SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Quarterly Period Ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission File No. 0-20111
ARONEX PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 76-0196535
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3400 Research Forest Drive, The Woodlands, Texas 77381
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (713) 367-1666
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 30, 1996
----- ----------------------------
Common Stock, $.001 par value 14,526,801 shares
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Quarterly Period June 30, 1996
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1 FINANCIAL STATEMENTS................................................................. 3
Balance Sheets - December 31, 1995 and June 30, 1996 (unaudited)..................... 4
Statements of Operations:
Six months ended June 30, 1995 and June 30, 1996 (unaudited) and for
the Period from Inception (June 13, 1986)
through June 30, 1996 (unaudited).................................................. 5
Statements of Cash Flows:
Six months ended June 30, 1995 and June 30, 1996 (unaudited) and for
the Period from Inception (June 13, 1986)
through June 30, 1996 (unaudited).................................................. 6
Notes to Financial Statements - June 30, 1996........................................ 7
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................................ 9
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders.................................. 12
Item 6 Exhibits and Reports on Form 8-K..................................................... 12
SIGNATURES ............................................................................ 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made herein are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the financial statements for the year ended December 31,
1995 included in the Company's Annual Report on Form 10- K/A for the year ended
December 31, 1995, as amended, filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.
3
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
BALANCE SHEETS
(All amounts in thousands, except share data)
A S S E T S
<TABLE>
<CAPTION>
June 30,
December 31, 1996
1995 (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 7,781 $ 3,162
Short-term investments......................................................... 2,480 38,003
Accounts receivable - affiliates............................................... 345 173
Accrued interest receivable.................................................... 9 534
Prepaid expenses and other assets.............................................. 279 197
------------ -----------
Total current assets......................................................... 10,894 42,069
Long-term investments............................................................. 1,754 1,762
Furniture, equipment and leasehold improvements, net.............................. 2,832 2,387
Investment in affiliate........................................................... 50 --
------------ ----------
Total assets............................................................... $ 15,530 $ 46,218
============ ============
</TABLE>
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses.......................................... $ 1,478 $ 1,106
Accrued payroll................................................................ 161 120
Current portion of notes payable - related party............................... 87 --
Current portion of other notes payable......................................... 211 211
Current portion of obligations under capital leases............................ 25 19
------------ ------------
Total current liabilities.................................................... 1,962 1,456
Long-term obligations:
Notes payable - related party, net of current portion.......................... 211 --
Other notes payable, net of current portion.................................... 446 345
Obligations under capital leases, net of current portion....................... 41 35
Deferred revenue............................................................... 876 926
------------ ------------
Total long-term obligations.................................................. 1,574 1,306
Commitments and contingencies
Stockholders' equity:
Preferred stock $.001 par value, 10,000,000 shares authorized,
none issued and outstanding.................................................. -- --
Common stock $.001 par value, 75,000,000 shares authorized
10,380,056 and 14,526,801 shares issued and outstanding, respectively 21 29
Additional paid-in capital..................................................... 56,331 93,679
Common stock warrants.......................................................... 1,488 970
Treasury stock................................................................. (11) (11)
Deferred compensation.......................................................... (1,536) (2,520)
Unrealized loss on investments................................................. (116) (108)
Deficit accumulated during development stage................................... (44,183) 48,583)
------------- -------------
Total stockholders' equity................................................... 11,994 43,456
------------ ------------
Total liabilities and stockholders' equity..................................... $ 15,530 $ 46,218
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(All amounts in thousands, except loss per share data)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(June 13, 1986)
Six Months Ended Three Months Ended through
June 30, June 30, June 30,
1995 1996 1995 1996 1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Research and development
grants and contracts............... $ 291 $ 1,008 $ 206 $ 465 $ 2,437
Interest income...................... 212 470 94 328 2,410
--------- ------------ ------------ ----------- -----------
Total revenues................... 503 1,478 300 793 4,847
--------- ------------ ------------ ----------- -----------
Expenses:
Research and development............. 3,540 4,845 1,760 2,523 33,630
Purchase of in-process
research and development......... -- 191 -- 191 8,574
General and administrative........... 815 771 435 376 10,314
Interest expense.................... 100 71 48 30 912
--------- ------------ ------------ ----------- -----------
Total expenses.................. 4,455 5,878 2,243 3,120 53,430
--------- ------------ ------------ ----------- -----------
Net loss ................................. $ (3,952)$ (4,400) $ (1,943) $ (2,327) $ (48,583)
=========== ============= ============= ============ ============
Loss per share........................... $ (0.76) $ (0.38) $ (0.37) $ (0.19)
===== ===== ====== =====
Weighted average shares used in
computing loss per share............ 5,227 11,527 5,291 12,404
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(June 13, 1986)
Six months ended through
June 30, June 30,
1995 1996 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... $ (3,952) $ (4,400) $(48,583)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities-
Depreciation and amortization ................................ 346 486 2,437
Compensation expense related to stock and stock options ...... 231 303 2,392
Charge for purchase of in-process research and development ... -- 191 8,574
Changes in assets and liabilities-
Increase in prepaid expenses and other assets .............. (17) (443) (546)
Increase (decrease) in accounts payable and accrued expenses 137 (413) 1,153
Decrease (increase) in accounts receivable - affiliates .... (130) 172 (173)
Increase in deferred revenue ............................... 235 50 573
Accrued interest payable converted to stock .................. -- -- 97
-------- -------- --------
Net cash used in operating activities .................... (3,150) (4,054) (34,076)
Cash flows from investing activities:
Net sales (purchases) of investments ............................. 3,931 (35,523) (34,022)
Purchase of furniture, equipment and leasehold
improvements ................................................... (78) (41) (3,554)
Unrealized gain (loss) on investment ............................. 143 8 (108)
Acquisition costs, net of cash received of $947,000 .............. -- (26) (296)
Loss in affiliate ................................................ 150 50 500
Investment in affiliate .......................................... -- -- (500)
Increase in other assets ......................................... (838) -- --
-------- -------- --------
Net cash provided by (used in) investing activities ...... 3,308 (35,532) (37,980)
Cash flows from financing activities:
Proceeds from notes payable and capital leases ................... 64 -- 2,672
Repayment of notes payable and principal payments under
capital lease obligations ...................................... (171) (411) (2,063)
Purchase of treasury stock ....................................... -- -- (11)
Proceeds from issuance of stock .................................. 11 35,378 74,620
------- -------- --------
Net cash provided by (used in) financing activities ...... (96) 34,967 75,218
------- -------- --------
Net increase (decrease) in cash and cash equivalents ................ 62 (4,619) 3,162
Cash and cash equivalents at beginning of period .................... 1,426 7,781 --
------- -------- --------
Cash and cash equivalents at end of period .......................... $ 1,488 $ 3,162 $ 3,162
======= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ......................... $ 100 $ 30 $ 544
Supplemental schedule of noncash financing activities:
Conversion of notes payable and accrued interest to
common stock ................................................. $ -- $ -- $ 3,043
</TABLE>
The accompanying notes are an integral part of these financial
statements.
6
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Organization and Basis of Presentation
Aronex Pharmaceuticals, Inc. ("Aronex" or the "Company") was incorporated
in Delaware on June 13, 1986 and merged with Triplex Pharmaceutical Corporation
("Triplex") and Oncologix, Inc. ("Oncologix") effective September 11, 1995.
Aronex is a development stage company which has devoted substantially all of its
efforts to research and product development and has not yet generated any
significant revenues, nor is there any assurance of significant revenues in the
future. In addition, the Company expects to continue to incur losses for the
foreseeable future and there can be no assurance that the Company will complete
the transition from a development stage company to successful operations. The
research and development activities engaged in by the Company involve a high
degree of risk and uncertainty. The ability of the Company to successfully
develop, manufacture and market its proprietary products is dependent upon many
factors. These factors include, but are not limited to, the need for additional
financing, attracting and retaining key personnel and consultants, and
successfully developing manufacturing, sales and marketing operations. The
Company's ability to develop these operations may be impacted by uncertainties
related to patents and proprietary technologies, technological change and
obsolescence, product development, competition, government regulations and
approvals, health care reform and product liability exposure. Additionally, the
Company is reliant upon collaborative arrangements for research, contractual
agreements with corporate partners, and its exclusive license agreements with
M.D. Anderson Cancer Center ("MD Anderson"), and an affiliate of the Baylor
College of Medicine ("Baylor"). Further, during the period required to develop
these products, the Company will require additional funds which may not be
available to it. The Company expects that its existing cash resources will be
sufficient to fund its cash requirements through mid-1998. Accordingly, there
can be no assurance of the Company's future success.
The balance sheet at June 30, 1996 and the related statements of operations
and cash flows for the six month periods ending June 30, 1996 and 1995 and the
period from inception (June 13, 1986) through June 30, 1996 are unaudited. These
interim financial statements should be read in conjunction with the December 31,
1995 financial statements and related notes. The unaudited interim financial
statements reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods presented and
all such adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results for a full year.
Certain reclassifications have been made to December 31, 1995 balances to
conform to current year presentation.
2. Cash, Cash Equivalents and Investments
The Company has adopted Statement of Financial Accounting Standards No. 115
("SFAS 115"), Accounting for Certain Investments in Debt and Equity Securities.
Debt and equity securities that the Company has the intent and ability to hold
to maturity are classified as "held to maturity" and reported at amortized cost.
Debt and equity securities that are held for current resale are classified as
"trading securities" and reported at fair value with unrealized gains and losses
included in earnings. Debt and equity securities not classified as either
"securities held to maturity" or "trading securities" are classified as
"securities available for sale" and reported at fair value, with unrealized
gains and losses excluded from earnings and reported as a separate component of
stockholders' equity. The adoption of SFAS 115 did not have a material effect on
the Company's financial position or results of operations.
Cash and cash equivalents include money market accounts and investments
with an original maturity of less than three months. All securities held to
maturity consist of high-grade commercial securities and U.S. Government backed
securities with a maturity date of less than one year and have a carrying value
which approximates fair market value and cost. Available for sale securities are
U.S. mortgage backed securities with various maturity dates over the next
several years that have an amortized cost of $1,870,000, a fair market value of
$1,762,000 and a gross unrealized loss of $108,000 at June 30, 1996. The Company
currently has no trading securities.
7
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
3. Federal Income Taxes
At December 31, 1995, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $57.1 million.
The Tax Reform Act of 1986 provided a limitation on the use of NOL and tax
credit carryforwards following certain ownership changes that could limit the
Company's ability to utilize these NOLs and tax credits. Accordingly, the
Company's ability to utilize its NOLs and tax credit carryforwards to reduce
future taxable income and tax liabilities may be limited. As a result of the
mergers with Triplex and Oncologix a change in control as defined by federal
income tax law occurred, causing the use of these carryforwards to be limited
and possibly eliminated. Additionally because U.S. tax laws limit the time
during which NOLs and the tax credit carryforwards may be applied against future
taxable income and tax liabilities, the Company may not be able to take full
advantage of its NOLs and tax credit carryforwards for federal income tax
purposes. The carryforwards will begin to expire in 2001 if not otherwise used.
The Company has not made any income tax payments since inception.
4. Subsequent Events
In August 1995, the Company was named as a defendant in a lawsuit filed by
certain common stockholders of Oncologix seeking damages as a result of the
merger with Oncologix. Plaintiffs contend that the provision of the merger
whereby common stockholders obtained no consideration is contrary to law and
damaging to them. Plaintiffs sought prior injunctive relief to prevent
consummation of the merger, but this relief was denied by the District Court. In
July 1996, the Company resolved this matter and the lawsuit was dismissed
without a material adverse effect on the accompanying financial statements. An
expense relating to this settlement has been recorded in the purchase of
in-process research and development.
At a Special Meeting of Stockholders held on May 24, 1996, the stockholders
of the Company approved a one-for-two reverse split of the Common Stock (the
"Reverse Split"). The Reverse Split became effective with the filing of an
amendment to the Company's Certificate of Incorporation on July 1, 1996. The
accompanying financial statements have been restated to give effect to the
Reverse Split.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Overview
Since its inception in 1986, Aronex Pharmaceuticals, Inc. ("Aronex" or the
"Company") has primarily devoted its resources to fund research, drug discovery
and development. The Company has been unprofitable to date and expects to incur
substantial operating losses for the next several years as it expends its
resources for product research and development, preclinical and clinical testing
and regulatory compliance. The Company has sustained losses of approximately
$48.6 million through June 30, 1996. The Company has financed its research and
development activities and operations primarily through public and private
offerings of securities. The Company's operating results have fluctuated
significantly during each quarter, and the Company anticipates that such
fluctuations, largely attributable to varying commitments and expenditures for
clinical trials and research and development, will continue for the next several
years. On September 11, 1995, Aronex acquired Oncologix, Inc. ("Oncologix") and
Triplex Pharmaceutical Corporation ("Triplex") in a three way merger (the
"Mergers"), which were accounted for under the purchase method of accounting.
The financial data prior to September 11, 1995 discussed below represent the
operations and balance sheet data of Aronex, while the financial data from and
after September 11, 1995 discussed below represent the combined operations and
balance sheet data of the merged companies.
Three and Six Month Periods Ended June 30, 1995 and 1996
Revenues from research and development grants and contracts were $465,000
and $206,000 for the three months ended June 30, 1996 and 1995, respectively, an
increase of $259,000. Research and development grants and contracts were
$1,008,000 and $291,000 for the six months ended June 30, 1996 and 1995,
respectively, an increase of $717,000. These increases were primarily due to the
increase in development revenue from RGene Therapeutics, Inc. ("RGene"), an
affiliate of the Company, to $335,000 for the six months ended June 30, 1996
from $291,000 for the corresponding period in 1995; revenues of $600,000 from
Hoechst Marion Roussel Inc. ("Hoechst") for the six months ended June 30, 1996;
and $73,000 from Small Business Innovative Research ("SBIR") grants for the six
months ended June 30, 1996. There were no Hoechst or SBIR grant revenue in the
first six months of 1995 because these grants and contracts were obtained as a
result of the Mergers.
Interest income was $328,000 and $94,000 for the three months ended June
30, 1996 and 1995, respectively, an increase of $234,000. Interest income was
$470,000 and $212,000 for the six months ended June 30, 1996 and 1995,
respectively, an increase of $258,000. These increases were primarily due to an
increase of funds available for investment in 1996 resulting from cash received
from the exercise of warrants and the completion of a stock offering in May
1996.
Research and development expenses were $2,523,000 and $1,760,000 for the
three months ended June 30, 1996 and 1995, respectively, an increase of
$763,000. Research and development expenses were $4,845,000 and $3,540,000 for
the six months ended June 30, 1996 and 1995, respectively, an increase of
$1,305,000. These increases were primarily due to the addition of Triplex's
research department following the Mergers.
In-process research and development represents costs incurred during the
six month period ended June 30, 1996 relating to the recording of the Mergers
including the settlement of a lawsuit that had been filed by certain common
stockholders of Oncologix.
General and administrative expenses were $376,000 and $435,000 for the
three months ended June 30, 1996 and 1995, respectively, a decrease of $59,000.
General and administrative expenses were $771,000 and $815,000 for the six
months ended June 30, 1996 and 1995, respectively, a decrease of $44,000. These
decreases were primarily a result of $229,000 in non-recurring operating
expenses incurred on behalf of Oncologix paid by the Company pursuant to the
terms of the Oncologix merger agreement in 1995. In the six months ended June
30, 1996 this decrease was partially offset by increases in payroll costs,
business consultant expenses and legal expenses.
Interest expense was $30,000 and $48,000 for the three months ended June
30, 1996 and 1995, respectively, a decrease of $18,000. Interest expense was
$71,000 and $100,000 for the six months ended June 30, 1996 and 1995,
respectively, a decrease of $29,000. These decreases in interest expense
resulted primarily from a decrease in the amount of laboratory equipment
obtained through leases and promissory notes payable
9
<PAGE>
.
Net loss was $2,327,000 and $1,943,000 for the three months ended June
30, 1996 and 1995, respectively, an increase of $384,000. Net loss for the six
months ended June 30, 1996 and 1995, respectively, was $4,400,000 and
$3,952,000, an increase of $448,000. These increases were primarily due to the
increase in research expenses.
Liquidity and Capital Resources
Since its inception, the Company's primary source of cash has been from
financing activities, which have consisted primarily of sales of equity
securities. The Company has raised an aggregate of approximately $74.6 million
from the sale of equity securities from its inception through June 30, 1996. In
July 1992, the Company raised net proceeds of approximately $10.7 million in the
initial public offering of its Common Stock. In September 1993, the Company
entered into a collaborative agreement with Genzyme relating to the development
and commercialization of TretinoinLF, in connection with which the Company
received net proceeds of approximately $4.5 million from the sale of Common
Stock to Genzyme. In November 1993, the Company raised net proceeds of
approximately $11.5 million in a public offering of Common Stock. From October
1995 through June 30, 1996, the Company received aggregate net proceeds of
approximately $5.3 million from the exercise of certain warrants issued in the
Mergers. From its inception until June 30, 1996, the Company also received an
aggregate of $2.5 million cash from collaborative arrangements and SBIR grants.
In September 1995, the Company's cash and securities held to maturity increased
by approximately $6.7 million as a result of its merger with Triplex. In May
1996, the Company received net proceeds of approximately $32.1 million in a
public offering of Common Stock.
Since its inception, the Company has an aggregate of approximately $2.4
million from research and development revenue grants and contracts. A
substantial portion of this revenue over the past two years resulted from the
collaborative agreements with RGene and Hoechst. As a result of RGene's merger
with Targeted Genetics Corporation in June 1996, Aronex expects that the
collaborative development work being performed for RGene will decrease
substantially over the next few months. The agreement with Hoechst terminates at
the end of 1996 unless the parties agree to renew it. No assurance can be given
that the agreement will be renewed. Hoechst recently completed a merger with
Marion Merrell Dow Pharmaceuticals, Inc. and has indicated that it is
re-evaluating its collaborative arrangements.
The Company's primary use of cash to date has been in operating activities
to fund research and development, including preclinical studies and clinical
trials, and general and administrative expenses. Cash of $4.1 million and $3.2
million was used in operating activities during the first six months of 1996 and
1995, respectively. The Company had cash, cash- equivalents and investments of
$42.9 million as of June 30, 1996, consisting primarily of cash in banks and
money market accounts, commercial securities and United States government
securities.
The Company has experienced negative cash flows from operations since its
inception and has funded its activities to date primarily from equity
financings. The Company has expended, and will continue to require, substantial
funds to continue research and development, including preclinical studies and
clinical trials of its products, and to commence sales and marketing efforts if
FDA and other regulatory approvals are obtained. The Company expects that its
existing capital resources will be sufficient to fund its capital requirements
through mid-1998. Thereafter, the Company will need to raise substantial
additional capital to fund its operations. The Company's capital requirements
will depend on many factors, including the problems, delays, expenses and
complications frequently encountered by development stage companies; the
progress of the Company's research, development and clinical trial programs; the
Company's ability to satisfy certain milestones under its current collaborative
arrangements with Genzyme and Hoechst; the extent and terms of any future
collaborative research, manufacturing, marketing or other funding arrangements;
the costs and timing of seeking regulatory approvals of the Company's products;
the Company's ability to obtain regulatory approvals; the success of the
Company's sales and marketing programs; the costs of filing, prosecuting and
defending and enforcing any patent claims and other intellectual property
rights; and changes in economic, regulatory or competitive conditions or the
Company's planned business. Estimates about the adequacy of funding for the
Company's activities are based on certain assumptions, including the assumption
that testing and regulatory procedures relating to the Company's products can be
conducted at projected costs. There can be no assurance that changes in the
Company's research and development plans, acquisitions or other events will not
result in accelerated or unexpected expenditures. To satisfy its capital
requirements, the Company may seek to raise additional funds in the public or
private capital markets. The Company's ability to raise additional funds in the
public or private markets will be adversely affected if the results of its
current or future clinical trials are not favorable. The Company may seek
additional funding through corporate collaborations and other financing
vehicles. There can be no assurance that any such funding will be available to
the Company on favorable terms or at all. If adequate funds are not available,
the Company may be required to curtail significantly one or more of its research
or development programs, or it may be required to obtain funds through
arrangements with future collaborative partners or others that may require the
Company to relinquish rights to some or all of its technologies or products. If
the Company is successful in obtaining additional financing, the terms of such
10
<PAGE>
financing may have the effect of diluting or adversely affecting the holdings or
the rights of the holders of the Company's Common Stock.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The words
"anticipate," "believe," "expect," "estimate," "project" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, believed,
expected, estimated or projected. For additional discussion of such risks,
uncertainties and assumptions, see "Item 1.Business -- Manufacturing," "-- Sales
and Marketing," "-- Patents, Proprietary Rights and Licenses," "-- Government
Regulation," "-- Competition" and "-- Additional Business Risks" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, as
amended, and "-- Liquidity and Capital Resources" included elsewhere in this
report.
11
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of the Stockholders of Aronex Pharmaceuticals, Inc.
was held on May 24, 1996, to consider and vote upon a proposal to
amend the Company's Amended and Restated Certificate of Incorporation
to effect a one-for-two reverse stock split. The proposal was
approved, with the following numbers of shares voted for and against
and abstaining from voting upon the proposal:
For Against Abstain
--- ------- -------
13,794,213 77,976 1,595
(b) The Annual Meeting of the Stockholders of Aronex Pharmaceuticals, Inc.
was held on July 9, 1996, to consider and vote upon the following
proposals:
(i) Election of Class III Directors. The following individuals
were nominated and elected as Class III directors, with the
following numbers of shares voted for and against and
withheld for each director:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
James M. Chubb, Ph.D. 19,039,619 none 130,445
George B. Mackaness, M.D. 19,039,619 none 130,445
Gregory F. Zaic 19,039,967 none 130,097
(ii) Ratification and Selection of Arthur
Andersen LLP as Independent
Public Accountants 19,150,035 4,350 15,679
(iii) Amendment and Restatement of the
Aronex Pharmaceuticals, Inc., 1993
Non-Employee Director Stock Option
Plan 18,978,830 129,413 37,821
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation, as amended.
3.2 Restated Bylaws. Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (No. 33-47418), declared effective by the
Commission on July 10, 1992, is incorporated herein by reference.
4.1 Specimen certificate for shares of Common Stock, par value $.001
per share.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
99.1 Amended and Restated 1993 Non-Employee Director Stock Option
Plan.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARONEX PHARMACEUTICALS, INC.
Dated: July 29, 1996 By:/S/JAMES M. CHUBB
-----------------
James M. Chubb, Ph.D.
President and Chief Executive Officer
Dated: July 29, 1996 By:/S/TERANCE A. MURNANE
---------------------
Terance A. Murnane
Controller
13
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ARGUS PHARMACEUTICALS, INC.
ARGUSPHARMACEUTICALS, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that it was incorporated on June 13, 1986 as THE MACROPHAGE COMPANY.
ARTICLE ONE
This Restated Certificate of Incorporation has been duly adopted in
accordance with the applicable provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware (the "DGCL") by the Board of Directors
of the Corporation.
ARTICLE TWO
This Restated Certificate of Incorporation was approved by written consent
of the stockholders pursuant to Section 228 of the DGCL.
ARTICLE THREE
The outstanding shares of the Corporation's common stock, par value $.001
per share ("Old Common Stock"), are hereby reclassified and converted into
shares of the Corporation's Common Stock, par value $.001 per share ("Common
Stock"), on the basis of one share of Common Stock for each 3.3 shares of Old
Common Stock. The Corporation shall not issue any fractional shares of Common
Stock in connection with any of the foregoing reclassification and conversion of
Old Common Stock; instead, any fractional interest in Common Stock resulting
from application of the specified reclassification and conversion ratios shall
be rounded up or down to the nearest whole share of Common Stock, and in the
event that any fractional interest is rounded down, there shall be no cash paid
by or to the Corporation in respect of any such fractional interest.
ARTICLE FOUR
The Certificate of Incorporation of this Corporation and all amendments
thereto are hereby superseded by the following Restated Certificate of
Incorporation which accurately sets forth the entire text of the Certificate of
Incorporation:
<PAGE>
<PAGE>
ARTICLE I
NAME
The name of the Corporation is Argus Pharmaceuticals, Inc.
ARTICLE II
REGISTERED OFFICE/AGENT
The registered office of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
ARTICLE III
PURPOSES
The purposes of the Corporation are to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
CAPITAL STOCK
A. Classes of Stock
The total number of shares of all classes of capital stock that the
Corporation shall be authorized to issue is 35,000,000 shares, divided into the
following: (i) 10,000,000 shares of preferred stock, par value $.001 per share
("Preferred Stock"), and (ii) 25,000,000 shares of common stock, par value $.001
per share ("Common Stock").
B. Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby vested with the authority to fix by
resolution the powers, designations, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, including,
without limitation, the dividend rate, conversion rights, voting rights,
redemption price and liquidation preference, and the qualifications, limitations
or restrictions on such preferences and/or rights and to fix the number of
shares constituting any such series. Unless otherwise provided by the
resolution(s) adopted by the Board of Directors providing for the issue of any
series of Preferred Stock, the number of shares comprising such series may be
increased or decreased (but not below the number of shares then outstanding)
from time to time by duly adopted resolutions(s) of the Board of Directors.
<PAGE>
<PAGE>
C. Common Stock
Except as otherwise provided in this Restated Certificate of Incorporation
or by law or by the resolution(s) of the Board of Directors providing for the
issue of any series of the Preferred Stock, each holder of Common Stock shall be
entitled to one vote for each share held. Subject to all of the rights of the
Preferred Stock or any series thereof, the holders of the Common Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, dividends payable in cash, stock or otherwise.
Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntarily, and after the holders of the Preferred Stock of each
series shall have been paid in full the amounts to which they respectively shall
be entitled, or a sum sufficient for such payments in full shall have been set
aside, the remaining net assets of the Corporation shall be distributed pro rata
to the holders of the Common Stock in accordance with their respective rights
and interest.
ARTICLE V
BOARD OF DIRECTORS
Except as otherwise provided by law, the business and affairs of the
Corporation shall be managed by, or under the direction of its Board of
Directors. The number of directors of the Corporation shall be fixed by and in
the manner provided in, the Corporation's Bylaws, but shall not be fewer than
three nor more than 15. None of the directors need be a stockholder or a
resident of the State of Delaware. Elections of directors need not be by written
ballot unless the Corporation's Bylaws provide otherwise. In furtherance and not
in limitation of the rights, powers, privileges and discretionary authority
conferred by the DGCL or other applicable law, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.
ARTICLE VI
STOCKHOLDERS
Stockholder action may only be taken at an annual or special meeting with
prior notice and a vote. No stockholder action may be taken by written consent.
Meetings of stockholders may be held within or without the State of Delaware as
the Bylaws may provide. In addition to such special meetings as are provided by
law or this Restated Certificate of Incorporation, special meetings of the
stockholders may be called only by (a) the Board of Directors pursuant to a
resolution adopted by a majority of the Board of Directors then in office, (b)
the Chairman of the Board, (c) the President of the Corporation or (d) the
holders of not less than 30% of the total voting power of all shares of stock of
the Corporation entitled to vote in the election of directors. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place(s) as may be designated from time to
time by the Board of Directors or in the Bylaws of the Corporation.
<PAGE>
<PAGE>
ARTICLE VII
LIMITED DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL for unlawful
payment of dividends or improper redemption of stock, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is hereafter amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation,
in addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the DGCL, as amended. Any repeal or
modification of this paragraph by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE VIII
INDEMNIFICATION
A. Mandatory Indemnification
Each person who at any time is or was a director of the Corporation, and is
threatened to be or is made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative (a "Proceeding"), by reason of the fact that such person is or
was a director of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, whether the basis of
a Proceeding is alleged action in such person's official capacity or in another
capacity while holding such office, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the DGCL, or any other
applicable law as may from time to time be in effect (but, in the case of any
such amendment or enactment, only to the extent that such amendment or law
permits the Corporation to provide broader indemnification rights than such law
prior to such amendment or enactment permitted the Corporation to provide),
against all expense, liability and loss (including, without limitation, court
costs and attorneys' fees, judgments, fines, excise taxes or penalties, and
amounts paid or to be paid in settlement) actually and reasonably incurred or
suffered by such person in connection with a Proceeding, and such
indemnification shall continue as to a person who has ceased to be a director of
the Corporation or a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, and shall inure to
the benefit of such person's heirs, executors and administrators. The
Corporation's obligations under Section A include, but are not limited to, the
convening of any meeting, and the consideration of any matter thereby, required
by statute in order to determine the eligibility of any person for
indemnification.
<PAGE>
<PAGE>
B. Prepayment of Expenses
Expenses incurred by a director of the Corporation in defending a
Proceeding shall be paid by the Corporation in advance of the final disposition
of such Proceeding to the fullest extent permitted by, and only in compliance
with, the DGCL or any other applicable laws as may from time to time be in
effect, including, without limitation, any provision of the DGCL which requires,
as a condition precedent to such expense advancement, the delivery to the
Corporation of an undertaking, by or on behalf of such director, to repay all
amounts so advanced if it shall ultimately be determined that such director is
not entitled to be indemnified under Section A of this Article VIII or
otherwise. Repayments of all amounts so advanced shall be upon such terms and
conditions, if any, as the Corporation's Board of Directors deems appropriate.
C. Vesting
The Corporation's obligation to indemnify and to prepay expenses under
Sections A and B of this Article VIII shall arise, and all rights granted to the
Corporation's directors hereunder shall vest, at the time of the occurrence of
the transaction or event to which a Proceeding relates, or at the time that the
action or conduct to which such Proceeding relates was first taken or engaged in
(or omitted to be taken or engaged in), regardless of when such Proceeding is
first threatened, commenced or completed. Notwithstanding any other provision of
this Certificate of Incorporation or the Bylaws of the Corporation, no action
taken by the Corporation, either by amendment of this Certificate of
Incorporation or the Bylaws of the Corporation or otherwise, shall diminish or
adversely affect any rights to indemnification or prepayment of expenses granted
under Sections A and B of this Article VIII which shall have become vested as
aforesaid prior to the date that such amendment or other corporate action is
effective or taken, whichever is later.
D. Enforcement
If a claim under Section A or Section B or both Sections A and B of this
Article VIII is not paid in full by the Corporation within 30 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit in a court of competent jurisdiction against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall also be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any such suit (other than a
suit brought to enforce a claim for expenses incurred in defending any
Proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the DGCL or
other applicable law to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. The failure of the
Corporation (including its Board of Directors, independent legal counsel, or
stockholders) to have made a determination prior to the commencement of such
suit as to whether indemnification is proper in the circumstances based upon the
applicable standard of conduct set forth in the DGCL or other applicable law
shall neither be a defense to the action nor create a presumption that the
claimant has not met the applicable standard of conduct. The termination of
<PAGE>
<PAGE>
any Proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal Proceeding, had reasonable cause
to believe that his conduct was unlawful.
E. Nonexclusive
The indemnification provided by this Article VIII shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under any stature, bylaw, other provisions of this Certificate of
Incorporation, agreement, vote of stockholders of disinterested directors or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
F. Permissive Indemnification
The rights to indemnification and prepayment of expenses which are
conferred to the Corporation's directors by Sections A and B of this Article
VIII may be conferred upon any officer, employee or agent of the Corporation if,
and to the extent, authorized by the Board of Directors.
G. Insurance
The Corporation shall have power to purchase and maintain insurance, at its
expense, on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, member, employee,
trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise against any expense,
liability or loss asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Corporation's Bylaws, the provisions of
this Article VIII, the DGCL or other applicable law.
ARTICLE IX
COMPROMISE
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
IN WITNESS WHEREOF, Argus Pharmaceuticals, Inc. has caused this Restated
Certificate of Incorporation to be signed by its Vice President and attested to
by its Secretary and Controller this 24th day of June, 1992.
/s/ Kenneth M. Cohen
--------------------
Kenneth M. Cohen,
Vice President
Acknowledged this 24th
day of June, 1992.
/s/Terance A. Murnane
- ---------------------
Terance A. Murnane,
Secretary and Controller
<PAGE>
<PAGE>
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, Rosa L. Williams, a notary public, in and for Harris County, Texas, do
hereby certify that on this the 24th day of June, 1992, personally appeared
before me, Kenneth M. Cohen, who being by me duly sworn, declared that he is the
person who signed the foregoing Restated Certificate of Incorporation of Argus
Pharmaceuticals, Inc. as Vice President of Argus Pharmaceuticals, Inc., as the
act and deed of such corporation, and that the statements contained therein are
true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 24th day of June, 1992.
/s/ ROSA L. WILLIAMS
[SEAL] -------------------------------------------
Notary Public in and for the State of Texas
My Commission Expires May 8, 1994
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARGUS PHARMACEUTICALS, INC.
Argus Pharmaceuticals, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation").
DOES HEREBY CERTIFY:
FIRST: That a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the Amended
and Restated Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of the
Corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Amended and Restated Certificate of Incorporation
of the Corporation be amended to change each of Article I, Article IV and
Article V thereto, so that as amended,
Article I shall be and read as follows:
ARTICLE I
NAME
The name of the Corporation is Aronex Pharmaceuticals, Inc.
Article IV shall be and read as follows:
ARTICLE IV
CAPITAL STOCK
A. Classes of Stock
The total number of shares of all classes of capital stock that the
Corporation shall be authorized to issue is 85,000,000 shares, divided into
the following: (i) 10,000,000 shares of preferred stock, par value $.001
per share ("Preferred Stock"), and (ii) 75,000,000 shares of common stock,
par value $.001 per share ("Common Stock").
-1-
<PAGE>
<PAGE>
B. Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby vested with the authority to
fix by resolution the powers, designations, preferences and relative,
participating, optional and other special rights of each series of
Preferred Stock, including, without limitation, the dividend rate,
conversion rights, voting rights, redemption price and liquidation
preference, and the qualifications, limitations or restrictions on such
preferences and/or rights to fix the number of shares constituting any such
series. Unless otherwise provided by the resolution(s) adopted by the Board
of Directors providing for the issue of any series of Preferred Stock, the
number of shares comprising such series may be increased or decreased (but
not below the number of shares then outstanding) from time to time by only
adopted resolution(s) of the Board of Directors.
C. Common Stock
Except as otherwise provided in this Amended and Restated Certificate
of Incorporation or by law or by the resolution(s) of the Board of
Directors providing for the issue of any series of the Preferred Stock,
each holder of Common Stock shall be entitled to one vote for each shares
held. Subject to all of the rights of the Preferred Stock or any series
thereof, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of funds legally available
therefor, dividends payable in cash, stock or otherwise. Upon any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, and after the holders of the Preferred Stock of
each series shall have been paid in full the amounts to which they
respectively shall be entitled, or a sum sufficient for such payments in
full shall have been set aside, the remaining net assets of the Corporation
shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interest.
Article V shall be and read as follows:
ARTICLE V
BOARD OF DIRECTORS
A. Classification
Except as otherwise provided by law, the business and affairs of the
Corporation shall be managed by, or under the direction of, its Board of
Directors. The Board of Directors shall be divided into three classes,
Class I, Class II and Class III, which shall be as nearly equal in number
as possible. At the annual meeting of stockholders to be held in 1995, or
any special meeting held in lien thereof, Class I Directors shall be
elected for a term expiring at the annual meeting of stockholders to be
held in 1998, Class II Directors shall be elected for a term expiring at
the annual meting of stockholders to be held in 1997, and Class III
Directors shall be elected for a term expiring at the annual meeting of
stockholders to be held
-2-
<PAGE>
<PAGE>
in 1996, with each director to hold office until his or her successor is
elected and qualified. At each annual meeting of stockholders subsequent to
1995, the successor(s) of the class of directors whose term expires at that
annual meeting shall be elected to hold office for a term expiring at the
annual meeting of stockholders to be held in the third year following the
year of such director's election. None of the directors need be a
stockholder or a resident of the State of Delaware. The election of
directors need not be by written ballot, unless so provided in the
Corporation's Bylaws. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
Any newly created or eliminated directorship resulting from an increase or
decrease in the Board of Directors shall be appointed by the Board of
Directors among the three classes of directors so as to maintain such
classes as nearly equal as possible. In furtherance and not in limitation
of the rights, powers, privileges and discretionary authority conferred by
the DGCL, or other applicable law, the Board of Directors is expressly
authorized to adopt, amend or repeal the Bylaws of the Corporation.
B. Vacancies
Except as otherwise provided for in this Amended and Restated
Certificate of Incorporation, vacancies resulting from newly-created
directorships, death, resignation, removal or other cause shall be filled
only by the affirmative vote of a majority of the remaining directors then
in office, even though less than a quorum of the Board of Directors, or by
a sole remaining director. Any director elected in accordance with the
preceding sentence of this Article V shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred until such director's successor shall have
been elected and qualified.
C. Removal
Any director may be removed from office only for cause and only by
either the affirmative vote of a majority of the continuing directors other
than such director, or by the affirmative vote of the holders of 80% of the
then outstanding shares of each class of stock of the Corporation having
voting power for the election of directors.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
-3-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by David M. Leech, its President and Chief Executive Officer and Terance
A. Murnane, its Controller and Secretary, this 11th day of September, 1995.
/s/ David M. Leech
-------------------------
David M. Leech, President
and Chief Executive Officer
ATTEST: /s/Terance A. Murnane
-----------------------
Terance A. Murnane,
Controller and Secretary
-4-
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARONEX PHARMACEUTICALS, INC.
Aronex Pharmaceuticals, Inc. (the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL") does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth the following amendment to the Amended and Restated
Certificate of Incorporation of the Corporation (the "Amendment"), declaring the
Amendment to be advisable and calling for the submission of the proposed
Amendment to the stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed Amendment is as follows:
ARTICLE IV of the Amended and Restated Certificate of Incorporation of
Aronex Pharmaceuticals, Inc., a Delaware corporation, is hereby amended by
adding thereto new Section D to read as follows:
D. Reverse Split
(i) Effective immediately upon the filing of this Amendment to the Amended
and Restated Certificate of Incorporation in the office of the Secretary of
State of the State of Delaware, each outstanding share of previously existing
Common Stock shall be and hereby is converted into and reclassified as one-half
of a share of Common Stock; provided, however, that fractional shares of Common
Stock will not be issued and each holder of a fractional share of Common Stock
shall receive in lieu thereof a cash payment from the Corporation determined by
multiplying such fractional share of Common Stock by two times the average
closing price of a share of previously existing Common Stock on the Nasdaq
National Market for the five trading days immediately preceding the effective
date, and upon such other terms as the officers of the Corporation, in their
sole discretion, deem to be advisable and in the best interests of the
Corporation.
(ii) Certificates representing reclassified shares are hereby canceled and
upon presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive certificate(s) representing the new shares
into which such canceled shares have been converted.
SECOND: That thereafter pursuant to a resolution of the Board of
Directors, a special meeting of the stockholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the DGCL at which
meeting the necessary number of shares as required by statute were voted in
favor of the Amendment.
THIRD: That the Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this
Certificate of Amendment is filed and accepted by the Secretary of State of the
State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by James M. Chubb, its President, and attested by Terance A. Murnane, its
Secretary, this 28th day of June, 1996.
ARONEX PHARMACEUTICALS, INC.
By: /s/ James M. Chubb
--------------------
James M. Chubb
President
Attest: /s/ Terance A. Murnane
--------------------
Terance A. Murnane
Secretary
<PAGE>
EXHIBIT 4.1
SPECIMEN COMMON STOCK CERTIFICATE
The common stock certificate indicates that the corporation is
incorporated under the laws of the State of Delaware, the par value of the
shares is $.001 and that the shares are denominated Common Stock. The
certificate further lists the CUSIP number. The certificate states that the
shares are fully paid and non-assessable shares, and the certficate bears the
seal of the corporation along with the signatures of the president and the
secretary of the corporation.
The reverse side of the certificate is as follows:
Aronex Pharmacueticals, Inc.
The Company will furnish upon request and without charge to each
stockholder the powers, designations, preferences and relative, participating,
optional and other special rights of each class of stock and series within a
class of the Company, as well as the qualifications, limitations and
restrictions of relating to those preferences and/or rights. A stockholder may
make the request to the Company or to its Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- _____________ Custodian _______________
(Cust) (Minor)
under Uniform Gift to Minors Act ______________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
For Value Received___________________
________________________________________________ hereby sell, assign and
transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE ----------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Shares of the Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint Attorney to transfer the said stock on the
books of the within-named Company with full power of substitution in the
premises
Dated _________________________
NOTICE: The signatures to this Assignment must correspond with the name(s) as
written upon the face of the certificate in every particular without
alternation or enlargement or any change whatever.
[SIGNATURE]
[SIGNATURE]
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
The following reflects the information used in calculating the number of shares
in the computation of net loss per share for each of the periods set forth in
the Statements of Operations.
<TABLE>
<CAPTION>
Average Loss
Days Shares Shares Per
Shares Outstanding X Days Outstanding Loss Share
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended June 30, 1995: 5,232,463 53 277,320,513
5,233,599 38 198,876,743
91 476,197,256 /91 5,291,081 (1,943,000) (0.37)
Six Months Ended June 30, 1995: 5,202,476 2 10,404,951
5,214,976 2 10,429,951
5,221,604 82 428,171,528
5,232,463 4 20,929,850
5,232,463 53 277,320,513
5,233,599 38 198,876,743
181 946,133,536 /181 5,227,257 (3,952,000) (0.76)
Quarter Ended June 30, 1996: 10,847,725 5 54,238,623
10,848,023 7 75,936,158
10,849,767 3 32,549,301
10,851,626 1 10,851,626
10,858,605 2 21,717,209
10,862,095 1 10,862,095
10,962,004 4 43,848,014
10,962,593 2 21,925,185
10,965,241 1 10,965,241
10,965,939 6 65,795,631
10,967,993 5 54,839,963
10,972,354 2 21,944,708
10,977,354 7 76,841,478
10,978,310 4 43,913,240
10,983,980 1 10,983,980
10,989,215 1 10,989,215
13,992,587 1 13,992,587
13,996,077 6 83,976,459
13,996,949 1 13,996,949
14,446,949 5 72,234,745
14,453,492 5 72,267,460
14,456,109 1 14,456,109
14,465,806 2 28,931,612
14,472,786 1 14,472,786
14,473,658 3 43,420,974
14,478,658 1 14,478,658
14,481,500 3 43,444,499
14,483,680 1 14,483,680
14,484,059 2 28,968,118
14,485,899 3 43,457,696
14,488,079 3 43,464,237
14,526,802 1 14,526,802
91 1,128,775,033 /91 12,404,121 (2,327,000) (0.19)
</TABLE>
Continued
WOD01:1996.1
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
Contnued
<TABLE>
<CAPTION>
Average Loss
Days Shares Shares Per
Shares Outstanding X Days Outstanding Loss Share
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1996: 10,847,725 1 10,847,725
10,848,023 5 54,240,113
10,849,767 7 75,948,369
10,851,626 3 32,554,877
10,858,605 1 10,858,605
10,862,095 2 21,724,189
10,962,004 1 10,962,004
10,962,593 4 43,850,370
10,965,241 2 21,930,482
10,965,939 1 10,965,939
10,967,993 6 65,807,955
10,927,354 5 54,861,770
10,977,354 2 21,954,708
10,978,310 7 76,848,170
10,983,980 4 43,935,920
10,989,215 1 10,989,215
13,992,587 1 13,992,587
13,996,077 1 13,996,077
13,996,949 6 83,981,694
14,446,949 1 14,446,949
14,453,492 5 72,267,460
14,456,109 5 72,280,545
14,465,806 1 14,465,806
14,472,786 2 28,945,571
14,473,658 1 14,473,658
14,478,658 3 43,435,974
14,481,500 1 14,481,500
14,483,680 3 43,451,040
14,484,059 1 14,484,059
14,485,899 2 28,971,797
14,488,079 3 43,464,237
14,526,802 3 43,580,405
10,380,056 1 10,380,056
10,390,003 10 103,900,030
10,409,608 4 41,638,432
10,418,676 2 20,837,351
10,478,786 1 10,478,786
10,046,458 3 30,139,374
10,598,792 1 10,598,792
10,678,561 2 21,357,121
10,680,653 1 10,680,653
10,680,903 3 32,042,709
10,710,132 4 42,840,526
10,718,504 6 64,311,024
10,727,170 4 42,908,678
10,728,565 1 10,728,565
10,729,263 1 10,729,263
10,729,394 7 75,105,758
10,731,487 19 203,898,253
10,742,559 7 75,197,913
10,771,115 2 21,542,230
10,775,477 2 21,550,954
10,776,991 4 43,107,962
10,784,842 1 10,784,842
10,812,921 1 10,812,921
10,832,546 2 21,665,092
10,847,725 2 21,695,449
182 2,097,932,497 /182 11,527,102 (4,400,000)(0.38)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ARONEX PHARMACEUTICALS, INC. SET
FORTH IN THE COMPANY'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,162,000
<SECURITIES> 39,765,000
<RECEIVABLES> 173,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,069,000
<PP&E> 4,806,000
<DEPRECIATION> 2,419,000
<TOTAL-ASSETS> 46,218,000
<CURRENT-LIABILITIES> 1,456,000
<BONDS> 0
0
0
<COMMON> 29,000
<OTHER-SE> 43,427,000
<TOTAL-LIABILITY-AND-EQUITY> 46,218,000
<SALES> 0
<TOTAL-REVENUES> 793,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,000
<INCOME-PRETAX> (2,327,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,327,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,327,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
EXHIBIT 99.1
ARONEX PHARMACEUTICALS, INC.
1993 AMENDED AND RESTATED NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
Aronex Pharmaceuticals, Inc., a Delaware Corporation (the "Company") hereby
amends and restates its 1993 Non-Employee Director Stock Option Plan (this
"Plan"), effective as of November 4, 1995, subject to stockholder approval.
1. PURPOSE.
The purpose of this Plan is to promote and advance the interests of
the Company by aiding the Company in attracting and retaining qualified
directors of the Company who, at the time of their service, are not employees of
the Company or any of its subsidiaries ("Non-Employee Directors"), and to
further align the interests of such Non-Employee Directors with those of
stockholders through stock options. An additional purpose of this Plan is to
recognize and reward the contributions of Non-Employee Directors who are
actively involved in aspects of the Company's business beyond their role as
directors.
2. ADMINISTRATION.
This Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"), which shall consist of not
less than two members of the Board of Directors, each of whom will be a
"disinterested person" within the meaning of Rule 16b-3 of the Securities and
Exchange Commission (or any successor rule to the same effect) as in effect from
time to time and an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended. For the purposes of this Plan, a
majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the vote of a majority of those members present at
any meeting shall decide any question brought before that meeting. No member of
the Committee shall be liable for any act or omission of any other member of the
Committee or for any act or omission on his own part, including (without
limitation) the exercise of any power or discretion given to him under this
Plan, except those resulting from his own gross negligence or willful
misconduct. All questions of interpretation and application of this Plan, or as
to options granted hereunder (the "Options"), shall be subject to the
determination, which shall be final and binding, of a majority of the whole
Committee.
3. OPTION SHARES.
The stock subject to the Options and other provisions of this Plan
shall be shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"). The total amount of the Common Stock with respect to which
Options may be granted shall not exceed 600,000 shares in the aggregate;
provided, that the class and aggregate number of shares which may be subject to
the Options granted hereunder shall be subject to adjustment in accordance with
the provisions of Section 11 of this Plan. Such shares may be treasury shares or
authorized but unissued shares.
If any outstanding Option for any reason shall expire or terminate by
reason of the death of the optionee or the fact that the optionee ceases to be a
director, the surrender of any such Option, or any other cause, the shares of
Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option under this Plan.
<PAGE>
<PAGE>
4. GRANT OF OPTIONS.
a. Formula Grants.
i. Directors on the Effective Date of the Amendment and Restatement of
this Plan. Subject to the provisions of Section 15 hereof, there shall be
granted to each person who is a Non-Employee Director, upon the effective
date of the amendment and restatement of this Plan, an Option to purchase
25,000 shares of the Common Stock at a per share Option Price equal to the
fair market value (as defined in Subsection 4(a)(iv) below) of a share of
Common Stock on such date.
ii. Directors Elected after the Effective Date of the Amendment and
Restatement of this Plan. Subject to the provisions of Section 15 hereof,
for so long as this Plan is in effect and shares are available for the
grant of Options hereunder, each person who is not otherwise an employee of
the Company, and who is first elected to the Board of Directors after the
effective date of the amendment and restatement of this Plan, shall be
granted, on the date of his election, an Option to purchase 25,000 shares
of Common Stock (such number of shares being subject to the adjustments
provided in Section 11 of this Plan) at a per share Option Price equal to
the fair market value of a share of Common Stock on such date.
iii. Annual Grants. On December 31 of each year that this Plan is in
effect (commencing with December 31, 1996), each Non-Employee Director who
is in office on that day (provided that such Non-Employee Director has
served as a director for at least six months prior to such date) shall
automatically receive an Option to purchase 7,500 shares of Common Stock
(such number of shares being subject to the adjustments provided in Section
11 of this Plan) at a per share Option Price equal to the fair market value
of a share of Common Stock on such date.
iv. Fair Market Value. For purposes of this Section 4, the "fair
market value" of a share of Common Stock as of any particular date shall
mean (i) if the Common Stock is listed or admitted to trading on any
securities exchange or on the National Association of Securities Dealers
(the "NASD") Automated Quotation System ("Nasdaq") National Market, the
closing price on such day on the principal securities exchange or on the
Nasdaq National Market on which the Common Stock is traded or quoted, or if
such day is not a trading day for such securities exchange or the Nasdaq
National Market, the closing price on the first preceding day that was a
trading day, (ii) if the Common Stock is not then listed or admitted to
trading on any securities exchange or on the Nasdaq National Market, the
closing bid price on such day as reported by the NASD, or if no such price
is reported by the NASD for such day, the closing bid price as reported by
the NASD on the first preceding day for which such price is available, and
(iii) if the Common Stock is not then listed or admitted to trading on any
securities exchange or on the Nasdaq National Market and no such closing
bid price is reported by the NASD, as determined by the Committee in good
faith.
v. No Discretion with Respect to Formula Grants. The selection of
Non-Employee Directors to whom Options are to be granted pursuant to this
Section 4(a), the number of shares subject to any such Option, the exercise
price of any such Option and the term of any such Option shall be as
provided herein and the Committee shall have no discretion as to such
matters.
b. Discretionary Grants. The Committee may from time to time authorize
grants to any Non-Employee Director (provided that no such grant may be made to
a Non-Employee Director who is a member of the Committee, and that no such grant
may be made that would prevent the members of the Committee from constituting
"disinterested persons" within the meaning of Rule 16b-3) of Options to purchase
shares of Common Stock upon such terms and conditions as it may determine in
accordance with the following provisions:
2
<PAGE>
i. Each grant will specify the number of shares of Common Stock to
which the Option granted pertains.
ii. Each grant will specify the Option Price of the Option, which may
be less than, equal to or greater than the fair market value of a share of
Common Stock on the date of grant.
iii. Each grant may specify the required period or periods of
continuous service by the grantee with the Company and/or the other
conditions of vesting (if any) before the Option or installments thereof
will become exercisable.
c. Outstanding Options. The amendment and restatement of this Plan
shall not affect the terms and conditions of any Options (including terms
relating to the vesting and term thereof) outstanding under this Plan on the
effective date of such amendment and restatement.
5. VESTING AND TERM OF OPTIONS.
Each Option granted under Section 4(a) of this Plan shall vest in full
and be exercisable to purchase all of the shares of Common Stock subject to the
Option on the date on which the Option was granted, and each Option granted
under Section 4(b) of this Plan shall vest and be exercisable to purchase the
number of shares subject to the Option at such times and upon such conditions as
may be established by the Committee on the date of grant, subject in each case
to earlier termination as provided in Section 8 of this Plan. Each Option
granted under this Plan shall expire on the tenth anniversary of the date on
which the Option was granted.
6. EXERCISE OF OPTIONS.
An optionee may exercise his Option by delivering to the Company a
written notice stating (a) that such optionee wishes to exercise such Option on
the date such notice is so delivered, (b) the number of shares of Common Stock
with respect to which such Option is to be exercised and (c) the address to
which the certificate representing such shares of stock should be mailed. To be
effective, such written notice shall be accompanied by payment of the Option
Price of each of such shares of Common Stock. Each such payment shall be made by
cash, cashier's check or bank draft drawn on a national banking association or
postal or express money order, payable to the order of the Company in United
States dollars.
Any Option granted under the Plan may be exercised by a broker-dealer
acting on behalf of an optionee if (i) the broker-dealer has received from the
optionee or the Company a duly endorsed agreement evidencing such Option and
instructions signed by the optionee requesting the Company to deliver the shares
of Common Stock subject to such Option to the broker-dealer on behalf of the
Participant and specifying the account into which such shares should be
deposited, (ii) adequate provision has been made with respect to the payment of
any withholding taxes due on such exercise and (iii) the broker-dealer and the
optionee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12
CFR Part 220.
As promptly as practicable after the receipt by the Company, in the
form required by the foregoing provisions of this Section 6, of (a) such written
notice from the optionee and (b) payment, of the Option Price of the shares of
stock with respect to which such Option is to be exercised, the Company shall
deliver to such optionee a certificate representing the number of shares of
stock with respect to which such Option has been so exercised registered in the
name of such optionee, provided that such delivery shall be considered to have
been made when such certificate shall have been mailed, postage prepaid, to such
optionee at the address specified for such purpose in such written notice from
the optionee to the Company.
3
<PAGE>
<PAGE>
7. TRANSFERABILITY OF OPTIONS.
Options shall not be transferable by the optionee otherwise than by
will or under the laws of descent and distribution.
8. TERMINATION.
Except as may be otherwise expressly provided in this Plan or
otherwise determined by the Committee, each Option, to the extent it shall not
have been exercised previously, shall terminate on the earliest of the
following:
(a) On the last day of the 24 month period commencing on the date on
which the optionee ceases to be a member of the Company's Board of
Directors, for any reason other than the death of the optionee, during
which period the optionee shall be entitled to exercise all Options held by
the optionee on the date on which the optionee ceased to be a member of the
Company's Board of Directors which could have been exercised on such date;
(b) On the last day of the six-month period commencing on the date of
the optionee's death while serving as a member of the Company's Board of
Directors, during which period the executor or administrator of the
optionee's estate or the person or persons to whom the optionee's Option
shall have been transferred by will or the laws of descent or distribution,
shall be entitled to exercise all Options in respect of the number of
shares that the optionee would have been entitled to purchase had the
optionee exercised such Options on the date of his death; or
(c) Ten years after the date of grant of such Option.
9. REQUIREMENTS OF LAW.
The Company shall not be required to sell or issue any shares under
any Option if the issuance of such shares shall constitute a violation by the
optionee or the Company of any provisions of any law or regulation of any
governmental authority. Each Option granted under this Plan shall be subject to
the requirement that, if at any time the Board of Directors of the Company or
the Committee shall determine that (i) the listing, registration or
qualification of the shares subject thereto upon any securities exchange or
under any state or federal law of the United States or of any other country or
governmental subdivision thereof, (ii) the consent or approval of any
governmental regulatory body, or (iii) the making of investment or other
representations, are necessary or desirable in connection with the issue or
purchase of shares subject thereto, no such Option may be exercised in whole or
in part unless such listing, registration, qualification, consent, approval or
representation shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. Any determination in this connection by
the Committee shall be final, binding and conclusive. If the shares issuable on
exercise of an Option are not registered under the Securities Act of 1933, the
Company may imprint on the certificate for such shares the following legend or
any legend which counsel for the Company considers necessary or advisable to
comply with the Securities Act of 1933:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH
REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, THAT REGISTRATION IS NOT REQUIRED FOR
SUCH SALE OR TRANSFER.
4
<PAGE>
<PAGE>
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereinafter amended) and, if any shares are so registered, the
Company may remove any legend on certificates representing such shares. The
Company shall not be obligated to take any other affirmative action to cause the
exercise of an Option or the issuance of shares pursuant thereto to comply with
any law or regulation or any governmental authority.
10. NO RIGHTS AS STOCKHOLDER.
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for such
shares; and, except as otherwise provided in Section 11 hereof, no adjustment
for dividends, or otherwise, shall be made if the record date therefor is prior
to the date of issuance of such certificate.
11. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any of
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving consideration therefor in money, services or property, then (a) the
number, class and per share price of shares of stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a manner as to entitle
an optionee to receive upon exercise of an Option, for the same aggregate cash
consideration, the same total number and class or classes of shares as he would
have received had he exercised his Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares then reserved
for issuance under this Plan and the number of shares to be subject to the
grants to be made pursuant to Section 4(a)(ii) and (iii) shall be adjusted by
substituting for the total number and class of shares of stock then reserved or
subject to grant the number and class or classes or shares of stock that would
have been received by the owner of an equal number of outstanding shares of
Common Stock as the result of the event requiring the adjustment, disregarding
any fractional shares.
If the Company merges or consolidates with another corporation,
whether or not the Company is a surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all of its assets
while unexercised Options remain outstanding under this Plan, or if any "person"
(as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing greater than 50% of the combined voting
power of the Company's then outstanding securities, after the effective date of
such merger, consolidation, liquidation, sale or other disposition, as the case
may be, each holder of an outstanding Option shall be entitled, upon exercise of
such Option, to receive, in lieu of shares of Common Stock, the number and class
or classes of shares of such stock or other securities or property to which such
holder would have been entitled if, immediately prior to such merger,
consolidation, liquidation, sale or other disposition, such holder had been the
holder of record of a number of shares of Common Stock equal to the number of
shares as to which such Option may be exercised.
Except as otherwise expressly provided in this Plan, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding Options.
5
<PAGE>
<PAGE>
12. AMENDMENT OR TERMINATION OF PLAN.
The Board of Directors may modify, revise or terminate this Plan at
any time and from time to time; provided, however, that without the further
approval of the holders of at least a majority of the outstanding shares of
voting stock, or if the provisions of the corporate charter, bylaws or
applicable state law prescribes a greater degree of stockholder approval for
this action, without the degree of stockholder approval thus required, the Board
of Directors may not (a) materially increase the benefits accruing to
participants under this Plan; (b) materially increase the number of shares of
Common Stock that may be issued under this Plan; or (c) materially modify the
requirements as to eligibility for participation in this Plan, unless, in each
such case, the Board of Directors of the Company shall have obtained an opinion
of legal counsel to the effect that stockholder approval of the amendment is not
required (x) by law, (y) by the rules and regulations of, or any agreement with,
the National Association of Securities Dealers, Inc. or (z) to make available to
the optionee with respect to any Option granted under this Plan the benefits of
Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act"), or any
similar or successor rule. In addition, this Plan may not be amended more than
once every six months with respect to the plan provisions referred to in Rule
16b-3(c)(2)(ii)(A) under the 1934 Act other than to comport with changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. All Options granted
under this Plan shall be subject to the terms and provisions of this Plan and
any amendment, modification or revision of this Plan shall be deemed to amend,
modify or revise all Options outstanding under this Plan at the time of such
amendment, modification or revision. If this Plan is terminated by action of the
Board of Directors, all outstanding Options may be terminated.
13. WRITTEN AGREEMENT.
Each Option granted hereunder shall be embodied in a written option
agreement, which shall be subject to the terms and conditions prescribed above,
and shall be signed by the optionee and by the appropriate officer of the
Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Committee in its discretion
shall deem advisable.
14. INDEMNIFICATION OF COMMITTEE AND BOARD OF DIRECTORS.
The Company shall, to the fullest extent permitted by law, indemnify,
defend and hold harmless any person who at any time is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) in any way
relating to or arising out of this Plan or any Option or Options granted
hereunder by reason of the fact that such person is or was at any time a
director of the Company or a member of the Committee against judgments, fines,
penalties, settlements and reasonable expenses (including attorney's fees)
actually incurred by such person in connection with such action, suit or
proceeding. This right of indemnification shall inure to the benefit of the
heirs, executors and administrators of each such person and is in addition to
all other rights to which such person may be entitled by virtue of the bylaws of
the Company or as a matter of law, contract or otherwise.
15. EFFECTIVE DATE OF AMENDED AND RESTATED PLAN.
The amendment and restatement of this Plan shall become effective,
subject to stockholder approval, on November 14, 1995. The amendment and
restatement of this Plan, and all Options granted pursuant to the amendment and
restatement of this Plan prior to stockholder approval, shall be void and of no
further force and effect unless the amendment and restatement of this Plan shall
have been approved by the requisite vote of the stockholders entitled to vote at
a meeting of the stockholders of the Company called for such purpose prior to
July 30, 1996. In the event such stockholder approval is not obtained, this Plan
shall continue in existence with the terms and conditions in effect prior to the
effective date of the amendment and restatement provided for hereby. No Option
shall be granted pursuant to this Plan on or after September 30, 2003.
6
