiers;
(vi)
Software
means any and all: (A) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in source code
24
or object code; (B) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise; (C) descriptions, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing, and screens, user interfaces,
report formats, firmware, development tools, templates, menus, buttons and icons; and (D) all
documentation, including user manuals and other training documentation, related to any of the
foregoing; and
(vii)
Technology
means all Software, information, designs, formulae, algorithms,
procedures, methods, techniques, ideas, know-how, research and development, technical data,
programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable
or unpatentable and whether or not reduced to practice), apparatus, creations, improvements and
other similar materials, and all recordings, graphs, drawings, reports, analyses, and other
writings, and other embodiments of any of the foregoing, in any form or media whether or not
specifically listed herein, and all related technology used in, incorporated in, embodied in,
displayed by or related to, or used in connection with, any of the foregoing.
(b) Section 5.18(b) of the Company Disclosure Schedules sets forth an accurate and complete
list of the following Company Intellectual Property: all issued Patents and pending Patent
applications; registered Marks; pending applications for registration of Marks and material
unregistered Marks; registered Copyrights; Internet domain names owned or filed by the Company or
any of its subsidiaries; Registrations owned by the Company or to which the Company has rights of
use or reference, in whole or in part. Section 5.18(b) of the Company Disclosure Schedules also
lists (i) the record owner of each such item of Intellectual Property and (ii) the jurisdictions in
which each such item of Intellectual Property has been issued or registered or in which any such
application for issuance or registration has been filed.
(c) The Company is the sole and exclusive owner of, or has valid and continuing rights to use,
sell, license and otherwise commercially exploit, as the case may be, all Company Intellectual
Property, Company Technology and Intellectual Property licensed to the Company under the
Intellectual Property Licenses as the same is used, sold, licensed and otherwise commercially
exploited by the Company in its business as presently conducted or proposed to be conducted, free
and clear of all liens, claims, encumbrances and security interests. The Company Intellectual
Property, the Company Technology and the Intellectual Property licensed to the Company under the
Intellectual Property Licenses include all of the Intellectual Property and Technology necessary
and sufficient to enable the Company to conduct its business in the manner in which it is currently
being conducted or proposed to be conducted. The Company owns no proprietary Software.
(d) The Company Intellectual Property, the Company Technology, the development, manufacturing,
licensing, marketing, importation, offer for sale, sale or use of any products and services in
connection with the business as presently conducted or proposed to be conducted, and the present
business practices, methods and operations of the Company do not, to the knowledge of the Company,
infringe, dilute, constitute an unauthorized use or misappropriation of, or violate any
Intellectual Property, Technology or other right of any person. To the knowledge of the Company,
no person is infringing, diluting, violating, misusing or misappropriating any Company Intellectual
Property or Company Technology, and no claims of infringement, dilution,
25
violation, misuse or misappropriation of any Company Intellectual Property or Company
Technology have been made against any person by the Company.
(e) The Company has taken reasonable security measures to protect the confidentiality and
value of all Trade Secrets and any other material non-public, proprietary information of the
Company (and any confidential information owned by a third person to whom the Company has a
confidentiality obligation) which measures are reasonable in the industry in which the business
operates. Each Company employee, consultant and independent contractor involved in the creation or
development of any products, services, Intellectual Property or Technology related to the business
of the Company has entered into a written non-disclosure and invention assignment agreement with
the Company in a form provided to CytRx prior to the date hereof.
(f) As of the date hereof, the Company is not the subject of any pending or, to the knowledge
of the Company, threatened legal proceedings that involve a claim by any person against the Company
of infringement, unauthorized use, misappropriation, dilution or violation of any Intellectual
Property, or that challenges the ownership, use, validity or enforceability of any Company
Intellectual Property, Company Technology or Intellectual Property licensed to the Company under
any of the Intellectual Property Licenses. The Company has not received oral or written notice of
any such threatened claim. The Company Intellectual Property and the Company Technology, and all
of the Companys rights in and to the Company Intellectual Property, the Company Technology and the
Intellectual Property licensed to the Company under the Intellectual Property Licenses, to the
knowledge of the Company, are valid and enforceable.
(g) The consummation of the transactions contemplated hereby will not result in the loss or
impairment of the Surviving Corporations right to own or use any of the Company Intellectual
Property, the Company Technology or any Intellectual Property licensed to the Company under the
Intellectual Property Licenses. Neither this Agreement nor any transaction contemplated by this
Agreement will result in the grant of any license or other rights with respect to any Company
Intellectual Property, Company Technology or Intellectual Property licensed to the Company under
the Intellectual Property Licenses to any third person pursuant to any Contract to which the
Company is a party or by which any assets or properties of the Company is bound.
(h) The data and information in all regulatory filings and submissions by the Company to any
regulatory agency, department, bureau or other government entity (collectively,
Regulatory
Filings
) were and are accurate and reliable for purposes of supporting approval of the
Regulatory Filings.
(i) The Company has, prior to the date hereof, provided to CytRx copies of all of the
Companys Regulatory Filings and correspondence between the Company, its employees, agents or
representatives, on the one hand, and the U.S. Food and Drug Administration or any other
governmental or regulatory bodies or authorities in any state, country, territory or group of
countries (including the European Union) (each of the foregoing a
Governmental Health
Authority
), on the other hand.
26
(j) No clinical trial that the Company has applied for, sought, proposed or commenced has been
placed on clinical hold by any Governmental Health Authority or any institutional review board.
(k) No Governmental Health Authority has informed the Company of any unresolved issues
regarding any of Companys product candidates.
SECTION 5.19
Insurance
. Section 5.19 of the Company Disclosure Schedule sets forth
each insurance policy maintained by the Company and its subsidiaries as of the date hereof and each
general liability, umbrella and excess liability policy currently maintained by the Company (each,
an
Insurance Policy
). Each Insurance Policy is in full force and effect with respect to
the period covered and is valid, outstanding and enforceable, and all premiums or installment
payments of premiums, as applicable, due thereon have been paid in full. No insurer under any
Insurance Policy has canceled or generally disclaimed liability under any such policy or, to the
knowledge of the Company, indicated any intent to do so or not to renew any such policy. To the
knowledge of the Company, all material claims under the Insurance Policies have been filed in a
timely fashion.
SECTION 5.20
Certain Payments
. The Company has not, nor to the knowledge of the
Company, has any director, officer, agent or employee of the Company, or any other person, directly
or indirectly, made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any entity or person, private or public, regardless of form, whether in money,
property or services, in material violation of any applicable law.
SECTION 5.21
Brokers and Finders
. The Company has not entered into any contract with
any person that may result in the obligation of the Company or the Surviving Corporation to pay any
investment banking fees, finders fees or brokerage fees in connection with the transactions
contemplated hereby, other than fees payable to Chartered Capital Advisers, Inc. (the
Company
Financial Advisor
). A true, correct and complete copy of the fee agreement with the Company
Financial Advisor has been made available to CytRx, and the Company has provided to CytRx a true,
correct and complete copy of any and all other engagement or retention agreements with outside
legal counsel, financial advisors or other advisors, to which the Company is a party and which are
related to the transactions contemplated hereby.
SECTION 5.22
Opinion of Financial Advisor
. The Board of Directors of the Company has
received the signed opinion of Company Financial Advisor, dated the date of this Agreement (the
Financial Advisor Opinion
), to the effect that, as of such date, and subject to customary
assumptions and qualifications set forth therein, the consideration to be received by the Companys
stockholders in the Merger is fair to such stockholders from a financial point of view. A true and
complete copy of such Financial Advisor Opinion has been furnished for informational purposes only
to CytRx, and such Financial Advisor Opinion has not been withdrawn, revoked or modified.
27
ARTICLE VI
COVENANTS
SECTION 6.01
Conduct of Business by the Company Pending the Merger
. Except as
otherwise contemplated by this Agreement or disclosed in the Company Disclosure Schedule, after the
date hereof and until the Effective Time or earlier termination of this Agreement, unless CytRx
shall otherwise agree in writing (which agreement shall not be unreasonably withheld or delayed),
the Company shall:
(a) conduct its business in the ordinary course of business consistent with past practice;
(b) consult with CytRx, in advance, regarding the conduct and management of the Companys
clinical trials and other development activities;
(c) use its commercially reasonable efforts to mitigate or compromise the Liabilities of the
Company from time to time;
(d) not (i) amend or propose to amend its Certificate of Incorporation or its Bylaws,
(ii) split, combine, subdivide or reclassify any shares of outstanding capital stock,
(iii) declare, set aside or pay any dividend or distribution payable in cash, stock, property or
otherwise, or make any other distribution in respect of any shares of its capital stock, or
(iv) repurchase, redeem or otherwise acquire, or modify or amend, any shares of its capital stock
or any other securities or any rights, warrants or options to acquire any such shares or other
securities;
(e) not issue, sell, pledge, grant or dispose of, or agree to issue, sell, pledge, grant or
dispose of, any additional shares of, or any options, warrants or rights of any kind to acquire any
shares of, its capital stock of any class or any debt or equity securities convertible into or
exchangeable for its capital stock, except that the Company may issue shares upon the exercise of
Company Warrants outstanding on the date hereof;
(f) not (i) incur or become contingently liable with respect to any indebtedness for borrowed
money, (ii) redeem, purchase, acquire or offer to purchase or acquire any shares of its capital
stock or any options, warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) make any acquisition of any capital
stock, assets or businesses of any other person other than expenditures for current assets in the
ordinary course of business consistent with past practice and expenditures for fixed or capital
assets in the ordinary course of business consistent with past practice, (iv) sell, pledge, dispose
of or encumber any assets or businesses that are material to the Company, except (A) sales, leases,
rentals and licenses in the ordinary course of business consistent with past practice, (B) pursuant
to contracts that are in force at the date of this Agreement and are disclosed in the Company
Disclosure Schedules hereto, (C) dispositions of obsolete or worthless assets or, or (v) enter into
any contract with respect to any of the foregoing;
(g) use all reasonable efforts to preserve intact its business organization and goodwill, keep
available the services of its present officers and key employees, and preserve the goodwill
28
and business relationships with customers and others having business relationships with them,
other than as expressly permitted by the terms of this Agreement;
(h) not enter into, amend, modify or renew any employment, consulting, severance or similar
contract with, pay any bonus or grant any increase in salary, wage or other compensation or any
increase in any employee benefit to, any directors, officers or employees of the Company, except in
each such case (i) as may be required by applicable law or (ii) to satisfy obligations existing as
of the date hereof pursuant to the terms of contracts that are in effect on the date hereof;
(i) not enter into, establish, adopt, amend or modify any pension, retirement, stock purchase,
savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare plan, agreement, program or arrangement, in respect of any
directors, officers or employees of the Company, except, in each such case (i) as may be required
by applicable law or pursuant to the terms of this Agreement or (ii) to satisfy obligations
existing as of the date hereof pursuant to the terms of contracts that are in effect on the date
hereof;
(j) except to the extent required under existing employee and director benefit plans,
agreements or arrangements as in effect on the date hereof or as expressly provided by this
Agreement, not accelerate the payment, right to payment or vesting of any bonus, severance, profit
sharing, retirement, deferred compensation, stock option, insurance or other compensation or
benefits;
(k) not make capital expenditures or enter into any binding commitment or contract to make
capital expenditures, except (i) capital expenditures which the Company or its subsidiaries are
currently committed to make, (ii) capital expenditures consistent with the estimated amounts
disclosed in the Company SEC Reports, (iii) capital expenditures for emergency repairs and other
capital expenditures necessary in light of circumstances not anticipated as of the date of this
Agreement which are necessary to avoid significant disruption to the Companys business or
operations consistent with past practice (and, if reasonably practicable, after consultation with
CytRx), and (iv) repairs and maintenance in the ordinary course of business;
(l) not make, change or revoke any material Tax election unless required by law or make any
agreement or settlement with any taxing authority regarding any material amount of Taxes or which
would reasonably be expected to materially increase the obligations of the Company or the Surviving
Corporation to pay Taxes in the future;
(m) not make any changes in financial or Tax accounting methods, principles or practices (or
change an annual accounting period), except insofar as may be required by a change in generally
accepted accounting principles or applicable law;
(n) not adopt a plan or agreement of complete or partial liquidation or dissolution;
(o) not pay, discharge or satisfy any material claims, material liabilities or material
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction (A) of any such material claims, material liabilities or
material obligations in the ordinary course of business consistent with past practice or (B) of
material
29
claims, material liabilities or material obligations reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) contained in the Company SEC
Reports;
(p) not agree to the settlement of any claim, litigation, investigation or other action that
is material to the Company;
(q) not enter into any contract that restrains, limits or impedes the ability of the Company
or the Surviving Corporation to compete with or conduct any business or line of business, including
geographic limitations on the activities of the Company;
(r) not materially modify or amend, or terminate any Material Contract, or waive, relinquish,
release or terminate any material right or material claim, or enter into any contract that would
have been a Material Contract if it had been in existence at the time of the execution of this
Agreement;
(s) not incur transaction costs and expenses in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, legal, accounting and financial
advisory fees, including fees payable to the Company Financial Advisor but excluding fees payable
to Ropes & Gray LLP (collectively,
Transaction Costs
), in excess of $200,000 in the
aggregate; and
(t) not agree to take any of the foregoing actions.
SECTION 6.02
Conduct of Business by CytRx Pending the Merger
. Except as otherwise
contemplated by this Agreement or disclosed in the CytRx Disclosure Schedule, after the date hereof
and until the Effective Time or earlier termination of this Agreement, unless the Company shall
otherwise agree in writing (which agreement shall not be unreasonably withheld or delayed), CytRx
shall:
(a) conducts its business in the ordinary course of business consistent with past practice;
(b) not (i) amend or propose to amend its Amended and Restated Certificate of Incorporation or
its Bylaws, (ii) split, combine, subdivide or reclassify any shares of CytRx Common Stock or
(iii) declare, set aside or pay any dividend or distribution payable in cash, stock, property or
otherwise, or make any other distribution in respect of any shares of CytRx Common Stock;
(c) use all reasonable efforts to preserve intact its business organization and goodwill, keep
available the services of it present officers and key employees, and preserve the goodwill and
business relationships with customers and others having business relationships with it, other than
as expressly permitted by the terms of this Agreement;
(d) not make any changes in financial or Tax accounting methods, principles or practices (or
change an annual accounting period), except insofar as may be required by a change in generally
accepted accounting principles or applicable law;
30
(e) not adopt a plan or agreement of complete or partial liquidation or dissolution; and
(f) not agree to take any of the foregoing actions.
SECTION 6.03
Acquisition Proposals
.
(a) After the date hereof and until the Effective Time or earlier termination of this
Agreement, the Company shall, and shall cause its directors, officers and investment bankers,
attorneys, accountants, financial advisors and other advisors, agents or representatives
(collectively,
Representatives
) to, (i) cease any discussions or negotiations that may be
ongoing as of the date of this Agreement with any person with respect to an Acquisition Transaction
(as defined below), (ii) request the prompt return or destruction of all confidential information
relating to the Company previously furnished to such person and (iii) furnish CytRx with such
information as it may request with respect to any recent discussions or negotiations with any
person with regard to an Acquisition Proposal.
(b) After the date hereof and until the Effective Time or earlier termination of this
Agreement, the Company shall not, and shall not permit any of its Representatives to, directly or
indirectly, (i) initiate, solicit, induce, negotiate, encourage or provide non-public or
confidential information to facilitate any inquiry that constitutes, or may reasonably be expected
to lead to, a proposal or offer to acquire, in one or any series of transactions with such person
(other than CytRx and Merger Subsidiary), any (A) license, sublicense or similar arrangement by the
Company involving any Intellectual Property of the Company under any of the Company License
Agreements, (B) acquisition of assets of the Company equal to 10% or more of the Companys
consolidated assets or to which 10% or more of the Companys revenues or earnings on a consolidated
basis is attributable, (C) acquisition of 10% or more of the outstanding Company Common Stock, (D)
tender offer or exchange offer that if consummated would result in any person beneficially owning
10% or more of the outstanding Company Common Stock or (E) merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar transaction involving
the Company; in each case, other than the transactions contemplated by this Agreement (any such
transactions being referred to herein as an
Acquisition Transaction
); or (ii) enter into,
continue or otherwise participate in any discussions or negotiations with any third party
regarding, or furnish to any person any non-public information or data, or afford access to the
properties, books or records of the Company with respect to, any inquiries that constitute, or may
reasonably be expected to lead to, an Acquisition Transaction, or otherwise knowingly facilitate
any effort to attempt to make or implement any Acquisition Transaction.
(c) Notwithstanding anything in this Agreement to the contrary, (i) prior to receipt of the
Company Stockholders Approval, the Company may, in response to a bona fide written offer or
proposal with respect to a potential or proposed Acquisition Transaction (
Acquisition
Proposal
) from a person or group (a
Potential Acquirer
) that was not solicited,
initiated, induced or knowingly encouraged in violation of this Section 6.03 and which the Company
Board of Directors determines, in good faith and after consultation with the Company Financial
Advisor or other financial advisor and its outside legal counsel, is or could reasonably be
expected to result in a Superior Proposal (as defined below), and only after the Company Board
31
of Directors determines, in good faith and after consultation with the Company Financial
Advisor or other financial advisor and its outside legal counsel, that such action is necessary to
comply with its fiduciary duties to the Companys stockholders under applicable law, (A) furnish
(subject to the execution of a confidentiality agreement not materially less favorable to the
Company than the Confidentiality Agreement, dated April 2, 2008, between CytRx and the Company (the
Confidentiality Agreement
)) confidential or non-public information to, and negotiate
with, such Potential Acquirer and (B) subject to Sections 6.03(d)-(e) below, resolve to accept, or
recommend, and, upon termination of this Agreement in accordance with Section 8.01(e), enter into
agreements relating to, an Acquisition Proposal as to which the Company Board of Directors has
determined in good faith constitutes a Superior Proposal and (ii) the Company Board of Directors
may take and disclose to the Companys stockholders a position contemplated by Rule 14d-9 or
Rule 14e-2 under the Exchange Act and otherwise make disclosures required by applicable law. In
addition, it is understood and agreed that, for purposes of this Agreement (including
Article VIII), a factually accurate public statement by the Company that describes the Companys
receipt of an Acquisition Proposal and the operation of this Agreement with respect thereto shall
not be deemed a withdrawal or modification of, or proposal by the Company Board of Directors to
withdraw or modify, the Directors Recommendation (as defined in Section 6.07), or an approval or
recommendation or neutral position with respect to such Acquisition Proposal. It is understood and
agreed that negotiations and other activities conducted in accordance with this paragraph (c) and
Sections 6.03(d) and (e) hereof shall not constitute a violation of paragraph (a) of this
Section 6.03. The Company agrees to provide to CytRx, to the extent the Company shall not have done
so previously, any information that it is providing to any Potential Acquirer pursuant to this
Section 6.03 at substantially the same time as it provides it to such other Potential Acquirer.
Superior Proposal
means a proposal to acquire, directly or indirectly, for consideration
consisting of cash or securities, all of the equity securities of the Company or all, or
substantially all, of the assets of the Company made by a third party, and which is otherwise on
terms and conditions which the Company Board of Directors determines in good faith (after
consultation with its financial advisor and outside legal counsel) to be more favorable to the
Companys stockholders from a financial point of view than the Merger and the other transactions
contemplated hereby, taking into account any offer by CytRx to amend the terms of this Agreement
pursuant to Section 6.03(d) below.
(d) The Company shall promptly notify CytRx after receipt of any Acquisition Proposal,
indication of interest or request for non-public information relating to the Company or its
subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or
records of the Company by any person or entity that informs the Board of Directors of the Company
that it is considering making, or has made, an Acquisition Proposal. Such notice to CytRx shall be
made orally and in writing and shall indicate in reasonable detail the identity of the offeror and
the material terms and conditions of such proposal, inquiry or contact. Thereafter, the Company
shall keep CytRx informed on a current basis of any material changes in the status of any such
Acquisition Proposal, including whether any such Acquisition Proposal has been withdrawn or
rejected. The Company shall notify CytRx if the Company Board of Directors shall resolve to
accept, or recommend, a Superior Proposal, in which event CytRx shall have the right, but not the
obligation, to offer to amend the terms of this Agreement at any time during the four business-day
period referred to in Section 8.01(e). The Company Board of Directors will review any proposal by
CytRx to amend the terms of this Agreement in good faith in order to determine, in its discretion
in the exercise of its fiduciary duties, whether CytRxs amended
32
proposal upon acceptance by the Company would result in such Superior Proposal ceasing to be a
Superior Proposal. If the Company Board of Directors so determines, it will enter into an amended
agreement with CytRx reflecting CytRxs amended proposal. If the Company Board of Directors
continues to believe, in good faith and after consultation with financial advisors and outside
counsel, that such Superior Proposal remains a Superior Proposal and therefore rejects CytRxs
amended proposal, the Company may, on termination of this Agreement in accordance with
Section 8.01(e), accept, approve, recommend or enter into an agreement, understanding or
arrangement in respect of such Superior Proposal.
(e) Except as expressly permitted by Section 6.03(c) or this Section 6.03(e), neither the
Company Board of Directors, nor any committee thereof, shall (i)(A) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to CytRx, the Directors Recommendation or the
approval or declaration of advisability by such Board of this Agreement and the Merger or
(B) approve or recommend, or propose publicly to approve or recommend, the adoption of any
Acquisition Proposal (any action described in this clause (i) being referred to as a
Company
Adverse Recommendation Change
), or (ii) cause, authorize or permit the Company to enter into
any letter of intent, memorandum of understanding, agreement in principal, acquisition agreement,
merger agreement, option agreement, joint venture agreement, partnership agreement, or any similar
agreement, with respect to any Acquisition Proposal (other than a confidentiality agreement
permitted by Section 6.03(c)) (each, a
Company Acquisition Agreement
). Notwithstanding
the foregoing, (x) the Company Board of Directors may withdraw or modify the Directors
Recommendation, or recommend an Acquisition Proposal, if the Company Board of Directors determines
in good faith, based on those matters as it deems appropriate after consulting with the Company
Financial Advisor or other financial advisor and its outside legal counsel, that taking such action
is necessary to comply with its fiduciary duties under applicable law, and (y) if the Company Board
of Directors receives an Acquisition Proposal that such Board determines in good faith constitutes
a Superior Proposal, then the Company or its subsidiaries may terminate this Agreement pursuant to
Section 8.01(e) and concurrently enter into a Company Acquisition Agreement with respect to such
Superior Proposal; provided, that, with respect to any termination pursuant to clause (y), the
Company shall have complied in all material respects with its obligations under this Section 6.03
since the date of this Agreement and the Company pays CytRx the Termination Fee pursuant to Section
8.02 hereof concurrent with (and as a condition of) such termination.
(f) After the date hereof and until the Effective Time or earlier termination of this
Agreement, CytRx shall promptly notify the Company after receipt of any proposal or offer to
acquire all or any substantial part of the business, properties or capital stock of CytRx, whether
by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof and shall indicate in reasonable detail the identity of the
offeror or person and the material terms and conditions of such proposal or offer and the financing
arrangements, if any, relating thereto.
SECTION 6.04
Access to Information; Confidentiality
.
(a) Subject to applicable law relating to the exchange of information, the parties shall
afford to each other and the others accountants, counsel, financial advisors, sources of financing
and other representatives reasonable access during normal business hours with reasonable notice
33
throughout the period from the date hereof until the Effective Time to all of their respective
properties, books, contracts and records (including, but not limited to, Tax Returns) and, during
such period, shall furnish promptly (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state securities laws or filed
by any of them with the SEC in connection with the transactions contemplated by this Agreement, and
(ii) such other information concerning its businesses, properties and personnel as any party shall
reasonably request, and will use reasonable efforts to obtain the reasonable cooperation of its
officers, employees, counsel, accountants, consultants and financial advisors in connection with
the review of such other information by the parties and their respective representatives.
(b) All nonpublic information provided to, or obtained by, a party regarding another party in
connection with the transactions contemplated hereby shall be
Proprietary Information
.
Notwithstanding the foregoing, the term Proprietary Information shall not include information that
(i) is or becomes within the public domain through no act of the receiving party in breach of this
Section 6.04, (ii) was in the possession of the receiving party prior to its disclosure or transfer
hereunder, (iii) is independently developed by the receiving party, or (iv) is received from
another source without any restriction on use or disclosure through no act of the receiving party
in breach of this Section 6.04.
(c) Except as specifically provided herein, each party agrees that it shall not disclose any
Proprietary Information to any third party nor use any Proprietary Information of another party for
any purpose other than as may be necessary in connection with the transactions contemplated hereby.
The parties shall each protect all Proprietary Information with the same degree of care as it
applies to protect its own proprietary information. As used herein, the term
third party
shall be broadly interpreted to include any corporation, company, partnership or individual.
(d) Notwithstanding the foregoing, a party may disclose such Proprietary Information to its
directors, officers, employees, consultants, agents and representatives who need to know such
Proprietary Information in connection with the transactions contemplated hereby (it being
understood that such directors, officers, consultants, agents and representatives shall be informed
by the receiving party of the confidential nature of such Proprietary Information and will agree to
be bound by the terms of this Section 6.04), provided, that, the receiving party agrees to be
responsible for any breach of this Section 6.04 by such persons.
(e) The parties agree that all communications with the other parties and all requests for
information related thereto will be submitted only to persons specifically designated in writing by
the parties.
(f) In the event a party is legally requested or required to disclose Proprietary Information
of the other party, the receiving party shall promptly notify the disclosing party of such request
or requirement so that the disclosing party may seek an appropriate protective order or waive the
provisions of this Section 6.04. In the event that such protection or other remedy is not obtained
or that the disclosing party waives compliance, the receiving party agrees to furnish only that
portion of the Proprietary Information which it is advised by counsel is legally required.
Notwithstanding anything to the contrary in this Agreement, a disclosing party shall not be
34
required to provide any information to any other party which it reasonably believes it may not
provide to another party by reason of applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which the disclosing party or any subsidiary
is required to keep confidential by reason of Contract, agreement or understanding with third
parties.
SECTION 6.05
Notices of Certain Events.
(a) The Company and CytRx shall as promptly as reasonably practicable after executive officers
acquire knowledge thereof, notify the other of: (i) any notice or other communication from any
person alleging that the consent of such person (or another person) is or may be required in
connection with the transactions contemplated by this Agreement which consent relates to a Material
Contract or the failure of which to obtain could materially delay consummation of the Merger;
(ii) any notice or other communication from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened, relating to or
involving or otherwise affecting the Company or CytRx, as the case may be that, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant to Sections 6.08,
6.09 or 6.11 or which relate to the consummation of the transactions contemplated by this
Agreement.
(b) Subject to the provisions of Section 6.03, each of the Company and CytRx agrees to give
prompt notice to the other of, and to use its reasonable best efforts to remedy, (i) the occurrence
or failure to occur of any event which occurrence or failure to occur would reasonably be expected
to cause any of its representations or warranties in this Agreement to be untrue or inaccurate at
the Effective Time unless such occurrence or failure to occur would not reasonably be expected to
have a Company Material Adverse Effect or a CytRx Material Adverse Effect, as the case may be, and
(ii) any failure on its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder unless such failure would not reasonably be expected to
have a Company Material Adverse Effect or a CytRx Material Adverse Effect, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section 6.05(b) shall not limit
or otherwise affect the representations, warranties, covenants or agreements of the parties, the
remedies available hereunder to the party receiving such notice or the conditions to such partys
obligation to consummate the Merger.
SECTION 6.06
Merger Subsidiary
. CytRx will take all action necessary to cause Merger
Subsidiary to perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement. Until the Effective Time, Merger Subsidiary will
not carry on any business or conduct any operations other than the execution of this Agreement, the
performance of its obligations hereunder and matters ancillary hereto.
SECTION 6.07
Meeting of the Companys Stockholders
. The Company shall as promptly as
practicable after the date of this Agreement take all action necessary in accordance with the DGCL
and its Certificate of Incorporation and Bylaws to establish a record date for, duly call, give
notice of, and convene a meeting of the Companys stockholders (the
Company Stockholders
Meeting
) for the purpose of obtaining the Company Stockholders Approval and will use its
reasonable best efforts (including postponing or adjourning the Company
35
Stockholders Meeting to obtain a quorum or to solicit additional proxies and, at CytRxs
request, retaining a proxy solicitation firm to assist in soliciting proxies) to obtain the Company
Stockholders Approval; provided, however, that the Company shall be relieved of its obligations
with respect to the Company Stockholders Meeting if the Company Board of Directors terminates this
Agreement pursuant to Section 8.01(e) and pays CytRx the Termination Fee pursuant to Section 8.02
concurrent with (and as a condition of) such termination. Subject to Sections 6.03(c) and (e),
the Company Board of Directors shall recommend that the Companys stockholders vote to approve this
Agreement, and the Proxy Statement/Prospectus shall contain the unqualified recommendation of the
Company Board of Directors that its stockholders vote in favor of the adoption of this Agreement
and the approval of the transactions contemplated hereby (the
Directors Recommendation
).
SECTION 6.08
Registration Statement
.
(a) As promptly as practicable after execution of this Agreement, CytRx shall prepare and file
with the SEC the Registration Statement containing the Proxy Statement/Prospectus and thereafter
shall use its reasonable best efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing. The Proxy Statement/Prospectus
shall, subject to Section 6.07, include the Directors Recommendation. CytRx, Merger Subsidiary
and the Company shall cooperate with each other in the preparation of the Registration Statement,
and CytRx shall promptly notify the Company of the receipt of any comments of the SEC with respect
to the Registration Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to the Company promptly copies of all
correspondence between CytRx or its representatives and the SEC. CytRx shall give the Company and
its counsel the opportunity to review the Registration Statement within a reasonable period of time
prior to its being filed with the SEC and to review all amendments and supplements to the
Registration Statement and all responses to requests for additional information and replies to
comments within a reasonable period of time prior to their being filed with, or sent to, the SEC.
Each of the Company, CytRx and Merger Subsidiary agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the SEC has cleared the Registration
Statement, the Company shall mail the Proxy Statement/Prospectus to the stockholders of the
Company. Prior to the date of approval of the Merger by the Companys stockholders, the Company
shall correct promptly any information provided by it to be used specifically in the Registration
Statement that shall have become false or misleading in any material respect, and CytRx shall take
all steps necessary to file with the SEC and have cleared by the SEC any amendment or supplement to
the Registration Statement so as to correct the same and to cause the Proxy Statement/Prospectus as
so corrected to be disseminated to the stockholders of the Company, in each case to the extent
required by applicable law.
(b) The Company shall cooperate with CytRx in connection with investor meetings and customary
road show presentations of CytRx. As part of such meetings and presentations, the Company
understands and agrees that CytRx may provide information with respect to the Companys clinical
trials, product candidates and other assets and business, subject to customary confidentiality
agreements.
36
SECTION 6.09
Public Announcements
. In connection with the execution and delivery of
this Agreement, Cytx and the Company shall issue press releases in substantially the forms attached
hereto as
Exhibit C
(the
Signing Releases
). CytRx, in its discretion, shall be
entitled to convene an investor conference call in conjunction with the issuance of the Signing
Releases. Except for the Signing Releases and such conference call, no party shall issue or cause
the publication of any press release or other public announcement (to the extent not previously
issued or made in accordance with this Agreement) with respect to this Agreement, the Merger or the
other transactions contemplated hereby without the prior consent of the other parties (which
consent shall not be unreasonably withheld or delayed), except as may be required by law, including
applicable SEC requirements, applicable fiduciary duties or by any applicable listing agreement
with The Nasdaq Capital Market (in which case such party shall not issue or cause the publication
of such press release or other public statement without prior consultation with the other party).
SECTION 6.10
Expenses and Fees.
Each of the parties shall bear and pay all costs and
expenses incurred by it in connection with this Agreement and the transactions contemplated hereby.
Subject to the limitation set forth in Section 6.01(r), within 30 days following the Closing Date,
CytRx shall pay or cause to be paid any unpaid Transaction Costs.
SECTION 6.11
Agreement to Cooperate
.
(a) Subject to the terms and conditions of this Agreement, including Section 6.03 and this
Section 6.11, each of the parties hereto shall use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable
under applicable law and regulations to consummate and make effective the transactions contemplated
by this Agreement, including using its reasonable best efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to preserve material
contractual relationships of CytRx and the Company and their respective subsidiaries and to effect
all necessary registrations, filings and submissions. In addition, subject to the terms and
conditions herein provided and subject to the fiduciary duties of the respective Boards of
Directors of the Company and CytRx, none of the parties hereto shall knowingly take or cause to be
taken any action that would reasonably be expected to materially delay or prevent consummation of
the Merger.
(b) CytRx shall use its reasonable efforts to ensure that the Equity Conditions cited in
Section 3.02(b) are met prior to the issuance of any shares of CytRx Common Stock that comprise the
Earnout Merger Consideration and to obtain any necessary permits and approvals under all applicable
state securities laws required to permit the distribution of the shares of CytRx Common Stock that
comprise the Earnout Merger Consideration. This Section 6.11(b) shall survive the Effective Time
and shall not terminate until the expiration of the Earnout Period and the payment of all Earnout
Merger Consideration pursuant to Section 3.02.
SECTION 6.12
Directors and Officers Indemnification
.
(a) After the Effective Time, CytRx shall cause the Surviving Corporation to, to the fullest
extent permitted under applicable law, indemnify, defend and hold harmless, each individual who at
the Effective Time is, or at any time prior to the Effective Time was, a
37
director, officer, employee or agent of the Company or any of its subsidiaries (each, together
with such persons heirs, executors or administrators, an
Indemnified Party
and
collectively, the
Indemnified Parties
) against any costs or expenses (including
attorneys fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any actual or threatened claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative (collectively,
Costs
and Expenses
), arising out of, relating to or in connection with any action or omission
occurring or alleged to occur prior to the Effective Time (including acts or omissions in
connection with such persons serving as an officer, director or other fiduciary in any entity if
such service was at the request or for the benefit of the Company or any of its affiliates). In
the event of any actual or threatened claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time) subject to this Section 6.12, (i) CytRx and the
Surviving Corporation shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to CytRx, the Surviving
Corporation and the Stockholder Representative, promptly after statements therefor are received and
shall pay all other reasonable expenses in advance of the final disposition of such action,
(ii) CytRx and the Surviving Corporation will cooperate and use all reasonable efforts to assist in
the defense of any such matter, and (iii) to the extent any determination is required to be made
with respect to whether an Indemnified Partys conduct complies with the standards set forth under
the DGCL and CytRxs or the Surviving Corporations respective certificate or articles of
incorporation or bylaws, such determination shall be made by independent legal counsel acceptable
to CytRx or the Surviving Corporation, as the case may be, and the Indemnified Party; provided,
however, that neither CytRx nor the Surviving Corporation shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably withheld or delayed);
and, provided, further, that if CytRx or the Surviving Corporation advances or pays any amount to
any person under this paragraph (b) and if it shall thereafter be finally determined by a court of
competent jurisdiction that such person was not entitled to be indemnified hereunder for all or any
portion of such amount, to the extent required by law, such person shall repay such amount or such
portion thereof, as the case may be, to CytRx or the Surviving Corporation, as the case may be. The
Indemnified Parties as a group may not retain more than one law firm to represent them with respect
to each matter, except to the extent that under applicable standards of professional conduct such
counsel would have a conflict representing such Indemnified Party or Indemnified Parties.
(b) In the event the Surviving Corporation or CytRx or any of their successors or assigns
(i) consolidates with or merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all
of its properties and assets to any person, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Surviving Corporation or CytRx shall assume the
obligations of the Surviving Corporation or CytRx, as the case may be, set forth in this
Section 6.12.
(c) For a period of three years commencing immediately after the Effective Time, CytRx shall
cause to be maintained, or shall cause the Surviving Corporation to maintain, in effect the current
policies of directors and officers liability insurance maintained by the Company and its
subsidiaries (provided that CytRx may substitute therefor policies, including a tail policy, of at
least the same coverage and amounts containing terms and conditions that are no
38
less advantageous to the Indemnified Parties, and which coverages and amounts shall be no less
than the coverages and amounts provided at that time for CytRxs directors and officers) with
respect to matters arising on or before the Effective Time; provided, however, that, if the
aggregate annual premiums for such insurance shall exceed 125% of the current aggregate annual
premium, then CytRx shall provide or cause to be provided a policy for the applicable individuals
with the best coverage as shall then be available at an annual premium of not more than 125% of the
current aggregate annual premium.
(d) To the maximum extent permitted by applicable law, CytRx and the Surviving Corporation
shall pay all reasonable expenses, including reasonable attorneys fees, that may be incurred by
any Indemnified Party in enforcing the indemnity and other obligations provided in this
Section 6.12. The rights of each Indemnified Party hereunder shall be in addition to, and not in
limitation of, any other rights such Indemnified Party may have under the charter or bylaws of the
Company, any indemnification agreement, under the DGCL or otherwise. The provisions of this
Section 6.12 shall survive the consummation of the Merger and expressly are intended to benefit
each of the Indemnified Parties.
SECTION 6.13
Loan and Security Agreement
. Concurrently with the execution and
delivery of this Agreement, CytRx and the Company shall enter into the Loan and Security Agreement
in substantially the form attached hereto as
Exhibit B
(the
Loan and Security
Agreement
), and thereafter shall comply with their respective obligations in accordance with
the terms thereof.
SECTION 6.14
Exemption From Liability Under Section 16(b)
. CytRx and the Company
shall cause their respective Boards of Directors and the Board of Directors of the Surviving
Corporation to adopt prior to the Effective Time such resolutions as may be required to, and shall
otherwise use reasonable efforts to, exempt the transactions contemplated by this Agreement from
the provisions of Section 16(b) of the Exchange Act to the maximum extent permitted by law. The
Company shall use reasonable efforts to provide the information to CytRx required in connection
with the adoption of such resolutions to exempt the transactions contemplated by this Agreement
from the provisions of Section 16(b) of the Exchange Act to the maximum extent permitted by law.
SECTION 6.15
Resignation of Officers
. CytRx and Merger Sub hereby agree that the
resignation of the Company officers required by Section 7.03(c) will not have any effect on any
severance provision in any applicable employment, change in control or similar agreement or under
the Companys Employee Retention Program adopted in February 2008, in each of which case the
officers resignation will not be deemed to be a voluntary resignation but rather a termination of
employment by the Company.
SECTION 6.16
Office Lease
. Immediately after the execution of this Agreement, CytRx
shall use its commercially reasonable efforts to remove Steven Kelly as a guarantor of the lease
for the Companys offices located at 555 Madison Avenue, 25
th
Floor, New York, New York
10022, to be effective at the Effective Time. If such removal is not effective at the Effective
Time, CytRx and the Surviving Corporation shall (a) at the Effective Time, enter into a written
agreement satisfactory to the Company and Mr. Kelly to indemnify, defend and hold
39
harmless Mr. Kelly under such lease guarantee and (b) use their commercially reasonable
efforts to have such removal effective as soon as possible after the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01
Conditions to the Obligations of Each Party
. The obligations of the
parties to consummate the Merger are subject to the fulfillment at or prior to the Effective Time
of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the requisite vote of the
stockholders of the Company in accordance with the DGCL;
(b) none of the parties hereto shall be subject to any law, order, injunction, judgment or
ruling enacted, promulgated, issued, entered, amended or enforced by any governmental authority of
competent jurisdiction that prohibits the consummation of the Merger or makes the consummation of
the Merger illegal;
(c) the Registration Statement shall be effective under the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC and not concluded or withdrawn;
(d) the issuance of the shares of CytRx Common Stock to be issued as the Initial Merger
Consideration shall be exempt from registration, or shall have been appropriately registered or
qualified, under applicable state securities laws;
(e) the shares of CytRx Common Stock to be issued as part of the Initial Merger Consideration
shall have been approved for listing on The Nasdaq Capital Market, effective upon notice of
issuance; and
(f) there shall not be pending any action, suit or other proceeding (i) seeking to restrain or
prohibit the consummation of the Merger or seeking to obtain from CytRx or Merger Subsidiary in
connection with the Merger any damages that are material in relation to CytRx, or seeking to obtain
from the Company any damages that are material in relation to the Company, (ii) seeking the sale,
divestiture or disposition of any material assets or businesses of the Company, or (iii) otherwise
seeking to limit the freedom of action of CytRx with respect to the material assets or businesses
of the Company or of the Surviving Corporation.
SECTION 7.02
Conditions to Obligation of the Company to Effect the Merger
. Unless
waived by the Company, the obligation of the Company to consummate the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional conditions:
(a) (i) the representations and warranties of CytRx and Merger Subsidiary set forth in
Sections 4.03(a) (c) (Authority; Non-Contravention) shall be true and correct in all respects as
of the date hereof and as of the Effective Time as if made on and as of the Effective Time (or, if
40
given as of a specific date, at and as of such date) and (ii) the other representations and
warranties of CytRx and Merger Subsidiary contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or CytRx Material Adverse
Effect, shall be true and correct in all respects as of the date hereof and as of the Effective
Time as if made on and as of the Effective Time (or, if given as of a specific date, at and as of
such date), except in the case of this clause (ii) (x) for changes expressly permitted by this
Agreement or (y) where the failure to be true and correct would not reasonably be expected to have
a CytRx Material Adverse Effect. The Company shall have received a certificate of the chief
executive officer or the chief financial officer of the CytRx to that effect; and
(b) each of CytRx and Merger Subsidiary shall have performed in all material respects all
obligations required to be performed by it under this Agreement on or prior to the Effective Time,
and the Company shall have received a certificate of the chief executive officer or the chief
financial officer of CytRx to that effect.
SECTION 7.03
Conditions to Obligations of CytRx and Subsidiary to Effect the Merger
.
Unless waived by CytRx and Merger Subsidiary, the obligations of CytRx and Merger Subsidiary to
consummate the Merger shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) (i) the representations and warranties of the Company set forth in Sections 5.02
(Capitalization), 5.03(a) (c) (Authority; Non-Contravention) and 5.22 (Opinion of Financial
Advisor) shall be true and correct in all respects as of the date hereof and as of the Effective
Time as if made on and as of the Effective Time (or, if given as of a specific date, at and as of
such date) and (ii) the other representations and warranties of the Company contained in this
Agreement, disregarding all qualifications and exceptions contained therein relating to materiality
or Company Material Adverse Effect, shall be true and correct in all respects as of the date hereof
and as of the Effective Time as if made on and as of the Effective Time (or, if given as of a
specific date, at and as of such date), except in the case of this clause (ii) (x) for changes
expressly permitted by this Agreement or (y) where the failure to be true and correct would not
reasonably be expected to have a Company Material Adverse Effect. CytRx shall have received a
certificate of the chief executive officer or the chief financial officer of the Company to that
effect;
(b) the Company shall have performed in all material respects all obligations required to be
performed by it under this Agreement on or prior to the Effective Time, and CytRx shall have
received a certificate of the chief executive officer or the chief financial officer of the Company
to that effect;
(c) CytRx shall have received the resignations, effective as of the Effective Time, of each
member of the Companys Board of Directors and of each officer of the Company; and
(d) Dissenting Shares, if any, shall constitute less than 5% of the issued and outstanding
shares of Company Common Stock.
41
ARTICLE VIII
TERMINATION
SECTION 8.01
Termination
. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement
by the stockholders of the Company):
(a) by mutual written consent of the Company and CytRx duly authorized by each of their
respective Boards of Directors;
(b) by either the Company or CytRx, if the Merger has not been consummated by September 30,
2008 (the
Outside Date
); provided, however, that the right to terminate this Agreement
under this Section 8.01(b) shall not be available to (i) CytRx, if the failure of CytRx or Merger
Subsidiary to fulfill any of its material obligations under this Agreement caused the failure of
the Closing to occur on or before such date, or (ii) the Company, if the failure of the Company to
fulfill any of its material obligations under this Agreement caused the failure of the Closing to
occur on or before such date, or (ii) CytRx or the Company, if the failure of the Closing to occur
on or before such date is due solely to the failure of the condition set forth in Section 7.01(c)
notwithstanding the performance by CytRx of its obligations under Section 6.08;
(c) by either the Company or CytRx, if (x) there has been a breach by the other of any
representation or warranty contained in this Agreement which would reasonably be expected to have a
Company Material Adverse Effect or a CytRx Material Adverse Effect, as the case may be, and which
breach is not curable or, if curable, the breaching party shall not be using on a continuous basis
its reasonable best efforts to cure in all material respects such breach after written notice of
such breach by the terminating party or such breach has not been cured within twenty business days
after written notice of such breach by the terminating party, or (y) there has been a breach of any
of the covenants or agreements set forth in this Agreement on the part of the other party, which
would reasonably be expected to have a CytRx Material Adverse Effect or a Company Material Adverse
Effect, as the case may be, and which breach is not curable or, if curable, the breaching party
shall not be using on a continuous basis its reasonable best efforts to cure such breach after
written notice of such breach by the terminating party or such breach has not been cured within
twenty business days after written notice of such breach by the terminating party;
(d) by either the Company or CytRx after ten days following the entry of any final and
non-appealable judgment, injunction, order or decree by a court or governmental agency or authority
of competent jurisdiction restraining or prohibiting the consummation of the Merger;
(e) by the Company if, prior to receipt of the Company Stockholders Approval, the Company
receives a Superior Proposal, resolves to accept such Superior Proposal, complies with its
Termination Fee payment obligations under Section 8.02 hereof and gives CytRx at least four
business days prior written notice of its intention to terminate pursuant to this provision;
provided, however, that such termination shall not be effective until such time as the payment
required by Section 8.02 shall have been received by CytRx;
42
(f) by CytRx, if the Board of Directors of the Company shall have failed to recommend, or
shall have withdrawn, modified or amended in a manner adverse to CytRx in any material respect the
Directors Recommendation, or shall have resolved to do any of the foregoing, or shall have
recommended another Acquisition Proposal or if the Board of Directors of the Company shall have
resolved to accept a Superior Proposal or shall have recommended to the stockholders of the Company
that they tender their shares in a tender or an exchange offer commenced by a third party
(excluding any affiliate of CytRx or any group of which any affiliate of CytRx is a member) or any
other circumstance in which a Company Adverse Recommendation Change shall have occurred; or
(g) by CytRx, if the Company shall have received an Acquisition Proposal from any person and
the Company Board of Directors took a neutral position or made no recommendation with respect to
such Acquisition Proposal and did not publicly reaffirm the Directors Recommendation in favor of
the Merger and the transactions contemplated hereby after a reasonable amount of time (and in no
event more than five business days following such receipt) has elapsed for the Company Board of
Directors to review and make a recommendation with respect to such Acquisition Proposal; or
(h) by CytRx or the Company if the stockholders of the Company fail to approve the Merger at
the Company Stockholders Meeting (including any adjournment or postponement thereof).
SECTION 8.02
Termination Fee
. The Company shall pay to CytRx a termination fee in an
amount in cash equal to $1,500,000 (the
Termination Fee
) in the event that (i) the
Company terminates this Agreement pursuant to Section 8.01(e); (ii) CytRx terminates this Agreement
pursuant to Sections 8.01(f) or (g); (iii) CytRx terminates this Agreement pursuant to Section
8.01(c), provided that such termination is as a result of the Companys breach of Section 6.03; or
(iv) CytRx or the Company terminates this Agreement pursuant to Section 8.01(h), provided, in the
case of this clause (iv), that (A) after the date hereof and prior to the Company Stockholders
Meeting, an Acquisition Proposal has been publicly announced and not withdrawn or abandoned at the
time of termination, and (B) within one year after such termination, the Company enters into a
definitive agreement with respect to or consummates such Acquisition Proposal. Payment of the
Termination Fee under this Section 8.02 shall be paid by wire transfer of same-day funds to an
account designated by CytRx, in the event of payment pursuant to clause (i) above on the date of
termination of this Agreement, in the event of payment pursuant to clauses (ii) or (iii) above
within three business days following the date of termination of this Agreement, and in the event of
payment pursuant to clause (iv) above, on the date of the execution and delivery by the Company of
the definitive agreement regarding such Acquisition Proposal. CytRx acknowledges and agrees that,
notwithstanding anything to the contrary in this Agreement or any document or instrument delivered
in connection herewith, the rights set forth in clause (iii) of this Section 8.02 shall be the sole
and exclusive remedy of CytRx, Merger Subsidiary and their respective affiliates against the
Company or its Subsidiaries or any of their respective affiliates with respect to the Companys
breach of Section 6.03 of this Agreement (excluding any willful breach of such provisions).
SECTION 8.03
Effect of Termination
. In the event of termination of this Agreement by
either CytRx or the Company pursuant to the provisions of Section 8.01, written
43
notice thereof shall be given to the other party or parties, specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith become void and
there shall be no liability or further obligation on the part of the Company, CytRx, Merger
Subsidiary or their respective officers or directors (except as set forth in the first sentence of
Section 5.21, Section 6.04(b) (d) and (f), Section 6.10, Section 8.02 and this Section 8.03, and
Article X, all of which shall survive the termination). Nothing in this Section 8.03 shall relieve
any party from liability for fraud or any willful breach of this Agreement.
ARTICLE IX
OFFSET
SECTION 9.01
Survival
. The parties agree that, regardless of any investigation made
by or on behalf of CytRx and Merger Subsidiary, the representations, warranties, covenants and
agreements of the Company contained in this Agreement shall survive the execution and delivery of
this Agreement and the Closing until the last day of the statute of limitations period for any
third-party claim relating thereto.
SECTION 9.02
Offset
.
(a) Subject to paragraph (b) below, CytRx shall be entitled to offset against the Earnout
Merger Consideration, if any, (i) the amount, if any, by which the actual Net Liabilities of the
Company as of the date of this Agreement (excluding up to $97,785 that may become due and payable
to Davos Chemical Corporation) exceed the Estimated Net Liabilities, (ii) any and all Losses (as
defined below) incurred by CytRx, Merger Subsidiary or the Surviving Corporation (collectively,
Indemnitees
) by reason of any inaccuracy in or breach of any of the Companys
representations, warranties, covenants or agreements contained in this Agreement, and any
misrepresentation contained in the Company Disclosure Schedule or in any written agreement or
certificate entered into or executed in connection herewith and furnished to CytRx or Merger
Subsidiary by or on behalf of the Company in connection with the transactions contemplated by this
Agreement and (iii) the amount, if any, by which the actual deposits returned to or recovered by
CytRx or the Surviving Corporation is less than the deposits reflected on Section 5.06(b) of the
Company Disclosure Schedule. For purposes of this Agreement, the term
Losses
means any
and all deficiencies, judgments, settlements, demands, claims, suits, actions or causes of action,
assessments, liabilities, losses, damages (whether direct, indirect, incidental or consequential),
interest, taxes, fines, penalties, costs, expenses (including reasonable legal, accounting and
other costs and expenses of professionals) incurred in connection with investigating, defending,
settling or satisfying any and all demands, claims, actions, causes of action, suits, proceedings,
assessments, judgments or appeals; provided, however, that Losses shall not include any amounts for
which Indemnitees are actually reimbursed under any insurance policy.
(b) Indemnitees shall have no right of offset under paragraph (a)(ii) above unless the
cumulative aggregate Losses exceed $50,000, in which event Indemnitees shall have a right of offset
for all Losses (including the first $50,000).
44
SECTION 9.03
Offset Claims
.
(a) In the event Indemnitees determine to offset against the Earnout Merger Consideration, if
any, any amounts pursuant to Section 9.02, CytRx shall a deliver notice (each, an
Offset
Notice
) to the Stockholder Representative setting forth in reasonable detail a description of
such amounts, whether the basis for such offset is clause (i), (ii) or (iii) of Section 9.02(a)
and, with respect to any Losses claimed under clause 9(ii) of Section 9.02(a), the nature of the
inaccuracy in or breach of representation, warranty, covenant or agreement of the Company to which
such Losses relate. Upon delivery of an Offset Notice, CytRx shall, subject to paragraph (b) below
and to Section 9.04, be entitled and authorized to withhold from the Earnout Merger Consideration,
if any, as and when the Earnout Merger Consideration would otherwise be payable hereunder, the
amounts set forth in the Offset Notice.
(b) Within 30 days after the delivery of an Offset Notice to the Stockholder Representative,
the Stockholder Representative may notify (the
Response Notice
) CytRx either that the
Stockholder Representative agrees to the offset against the Earnout Merger Consideration of amounts
as set forth in the Offset Notice or disputes all, or any portion of, the amounts claimed in the
Offset Notice. If no Response Notice has been delivered to CytRx before the expiration of such
30-day period, the Stockholder Representative shall be deemed to have agreed, on behalf of the
Company Stockholders, that all of the amounts set forth in the Offset Notice may be offset pursuant
to this Article IX, and CytRx may thereafter offset against the Earnout Merger Consideration, if
any, and retain, as and when the Earnout Merger Consideration would otherwise be payable hereunder,
such amounts. If the Response Notice is delivered to CytRx before the expiration of such thirty
30-day period and disputes a portion, but not all, of the claimed amounts, then the Stockholder
Representative shall be deemed to have agreed, on behalf of the Company Stockholders, that such
undisputed amounts may likewise be offset pursuant to this Article IX.
SECTION 9.04
Resolution of Conflicts
. If the Stockholder Representative shall have
timely delivered a Response Notice to CytRx disputing any amounts claimed in any Offset Notice, the
Stockholder Representative and CytRx will attempt in good faith to agree upon the rights of the
respective parties with respect to the disputes amounts. If the parties fail to reach such an
agreement, either the Stockholder Representative or CytRx may make a written demand upon the other
for formal resolution of the dispute and specifying the scope of the dispute. As soon as
practicable, and in any event within 60 days, after such written notification, the parties and
their respective representatives shall meet for one day with an impartial mediator, mutually agreed
upon by the Stockholder Representative and CytRx for purposes of reaching an agreement on a dispute
resolution alternative other than litigation. If an alternative method of dispute resolution is
not agreed upon as a result of the one-day mediation, the parties may thereafter exercise any and
all available rights and remedies. With respect to the one-day of mediation and any other
mediation that may result from this Section 9.04, the parties shall cooperate with one another in
selecting a mediator and in scheduling mediation proceedings, and shall act in good faith in such
mediation. CytRx initially shall bear the costs of mediation, but shall be entitled to an offset
against the Earnout Merger Consideration, if any, of all or a portion of such costs as determined
in such mediation or any ensuing litigation.
45
SECTION 9.05
Stockholder Representative
.
(a) If the Company Stockholders Approval is obtained as contemplated in this Agreement, then,
as part thereof, immediately and automatically upon the Effective Time, and without any further
action on the part of the Company Stockholders, each Company Stockholder shall be deemed to have
consented to the appointment of Steven Kelly, as his, her or its representative and
attorney-in-fact (the
Stockholder Representative
) for and on behalf of each such Company
Stockholder, and the taking by the Stockholder Representative of any and all actions and the making
of any decisions required or permitted to be taken by such Company Stockholder under this
Agreement, including the exercise of the power to (i) agree to, negotiate, enter into settlements
and compromises of, and comply with orders of courts and awards of arbitrators with respect to, the
determination of the Liabilities of the Company as of the date of this Agreement, Net Sales and
Losses; (ii) resolve any disputes with respect to the Liabilities of the Company as of the date of
this Agreement, Net Sales and Losses; and (iii) take all actions necessary in the judgment of the
Stockholder Representative for the accomplishment of the foregoing and all of the other terms,
conditions and limitations of this Agreement. Accordingly, the Stockholder Representative shall
have all necessary authority and power to act on behalf of the Company Stockholders with respect to
this Agreement and the disposition, settlement or other handling of all claims, rights or
obligations arising from and taken pursuant to this Agreement, including matters contemplated by,
but not specifically addressed in, this Section 9.05. The Company Stockholders will be bound by
all actions taken by the Stockholder Representative in connection with this Agreement, and CytRx
shall be entitled to rely on any action or decision of the Stockholder Representative as being the
decision, act, consent or instruction of each and every Company Stockholder. Subject to
Section 9.05(e) below, CytRx is hereby relieved from any liability to any person for any acts done
by it in accordance with such decision, act, consent or instruction of the Stockholder
Representative. The Stockholder Representative shall have no liability with respect to any action
taken or suffered by him in reliance upon any notice, direction, instruction, consent, statement or
other document believed by him to be genuine and to have been signed by the proper person (and
shall have no responsibility to determine the authenticity thereof), nor for any other action or
inaction, except his own willful misconduct or gross negligence. In all questions arising under
this Agreement, the Stockholder Representative may rely on the advice of counsel, and the
Stockholder Representative will not be liable to any person for anything done, omitted to be done
or suffered in good faith by the Stockholder Representative based on such advice. The Stockholder
Representative will not be required to take any action involving any expense to the Stockholder
Representative unless the payment of such expense is made or provided for in a manner satisfactory
to him. The reasonable legal fees and other expenses, if any, incurred by the Stockholder
Representative in performance of his duties hereunder, not to exceed $20,000 in the aggregate,
shall be advanced by CytRx. CytRx shall compensate the Stockholder Representative at the rate of
$250 per hour, not to exceed $10,000 in the aggregate, for the performance of his duties hereunder.
All such legal fees and expenses and compensation of the Stockholder Representative, including any
such legal fees and expenses in excess of $20,000, shall be paid or reimbursed to CytRx or the
Stockholder Representative, as the case may be, from the Earnout Merger Consideration, if any,
before any payment thereof to the Company Stockholders.
(b) This appointment of agency and this power of attorney is coupled with an interest and
shall be irrevocable and is not terminable by any Company Stockholder or by operation of
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law, whether by the death or incapacity of any Company Stockholder or the occurrence of any
other event, and any action taken by the Stockholder Representative shall be as valid as if such
death, incapacity or other event had not occurred, regardless of whether or not the Stockholder
Representative shall have received any notice thereof.
(c) The Stockholder Representative shall establish and maintain a register of the Company
Stockholders and the Company Warrant Holders for purposes of payment and distribution of the
Earnout Merger Consideration, if any. CytRx shall be entitled to rely conclusively on such
register for purposes of determining the persons to whom the Earnout Merger Consideration, if any,
shall be payable hereunder.
(d) The Stockholder Representative may resign as such at any time by giving 30 days prior
notice to CytRx. Such resignation shall take effect upon the appointment of a successor
Stockholder Representative as provided below. As a condition to the Stockholder Representatives
resignation, the Stockholder Representative shall appoint a successor Stockholder Representative.
If a successor Stockholder Representative has not been appointed within such 30-day period, CytRx
may petition any court of competent jurisdiction or may interplead the Stockholder Representative
in a proceeding for the appointment of a successor Stockholder Representative. All fees,
including, but not limited to, extraordinary fees associated with the filing of interpleader and
expenses associated therewith, shall be advanced by CytRx and shall be offset by CytRx against the
Earnout Merger Consideration, if any.
(e) Notwithstanding anything herein to the contrary, CytRx shall indemnify and hold harmless
the Stockholder Representative from and against any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable attorneys fees, which the Stockholder
Representative may suffer or incur by reason of any action, claim or proceeding brought against the
Stockholder Representative, in his capacity as such (but not in any other capacity), arising out of
or relating in any way to this Agreement, any transaction to which this Agreement relates or the
performance of the Stockholder Representatives duties pursuant thereto unless such action, claim
or proceeding is the result of the willful misconduct or gross negligence of the Stockholder
Representative.
ARTICLE X
MISCELLANEOUS
SECTION 10.01
Non-Survival of Representations and Warranties
. Except as otherwise
provided in this Agreement, no representations, warranties or agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective Time, and after the
Effective Time neither the Company, CytRx, Merger Subsidiary nor their respective officers or
directors shall have any further obligation with respect thereto; provided, however, that this
Section 10.01 shall not limit any covenant or agreement of the parties hereto which by its express
terms contemplates performance, in whole or in part, after the Effective Time.
SECTION 10.02
Notices
. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, mailed by registered or certified
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mail (return receipt requested), sent via facsimile or sent by a nationally recognized
overnight courier (providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to the Company:
Innovive Pharmaceuticals, Inc.
555 Madison Avenue, 25
th
Floor
New York, New York 10022
Attention: Steve Kelly
Facsimile: (212) 716-1811
with a copy to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
Attention: W. David Mannheim, Esq.
and Alexander M. Donaldson, Esq.
Facsimile: (919) 781-4815
If to CytRx or Merger Subsidiary:
CytRx Corporation
11726 San Vicente Blvd., Suite 650
Los Angeles, California 90049
Attention: Steven A. Kriegsman
Facsimile: (310) 826-6139
with a copy to:
TroyGould PC
1801 Century Park East, 16
th
Floor
Los Angeles, California 90067
Attention: Sanford J. Hillsberg, Esq. and Dale E. Short, Esq.
Facsimile: (310) 201-4746
If to the Stockholder Representative and prior to the Effective Time:
Steven Kelly
c/o Innovive Pharmaceuticals, Inc.
555 Madison Avenue, 25
th
Floor
New York, New York 10022
Facsimile: (212) 716-1811
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If to Stockholder Representative and after the Effective Time:
Steven Kelly
83 Mercer St. #3
New York, New York 10012
(917) 607-6015
SECTION 10.03
Interpretation
.
(a) The headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless a
contrary intention appears, (i) the words
herein
,
hereof
and
hereunder
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision, (ii)
knowledge
shall mean actual
knowledge as of the date hereof of the executive officers of the Company or CytRx, as the case may
be, after reasonable inquiry of any person directly reporting to any such executive officer, (iii)
including
shall mean
including, without limitation
, and
includes
shall mean
includes, without limitation
, and (iv) reference to any Article or Section
means such Article or Section hereof. No provision of this Agreement shall be interpreted or
construed against any party hereto solely because such party or its legal representative drafted
such provision. For purposes of determining whether any fact or circumstance involves a material
adverse effect on the ongoing operations of a party, any special transaction charges incurred by
such party as a result of the consummation of transactions contemplated by this Agreement shall not
be considered.
(b) The parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
SECTION 10.04
Assignment; Governing Law; Forum
. This Agreement (including the
documents and instruments referred to herein) shall not be assigned by operation of law or
otherwise except that Merger Subsidiary may assign its obligations under this Agreement to any
other wholly-owned subsidiary of CytRx subject to the terms of this Agreement, in which case such
assignee shall become the
Merger Subsidiary
for all purposes of this Agreement. THIS
AGREEMENT, AND ANY DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PARTIES
RELATIONSHIP TO EACH OTHER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. The parties hereby (a) submit to the jurisdiction of any
federal or state court sitting in the State of Delaware, (b) agree not to object to venue in such
courts or to claim that such forum is inconvenient and (c) agree that notice or the service of
process in any proceeding shall be properly served or delivered if delivered in the manner
contemplated by Section 10.02 of this Agreement.
49
SECTION 10.05
Counterparts
. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
SECTION 10.06
Amendments; No Waivers
.
(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if,
and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the
Company, CytRx and Merger Subsidiary or, in the case of a waiver, by the party against whom the
waiver is to be effective; provided that any waiver or amendment shall be effective against a party
only if the board of directors of such party approves such waiver or amendment.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.07
Entire Agreement
. This Agreement and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter of this Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth herein has been made or relied upon by
any party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any
person other than the parties hereto any rights or remedies hereunder except for the provisions of
Section 6.12, which are intended for the benefit of the Companys officers, directors, employees
and agents, the provisions of Articles I, II and III, which are intended for the benefit of the
Company Stockholders and the Company Warrant Holders, and Section 6.16, which are intended for the
benefit of Steven Kelly, the Companys President and Chief Executive Officer.
SECTION 10.08
Severability
. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full
force and effect so long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party.
SECTION 10.09
Specific Performance
. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not to be performed in
accordance with the terms hereof and that the parties shall be entitled to specific performance of
the terms hereof in addition to any other remedies at law or in equity.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
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INNOVIVE PHARMACEUTICALS, INC.
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/s/ Steven Kelly
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Name:
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Steven Kelly
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Title:
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President and Chief Executive Officer
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CYTRX CORPORATION
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Steven Kelly
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STEVEN KELLY
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Signature Page to Agreement and Plan of Merger
EXHIBIT A
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June ___,
2008, by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger
Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger
Subsidiary
), and
(
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of
shares of common stock, par value $0.001 per share, of the Company (such shares,
together with any other shares of Company common stock acquired by Stockholder after the date
hereof, being collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
(b)
Irrevocable Proxy
. Concurrently with the execution of this Agreement, Stockholder
agrees to deliver to CytRx a proxy in the form attached hereto as
Annex A
(the
Proxy
), which shall be irrevocable to the extent provided therein.
(c)
Restriction on Transfer; Other Restrictions
. From the date hereof until any
termination of this Agreement in accordance with its terms, Stockholder shall not directly or
indirectly (i) sell, transfer (including by operation of law), give, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, gift, pledge, encumbrance, assignment or other disposition of, any
of the Shares (or any right, title or interest thereto or therein), (ii) deposit any of the Shares
into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or
voting trust with respect to any of the Shares, (iii) take any action that would make any
representation or warranty of Stockholder set forth in this Agreement untrue or incorrect in any
material respect or have the effect of preventing, disabling or delaying Stockholder from
performing any of his obligations under this Agreement or (iv) agree (whether or not in writing) to
take any of the actions referred to in the foregoing clauses of this Section 1(c). Notwithstanding
the foregoing, Stockholder (a) may transfer any of the Shares, or execute an assignment with
respect to the Shares, if such transfer or assignment is made to a family member or a controlled
affiliate of the Stockholder or is made to a trust or similar vehicle in connection with estate
planning purposes; provided that, in each case, the transferee, trustee, proxy holder, or
beneficiary of the Shares resulting from such transfer or assignment executes a joinder agreement,
reasonably acceptable to CytRx and Merger Subsidiary, whereby such transferee, proxy holder or
beneficiary would become a party to this Agreement and become subject to all of the rights and
obligations hereunder, or (b) with the prior written consent of CytRx and Merger Subsidairy (which
consent may be withheld in their sole discretion), may transfer any of the Shares, or execute an
assignment with respect to the Shares, other than as contemplated in clause (a).
2.
Representation and Warranties of CytRx and Merger Subsidiary
. CytRx and Merger
Subsidiary jointly and severally represent and warrant to Stockholder as follows:
(a)
Due Authorization
. This Agreement has been authorized by all necessary corporate
action on the part of each of CytRx and Merger Subsidiary and has been duly executed by a duly
authorized officer of each of CytRx and Merger Subsidiary.
(b)
Validity; No Conflict
. This Agreement constitutes the legal, valid and binding
obligation of each of CytRx and Merger Subsidiary, enforceable against each of them in accordance
with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to creditors rights generally and by general
principles of equity. Neither the execution of this Agreement by CytRx and Merger Subsidiary nor
the consummation of the transactions contemplated hereby will result in a breach or violation of
the terms of any agreement by which CytRx or any CytRx subsidiary is bound or of any decree,
judgment, order, law or regulation now in effect of any court or other governmental body applicable
to CytRx or any CytRx subsidiary.
3.
Representations and Warranties of Stockholder
. Stockholder hereby represents and
warrants to CytRx and Merger Subsidiary as follows:
3
(a)
Validity; Consents and Approvals; No Conflict
. This Agreement constitutes the
legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to creditors rights generally and by general
principles of equity. No consents or approvals of, or filings, declarations or registrations with,
any governmental agency are necessary for the performance by Stockholder of its obligations under
this Agreement, other than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the performance by Stockholder of any of his obligations
under this Agreement. Neither the execution and delivery of this Agreement by Stockholder, nor the
performance by Stockholder of his obligations hereunder, will result in a breach or violation of
the terms of any agreement by which Stockholder is bound or of any decree, judgment, order, law or
regulation now in effect of any court or other governmental body applicable to Stockholder.
(b)
Ownership of Shares
. Except as specifically described on
Annex B
,
Stockholder (i) is the record and beneficial owner of all of the Shares and (ii) owns all of the
Shares free and clear of any proxy, voting restriction, adverse claim or other Lien (other than
proxies and restrictions in favor of CytRx and Merger Subsidiary pursuant to this Agreement and
except for such transfer restrictions of general applicability as may be provided under the
Securities Act and the blue sky laws of the various states of the United States). Without
limiting the foregoing, except for certain proxies and restrictions provided for in clause (ii)
above, Stockholder has sole voting power and sole power of disposition with respect to all of the
Shares, with no restrictions on Stockholders rights of voting or disposition pertaining thereto
and no Person other than Stockholder has any right to direct or approve the voting or disposition
of any of the Shares. As of the date hereof, Stockholder does not own, beneficially or of record,
any securities of the Company other than
shares of common stock which constitute the
Shares.
4.
Termination
. This Agreement and the Proxy shall terminate on the first to occur of
(a) the termination of the Merger Agreement in accordance with its terms and (b) the Effective
Time. Notwithstanding the foregoing, (i) nothing herein shall relieve any party from liability for
breach of this Agreement and (ii) the provisions of this Section 4 and Section 5 of this Agreement
shall survive any termination of this Agreement.
5.
Miscellaneous
.
(a)
Action in Stockholder Capacity Only
. The parties acknowledge that this Agreement
is entered into by Stockholder in his capacity as owner of the Shares and that nothing in this
Agreement shall in any way restrict or limit any director or officer of the Company from taking any
action in his capacity as a director or officer of the Company that is necessary for him to comply
with his fiduciary duties as a director or officer of the Company, including, without limitation,
participating in his capacity as a director of the Company in any discussions or negotiations in
accordance with Section 6.03 of the Merger Agreement.
4
(b)
Expenses
. Except as otherwise expressly provided in this Agreement, all costs and
expenses incurred in connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such costs and expenses.
(c)
Additional Shares
. Until any termination of this Agreement in accordance with its
terms, Stockholder shall promptly notify CytRx of the number of shares of Company common stock, if
any, as to which Stockholder acquires record or beneficial ownership after the date hereof. Any
shares of Company common stock as to which Stockholder acquires record or beneficial ownership
after the date hereof and prior to termination of this Agreement shall be Shares for purposes of
this Agreement. Without limiting the foregoing, in the event of any stock split, stock dividend or
other change in the capital structure of the Company affecting the Company common stock, the number
of shares constituting Shares shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company common stock or other voting
securities of the Company issued to Stockholder in connection therewith.
(d)
Definition of Beneficial Ownership
. For purposes of this Agreement, beneficial
ownership with respect to (or to own beneficially) any securities shall mean having beneficial
ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or not in writing.
(e)
Further Assurances
. From time to time, at the request of CytRx and without
further consideration, Stockholder shall execute and deliver such additional documents and take all
such further action as may be reasonably required to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
(f)
Entire Agreement; No Third Party Beneficiaries
. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof. This Agreement is
not intended to and shall not confer upon any Person other than the parties hereto any rights
hereunder.
(g)
Assignment; Binding Effect
. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties, except that (i) Merger Subsidiary may assign its rights and
interests hereunder to CytRx or to any wholly owned subsidiary of CytRx if such assignment would
not cause a delay in the consummation of any of the transactions contemplated by the Merger
Agreement and (ii) the rights, interests and obligations of Stockholder hereunder shall be binding
upon Stockholders heirs, trustees, executors and other representatives in the event of
Stockholders death or incapacity. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Any purported assignment not permitted under this Section shall be null and
void.
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(h)
Amendments
. This Agreement may not be amended or supplemented, except by a
written agreement executed by the parties hereto.
(i)
Severability
. If any term or other provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible to the fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
(j)
Counterparts
. This Agreement may be executed in two or more separate
counterparts, each of which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other parties hereto.
(k)
Descriptive Headings
. Headings of Sections and subsections of this Agreement are
for convenience of the parties only, and shall be given no substantive or interpretive effect
whatsoever.
(l)
Notices
. All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile transmission) and shall be given,
If to CytRx or Merger Subsidiary, to:
CytRx Corporation
11726 San Vicente Boulevard, Suite 650
Los Angeles, California 90049
Attention: Steven A. Kriegsman
Facsimile: (310) 826-6139
with a copy (which shall not constitute notice) to:
TroyGould PC
1801 Century Park East, 16
th
Floor
Los Angeles, California 90067
Attention: Sanford J. Hillsberg, Esq. and Dale E. Short, Esq.
Facsimile: (310) 201-4746
If to Stockholder, to:
Facsimile:
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with a copy (which shall not constitute notice) to:
Attention:
Facsimile:
or such other address or facsimile number as such party may hereafter specify for the purpose by
notice to the other parties hereto. All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received prior to 5 P.M. in the
place of receipt and such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
(m)
Governing Law; Enforcement; Jurisdiction
. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applicable to contracts
executed in and to be performed entirely within that State. All actions and proceedings arising
out of or relating to this Agreement shall be heard and determined in any federal or state court
sitting in the State of Delaware, and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of
an inconvenient forum to the maintenance of any such action or proceeding. The parties hereto
agree that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by
applicable law.
(n)
Specific Performance; Injunctive Relief
. The parties 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 of this Agreement in any federal or state court
sitting in the State of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity.
(o)
Definitions
. Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Merger Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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Name:
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
8
ANNEX A
IRREVOCABLE PROXY
The undersigned Stockholder of Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), hereby irrevocably appoints and constitutes the members of the Board of
Directors of CytRx Corporation, a Delaware corporation (
CytRx
), and each of them (the
Proxyholders
), the proxies of the undersigned, with full power of substitution and
resubstitution, to the full extent of the undersigneds rights with respect to the shares of common
stock of the Company beneficially owned by the undersigned as of the date here, together with any
other shares of common stock of the Company acquired by Stockholder after the date hereof and prior
to the date this proxy terminates (collectively, the
Shares
), to vote the Shares for the
following limited, and for no other, purposes:
1. In favor of adoption of the Agreement and Plan of Merger, dated as of June ___, 2008, by and
among CytRx, CytRx Merger Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of
CytRx (
Merger Subsidiary
), and the Company, as the same may be amended from time to time,
and approval of the transactions contemplated by the Merger Agreement; and
2. Against (A) any action or agreement (including, without limitation, any amendment of any
agreement) that would result in a breach of any representation, warranty, covenant, agreement or
other obligation of the Company under the Merger Agreement, (B) any Acquisition Proposal (as such
term is defined in the Merger Agreement) and (C) any agreement (including, without limitation, any
amendment of any agreement), amendment of the Companys charter documents or other action that is
intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or
discourage the consummation of the Merger.
The Proxyholders may not exercise this proxy on any other matter. The undersigned Stockholder
may vote the Shares on all such other matters.
The proxies named above are empowered at any time prior to termination of this proxy to
exercise all voting rights (including the power to execute and deliver written consents with
respect to the Shares) of the undersigned at every annual, special or adjourned meeting of Company
shareholders, and in every written consent in lieu of such meeting, or otherwise.
The proxy granted by the Stockholder to the Proxyholders is hereby granted as of the date
hereof in connection with the obligations of the Stockholder set forth in the Support Agreement,
dated as of June ___, 2008, among CytRx, Merger Subsidiary and the Stockholder (the
Support
Agreement
), and is irrevocable and coupled with an interest in such obligations and in the
interests in the Company to be purchased and sold pursuant to the Merger Agreement. This proxy
will automatically terminate upon the termination of the Support Agreement in accordance with its
terms.
A-1
Upon the execution hereof, all prior proxies given by the undersigned with respect to the
Shares, and any and all other shares or securities issued or issuable in respect thereof on or
after the date hereof, are hereby revoked and no subsequent proxies will be given until such time
as this proxy shall be terminated in accordance with its terms.
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns
of the undersigned. The undersigned hereby authorizes the Proxyholders to file this proxy and any
substitution or revocation of substitution with the Secretary of the Company and with any Inspector
of Elections at any meeting of Stockholders of the Company.
This proxy is irrevocable and shall survive the incapacity or death of the undersigned.
Dated: June __, 2008
THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS PROXY, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY PROPERTY
INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS PROXY.
A-2
ANNEX B
OWNERSHIP OF SHARES
B - 1
Exhibit 10.1
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and J. Jay Lobell (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 173,200
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and Steven Kelly (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 314,301
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and Lindsay A. Rosenwald (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 1,627,774
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
3
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and Eric Poma (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 63,160
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and Neil Herskowitz (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 63,043
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and Angelo De Caro (
Stockholder
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, Stockholder is the record and beneficial owner of 30,000
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholder after the date hereof, being
collectively referred to herein as the
Shares
); and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that Stockholder enter into this Agreement and, in order to induce
CytRx and Merger Subsidiary to enter into the Merger Agreement, Stockholder is willing to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholder
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, Stockholder shall vote the Shares (or cause them to be voted) or (as
appropriate) execute written consents in respect thereof, (i) in favor of the adoption of the
Merger Agreement and the approval of the transactions contemplated thereby, (ii) against any action
or agreement (including, without limitation, any amendment of any agreement) that would result in a
breach of any representation, warranty, covenant, agreement or other obligation of the Company
under the Merger Agreement, (iii) against any Acquisition Proposal and (iv) against any agreement
(including, without limitation, any amendment of any agreement), amendment of the Companys charter
documents or other action that is intended or could reasonably be expected to prevent, impede,
interfere with, delay, postpone or discourage the consummation of the Merger. Any such vote shall
be cast (or consent shall be given) by Stockholder in accordance with such procedures relating
thereto so as to ensure that it is duly counted, including for purposes of determining that a
quorum is present and for purposes of recording the results of such vote (or consent). Stockholder
further covenants and agrees that he shall not solicit proxies or participate in a solicitation
with respect to an Acquisition Proposal.
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this
Agreement
) is made and entered into as of June 6, 2008,
by and among CytRx Corporation, a Delaware corporation (
CytRx
), CytRx Merger Subsidiary,
Inc., a Delaware corporation and wholly owned subsidiary of CytRx (
Merger Subsidiary
),
and the entities set forth on
Schedule I
hereto (each a
Stockholder
and together,
the
Stockholders
).
WHEREAS, concurrently with the execution of this Agreement, CytRx, Merger Subsidiary and
Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), are entering into
an Agreement and Plan of Merger (as it may be amended, the
Merger Agreement
), providing
for the merger of Merger Subsidiary with and into the Company (the
Merger
), pursuant to
which the Company will become a wholly owned subsidiary of CytRx;
WHEREAS, as of the date hereof, the Stockholders are the record and beneficial owners of
shares of common stock, par value $0.001 per share, of the Company (such shares, together with any
other shares of Company common stock acquired by Stockholders after the date hereof, being
collectively referred to herein as the
Shares
), and the Shares consist of an aggregate of
1,399,129 shares of common stock; and
WHEREAS, as a condition to their willingness to enter into the Merger Agreement, CytRx and
Merger Subsidiary have required that the Stockholders enter into this Agreement and, in order to
induce CytRx and Merger Subsidiary to enter into the Merger Agreement, the Stockholders are willing
to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
Agreements of Stockholders
.
(a)
Voting; Refrain From Certain Proxy Solicitations
. From the date hereof until any
termination of this Agreement in accordance with its terms, at any meeting of the shareholders of
the Company however called (or any action by written consent in lieu of a meeting) and any
adjournment thereof, the Stockholders shall vote their respective Shares (or cause them to be
voted) or (as appropriate) execute written consents in respect thereof, (i) in favor of the
adoption of the Merger Agreement and the approval of the transactions contemplated thereby, (ii)
against any action or agreement (including, without limitation, any amendment of any agreement)
that would result in a breach of any representation, warranty, covenant, agreement or other
obligation of the Company under the Merger Agreement, (iii) against any Acquisition Proposal and
(iv) against any agreement (including, without limitation, any amendment of any agreement),
amendment of the Companys charter documents or other action that is intended or could reasonably
be expected to prevent, impede, interfere with, delay, postpone or discourage the consummation of
the Merger. Any such vote shall be cast (or consent shall be given) by the Stockholders in
accordance with such procedures relating thereto so as to ensure that it is duly counted, including
for purposes of determining that a quorum is present and for purposes of recording the results of
such vote (or consent). The Stockholders further covenant and agree that they shall not solicit
proxies or participate in a solicitation with respect to an Acquisition Proposal.
(b)
Irrevocable Proxy
. Concurrently with the execution of this Agreement, Stockholder
agrees to deliver to CytRx a proxy in the form attached hereto as
Annex A
(the
Proxy
), which shall be irrevocable to the extent provided therein.
(c)
Restriction on Transfer; Other Restrictions
. From the date hereof until any
termination of this Agreement in accordance with its terms, Stockholder shall not directly or
indirectly (i) sell, transfer (including by operation of law), give, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, gift, pledge, encumbrance, assignment or other disposition of, any
of the Shares (or any right, title or interest thereto or therein), (ii) deposit any of the Shares
into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or
voting trust with respect to any of the Shares, (iii) take any action that would make any
representation or warranty of Stockholder set forth in this Agreement untrue or incorrect in any
material respect or have the effect of preventing, disabling or delaying Stockholder from
performing any of his obligations under this Agreement or (iv) agree (whether or not in writing) to
take any of the actions referred to in the foregoing clauses of this Section 1(c).
2.
Representation and Warranties of CytRx and Merger Subsidiary
. CytRx and Merger
Subsidiary jointly and severally represent and warrant to Stockholder as follows:
(a)
Due Authorization
. This Agreement has been authorized by all necessary corporate
action on the part of each of CytRx and Merger Subsidiary and has been duly executed by a duly
authorized officer of each of CytRx and Merger Subsidiary.
(b)
Validity; No Conflict
. This Agreement constitutes the legal, valid and binding
obligation of each of CytRx and Merger Subsidiary, enforceable against each of them in accordance
with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to creditors rights generally and by general
principles of equity. Neither the execution of this Agreement by CytRx and Merger Subsidiary nor
the consummation of the transactions contemplated hereby will result in a breach or violation of
the terms of any agreement by which CytRx or Merger Subsidiary is bound or of any decree, judgment,
order, law or regulation now in effect of any court or other governmental body applicable to CytRx
or Merger Subsidiary.
3.
Representations and Warranties of Stockholder
. Stockholder hereby represents and
warrants to CytRx and Merger Subsidiary as follows:
(a)
Validity; Consents and Approvals; No Conflict
. This Agreement constitutes the
legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to creditors rights generally and by general
principles of equity. No consents or approvals of, or filings, declarations or registrations with,
any governmental agency are necessary for the performance by Stockholder of its obligations under
this Agreement, other than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the performance by Stockholder of any of his obligations
under this Agreement. Neither the execution and delivery
2
of this Agreement by Stockholder, nor the performance by Stockholder of his obligations
hereunder, will result in a breach or violation of the terms of any agreement by which Stockholder
is bound or of any decree, judgment, order, law or regulation now in effect of any court or other
governmental body applicable to Stockholder.
(b)
Ownership of Shares
. Except as specifically described on
Annex B
,
Stockholder (i) is the record and beneficial owner of all of the Shares and (ii) owns all of the
Shares free and clear of any proxy, voting restriction, adverse claim or other Lien (other than
proxies and restrictions in favor of CytRx and Merger Subsidiary pursuant to this Agreement and
except for such transfer restrictions of general applicability as may be provided under the
Securities Act and the blue sky laws of the various states of the United States). Without
limiting the foregoing, except for certain proxies and restrictions provided for in clause (ii)
above, Stockholder has sole voting power and sole power of disposition with respect to all of the
Shares, with no restrictions on Stockholders rights of voting or disposition pertaining thereto
and no Person other than Stockholder has any right to direct or approve the voting or disposition
of any of the Shares. As of the date hereof, Stockholder does not own, beneficially or of record,
any securities of the Company other than
shares of common stock which constitute the
Shares.
4.
Termination
. This Agreement and the Proxy shall terminate on the first to occur of
(a) the termination of the Merger Agreement in accordance with its terms and (b) the Effective
Time. Notwithstanding the foregoing, (i) nothing herein shall relieve any party from liability for
breach of this Agreement and (ii) the provisions of this Section 4 and Section 5 of this Agreement
shall survive any termination of this Agreement.
5.
Miscellaneous
.
(a)
Action in Stockholder Capacity Only
. The parties acknowledge that this Agreement
is entered into by Stockholder in his capacity as owner of the Shares and that nothing in this
Agreement shall in any way restrict or limit any director or officer of the Company from taking any
action in his capacity as a director or officer of the Company that is necessary for him to comply
with his fiduciary duties as a director or officer of the Company, including, without limitation,
participating in his capacity as a director of the Company in any discussions or negotiations in
accordance with Section 6.03 of the Merger Agreement.
(b)
Expenses
. Except as otherwise expressly provided in this Agreement, all costs and
expenses incurred in connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such costs and expenses.
(c)
Additional Shares
. Until any termination of this Agreement in accordance with its
terms, Stockholder shall promptly notify CytRx of the number of shares of Company common stock, if
any, as to which Stockholder acquires record or beneficial ownership after the date hereof. Any
shares of Company common stock as to which Stockholder acquires record or beneficial ownership
after the date hereof and prior to termination of this Agreement shall be Shares for purposes of
this Agreement. Without limiting the foregoing, in the event of any stock split, stock dividend or
other change in the capital structure of the Company affecting the Company common stock, the number
of shares constituting Shares shall be adjusted
3
appropriately and this Agreement and the obligations hereunder shall attach to any additional
shares of Company common stock or other voting securities of the Company issued to Stockholder in
connection therewith.
(d)
Definition of Beneficial Ownership
. For purposes of this Agreement, beneficial
ownership with respect to (or to own beneficially) any securities shall mean having beneficial
ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or not in writing.
(e)
Further Assurances
. From time to time, at the request of CytRx and without
further consideration, Stockholder shall execute and deliver such additional documents and take all
such further action as may be reasonably required to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
(f)
Entire Agreement; No Third Party Beneficiaries
. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof. This Agreement is
not intended to and shall not confer upon any Person other than the parties hereto any rights
hereunder.
(g)
Assignment; Binding Effect
. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties, except that (i) Merger Subsidiary may assign its rights and
interests hereunder to CytRx or to any wholly owned subsidiary of CytRx if such assignment would
not cause a delay in the consummation of any of the transactions contemplated by the Merger
Agreement and (ii) the rights, interests and obligations of Stockholder hereunder shall be binding
upon Stockholders heirs, trustees, executors and other representatives in the event of
Stockholders death or incapacity. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Any purported assignment not permitted under this Section shall be null and
void.
(h)
Amendments
. This Agreement may not be amended or supplemented, except by a
written agreement executed by the parties hereto.
(i)
Severability
. If any term or other provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible to the fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
4
(j)
Counterparts
. This Agreement may be executed in two or more separate
counterparts, each of which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other parties hereto.
(k)
Descriptive Headings
. Headings of Sections and subsections of this Agreement are
for convenience of the parties only, and shall be given no substantive or interpretive effect
whatsoever.
(l)
Notices
. All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile transmission) and shall be given,
If to CytRx or Merger Subsidiary, to:
CytRx Corporation
11726 San Vicente Boulevard, Suite 650
Los Angeles, California 90049
Attention: Steven A. Kriegsman
Facsimile: (310) 826-6139
with a copy (which shall not constitute notice) to:
TroyGould PC
1801 Century Park East, 16
th
Floor
Los Angeles, California 90067
Attention: Dale E. Short, Esq.
Facsimile: (310) 201-4746
If to Stockholder, to:
Facsimile:
with a copy (which shall not constitute notice) to:
Attention:
Facsimile:
or such other address or facsimile number as such party may hereafter specify for the purpose by
notice to the other parties hereto. All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received prior to 5 P.M. in the
place of receipt and such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
5
(m)
Governing Law; Enforcement; Jurisdiction
. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applicable to contracts
executed in and to be performed entirely within that State. All actions and proceedings arising
out of or relating to this Agreement shall be heard and determined in any federal or state court
sitting in the State of Delaware, and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of
an inconvenient forum to the maintenance of any such action or proceeding. The parties hereto
agree that a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by
applicable law.
(n)
Specific Performance; Injunctive Relief
. The parties 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 of this Agreement in any federal or state court
sitting in the State of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity.
(o)
Definitions
. Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Merger Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ J. Jay Lobell
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Name:
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J. Jay Lobell
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
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/s/ Beverly Lobell
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Beverly Lobell (spouse of J. Jay Lobell)
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7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Steven Kelly
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Name:
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Steven Kelly
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
Jennifer Kelly (spouse of
)
7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Lindsay A. Rosenwald
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Name:
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Lindsay A. Rosenwald
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
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/s/ Rivki Rosenwald
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Rivki Rosenwald (spouse of
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Lindsay A. Rosenwald
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7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Eric Poma
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Name:
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Eric Poma
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
(spouse of
)
7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Neil Herskowitz
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Name:
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Neil Herskowitz
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
(spouse of
)
7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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/s/ Angelo De Caro
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Name:
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Angelo De Caro
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THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS AGREEMENT, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY
PROPERTY INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
(spouse of
)
7
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of
the date and year first written above.
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CYTRX CORPORATION
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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CYTRX MERGER SUBSIDIARY, INC.
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By:
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/s/ Steven A. Kriegsman
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Name:
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Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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THE LINDSAY A. ROSENWALD 2000
IRREVOCABLE TRUST DATED
MAY 24, 2000 (DELAWARE)
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By:
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/s/ Lester Lipschutz
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Name:
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Lester Lipschutz
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Title:
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Trustee
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THE LINDSAY A. ROSENWALD RHODE ISLAND
IRREVOCABLE
TRUST DATED AUGUST 28, 2001
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By:
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/s/ Lester Lipschutz
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Name:
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Lester Lipschutz
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Title:
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Trustee
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7
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THE LINDSAY A. ROSENWALD ALASKA
IRREVOCABLE TRUST
DATED AUGUST 28, 2001
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By:
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/s/ Lester Lipschutz
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Name:
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Lester Lipschutz
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Title:
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Trustee
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THE LINDSAY A. ROSENWALD NEVADA
IRREVOCABLE INDENTURE
OF TRUST DATED JANUARY 6, 2003
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By:
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/s/ Lester Lipschutz
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Name:
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Lester Lipschutz
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Title:
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Trustee
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THE LINDSAY A. ROSENWALD 2000 FAMILY
TRUSTS DATED
DECEMBER 15, 2000
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By:
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/s/ Lester Lipschutz
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Name:
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Lester Lipschutz
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Title:
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Trustee
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8
Schedule I
The Lindsay A. Rosenwald 2000 Irrevocable Trust dated May 24, 2000 (Delaware)
The Lindsay A. Rosenwald Rhode Island Irrevocable Trust dated August 28, 2001
The Lindsay A. Rosenwald Alaska Irrevocable Trust dated August 28, 2001
The Lindsay A. Rosenwald Nevada Irrevocable Indenture of Trust dated January 6, 2003
The Lindsay A. Rosenwald 2000 Family Trusts dated December 15, 2000
ANNEX A
IRREVOCABLE PROXY
The undersigned Stockholder of Innovive Pharmaceuticals, Inc., a Delaware corporation (the
Company
), hereby irrevocably appoints and constitutes the members of the Board of
Directors of CytRx Corporation, a Delaware corporation (
CytRx
), and each of them (the
Proxyholders
), the proxies of the undersigned, with full power of substitution and
resubstitution, to the full extent of the undersigneds rights with respect to the shares of common
stock of the Company beneficially owned by the undersigned as of the date here, together with any
other shares of common stock of the Company acquired by Stockholder after the date hereof and prior
to the date this proxy terminates (collectively, the
Shares
), to vote the Shares for the
following limited, and for no other, purposes:
1. In favor of adoption of the Agreement and Plan of Merger, dated as of June ___, 2008, by and
among CytRx, IPI Acquisition Co., a Delaware corporation and wholly owned subsidiary of CytRx
(
Merger Subsidiary
), and the Company, as the same may be amended from time to time, and
approval of the transactions contemplated by the Merger Agreement; and
2. Against (A) any action or agreement (including, without limitation, any amendment of any
agreement) that would result in a breach of any representation, warranty, covenant, agreement or
other obligation of the Company under the Merger Agreement, (B) any Acquisition Proposal (as such
term is defined in the Merger Agreement) and (C) any agreement (including, without limitation, any
amendment of any agreement), amendment of the Companys charter documents or other action that is
intended or could reasonably be expected to prevent, impede, interfere with, delay, postpone or
discourage the consummation of the Merger.
The Proxyholders may not exercise this proxy on any other matter. The undersigned Stockholder
may vote the Shares on all such other matters.
The proxies named above are empowered at any time prior to termination of this proxy to
exercise all voting rights (including the power to execute and deliver written consents with
respect to the Shares) of the undersigned at every annual, special or adjourned meeting of Company
shareholders, and in every written consent in lieu of such meeting, or otherwise.
The proxy granted by the Stockholder to the Proxyholders is hereby granted as of the date
hereof in connection with the obligations of the Stockholder set forth in the Support Agreement,
dated as of June ___, 2008, among CytRx, Merger Subsidiary and the Stockholder (the
Support
Agreement
), and is irrevocable and coupled with an interest in such obligations and in the
interests in the Company to be purchased and sold pursuant to the Merger Agreement. This proxy
will automatically terminate upon the termination of the Support Agreement in accordance with its
terms.
Upon the execution hereof, all prior proxies given by the undersigned with respect to the
Shares, and any and all other shares or securities issued or issuable in respect thereof on or
after the date hereof, are hereby revoked and no subsequent proxies will be given until such time
as this proxy shall be terminated in accordance with its terms.
Any obligation of the undersigned hereunder shall be binding upon the successors and assigns
of the undersigned. The undersigned hereby authorizes the Proxyholders to file this proxy and any
substitution or revocation of substitution with the Secretary of the Company and with any Inspector
of Elections at any meeting of Stockholders of the Company.
This proxy is irrevocable and shall survive the incapacity or death of the undersigned.
Dated:
, 2008
THE UNDERSIGNED, SPOUSE OF THE SHAREHOLDER, HEREBY EXPRESSLY APPROVES AND AGREES TO BE BOUND BY THE
PROVISIONS OF THIS PROXY, AND HEREBY AGREES NOT TO DEVISE OR BEQUEATH WHATEVER COMMUNITY PROPERTY
INTEREST OR QUASI-COMMUNITY PROPERTY INTEREST THE UNDERSIGNED MAY HAVE IN THE SHARES IN
CONTRAVENTION OF THE TERMS OF THIS PROXY.
(spouse of
)
ANNEX B
OWNERSHIP OF SHARES
Exhibit 10.3
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this
Agreement
) is dated as of this 6
th
day of June 2008 (the
Effective Date
), by and between
Innovive Pharmaceuticals, Inc.
, a
Delaware corporation (
Borrower
), and
CytRx Corporation
, a Delaware corporation
(
Lender
).
BACKGROUND
WHEREAS, Borrower has requested that Lender enter into a financing arrangement with Borrower
pursuant to which Lender may make loans to Borrower;
WHEREAS, Lender is willing to agree to make such loans to Borrower on the terms and conditions
set forth herein; and
WHEREAS, this Agreement is intended to aid the completion of the transactions contemplated by
the Agreement and Plan of Merger dated as of the Effective Date by and among Borrower, Lender and
CytRx Merger Subsidiary, Inc. (the
Merger Agreement
).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION I. DEFINITIONS AND INTERPRETATION
1.1
Defined Terms
: As used in this Agreement, the following terms have the following
respective meanings:
Advance(s)
Any monies advanced or credit extended to Borrower by Lender under the
Loan, including, without limitation, cash advances.
Business Day
A day other than Saturday or Sunday when banks are open for business in
Los Angeles, California.
Collateral
All of the Property and interests in Property described in Section 3.1 of
this Agreement and all other interests in Property that now or hereafter secure payment of the
Obligations and satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents.
Closing
The making of the Initial Advance to the Borrower on the Closing Date
pursuant to the terms of this Agreement.
Closing Date
The date upon which the conditions set forth in Section 4.1 hereof each
have been satisfied or waived, which shall in any event be no more than two (2) Business Days after
the Effective Date or at such other time as may be mutually agreed to by the parties.
Default
Any event, act, condition or occurrence which with notice, or lapse of time
or both, would constitute an Event of Default hereunder.
1
Initial Advance
The initial Advance in the principal amount set forth on
Schedule 1.1(a
) attached hereto.
Lien
Any interest of any kind or nature in property securing an obligation owed to,
or a claim of any kind or nature in property by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute, regulation or contract, and including,
but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt, a financing lease, consignment or bailment for security
purposes, a trust, or an assignment.
Loan Documents
Collectively, this Agreement and all agreements, certificates,
instruments and documents executed and/or delivered in connection therewith, all as may be
supplemented, restated, superseded, amended or replaced from time to time. The Loan Documents
shall not include the Merger Agreement.
Loan Maturity Date
The earliest of (i) the date of commencement of any bankruptcy,
insolvency or similar proceeding with respect to Borrower, (ii) the date on which the Merger
Agreement is terminated pursuant to its terms, and (iii) September 30, 2008 or such later date as
the parties hereto mutually agree.
Maximum Loan Amount
The aggregate amount of Five Million Five Hundred Thousand
Dollars ($5,500,000) of principal.
Obligations
All existing and future debts, liabilities and obligations owing by
Borrower to Lender or any other subsidiary or affiliate of Lender under the Loan Documents and the
Merger Agreement.
Permitted Liens
(a) Liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, and other like
persons not yet due; (b) Liens incurred or deposits made in the ordinary course of business in
connection with workers compensation, unemployment insurance, social security and other like laws;
and (c) Liens existing on the Closing Date and shown on
Schedule 1.1(b
) attached hereto and
made part hereof.
Person
An individual, partnership, corporation, trust, limited liability company,
limited liability partnership, unincorporated association or organization, joint venture or any
other entity.
Property
Any interest of Borrower in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
UCC
The Uniform Commercial Code of the State of Delaware and any other applicable
law of any state that has jurisdiction with respect to all, or any portion of, the Collateral or
this Agreement, from time to time.
1.2
Other Capitalized Terms
Any other capitalized terms used without further
definition herein shall have the meanings set forth in the UCC.
2
SECTION II. THE LOAN
2.1 Loan:
a. Subject to the terms and conditions of this Agreement, Lender hereby establishes for the
benefit of Borrower a credit facility (the
Loan
), which shall include Advances extended
by Lender to or for the benefit of Borrower from time to time hereunder. The aggregate principal
amount of all Advances made hereunder shall not exceed the Maximum Loan Amount. To the extent any
Advance made hereunder shall cause the sum of all Advances hereunder to exceed the Maximum Loan
Amount, Borrower shall immediately return and repay to Lender the excess of such Advance over the
Maximum Loan Amount. All Advances under the Loan shall be due and payable, in full, on the Loan
Maturity Date, subject to the provisions of Section VII below.
b. This Agreement shall evidence Borrowers unconditional obligation to repay Lender for all
Advances made under the Loan, with interest and other charges and expenses as herein provided.
Each Advance under the Loan shall be deemed evidenced by this Agreement.
c. The term of the Loan shall expire on the Loan Maturity Date. On such date, unless having
been sooner accelerated by Lender pursuant to the terms hereof, all sums owing under the Loan and
this Agreement shall be due and payable in full, and as of and after such date Borrower shall not
request and Lender shall not make any further Advances under the Loan.
2.2
Advances and Payments
:
a. Except to the extent otherwise set forth in this Agreement, all payments of principal and
of interest on the Loan and all Expenses, fees, indemnification obligations and all other charges
and any other Obligations of Borrower, shall be made to Lender via wire transfer of same day funds
to such account as Lender may from time to time direct. Any payments received prior to 2:00 P.M.,
Pacific Time, on any Business Day shall be deemed received on such Business Day. Any payments
(including any payment in full of the Obligations), received after 2:00 P.M., Pacific Time, on any
Business Day shall be deemed received on the immediately following Business Day.
b. Lender shall make the Initial Advance on the third Business Day following the Closing Date.
All additional Advances under the Loan must be requested by Borrower by 11:00 A.M., Pacific Time,
at least two Business Days prior to the date such Advance is to be made. All requests for an
Advance are to be in writing pursuant to a written request executed by Steven Kelly or J. Gregory
Jester in the form of Exhibit A (
Advance Request
) attached hereto and made part hereof.
Such request may be sent by facsimile transmission provided that Lender shall have the right to
require that receipt of such request not be effective unless confirmed via telephone with Lender.
c. All Advances following the Initial Advance shall be at the sole discretion of Lender. Upon
receiving a request for an Advance in accordance with subparagraph (b) above,
3
and subject to the terms and conditions set forth in this Agreement, Lender, in its
discretion, shall make the requested Advance, or any amount thereof as Lender determines in its
discretion, to Borrower by Lenders check delivered to Borrower or, in Lenders discretion, by wire
transfer to Borrowers account specified on
Schedule 2.2
attached hereto, on the Business
Day the requested Advance is to be made or as soon as is reasonably practicable thereafter.
2.3
Interest
: The outstanding principal under the Loan shall bear interest, subject
to the terms hereof, at the rate of 12.5% per annum. Interest shall be payable on the Loan
Maturity Date.
2.4
Additional Interest Provisions
:
a. Interest on the Loan shall be calculated on the basis of a year of three hundred sixty
(360) days and charged for the actual number of days elapsed.
b. After the occurrence and during the continuance of an Event of Default hereunder, the per
annum rate of interest on all outstanding principal under the Loan shall be increased by two
hundred (200) basis points. All such increases shall be applied retroactively to the date of the
occurrence of the Event of Default. Borrower agrees that the default rate payable to Lender is a
reasonable estimate of Lenders damages and is not a penalty.
c. Borrower shall not request any Advance while a Default exists.
d. Interest on outstanding principal under the Loan shall continue to accrue and be paid even
after an Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any event or occurrence, similar or dissimilar.
e. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest
hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such court determines Lender has received interest
hereunder in excess of the highest applicable rate, Lender shall apply, in its sole discretion, and
set off such excess interest received by Lender against other Obligations due or to become due and
such rate shall automatically be reduced to the maximum rate permitted by such law.
2.5
Prepayments
: Borrower may prepay the Loan, without premium or penalty, in whole or
in part, at any time or from time to time. Any partial prepayment shall first be applied to
accrued and unpaid interest on the Loan being prepaid and then to the principal balance of the
Loan.
2.6
Use of Proceeds
:
a. The Initial Advance shall be used by Borrower to pay the accounts payable and accrued
liabilities of Borrower set forth on
Schedule 1.1(a
) attached hereto.
4
b. Additional Advances may be used by Borrower for working capital and general corporate
purposes consistent with Borrowers covenants under the Merger Agreement, including, without
limitation, for professional and other fees and expenses and other transaction costs incurred by
Borrower in connection with the negotiation, documentation, execution and consummation of the
transactions contemplated in the Merger Agreement. Each Advance Request shall state the specific
intended uses of the Advance requested, including, without limitation, the name of each payee (or
class of payees in the case of employees and other readily identifiable categories of payees) and
amount to be paid to such payee out of such Advance. Any actual use by Borrower of an Advance that
differs materially from the intended use as set forth in the Advance Request shall constitute a
material breach of this Agreement.
SECTION III. COLLATERAL
3.1
Collateral
: As security for the payment of the Obligations, and satisfaction by
Borrower of all covenants and undertakings contained in this Agreement and the other Loan
Documents, Borrower hereby assigns and grants to Lender, a continuing Lien on and security interest
in, upon and to all assets of Borrower and all subsidiaries of Borrower, including but not limited
to the following Property, all whether now owned or hereafter acquired, created or arising and
wherever located:
a. all Accounts;
b. all Chattel Paper;
c. all Documents;
d. all Instruments;
e. all Inventory;
f. all General Intangibles;
g. all Equipment,
h. all Fixtures;
i. all Deposit Accounts;
j. all Goods;
k. all Investment Property; and
l. all Proceeds (including, without limitation, insurance proceeds), whether cash or non-cash,
of all of the foregoing Property described in clauses (a) through (k).
3.2
Lien Documents
: On the Effective Date and thereafter as Lender reasonably deems
necessary, Borrower shall execute and deliver to Lender, or have executed and delivered (all in
form and substance satisfactory to Lender and its counsel):
5
a. Financing statements pursuant to the UCC, which Lender may file in the jurisdiction where
Borrower is organized and in any other jurisdiction that Lender deems appropriate; and
b. Any other agreements, documents, instruments and writings, including, without limitation,
intellectual property security agreements, required by Lender to evidence, perfect or protect the
Liens and security interests in the Collateral or as Lender may reasonably request from time to
time.
3.3
Other Actions
:
a. In addition to the foregoing, Borrower shall do anything further that may be reasonably
required by Lender to secure Lender and effectuate the intentions and objects of this Agreement,
including, without limitation, the execution and delivery of security agreements, contracts and any
other documents required hereunder. At Lenders request, Borrower shall also immediately deliver
(with execution by Borrower of all necessary documents or forms to reflect, implement or enforce
the Liens described herein), or cause to be delivered to Lender all items for which Lender must
receive possession to obtain a perfected security interest, including without limitation, all
Deposit Accounts and all notes, stock powers, letters of credit, certificates and documents of
title, Chattel Paper, Warehouse Receipts, Instruments, and any other similar instruments
constituting Collateral.
b. Lender is hereby authorized to file financing statements and amendments to financing
statements without Borrowers signature, in accordance with the UCC. Borrower hereby authorizes
Lender to file all such financing statements and amendments to financing statements describing the
Collateral in any filing office as Lender, in its sole discretion may determine, including
financing statements listing All Assets in the collateral description therein. Borrower agrees
to comply with the requests of Lender in order for Lender to have and maintain a valid and
perfected security interest in the Collateral.
3.4
Searches, Certificates
:
a. Lender may, as Lender reasonably determines from time to time, at Lenders expense, obtain
the following searches:
i. UCC searches with the Secretary of State and local filing office of each state where
Borrower is organized, maintains its executive office, a place of business, or assets; and
ii. judgment, state and federal tax lien and corporate tax lien searches, in all applicable
filing offices of each state searched under subparagraph (i) above.
3.5
Filing Security Agreement
: A carbon, photographic or other reproduction or other
copy of this Agreement is sufficient, as and may be filed in lieu of, a financing statement.
3.6
Power of Attorney
: Each of Steven A. Kriegsman and Mitchell K. Fogelman, both
executive officers of Lender, is hereby irrevocably made, constituted and appointed the true and
6
lawful attorney for Borrower (without requiring any of them to act as such) with full power of
substitution to do the following:
a. during the continuance of an Event of Default, endorse the name of Borrower upon any and
all checks, drafts, money orders and other instruments for the payment of monies that are payable
to Borrower and constitute collections on Borrowers Accounts or proceeds of other Collateral;
b. execute and file in the name of Borrower any financing statements, schedules, assignments,
instruments, documents and statements that Borrower is obligated to give Lender hereunder or is
necessary to perfect (or continue or evidence the perfection of such security interest or Lien)
Lenders security interest or Lien in the Collateral; and
c. during the continuance of an Event of Default, do such other and further acts and deeds in
the name of Borrower that Lender may deem necessary or desirable to enforce any Account or preserve
or protect any other Collateral.
SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO INITIAL ADVANCE
4.1
Closing
: The Closing under this Agreement is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance reasonably
satisfactory to Lender and Lenders counsel), unless waived by the Lender:
a. Borrower shall have delivered, or caused to be delivered to Lender the following:
i. the Merger Agreement and this Agreement, properly executed;
ii. each of the other documents to be delivered by Borrower or any other Person pursuant to
this Agreement; and
iii. such other documents reasonably required by Lender;
b. at the Closing Date, no Default or Event of Default hereunder shall have occurred and be
continuing;
c. the warranties and representations contained in Section 5 as well as any other Section of
this Agreement shall be true and correct on the Closing Date with the same effect as though made on
and as of that date, and Lender shall have received a certificate of the Chief Executive Officer of
Borrower to that effect; and
d. Borrower shall have performed and complied in all material respects with all agreements,
covenants and conditions contained herein, which are required to be performed or complied with by
Borrower before or at the Closing Date.
4.2
Waiver of Rights
: By completing the Closing hereunder, or by making Advances
hereunder, Lender does not thereby waive a breach of any warranty or
representation made by Borrower hereunder or under any agreement, document, or instrument delivered to Lender or
7
otherwise referred to herein, and any claims and rights of Lender resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
SECTION V. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the Initial Advance under the Loan and
additional Advances under the Loan to Borrower, Borrower warrants and represents to Lender, that
except as disclosed in the Merger Agreement or the Company Disclosure Schedule (as defined in the
Merger Agreement):
5.1
Validity
:
a. The making and performance of this Agreement and the other Loan Documents will not violate
any law, government rule or regulation, court or administrative order or other such order, or the
certificate of incorporation or bylaws of Borrower, or breach or result in a default (immediately
or with the passage of time) under any contract, agreement or instrument to which Borrower is a
party, or by which Borrower or any of its Property is bound. Borrower is not in violation of any
term of any agreement or instrument to which it is a party or by which it may be bound which
violation has or could reasonably be expected to have a Material Adverse Effect (as defined in the
Merger Agreement).
b. Borrower has all requisite power and authority to enter into and perform this Agreement and
to incur the obligations herein provided for, and has taken all proper and necessary action to
authorize the execution, delivery and performance of this Agreement, and the other Loan Documents
as applicable.
c. This Agreement and all of the other Loan Documents, when delivered, will be valid and
binding upon Borrower, and enforceable in accordance with their respective terms except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors rights generally and by general equitable
principles.
5.2
Places of Business
: The only places of business of Borrower, and the places where
Borrower keeps and intends to keep its Property, are at the addresses existing as of the date
hereof shown on
Schedule 5.2
attached hereto and made part hereof.
5.3
Names
: Since its organization, Borrower has not conducted business under or used
any other name (whether corporate or assumed) except for the names shown on
Schedule 5.3
attached hereto and made part hereof.
5.4
Perfection and Priority
: This Agreement and the other Loan Documents are
effective to create in favor of Lender legal, valid and enforceable Liens in all right, title and
interest of Borrower in the Collateral, and when (i) financing statements have been filed in the
offices of the jurisdictions shown on
Schedule 5.4
, attached hereto and made part hereof
under Borrowers name, (ii) a control agreement has been executed among Borrower, Lender and any
financial institution in which a Deposit Account of Borrower is held, and (iii) Borrower has
delivered to Lender any certificates representing its ownership rights in Borrowers
subsidiaries,
8
Borrower will have granted to Lender, and Lender will have perfected Liens in the
Collateral, superior in right to any and all other Liens (other than Permitted Liens), existing or
future.
5.5
Deposit Accounts
: All Deposit Accounts of Borrower are shown on
Schedule 5.5
, attached hereto and made part hereof.
SECTION VI. BORROWERS COVENANTS
6.1
Merger Agreement
: Borrower covenants that, until all of the Obligations are paid
and satisfied in full and the Loan has been terminated, it will comply with the covenants
applicable to it in the Merger Agreement.
6.2
Responsibility for Collateral
: Borrower retains all liabilities and
responsibility in connection with all Collateral, and the Obligations shall in no way be affected
or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.
SECTION VII. DEFAULT
7.1
Events of Default
: Each of the following events shall constitute an event of
default (
Event of Default
):
a. if Borrower fails to make any payment of principal or of interest under the Loan or other
Obligations when such payment is due and payable; or
b. if Borrower fails to perform, comply with or observe any covenant or undertaking contained
in this Agreement and such failure continues for ten (10) days after the occurrence thereof; or
c. if any warranty, representation or other statement by or on behalf of Borrower contained in
or pursuant to this Agreement, the other Loan Documents or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous,
or misleading in any material respect when made hereunder; or
d. if any provision of this Agreement or any material term of the Merger Agreement shall at
any time for any reason be declared to be null and void, or the validity or enforceability thereof
shall be contested by Borrower, or a proceeding shall be commenced by Borrower, or by any
governmental authority having jurisdiction over Borrower, seeking to establish the validity or
enforceability thereof, or Borrower shall deny that Borrower has any liability or obligation
purported to be created under this Agreement or any other Loan Document or the Merger Agreement; or
e. if there is a seizure or attachment of, or a levy on, any of the Collateral;
provided
,
however
, that an Event of Default shall not include any of the foregoing
events that result from Lenders failure or refusal, in the exercise of its discretion, to make an
additional Advance requested by Borrower in accordance with Section 2.2(c).
9
7.2
Cure
: Nothing contained in this Agreement or the Loan Documents shall be deemed
to compel Lender to accept a cure of any Event of Default hereunder, which shall be in Lenders
discretion (provided, that the foregoing shall not be interpreted or construed in any way or under
any circumstances to limit or contradict the express provisions hereof which provide for any cure
period that must expire before any particular Event of Default shall occur).
7.3
Rights and Remedies on Default
:
a. In addition to all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or
otherwise available at law or in equity, upon or at any time after the occurrence and during the
continuance of a Default or an Event of Default, Lender may, in its discretion, terminate this
Agreement.
b. In addition to all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or
otherwise available at law or in equity, upon or at any time after the occurrence and during the
continuance of an Event of Default Lender may, in its discretion, declare the principal amount of
and interest on the Loan and all other Obligations immediately due and payable, all without demand,
notice, presentment or protest or further action of any kind.
c. In addition to all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or
otherwise available at law or in equity, upon or at any time after the acceleration of the
Obligations following the occurrence of an Event of Default, Lender may, in its discretion,
exercise all rights under any applicable law or in equity, and under all Loan Documents permitted
to be exercised after the occurrence of an Event of Default, including the following rights and
remedies (which list is given by way of example and is not intended to be an exhaustive list of all
such rights and remedies):
i. the right to modify the terms and conditions upon which Lender may be willing to consider
making Advances under the Loan or to take reserves against the Loan;
ii. the right to take possession of, send notices regarding and collect directly the
Collateral, with or without judicial process (including without limitation the right to notify the
United States postal authorities to redirect mail addressed to Borrower to an address designated by
Lender); and
iii. by its own means or with judicial assistance, enter Borrowers premises and take
possession of the Collateral, or render it unusable, or dispose of the Collateral on such premises,
without any liability for rent, storage, utilities or other sums, and Borrower shall not resist or
interfere with such action.
d. Borrower hereby agrees that a notice received by it at least ten (10) days before the time
of any intended public sale or of the time after which any private sale or other disposition of the
Collateral is to be made, shall be deemed to be reasonable notice of such sale
10
or other
disposition. If permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lenders exercise of its rights and remedies with respect
to the Collateral, after the occurrence of an Event of Default hereunder. Lender shall have no
obligation to clean up or prepare the Collateral for sale. If Lender sells any of the Collateral
upon credit, Borrower will only be credited with payments actually made by the purchaser thereof,
that are received by Lender. Lender may, in connection with any sale of the Collateral
specifically disclaim any warranties of title or the like.
e. Lender shall have the right to become the purchaser at any public sale made pursuant to the
provisions of this Section, and shall have the right to credit against the amount of the bid made
therefor the amount payable to Lender out of the net proceeds of such sale. For the purpose of
determining the rights to any purchaser therein, recitals contained in any conveyance to any
purchaser at any sale made hereunder shall conclusively establish the truth and accuracy of the
matters therein stated, including, without limitation, nonpayment of the Obligations and
advertisement and conduct of such sale in the manner provided herein, Borrower hereby ratifies and
confirms all legal acts that Lender may do in carrying out the provisions of this Agreement.
7.4
Applications of Proceeds
: The proceeds of any sale, lease or other disposition of
the Collateral hereunder shall be applied first, to the expenses of retaking, holding, storing,
processing and preparing for sale, selling, and the like (including, without limitation, any taxes,
fees and other costs incurred in connection therewith) of the Collateral, to the reasonable
attorneys fees and expenses incurred by Lender in enforcing its rights hereunder and in connection
with collecting, storing and disposing of the Collateral, and then to satisfaction of the
Obligations, and then to the payment of any other amounts required by applicable law, after which
Lender shall pay to Borrower any surplus proceeds. If, upon the sale, license or other disposition
of the Collateral, the proceeds thereof are insufficient to pay all amounts to which Lender is
legally entitled, Borrower will be liable for the deficiency.
7.5
Nature of Remedies
: All rights and remedies granted Lender hereunder and under
the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Lender may proceed with any number of remedies at the
same time until all Obligations are satisfied in full. The exercise of any one right or remedy
shall not be deemed a waiver or release of any other right or remedy, and Lender, upon or at any
time after the occurrence of an Event of Default, may proceed against Borrower, at any time, under
any agreement, with any available remedy and in any order.
11
SECTION VIII. STOCK PURCHASE OPTION
8.1 Option:
a. As a material inducement to Lender to enter into this Agreement and make the Initial
Advance and any and all Additional Advances, Borrower hereby grants Lender the irrevocable option
(the
Option
) to purchase up to 2,000,000 shares (the
Option Shares
) of common
stock, $0.001 par value per share, of Borrower (
Borrower Common Stock
) at an initial
price per Option Share (the
Initial Exercise Price
) of $0.01.
b. Lender may exercise the Option, in whole or in part, at any time on or after Borrower
terminates or purports to terminate the Merger Agreement pursuant to Section 8.01(e) thereof and
prior to the first anniversary (the
Expiration Date
) of the date of the consummation by
Borrower of a Superior Proposal (as defined in the Merger Agreement).
c. In order to exercise the Option, Lender shall send to Borrower a notice specifying the
denominations of the certificate or certificates evidencing the Option Shares which Lender wishes
to receive, and shall pay Borrower the aggregate Exercise Price of such Option Shares, by, at
Lenders option, (i) delivery of shares of common stock, $0.001 par value per share, of Lender
(
Lender Common Stock
), which shall be valued for this purpose at the Initial Merger
Consideration Price (as defined in the Merger Agreement), or (ii) wire transfer of same day funds
to Borrowers account specified on
Schedule 2.2
attached hereto, and Borrower shall
promptly cause to be issued to Lender a certificate or certificates representing the Option Shares.
Upon delivery by Lender to Borrower of the exercise notice and the payment of the Exercise Price
described in the immediately preceding sentence, Lender shall be deemed to be the holder of record
of the Option Shares issuable upon that exercise, notwithstanding that the stock transfer books of
Borrower shall then be closed or that certificates representing those Option Shares shall not then
be actually delivered to Lender.
8.2
Adjustment of Exercise Price and Number of Option Shares:
a. In order to prevent dilution of the rights under the Option, the Initial Exercise Price
(such price or such price as last adjusted pursuant to the terms hereof, as the case may be, is
herein called the
Exercise Price
) and the number of Option Shares purchasable upon
exercise of the Option shall be subject to adjustment from time to time as provided in this
Section 8.2.
b. In case of any reclassification, capital reorganization, consolidation, merger, sale of all
or substantially all of Borrowers assets or any other change in Borrower Common Stock, other than
as a result of a subdivision, combination, or stock dividend provided for in paragraph (c) below
(any of which, a
Change Event
), then, as a condition of such Change Event, lawful
provision shall be made, and duly executed documents evidencing the same from Borrower or its
successor shall be delivered to Lender, so that Lender shall have the right at any time prior to
the Expiration Date to purchase, at a total price equal to the total Exercise Price payable for the
total number of Option Shares purchasable upon exercise of the Option, the kind and amount of
shares of stock and other securities and property receivable in connection with
such Change Event by a holder of the same number of shares of Borrower
12
Common Stock as were
purchasable under the Option immediately prior to such Change Event. In any such case, appropriate
provisions shall be made with respect to the rights and interest of Lender so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or other securities and
property deliverable upon exercise hereof, and appropriate adjustments shall be made to the
Exercise Price per share payable hereunder, provided the aggregate Exercise Price shall remain the
same.
c. If Borrower shall at any time prior to the Expiration Date (i) subdivide Borrower Common
Stock, by split up or otherwise, or combine Borrower Common Stock, or (ii) issue additional shares
of Borrower Common Stock or other equity securities as a dividend with respect to any shares of
Borrower Common Stock, the number of shares of Borrower Common Stock issuable on the exercise of
the Option shall forthwith be proportionately increased in the case of a subdivision or stock, or
proportionately decreased in the case of a combination. Appropriate adjustments shall also be made
to the Exercise Price per share, but the aggregate Exercise Price payable for the total number of
Option Shares purchasable upon exercise of the Option shall remain the same. Any adjustment under
this paragraph (c) shall become effective at the close of business on the date the subdivision or
combination becomes effective, or as of the record date of such dividend, or in the event that no
record date is fixed, upon the making of such dividend.
SECTION IX. MISCELLANEOUS
9.1
Governing Law
: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, AND ALL
MATTERS RELATED HERETO OR ARISING HEREUNDER (WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE),
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
DELAWARE. THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO
HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
9.2
Integrated Agreement
: The other Loan Documents, all related agreements, and this
Agreement shall be construed as integrated and complementary of each other, and as augmenting and
not restricting Lenders rights and remedies. If, after applying the foregoing, an inconsistency
still exists, the provisions of this Agreement shall constitute an amendment thereto and shall
control.
9.3
Waiver
: No omission or delay by Lender in exercising any right or power under
this Agreement or any related agreements and documents will impair such right or power or be
construed to be a waiver of any Default, or Event of Default or an acquiescence therein, and any
single or partial exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in
writing and signed by Lender and then only to the extent specified.
9.4
Expenses of Lender
: Borrower will pay upon demand of Lender all reasonable costs,
fees and expenses incurred by Lender in connection with (i) the enforcement of Lenders
13
rights
hereunder, or the collection of any payments owing from, Borrower under this Agreement and the
other Loan Documents or the protection, preservation or defense of the rights of Lender hereunder
and under the other Loan Documents, and (ii) any refinancing or restructuring of the credit
arrangements provided under this Agreement and other Loan Documents in the nature of a work-out
or of any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and
disbursements of counsel for Lender) (collectively, the
Expenses
).
9.5
Notices
:
a. All notices and other communications given or made pursuant hereto shall be in writing and
shall be deemed to have been duly delivered (i) four (4) Business Days after being sent by
registered or certified mail (postage prepaid, return receipt requested), (ii) one (1) Business Day
after being sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight
courier service, or (iii) on the date of confirmation of receipt (or the first Business Day
following such receipt if the date of such receipt is not a Business Day) of transmission by
facsimile, in each case to the intended recipient at the following addresses (or at such other
address for a party as shall be specified by like changes of address). A party electing to provide
notice by electronic transmission as provided herein shall also provide mailed copies of any such
notice.
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i.
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If to Lender:
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CytRx Corporation
11726 San Vicente Blvd., Suite 650
Los Angeles, California 90049
Telecopier No.: (310) 826-6139
Attention: Steven A. Kriegsman, President and Chief Executive Officer
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with a copy (which shall not constitute notice) to:
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TroyGould PC
1801 Century Park East, 16
th
Floor
Los Angeles, California 90067
Telecopier No.: (310) 201-4746
Attention: Sanford J. Hillsberg, Esq. and Dale E. Short, Esq.
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ii.
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If to Innovive:
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Innovive Pharmaceuticals, Inc.
555 Madison Avenue, 25
th
Floor
New York, New York 10022
Telecopier No.: (212) 716-1811
Attention: Steven Kelly, President and Chief Executive Officer
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with a copy (which shall not constitute notice) to:
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Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Suite 300
Raleigh, North Carolina 27607
Telecopier No.: (919) 781-4865
Attention: W. David Mannheim, Esq.
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9.6
Headings
: The headings of any paragraph or Section of this Agreement are for
convenience only and shall not be used to interpret any provision of this Agreement.
9.7
Survival
: All warranties, representations, and covenants made by Borrower herein,
or in any agreement referred to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Agreement, shall be considered to have been relied upon
by Lender, regardless of any investigation made by Lender or on its behalf. All statements in any
such certificate or other instrument prepared and/or delivered for the benefit of Lender shall
constitute warranties and representations by Borrower hereunder. Except as otherwise expressly
provided herein, all covenants made by Borrower hereunder or under any other agreement or
instrument shall be deemed continuing until all Obligations are satisfied in full.
9.8
Successors and Assigns
: This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties. Neither party may transfer, assign
or delegate any of its duties or obligations hereunder.
9.9
Duplicate Originals
: Two or more duplicate originals of this Agreement may be
signed by the parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.10
Modification
: No modification hereof or any agreement referred to herein shall
be binding or enforceable unless in writing and signed by Borrower and Lender.
9.11
Third Parties
: No rights are intended to be created hereunder, or under any
related agreements or documents for the benefit of any third party donee, creditor or incidental
beneficiary of Borrower. Nothing contained in this Agreement shall be construed as a delegation to
Lender of Borrowers duty of performance, including, without limitation, Borrowers duties under
any account or contract with any other Person.
9.12
Discharge of Taxes, Borrowers Obligations, Etc
.: Lender, in its sole
discretion, shall have the right at any time, and from time to time, with at least ten (10) days
prior notice to Borrower if Borrower fail to do so, to pay for the performance of any of Borrowers
obligations hereunder and discharge taxes or Liens (other than Permitted Liens), at any time levied
or placed on Borrowers Property in violation of this Agreement, unless Borrower is in good faith
with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper
reserves therefor. Expenses and advances shall be added to the Loan, and bear interest at the rate
applicable to the Loan, until reimbursed to Lender. Such payments and advances made by Lender
shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement.
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9.13
Consent to Jurisdiction
: Borrower and Lender each hereby irrevocably consent to
the non-exclusive jurisdiction of the Courts of the State of Delaware or any Federal Court located
in the State of Delaware in any and all actions and proceedings whether arising hereunder or under
any other agreement or undertaking. Borrower waives any objection which Borrower may have based
upon lack of personal jurisdiction, improper venue or forum non conveniens. Borrower irrevocably
agrees to service of process by certified mail, return receipt requested to the address of the
appropriate party set forth herein.
9.14
Waiver of Jury Trial
: BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS
IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING
WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH
RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR
RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE,
WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
[Remainder of Page Left Intentionally Blank]
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WITNESS
the due execution of this Loan and Security Agreement as a document under seal as of
the date first written above.
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INNOVIVE PHARMACEUTICALS, INC.
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By:
Name:
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/s/ Steven Kelly
Steven Kelly
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Title:
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President and Chief Executive Officer
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CYTRX CORPORATION
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By:
Name:
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/s/ Steven A. Kriegsman
Steven A. Kriegsman
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Title:
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President and Chief Executive Officer
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EXHIBIT A
FORM OF LOAN ADVANCE REQUEST
(Letterhead of Innovive Pharmaceuticals, Inc.)
CytRx Corporation
11726 San Vicente Blvd., Suite 650
Los Angeles, California 90049
Telecopier No.: (310) 826-6139
(
Lender
)
Attention: Steven A. Kriegsman, Chief Executive Officer
Borrower
hereby requests an Advance in the amount of $
pursuant to Section 2.1 of
that certain Loan and Security Agreement by and among Borrower and Lender dated as of June
, 2008
(as it may hereafter be amended, modified, restated or replaced, the
Loan Agreement
).
Capitalized terms used herein but not otherwise defined shall have the meanings given to them in
the Loan Agreement.
Borrower hereby represents and warrants to Lender as follows:
a. No Default or Event of Default under the Loan Agreement now exists or would exist immediately
after giving effect to the making of the requested Advance.
b. All representations and warranties made by the Borrower in the Loan Agreement and/or in any
other Loan Document as in effect on the date hereof (as heretofore amended from time to time) are
true and correct in all material respects as of the date hereof as if made on and as of the date
hereof (except to the extent such representations and warranties are made only as of a specific
earlier date).
c. The aggregate principal amount of all Advances outstanding under the Loan prior to giving effect
to the requested Advance is $
.
d. To the best of my knowledge, Borrower is currently in compliance with all obligations under the
Loan Agreement, the Loan Documents and the Merger Agreement.
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INNOVIVE PHARMACEUTICALS, INC.
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By:
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Name:
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Date:
, 2008
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Title:
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