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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Identification No.)
of incorporation or organization)
3400 Research Forest Drive, The Woodlands, Texas 77381-4223
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (281) 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, 1997
----- ----------------------------
Common Stock, $.001 par value 14,687,394 shares
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
Quarterly Period June 30, 1997
INDEX
Page
FACTORS AFFECTING FORWARD LOOKING STATEMENTS.............................. 3
PART I. Financial Information
Item 1 Financial Statements............................................... 3
Balance Sheets - December 31, 1996 and June 30, 1997 (unaudited)... 4
Statements of Operations:
Six Months Ended June 30, 1996 and June 30, 1997
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1997 (unaudited)................................ 5
Statements of Cash Flows:
Six Months Ended June 30, 1996 and June 30, 1997
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1997 (unaudited)................................ 6
Notes to Financial Statements - June 30, 1997...................... 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 Vote of Security Holders ................. 12
Item 6 Exhibits and Reports on Form 8-K................................... 13
SIGNATURES .............................................................. 14
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<PAGE>
FACTORS AFFECTING 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, 1996, and
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "- Liquidity and Capital Resources" included elsewhere in
this report.
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,
1996 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, 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.
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<PAGE>
<TABLE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
BALANCE SHEETS
(All amounts in thousands, except share data)
ASSETS
<CAPTION>
June 30,
December 31, 1997
1996 (Unaudited)
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 4,179 $ 6,233
Short-term investments.......................... 30,414 25,468
Accounts receivable - affiliates................ 78 --
Prepaid expenses and other assets............... 663 841
----------- ---------
Total current assets......................... 35,334 32,542
Long-term investments............................. 6,795 3,765
Furniture, equipment and leasehold improvements,
net ........................................... 2,152 1,742
Other assets...................................... -- 147
----------- ---------
Total assets................................. $ 44,281 $ 38,196
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 1,191 $ 1,153
Accrued payroll................................. 126 101
Advance payable to Genzyme...................... 2,000 2,000
Current portion of other notes payable.......... 325 298
Current portion of obligations under capital
leases ....................................... 16 16
----------- ---------
Total current liabilities.................... 3,658 3,568
Long-term obligations:
Other notes payable, net of current portion..... 121 --
Obligations under capital leases, net of
current portion ............................... 25 18
----------- ---------
Total long-term obligations.................. 146 18
Commitments and contingencies
Stockholders' equity:
Preferred stock $.001 par value, 5,000,000
shares authorized, none issued and
outstanding.... ............................... -- --
Common stock $.001 par value, 30,000,000 shares
authorized, 14,597,247 and 14,687,394 shares
issued and outstanding, respectively........... 15 15
Additional paid-in capital...................... 93,742 93,699
Common stock warrants........................... 968 968
Treasury stock.................................. (11) (11)
Deferred compensation........................... (1,949) (1,448)
Unrealized loss on investments.................. (75) (106)
Deficit accumulated during development stage.... (52,213) (58,507)
----------- ---------
Total stockholders' equity................... 40,477 34,610
----------- ---------
Total liabilities and stockholders' equity...... $ 44,281 $ 38,196
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(All amounts in thousands, except loss per share data)
(Unaudited)
<CAPTION>
Period
from
Inception
(June 13,
Six Months Ended Three Months Ended 1986)
June 30, June 30, through
June 30,
1996 1997 1996 1997 1997
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income ............ $ 470 $1,123 $ 328 $ 531 $ 4,645
Research and development
grants and contracts ..... 1,008 316 465 30 4,525
------- ------- -------- -------- --------
Total revenues ............... 1,478 1,439 793 561 9,170
------- ------- -------- -------- --------
Expenses:
Research and development ... 4,845 6,652 2,523 3,167 45,794
Purchase of in-process
research and development . 191 -- 191 -- 8,625
General and administrative . 771 931 376 475 12,094
Interest expense and other . 71 150 30 120 1,164
------- ------- -------- -------- --------
Total expenses .............. 5,878 7,733 3,120 3,762 67,677
------- ------- -------- -------- --------
Net loss .................... $(4,400) $(6,294) $ (2,327) $ (3,201) $(58,507)
======= ======= ======== ======== ========
Loss per share .............. $ (0.38) $(0.43) $ (0.19) $(0.22)
===== ===== ===== =====
Weighted average shares used
in computing loss per share 11,527 14,646 12,404 14,671
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<CAPTION>
Period from
Inception
(June 13, 1986)
Six Months Ended through
June 30, June 30,
1996 1997 1997
----------- ------------ --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss .................................................................. $ (4,400) $ (6,294) $(58,507)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities-
Depreciation and amortization ......................................... 486 475 3,362
Loss on disposal of assets ............................................ -- 107 107
Compensation expense related to stock and stock options ............... 303 315 2,957
Charge for purchase of in-process research and development 191 -- 8,547
Unrealized gain (loss) on investment 8 (31) (106)
Acquisition costs, net of cash received ............................... (26) -- (270)
Loss in affiliate ..................................................... 50 -- 500
Changes in assets and liabilities:
Increase in prepaid expenses and other assets ....................... (443) (178) (656)
Decrease in accounts receivable - affiliates ........................ 172 78 --
Increase (decrease) in accounts payable and accrued
expenses ....................................................... (413) (63) 1,181
Increase (decrease) in deferred revenue ............................. 50 -- (353)
Accrued interest payable converted to stock ........................... -- -- 97
-------- -------- --------
Net cash used in operating activities ........................... (4,022) (5,591) (43,141)
Cash flows from investing activities:
Net sales (purchases) of investments ...................................... (35,523) 7,976 (23,498)
Purchase of furniture, equipment and leasehold improvements ............... (41) (206) (3,975)
Proceeds from sale of assets .............................................. -- 34 34
Increase in other assets .................................................. -- (147) (147)
Investment in affiliate ................................................... -- -- (500)
-------- -------- --------
Net cash provided by (used in) investing activities ............. (35,564) 7,657 (28,086)
Cash flows from financing activities:
Proceeds from notes payable and capital leases ............................ -- -- 4,672
Repayment of notes payable and principal payments under capital
lease obligations ........................................................ (411) (155) (2,341)
Purchase of treasury stock ................................................ -- -- (11)
Proceeds from issuance of stock ........................................... 35,378 143 75,140
-------- -------- --------
Net cash provided by (used in) financing activities ............. 34,967 (12) 77,460
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ........................ (4,619) 2,054 6,233
Cash and cash equivalents at beginning of period ............................ 7,781 4,179 --
-------- -------- --------
Cash and cash equivalents at end of period .................................. $ 3,162 $ 6,233 $ 6,233
======== ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest .................................. $ 30 $ 43 $ 891
Supplemental schedule of noncash financing activities:
Conversion of notes payable and accrued interest to common$stoc$ .......... $ -- $ -- $ 3,043
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(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 future revenues.
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 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-1999. Accordingly, there can be no
assurance of the Company's future success.
The balance sheet at June 30, 1997 and the related statements of operations
and cash flows for the six month period ending June 30, 1997 and 1996 and the
period from inception (June 13, 1986) through June 30, 1997 are unaudited. These
interim financial statements should be read in conjunction with the December 31,
1996 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.
2. Accounting Policies
In January 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per share" ("SFAS 128").
Management believes that this statement will have no material effect on its
financial statements.
3. Cash, Cash Equivalents and Investments
Cash and cash equivalents include money market accounts and investments with
an original maturity of less than three months. At June 30, 1997, all short-term
investments are held to maturity securities consisting of high-grade commercial
paper and U. S. Government backed securities with a carrying value of
$25,468,000, which approximates fair market value and cost. Long-term
investments include (i) held to maturity securities consisting of high-grade
commercial paper that mature over one to two years with a carrying value of
$2,000,000, which approximates fair market value and cost, and (ii) available
for sale securities which are U.S. mortgage backed securities with various
maturity dates over the next several years that have an amortized cost of
$1,871,000, a fair market value of $1,765,000 and a gross unrealized loss of
$106,000 at June 30, 1997. The Company currently has no trading securities.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. Federal Income Taxes
At December 31, 1996, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $66.9 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
1995 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.
A valuation allowance has been established to offset the Company's deferred tax
assets as the Company has had losses since inception. The Company has not made
any income tax payments since inception.
5. Reverse Stock Split
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.
6. Building Lease
In April 1997, the Company signed a lease for a new building with its current
landlord, under which, the Company has committed to lease 30,000 square feet for
ten years at approximately $2.00 per square foot per month and to pay certain
construction costs. The Company expects to occupy this lease space late in 1997
or early in 1998.
7. Contingent Stock Rights
In connection with the Triplex merger agreement, the Company issued
contingent rights (the "Triplex Contingent Stock Rights") to the former holders
of Triplex stock and options entitling them to receive additional shares of
Common Stock upon the occurrence of certain events. The Triplex Contingent Stock
Rights entitle the former Triplex stock and option holders to receive shares of
Common Stock with an aggregate fair market value at the time of issuance of $5.0
million (subject to certain adjustments) if the Company either (i) enters into
an agreement on or before September 11, 1997 with respect to the licensing of
ZintevirTM whereby the Company receives at least $5.0 million in cash or an
unconditional binding commitment for at least $5.0 million or (ii) obtains data
from clinical trials of ZintevirTM on or before September 11, 2000 that the
Company's Board of Directors determines to be sufficient to file an NDA. In
addition, the Triplex Contingent Stock Rights entitle the former Triplex stock
and option holders to receive shares of Common Stock with an aggregate fair
market value at the time of issuance of $3.0 million if the Company does not
receive a minimum of $5.0 million in equity milestone payments from Genzyme on
or before September 11, 1997 with respect to the development of AtragenTM. In no
event, however, shall more than 3,500,097 shares of Common Stock (subject to
adjustments in the event of stock splits, stock dividends or reclassification of
the Common Stock) be issued pursuant to the Triplex Contingent Stock Rights. The
Company has not received the minimum equity milestone payments from Genzyme
contemplated by the Triplex Contingent Stock Rights. The Company will be
required to issue shares of Common Stock under such contingent rights with an
aggregate fair market value at the time of issuance of $3,000,000 and will
record a corresponding non-cash research and development expense of $3,000,000
in the third quarter of 1997 if equity milestone payments of $5,000,000 are not
received from Genzyme relating to AtragenTM on or before September 11, 1997.
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<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
$58.5 million through June 30, 1997. 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.
Three and Six Month Periods Ended June 30, 1996 and 1997
Revenues from research and development grants and contracts were $30,000 and
$465,000 for the three months ended June 30, 1997 and 1996, respectively, a
decrease of $435,000. Research and development grants and contracts were
$316,000 and $1,008,000 for the six months ended June 30, 1997 and 1996,
respectively, a decrease of $692,000. These decreases were due to the following:
(i) no revenues from Hoechst Marion Roussel, Inc. ("Hoechst") in 1997 compared
to $600,000 for the six months ended June 30, 1996, as the agreement terminated
at the end of 1996; (ii) no Small Business Innovative Research ("SBIR") grant
revenue in 1997 compared to $73,000 for the six months ended June 30, 1996, as
there are currently no SBIR grants in 1997 and (iii) a decrease in the
development revenue from Targeted Genetics Incorporated ("Targeted") to $150,000
for the six months ended June 30, 1997 from $335,000 for the corresponding
period in 1996. This three year agreement with Targeted ended in the second
quarter of 1997. The decreases in research and development revenues were
partially offset by $150,000 in revenue received in the first quarter of 1997
from the Company's license agreement with Boehringer Mannheim GmbH.
Interest income was $531,000 and $328,000 for the three months ended June 30,
1997 and 1996, respectively, an increase of $203,000. Interest income was
$1,123,000 and $470,000 for the six months ended June 30, 1997 and 1996,
respectively, an increase of $653,000. These increases were primarily due to an
increase of funds available for investment resulting from cash received from the
completion of a stock offering in May 1996.
Research and development expenses were $3,167,000 and $2,523,000 for the
three months ended June 30, 1997 and 1996, respectively, an increase of
$644,000. Research and development expenses were $6,652,000 and $4,845,000 for
the six months ended June 30, 1997 and 1996, respectively, an increase of
$1,807,000. These increases were primarily due to an increase of $756,000 in
medical affairs and pharmaceutical development salaries and payroll costs,
including costs relating to the hiring of a Vice President of Pharmaceutical
Development and Operations and a Senior Vice President of Medical Affairs and
Chief Medical Officer, an increase of $789,000 in drug manufacturing costs
relating mainly to NyotranTM and ZintevirTM and an increase of $406,000 in
outside pharmacology studies relating mainly to NyotranTM and AtragenTM. The
increases were partially offset by a decrease of $287,000 in research expenses
in the second quarter of 1997 as the majority of the Company's internal research
efforts were eliminated in the second quarter of 1997. The Company's decision to
eliminate such research efforts was related in part to the termination of
research funding from Hoechst.
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<PAGE>
In-process research and development represents costs incurred during the six
month period ended June 30, 1996 related to the 1995 mergers of Triplex
Pharmaceutical Corporation ("Triplex") and Oncologix, Inc.("Oncologix") with
subsidiaries of the Company, and consists of the settlement of a lawsuit that
had been filed by certain common stockholders of Oncologix. In connection with
the Triplex merger, the Company issued contingent rights to the former holders
of Triplex stock and options entitling them to receive additional shares of
Common Stock upon the occurrence of certain events. The Company will be required
to issue shares of Common Stock under such contingent rights with an aggregate
fair market value at the time of issuance of $3,000,000 and will record a
corresponding non-cash research and development expense of $3,000,000 in the
third quarter of 1997 if equity milestone payments of $5,000,000 are not
received from Genzyme relating to AtragenTM on or before September 11, 1997. See
Note 7 of Notes to Finanacial Statements.
General and administrative expenses were $475,000 and $376,000 for the three
months ended June 30, 1997 and 1996, respectively, an increase of $99,000.
General and administrative expenses were $931,000 and $771,000 for the six
months ended June 30, 1997 and 1996, respectively, an increase of $160,000.
These increases were primarily due to an increase of $106,000 in salaries and
payroll costs, which includes several new positions and a related increase in
operating costs.
Interest expense and other was $120,000 and $30,000 for the three months
ended June 30, 1997 and 1996, respectively, an increase of $90,000. Interest
expense and other was $150,000 and $71,000 for the six months ended June 30,
1997 and 1996, respectively, an increase of $71,000. These increases in interest
expense and other resulted primarily from a loss on disposal of assets of
$107,000 in the quarter ended June 30, 1997 that relates to the disposition of
equipment and leasehold improvements that had been used in research activities
that have been eliminated. These increases were partially offset by a decrease
in interest expense as the amount of outstanding debt which resulted from
obtaining laboratory equipment through leases and promissory notes payable has
decreased.
Net loss was $3,201,000 and $2,327,000 for the three months ended June 30,
1997 and 1996, respectively, an increase of $874,000. Net loss for the six
months ended June 30, 1997 and 1996, respectively, was $6,294,000 and
$4,400,000, an increase of $1,894,000. These increases were primarily due to the
increase in research and development 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 $75 million
from the sale of equity securities from its inception through June 30, 1997. 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 AtrogenTM, 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 and May 1996, the Company raised net proceeds
of approximately $11.5 and $32.1 million, respectively, in public offerings of
Common Stock. From October 1995 through June 30, 1997, the Company received
aggregate net proceeds of approximately $6.5 million from the exercise of
certain warrants issued in its 1995 merger with Oncologix, Inc. From its
inception until June 30, 1997, the Company also received an aggregate of $4.5
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 1995 merger with Triplex Pharmaceutical
Corporation.
-10-
<PAGE>
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 $5.6 million and $4.0
million was used in operating activities during the first six months of 1997 and
1996, respectively. The Company had cash, cash-equivalents and short-term and
long-term investments of $35.5 million as of June 30, 1997, consisting primarily
of cash and money market accounts, and United States government securities and
investment grade commercial paper.
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-1999. 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
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; costs of
filing, prosecuting and defending and enforcing any patent claims and other
intellectual property rights; and changes in economic, regulatory or competitive
conditions of 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
financing may have the effect of diluting or adversely affecting the holdings or
the rights of the holders of the Company's Common Stock.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders of Aronex Pharmaceuticals, Inc. was
held on May 14, 1997 to consider and vote upon the following proposals:
(i) Election of Class II Directors. The following individuals were
nominated and elected as Class II directors, with the following
numbers of shares voted for and against and withheld for each
director:
For Withheld
Geoffrey F. Cox, Ph.D. 12,357,339 1,006,593
Gabriel Lopez-Berestein, M.D. 13,166,801 197,131
For Against Abstain
(ii) Amendment and restatement of
Amended and Restated 1989 Stock
Option Plan 7,696,414 2,492,730 38,669
(iii)Amendment and restatement of
Amended and Restated 1993
Non-Employee Director Stock
Option Plan 10,236,639 513,595 31,494
(iv) Approval of 1997 Employee Stock
Purchase Plan 10,385,171 368,163 28,394
(v) Amendment of Restated Certificate
of Incorporation 10,086,176 46,788 24,052
(vi) Ratification and Selection of
Arthur Andersen LLP as Independent
Public Accountants 13,331,146 14,141 18,645
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<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a)Exhibits
3.1 Restated Certificate of Incorporation, as amended.
10.1 Amended and Restated 1989 Stock Option Plan.
10.2 Amended and Restated 1993 Non-Employee Director Stock Option Plan.
10.3 Lease Agreement dated April 4, 1997 between the Company and The
Woodlands Corporation.
11.1 Statement regarding computation of per share earnings.
27.1 Financial data schedule.
(b)Reports on Form 8-K
None
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<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: August 12, 1997 By:/S/JAMES M. CHUBB
-----------------
James M. Chubb, Ph.D.
President and Chief Executive Officer
Dated: August 12, 1997 By:/S/TERANCE A. MURNANE
---------------------
Terance A. Murnane
Controller
-14-
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ARGUS PHARMACEUTICALS, INC.
ARGUS PHARMACEUTICALS, 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:
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.
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<PAGE>
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 resolution(s) of the Board of Directors.
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 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 he 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.
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<PAGE>
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.
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
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<PAGE>
obligations under this 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.
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 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 statute, bylaw, other provisions of this Certificate of
Incorporation, agreement, vote of stockholders or 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.
-4-
<PAGE>
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.
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<PAGE>
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
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
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
----------------
Notary Public in and for the
State of Texas
-6-
<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").
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 resolution(s) of the Board of Directors.
-1-
<PAGE>
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
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 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 lieu 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 meeting 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 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.
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<PAGE>
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.
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
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<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.
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<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
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<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
deleting Section A, and inserting the following as Section A:
A. Classes of Stock
The 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) 5,000,000 shares of preferred stock, par value $.001 per share
("Preferred Stock"), and (ii) 30,000,000 shares of common stock, par value $.001
per share ("Common Stock")
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.
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 14th day of May, 1997.
ARONEX PHARMACEUTICALS, INC.
By: /s/ James M. Chubb
--------------
James M. Chubb
President
ATTEST:/s/ Terance A. Murnane
------------------
Terance A. Murnane
Secretary
Exhibit 10.1
ARONEX PHARMACEUTICALS, INC.
AMENDED AND RESTATED 1989 STOCK OPTION PLAN
1. Purpose of the Plan
This Aronex Pharmaceuticals, Inc. Amended and Restated 1989 Stock Option
Plan is intended to promote the interests of the Company by providing the
employees and consultants of the Company, who are largely responsible for the
management, growth and protection of the business of the Company, with a
proprietary interest in the Company.
2. Definitions
As used in the Plan, the following definitions apply to the terms
indicated below:
(a)"Board of Directors" shall mean the Board of Directors of Aronex
Pharmaceuticals, Inc.
(b)"Cause," when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination of
the Participant's employment by the Company by reason of (i) the conviction
of the Participant of a crime involving moral turpitude by a court of
competent jurisdiction as to which no further appeal can be taken; (ii) the
proven commission by the Participant of an act of fraud upon the Company;
(iii) the willful and proven misappropriation of any funds or property of
the Company by the Participant; (iv) the willful, continued and
unreasonable failure by the Participant to perform duties assigned to him
and agreed to by him; (v) the knowing engagement by the Participant in any
direct, material conflict of interest with the Company without compliance
with the Company's conflict of interest policy, if any, then in effect;
(vi) the knowing engagement by the Participant, without the written
approval of the Board of Directors of the Company, in any activity which
competes with the business of the Company or which would result in a
material injury to the Company; or (vii) the knowing engagement in any
activity which would constitute a material violation of the provisions of
the Company's Insider Trading Policy or Business Ethics Policy, if any,
then in effect.
(c)"Change in Control" shall mean the occurrence of any of the
following events:
(i) any Person becomes, after the effective date of this Plan, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities;
(ii) Individuals who constitute the Incumbent Board cease, for any
reason, to constitute at least a majority of the Board of Directors;
provided, however, that any person becoming a director subsequent to
the Effective Date who was nominated for election by at least 66 2/3 %
of the Incumbent Board (other than the nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Board of
Directors, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this
Plan, considered a member of the Incumbent Board;
(iii) the Board of Directors determines in its sole and absolute
discretion that there has been a change in control of the Company.
(d)"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e)"Committee" shall mean the Compensation Committee of the Board of
Directors or such other committee as the Board of Directors shall appoint
from time to time to administer the Plan.
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(f)"Common Stock" shall mean the Company's common stock, $.001 par
value per share.
(g)"Company" shall mean Aronex Pharmaceuticals, Inc., a Delaware
corporation, and each of its Subsidiaries, and its successors.
(h)"Consultant" shall mean any person who is engaged by the Company or
any Parent or Subsidiary to render consulting services and is compensated
for such consulting services.
(i)"Disability" shall mean the physical or mental disability of the
Participant to such an extent that the Participant is unable substantially
to perform his or her usual duties at the Company for a period of 60
consecutive days, or a written certification by two doctors selected by the
Participant and acceptable to the Company that the Participant is
substantially unable to perform such duties.
(j)"Effective Date" shall mean the date upon which the Plan is
approved by the affirmative vote of the holders of the requisite majority
of the outstanding shares of the Company's capital stock.
(k)"Employee" shall mean any person employed by the Company or any
Parent or Subsidiary of the Company. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(l)"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(m)the "Fair Market Value" of a share of Common Stock on any date
shall be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities
exchange on which shares of Common Stock are then listed or admitted to
trading or (ii) if not so reported, the average of the closing bid and
asked prices for a share of Common Stock on the immediately preceding
business day as quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or (iii) if not quoted on NASDAQ, the
average of the closing bid and asked prices for a share of Common Stock as
quoted by the National Quotation Bureau's "Pink Sheets" or the National
Association of Securities Dealers' OTC Bulletin Board System. If the price
of a share of Common Stock shall not be so reported, the Fair Market Value
of a share of Common Stock shall be determined by the Committee in its
absolute discretion.
(n)"Incentive Award" shall mean an Option, a grant of Restricted Stock
or a Stock Bonus granted pursuant to the terms of the Plan.
(o)"Incentive Stock Option" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of the Code and
which is identified as an Incentive Stock Option in the agreement by which
it is evidenced.
(p)"Incumbent Board" shall mean the Board of Directors as constituted
on the Effective Date.
(q)"Issue Date" shall mean the date established by the Committee on
which certificates representing shares of Restricted Stock shall be issued
by the Company pursuant to the terms of Section 7(d) hereof.
(r)"Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(s)"Option" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to Section 6 hereof. Each Option shall be
identified either as an Incentive Stock Option or a Non-Qualified Stock
Option in the agreement by which it is evidenced.
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(t)"Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(u)"Participant" shall mean an employee or consultant of the Company
who is eligible to participate in the Plan and to whom an Incentive Award
is granted pursuant to the Plan and his successors, heirs, executors and
administrators, as the case may be, to the extent permitted hereby.
(v)"Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, and the rules and regulations in
effect from time to time thereunder.
(w)"Plan" shall mean this Amended and Restated 1989 Stock Option Plan,
as it may be amended from time to time.
(x)"Qualified Domestic Relations Order" shall mean a qualified
domestic relations order as defined in the Code, in Title I of the Employee
Retirement Income Security Act, or in the rules and regulations as may be
in effect from time to time thereunder.
(y)"Regulations" shall mean all regulations promulgated pursuant to
the Code.
(z)"Restricted Stock" shall mean a share of Common Stock which is
granted pursuant to the terms and subject to the restrictions set forth in
Section 7 hereof.
(aa)"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(ab)"Stock Bonus" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to Section 8 hereof.
(ac)"Subsidiary" or "Subsidiaries" shall mean any and all corporations
in which at the pertinent time the Company owns, directly or indirectly,
stock vested with more than fifty percent of the total combined voting
power of all classes of stock of such corporation.
(ad)"Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock may vest.
3. Stock Subject to the Plan
Under the Plan, the Committee may grant to Participants (i) Options, (ii)
Restricted Stock, and/or (iii) Stock Bonuses.
The Committee may grant Options, shares of Restricted Stock and Stock
Bonuses under the Plan with respect to a number of shares of Common Stock that
in the aggregate does not exceed the greater of (i) 2,490,000 shares and (ii)
ten percent of the issued and outstanding shares of Common Stock determined as
of the close of business on the last day of the preceding fiscal quarter of the
Company. The Company will, during the term of this Plan, reserve and keep
available for issuance a sufficient number of shares of Common Stock to satisfy
the requirements of the Plan.
The total number of shares of Common Stock with respect to which Incentive
Stock Options may be granted under the Plan shall be 2,490,000 shares, subject
to adjustment on the same basis as outstanding Options are adjusted pursuant to
Section 9(b).
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The maximum number of shares of Common Stock subject to Options which may
be issued to any Participant during any period of three consecutive years is
500,000 shares, subject to adjustment on the same basis as outstanding Options
are adjusted pursuant to Section 9(b).
If any outstanding Option expires, terminates or is canceled for any
reason, the shares of Common Stock subject to the unexercised portion of such
Option shall again be available for grant under the Plan. If any shares of
Restricted Stock or any shares of Common Stock granted in a Stock Bonus are
forfeited or canceled for any reason, such shares shall again be available for
grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly issued or
treasury shares, at the discretion of the Committee.
4. Administration of the Plan
The Plan shall be administered by the Committee, which shall consist of
two or more persons each of whom shall be a "non-employee director" within the
meaning of Rule l6b-3(b)(3)(i) promulgated under Section 16 of the Exchange Act
and an "outside director" within the meaning of Section 162(m) of the Code. The
Committee shall from time to time designate the Participants who shall be
granted Incentive Awards and the amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date on
which any Option granted under the Plan becomes exercisable, (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable or
(iii) accelerate the Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of Restricted Stock
granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such Participants
surrender to the Committee for cancellation such other Incentive Awards
(including, without limitation, Incentive Awards with higher exercise prices) as
the Committee specifies. Notwithstanding Section 3 hereof, Incentive Awards
granted on the condition of surrender of outstanding Incentive Awards shall not
count against the limits set forth in such Section 3 until such time as such
Incentive Awards are surrendered.
Whether an authorized leave of absence or absence in military or
government service shall constitute termination of employment shall be
determined by the Committee in its absolute discretion.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. Eligibility
All Employees and Consultants of the Company shall be eligible to receive
Incentive Awards pursuant to the Plan; however, Incentive Stock Options may only
be granted to Employees of the Company.
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6. Options
The Committee may grant Options pursuant to the Plan, which Options shall
be evidenced by agreements in such form as the Committee shall from time to time
approve. Options shall comply with and be subject to the following terms and
conditions:
(a)Identification of Options
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options.
(b)Exercise Price
The exercise price of any Non-Qualified Stock Option granted under the
Plan shall be such price as the Committee shall determine on the date on
which such Non-Qualified Stock Option is granted; provided, that such
price may not be less than the minimum price required by law. Except as
provided in Section 6(d) hereof, the exercise price of any Incentive Stock
Option granted under the Plan shall be not less than 100% of the Fair
Market Value of a share of Common Stock on the date on which such
Incentive Stock Option is granted.
(c)Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates, during
such period and for such number of shares of Common Stock as shall be
determined by the Committee on the day on which such Option is granted
and set forth in the agreement evidencing the Option; provided,
however, that (A) no Incentive Stock Option shall be exercisable after
the expiration of seven years from the date such Incentive Stock Option
was granted, and (B) no Non-Qualified Stock Option shall be exercisable
after the expiration of seven years and one day from the date such
Non-Qualified Stock Option was granted; and, provided, further, that
each Option shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
(2) Each Option shall be exercisable in whole or in part with
respect to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or cancellation of
the remaining portion thereof. Upon the partial exercise of an Option,
the agreement evidencing such Option shall be returned to the
Participant exercising such Option together with the delivery of the
certificates described in Section 6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no fewer
than five business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the agreement
evidencing the Option, shall specify the number of shares of Common
Stock with respect to which the Option is being exercised and the
effective date of the proposed exercise, and shall be signed by the
Participant. The Participant may withdraw such notice at any time prior
to the close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case such agreement
shall be returned to the Participant. Payment for shares of Common
Stock purchased upon the exercise of an Option shall be made on the
effective date of such exercise either (i) in cash, by certified check,
bank cashier's check or wire transfer or (ii) subject to the approval
of the Committee, in shares of Common Stock owned by the Participant
and valued at their Fair Market Value on the effective date of such
exercise, or partly in shares of Common Stock with the balance in cash,
by certified check, bank cashier's check or wire transfer. Any payment
in shares of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any
other documents and evidences as the Secretary of the Company shall
require from time to time.
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(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a duly
endorsed agreement evidencing such Option and instructions signed by
the Participant 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 upon such exercise and (iii) the
broker-dealer and the Participant have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the Participant
and delivered to the Participant as soon as practicable following the
effective date on which the Option is exercised; provided, however,
that such delivery shall be effected for all purposes when a stock
transfer agent of the Company shall have deposited such certificates in
the United States mail, addressed to the Participant.
(6) During the lifetime of a Participant each Option granted to him
shall be exercisable only by him. No Option shall be assignable or
transferable otherwise than by will or by the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order.
(d)Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by a Participant during any calendar year under the Plan and any
other stock option plan of the Company or any Subsidiary of the Company
shall not exceed $100,000. Such Fair Market Value shall be determined
as of the date on which each such Incentive Stock Option is granted. If
the aggregate Fair Market Value of shares of Common Stock underlying
such Incentive Stock Options exceeds $100,000, then Incentive Stock
Options granted hereunder to such Participant shall, to the extent and
in the order required by Regulations promulgated under the Code (or any
other authority having the force of Regulations), automatically be
deemed to be Non-Qualified Stock Options, but all other terms and
provisions of such Incentive Stock Options shall remain unchanged. In
the absence of such Regulations (and authority), or if such Regulations
(or authority) require or permit a designation of the options which
shall cease to constitute Incentive Stock Options, Incentive Stock
Options shall, to the extent of such excess and in the order in which
they were granted, automatically be deemed to be Non-Qualified Stock
Options, but all other terms and provisions of such Incentive Stock
Options shall remain unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock possessing
more than ten percent of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries unless (i) the
exercise price of such Incentive Stock Option is at least 110 % of the
Fair Market Value of a share of Common Stock at the time such Incentive
Stock Option is granted and (ii) such Incentive Stock Option is not
exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.
(e)Effect of Termination of Employment Unless otherwise expressly
provided for by the Committee in its approval of an Option:
(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause, Disability, the voluntary
retirement of the Participant in accordance with the Company's
retirement policy as then in effect or the death of the Participant (i)
Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable
until the expiration of one month after such termination, on which date
they shall expire, and (ii) Options granted to such Participant, to the
extent that they were not exercisable at the time of such termination,
shall expire at the close of business on the date of such termination;
provided, however, that the Committee may extend
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such period in its sole discretion (except that the agreement of the
holder of any Incentive Stock Option shall be required as a condition
to such extension if the effect of such extension would be to make such
option ineligible for treatment as an Incentive Stock Option under the
Code; and provided further, no Option shall be exercisable after the
expiration of its term.
(2) If the employment of a Participant with the Company shall
terminate on account of the Disability, the voluntary retirement of the
Participant in accordance with the Company's retirement policy as then
in effect or the death of the Participant (i) Options granted to such
Participant, to the extent that they were exercisable at the time of
such termination, shall remain exercisable until the expiration of one
year after such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, the
Committee may extend such period in its sole discretion (except that
the agreement of the holder of any Incentive Stock Option shall be
required as a condition to such extension if the effect of such
extension would be to make such option ineligible for treatment as an
Incentive Stock Option under the Code; and provided further, that no
Option shall be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's employment
for Cause, all outstanding Options granted to such Participant shall
expire at the commencement of business on the date of such termination.
(f)Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control, each Option granted under
the Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration, termination
or cancellation pursuant to the terms of the Plan.
7. Restricted Stock
The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time approve. Each
grant of shares of Restricted Stock shall comply with and be subject to the
following terms and conditions:
(a)Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting
Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for
each class. Except as provided in Sections 7(c) and 7(f) hereof, upon the
occurrence of the Issue Date with respect to a share of Restricted Stock,
a share of Restricted Stock shall be issued in accordance with the
provisions of Section 7(d) hereof. Provided that all conditions to the
vesting of a share of Restricted Stock imposed pursuant to Section 7(b)
hereof are satisfied, and except as provided in Sections 7(c) and 7(f)
hereof, upon the occurrence of the Vesting Date with respect to a share of
Restricted Stock, such share shall vest and the restrictions of Section
7(c) hereof shall cease to apply to such share.
(b)Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it in its absolute
discretion deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting of
any class or classes of shares of Restricted Stock, that the Participant
or the
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Company achieve certain performance criteria, such criteria to be
specified by the Committee at the time of the grant of such shares.
(c)Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee
with any interest or right in or with respect to such share, but
immediately upon any attempt to transfer such rights, such share, and all
of the rights related thereto, shall be forfeited by the Participant and
the transfer shall be of no force or effect.
(d)Issuance of Certificates
(1) Except as provided in Sections 7(c) or 7(f) hereof, reasonably
promptly after the Issue Date with respect to shares of Restricted
Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were
granted, evidencing such shares; provided, that the Company shall not
cause to be issued such a stock certificates unless it has received a
stock power duly endorsed in blank with respect to such shares. Each
such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the Aronex Pharmaceuticals, Inc. 1989 Stock Option Plan
and an Agreement entered into between the registered owner of such
shares and Aronex Pharmaceuticals, Inc. A copy of the Plan and the
Agreement is on file in the office of the Secretary of Aronex
Pharmaceuticals, Inc., 3400 Research Forest Drive, The Woodlands,
Texas 77381-4223
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Paragraph 7(d)(1) hereof,
together with the stock powers relating to the shares of Restricted
Stock evidenced by such certificate, shall be held by the Company. The
Company shall issue to the Participant a receipt evidencing the
certificates held by it which are registered in the name of the
Participant.
(e)Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 7(c) hereof shall cease to apply to
such share. Reasonably promptly after a share of Restricted Stock vests
pursuant to the terms hereof, the Company shall cause to be issued and
delivered to the Participant to whom such shares were granted, a
certificate evidencing such share, free of the legend set forth in
Paragraph 7(d)(1) hereof, together with any other property of the
Participant held by Company pursuant to Section 7(d) hereof; provided,
however, that such delivery shall be effected for all purposes when the
Company shall have deposited such certificate and other property in the
United States mail, addressed to the Participant.
(f)Effect of Termination of Employment
(1) If the employment of a Participant with the Company shall
terminate for any reason other than Cause prior to the vesting of
shares of Restricted Stock granted to such Participant, a portion of
such shares, to the extent not forfeited or canceled on or prior to
such termination pursuant to any provision hereof, shall vest on the
date of such termination. The portion referred to in the preceding
sentence shall
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be determined by the Committee at the time of the grant of such shares
of Restricted Stock and may be based on the achievement of any
conditions imposed by the Committee with respect to such shares
pursuant to Section 10(b). Such portion may equal zero.
(2) In the event of the termination of a Participant's employment
for Cause, all shares of Restricted Stock granted to such Participant
which have not vested as of the date of such termination shall
immediately be forfeited.
(g)Effect of Change in Control
Upon the occurrence of a Change in Control, all shares of Restricted
Stock which have not theretofore vested (including those with respect to
which the Issue Date has not yet occurred) shall immediately vest.
8. Stock Bonuses
The Committee may, in its absolute discretion, grant Stock Bonuses in such
amounts as it shall determine from time to time. A Stock Bonus shall be paid at
such time and subject to such conditions as the Committee shall determine at the
time of the grant of such Stock Bonus. Certificates for shares of Common Stock
granted as a Stock Bonus shall be issued in the name of the Participant to whom
such grant was made and delivered to such Participant as soon as practicable
after the date on which such Stock Bonus is required to be paid.
9. Adjustment Upon Changes in Common Stock
(a)Outstanding Restricted Stock
Unless the Committee in its absolute discretion otherwise determines,
if a Participant receives any securities or other property (including
dividends paid in cash) with respect to a share of Restricted Stock, the
Issue Date with respect to which occurs prior to such event, but which has
not vested as of the date of such event, as a result of any dividend,
stock split recapitalization, merger, consolidation, combination, exchange
of shares or otherwise, such securities or other property will not vest
until such share of Restricted Stock vests, and shall be held by the
Company pursuant to Paragraph 7(d)(2) hereof.
The Committee may, in its absolute discretion, adjust any grant of
shares of Restricted Stock, the Issue Date with respect to which has not
occurred as of the date of the occurrence of any of the following events,
to reflect any dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of shares or similar corporate change
as the Committee may deem appropriate to prevent the enlargement or
dilution of rights of Participants under the grant.
(b)Outstanding Options, Increase or Decrease in Issued Shares Without
Consideration
Subject to any required action by the stockholders of the Company, in
the event of any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend (but only on the shares of
Common Stock), or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company, the
Committee shall proportionally adjust the number of shares and the
exercise price per share of Common Stock subject to each outstanding
Option. Conversion of any of the Company's convertible securities shall
not be deemed to have been "effected without receipt of consideration by
the Company."
(c)Outstanding Options, Certain Mergers
Subject to any required action by the stockholders of the Company, if
the Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the
holders
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of shares of Common Stock receive securities of another corporation), each
Option outstanding on the date of such merger or consolidation shall
entitle the Participant to acquire upon exercise the securities which a
holder of the number of shares of Common Stock subject to such Option
would have received in such merger or consolidation.
(d)Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company, a sale of
all or substantially all of the Company's assets, a merger or
consolidation involving the Company in which the Company is not the
surviving corporation or a merger or consolidation involving the Company
in which the Company is the surviving corporation but the holders of
shares of Common Stock receive securities of another corporation and/or
other property, including cash, the Committee shall, in its absolute
discretion, have the power to:
(i) cancel, effective immediately prior to the occurrence of such
event, each Option outstanding immediately prior to such event (whether
or not then exercisable), and, in full consideration of such
cancellation, pay to the Participant to whom such Option was granted an
amount in cash, for each share of Common Stock subject to such Option
equal to the excess of (A) the value, as determined by the Committee in
its absolute discretion, of the property (including cash) received by
the holder of a share of Common Stock as a result of such event over
(B) the exercise price of such Option; or
(ii) provide for the exchange of each Option outstanding immediately
prior to such event (whether or not then exercisable) for an option on
some or all of the property for which such Option is exchanged and,
incident thereto, make an equitable adjustment as determined by the
Committee in its absolute discretion in the exercise price of the
option, or the number of shares or amount of property subject to the
option or, if appropriate, provide for a cash payment to the
Participant to whom such Option was granted in partial consideration
for the exchange of the Option.
(e)Outstanding Options, Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections
9(b), (c) or (d) hereof, the Committee may, in its absolute discretion,
make such adjustments in the number and class of shares subject to Options
outstanding on the date on which such change occurs and in the per share
exercise price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f)No Other Rights
Except as expressly provided in the Plan, no Participant shall have any
rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation,
merger or consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Common Stock subject to an
Incentive Award or the exercise price of any Option.
10. Rights as a Stockholder
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award granted
pursuant to this Plan until the date of the issuance of a stock certificate with
respect to such shares. Except as otherwise expressly provided in Section 9
hereof, no adjustment to any Incentive Award shall be made for dividends or
other rights for which the record date occurs prior to the date such stock
certificate is issued.
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11. No Special Employment Rights; No Right to Incentive Award
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant any right with respect to the continuation of his employment by the
Company or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Incentive
Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
12. Securities Matters
(a)The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan unless and until the Company
is advised by its counsel that the issuance and delivery of such
certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange on
which shares of Common Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates evidencing shares
of Common Stock pursuant to the terms hereof, that the recipient of such
shares make such covenants, agreements and representations, and that such
certificates bear such legends, as the Committee, in its sole discretion,
deems necessary or desirable.
(b)The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise
is in compliance with all applicable laws, regulations of governmental
authorities and the requirements of any securities exchange on which
shares of Common Stock are traded. The Company may, in its sole
discretion, defer the effectiveness of any exercise of an Option granted
hereunder in order to allow the issuance of shares of Common Stock
pursuant thereto to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or
state securities laws. The Company shall inform the Participant in writing
of its decision to defer the effectiveness of the exercise of an Option
granted hereunder. During the period that the effectiveness of the
exercise of an Option has been deferred, the Participant may, by written
notice, withdraw such exercise and obtain the refund of any amount paid
with respect thereto.
13. Withholding Taxes
Whenever shares of Common Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares.
14. Amendment of the Plan
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever, provided, however, that without
approval of the holders of a majority of the outstanding shares of Common Stock
present in person or by proxy at an annual or special meeting of stockholders,
no revision or amendment shall (i) increase the number of shares of Common Stock
that may be issued under the Plan, except as provided in Section
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9 hereof, (ii) materially increase the benefits accruing to individuals holding
Incentive Awards granted pursuant to the Plan or (iii) materially modify the
requirements as to eligibility for participation in the Plan.
15. No Obligation to Exercise
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
16. Transfers Upon Death
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award.
17. Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
18. Failure to Comply
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant to comply with any of the terms and conditions of the
Plan or the agreement executed by such Participant evidencing an Incentive
Award, unless such failure is remedied by such Participant within ten days after
having been notified of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Incentive Award, in whole or in part as the
Committee, in its absolute discretion, may determine.
19. Effective Date and Term of Plan
The amendment and restatement of this Plan shall become effective, subject
to stockholder approval, on April 1, 1997. The amendment and restatement of this
Plan, and all Incentive Awards 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, 1997. 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
Incentive Award shall be granted pursuant to this Plan on or after December 31,
1999.
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Exhibit 10.2
ARONEX PHARMACEUTICALS, INC.
AMENDED AND RESTATED 1993 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
Aronex Pharmaceuticals, Inc., a Delaware Corporation (the "Company")
hereby amends and restates its Amended and Restated 1993 Non-Employee Director
Stock Option Plan (this "Plan"), effective as of March 12, 1997, 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 "non-employee
director" 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.
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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 16,250 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, 1997), 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 "non-employee director" within the meaning of Rule 16b-3
or "outside directors" within the meaning of Section 162(m)) of Options to
purchase shares of Common Stock upon such terms and conditions as it may
determine in accordance with the following provisions:
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<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.
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<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.
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
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<PAGE>
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.
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,
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<PAGE>
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 March 12, 1997. 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,
1997. 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.
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LEASE AGREEMENT
VENTURE TECHNOLOGY CENTER VII BUILDING
8707 TECHNOLOGY FOREST PLACE
THE WOODLANDS, MONTGOMERY COUNTY, TEXAS
THIS LEASE AGREEMENT ("Lease") is made and entered into on this the 4th day
of April, 1997, between THE WOODLANDS CORPORATION, a Delaware corporation,
("Lessor"), and ARONEX PHARMACEUTICALS, INC., a Delaware corporation,
("Lessee").
l. Premises. Upon the terms and conditions hereinafter set forth,
Lessor does hereby lease, demise and let to Lessee and Lessee does hereby lease,
and take from Lessor, the following described premises ("Premises"):
All that certain tract or parcel of land containing approximately
3.6147 acres described in Exhibit "A" attached hereto ("Land"),
together with that certain structure to be constructed thereon by
Lessor having approximately 30,000 square feet of net rentable area
("Building") and a parking area;
known and referred to as Venture Technology Center VII Building ("Building"),
located at 8707 Technology Forest Place, The Woodlands, Montgomery County,
Texas. The Premises is shown on the site development plan attached hereto as
Exhibit "A-1" ("Site Plan").
2. Parking. Upon completion of the Building, a parking area providing
for approximately 81 parking spaces and access drives will be provided by Lessor
on the Land at no charge for the Initial Term, and any renewal thereof, in
accordance with the terms of the Lease.
"Initial Term", as used herein, shall mean the first 120 month term of the
Lease described in 3 below Lessee shall have the exclusive right to use the
parking areas and access drives during the Term for ingress and egress and
automobile parking, except that Lessor and any future owners shall have the
right to construct pathways in the forest preserves over the Land and utilize
the parking areas and access drives for ingress and egress and automobile
parking in connection with its rights and obligations under the Lease. During
the Term, Lessor shall keep the parking areas and access drives and the Building
exterior in a neat, clean and orderly condition, lighted and landscaped and
shall repair any damage to same. The use of such parking areas and access drives
shall at all times be subject to such reasonable rules and regulations as Lessor
may promulgate.
3. Term. The term of this Lease ("Term") shall commence on the date
("Commencement Date") which is the earlier of (a) 10 days after Lessor tenders
to Lessee possession of the Premises with all work to be performed by Lessor
pursuant to the tenant improvement letter attached hereto as Exhibit "B"
("Tenant Improvement Letter") substantially completed or (b) the day upon which
Lessee takes occupancy of the Premises, and shall expire on the last day of the
120th full calendar month following the Commencement Date, subject to earlier
termination as hereinafter provided. Lessor shall not be liable or responsible
for any claims, damages or liabilities of any nature whatsoever in connection
with or by reason of any delayed occupancy. Within 15 days following Lessee's
receipt from Lessor of a memorandum of this Lease specifying the Commencement
Date and date of expiration of the Term, Lessee agrees to execute the
memorandum.
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4. Use. Lessee shall use the entire Premises solely for general office,
research and development laboratory purposes , and for no other use.
5. Acceptance of the Premises. Upon taking possession of all or any
portion of the Premises, Lessee shall be deemed to have accepted the Premises,
to have acknowledged that the same are in the condition called for hereunder and
to have agreed that the obligations of the Lessor imposed by Exhibit "B"
attached hereto have been fully performed except for punch list items. Lessor
will use reasonable efforts to complete the punch list items within 30 days
after the Commencement Date (unless the failure to complete is due to events of
Lessee Delay as described Exhibit "B"). Lessee hereby waives any implied
warranty of Lessor that the Premises are suitable for their intended commercial
purpose and acknowledges and agrees that all of Lessee's obligations hereunder
(including without limitation, the obligation to pay rent) are independent of
any such implied warranty and agrees to perform all such obligations and pay
rent notwithstanding any breach or allegation of breach by Lessor of any such
implied warranty (which implied warranty as aforesaid is hereby waived by
Lessee).
6. Security Deposit. INTENTIONALLY DELETED.
7. Base Rent. The Base Rent, which Lessee hereby agrees to pay to
Lessor monthly, in advance, at Lessor's address stated above, shall be the
monthly sum calculated as described in Article 7 of the Tenant Improvement
Letter attached as Exhibit "B", due and payable on the first day of each
calendar month during the Term hereof, without offset or deduction, with a pro
rata portion being due and payable in advance for any partial month occurring at
the beginning of the Term.
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8. Additional Rent. Lessee agrees to pay all Operating Expenses (as
defined in Section 10 below) for the Premises. Within 90 days following the
completion of each Fiscal Year, Lessor will provide to Lessee a statement
showing in reasonable detail the Operating Expenses for the preceding Fiscal
Year, the Additional Rent due, and Lessor's reasonable estimate of Operating
Expenses for the then current Fiscal Year. Lessee shall, on or before 30 days
following receipt of said statement, pay to Lessor the amount of Additional Rent
due as provided herein, less the amount of Additional Rent paid in advance (if
any) during the preceding Fiscal Year. Any overpayment will be credited by
Lessor to the next rental payment(s) due on or before 30 days after delivery of
the statement to Lessee. Lessee agrees to pay Additional Rent each month
thereafter, in addition to Base Rent, in an amount necessary to amortize the
estimated Operating Expenses for the then current Fiscal Year over a period
equal to the lesser of (i) the number of months remaining in the Term on a pro
rata basis or (ii) the number of months remaining in the current Fiscal Year.
Notwithstanding that the Term has expired or been terminated, Lessee shall
remain liable for and agrees to pay to Lessor within 30 days following receipt
of an invoice therefor, Operating Expenses for the Fiscal Year during which the
Term expired or was terminated. Lessee shall have the right, at its expense and
at a reasonable time, to audit Lessor's books relevant to the Additional Rent
due under this Section. In the event Lessee determines that Lessor has
overstated Lessee's Additional Rent in any Fiscal Year by greater than 3%, then
Lessor agrees to promptly refund any overpayment to Lessee after written notice
from Lessee, accompanied by evidence substantiating the overpayment, and to
reimburse Lessee for Lessee's reasonable costs of the audit, not to exceed
$1,000.00. If Lessor and Lessee are unable to agree upon the accuracy of any
such statement, either party may initiate a civil suit in any court of competent
jurisdiction and the amount of said Additional Rent shall be paid to Lessor
pending the rendering of a decision. The term "Fiscal Year", as used herein,
shall mean Lessor's fiscal year for accounting purposes which currently is the
12-month period beginning January 1 and ending December 31. Lessor shall have
the right to change the Fiscal Year, from time to time, and, in such event,
Lessor shall notify Lessee in writing of such change. Lessee also agrees to pay
to Lessor, as Additional Rent, a management fee ("Management Fee") of 3% of the
annual Base Rent. Lessee agrees to pay the Management Fee each month, in
addition to other Additional Rent and Base Rent, during each Fiscal Year in an
amount necessary to amortize the Management Fee and Additional Rent due for the
then current Fiscal Year over a 12 month period. For the Fiscal Year in which
the Term begins or ends, Lessee shall only be responsible for the amortized
Management Fee and Additional Rent due for the months of each such Fiscal Year
that the Lease is in force. This Section of the Lease is subject to the terms of
Section 6. of Rider 1 to the Lease.
9. Payment of Rentals. Lessee covenants to promptly pay all rentals
when due and payable. A late charge of 7% shall be added to any payment of Base
Rent or Additional Rent which is more than 10 days past due in order to
compensate Lessor for the extra administrative expenses incurred. If Lessor
shall pay any monies or incur any expenses in correction of violations of the
covenants herein set forth, the amounts so paid or incurred shall, on notice to
Lessee, be considered additional rent payable by Lessee with the first
installment of Base Rent thereafter to become due and payable, and may be
collected or enforced as by law provided in respect of rentals.
10. Operating Expenses. The term "Operating Expenses" means all of
Lessor's costs, expenses and disbursements (but not acquisition of capital
investment items, except as hereinafter
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expressly provided or specific costs billed to specific lessees) to operate and
maintain the Land, the Building, and all improvements on the Land from time to
time (to the extent and only to the extent same are Lessor's obligation to pay
or furnish under the other provisions of this Lease), including, but not limited
to, Lessor's costs of providing utilities, including, but not limited to
lighting; porter services and supplies; refuse removal (if Lessor elects to
furnish this service); courtesy guard services; landscaping, including
irrigation; and general maintenance and repairs, including, but not limited to,
repairs to roof surface and preventive maintenance, parking area restriping,
exterior painting and other activities. Operating Expenses shall also include a
reasonable amortization charge on account of any capital expenditure incurred to
effect a reduction of Operating Expenses and a reasonable charge for
amortization of all capital items Lessor installs (a) to reduce Operating
Expenses, so long as the amortization charge never exceeds the savings in any
future year, or (b) which Lessor is required to install on or for the benefit of
the Building by any governmental law, code or regulation passed or enacted on or
after the Commencement Date, or (c) which is a replacement (as opposed to
additions or new improvements) of items located in the common areas adjacent to
the Building, the parking area and other facilities used in connection with the
Building, or involving the exterior of the Building, including, but not limited
to, the roof and structural elements. Additionally, Operating Expenses shall
include all ad valorem taxes or assessments, and Annual Assessments of The
Woodlands Commercial Owners Association which accrue against the Building or the
Land during the Term, together with all insurance premiums which Lessor is
required to pay or deems necessary to pay with respect to the Building or the
Land, including, but not limited to, casualty insurance and liability insurance.
11. Utilities. Lessor shall make available to the Building gas,
electricity, water and sewer facilities. Lessee agrees to assume all costs and
expenses for water and sewer, except as herein provided, gas, electricity,
telephone, and any other service needed for its use at the Premises, including
any license or deposit required to establish or maintain such services, and the
costs of hook-up. Lessor agrees to pay all costs and expenses for water and
sewer service. The cost of these services shall be included with Operating
Expenses as defined in Section 10 hereof. Lessee shall promptly pay for all
utility services furnished to the Premises during the term of this Lease. Lessor
shall under no circumstances be liable to Lessee in damage or otherwise for any
interruption in service of water, electricity, heating, air conditioning or
other utilities or services caused by govern mental regulation, emergencies,
Acts of God, by the making of any necessary repairs or improve ments, or by any
cause beyond Lessor's reasonable control. Lessor shall endeavor in good faith to
give at least 24 hours notice to Lessee when any necessary interruption in
service will be made by Lessor. Notwithstanding the preceding sentence, if there
shall occur an interruption or discontinuance of utilities or services to be
provided or made available by Lessor of such nature that (i) Lessee is unable
to, or does not, make normal use of the Premises, (ii) such interruption or
discontinuance has not been caused in whole or substantial part, directly or
indirectly, by the gross negligence or willful misconduct of Lessee, or Lessee's
agents, employees, contractors, subcontractors, subtenants or assignees, (iii)
the interruption or continuance is within the control of Lessor, and (iv) Lessee
shall have given written notice to Lessor respecting such interruption or
discontinuance and Lessor shall have failed to cure such interruption or
discontinuance for 5 consecutive business days after Lessor receives said
notice, then all Base Rent and Additional Rent
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payable herein shall automatically abate from the expiration of the 5 day
period, until such time as the services or utilities are restored or Lessee
begins normal use of the Premises again, whichever occurs first, and Lessee
shall have the right to terminate the Lease if the interruption or
discontinuance, which meets the requirements of (i) - (iv) above continues for
more than 30 days. For purposes of determining whether there is an interruption
or discontinuance of utilities or services, an outage or series of outages
totalling 6 hours or more between 7:00 a.m. and 6:00 p.m. on any day, Monday
through Friday, excluding Holidays, shall constitute an interruption or
discontinuance of services or utilities for such day, but outages that are of
shorter duration shall not be considered. In the event of any such interruption,
however, Lessor shall use reasonable diligence to restore such service. For
purposes of this Section, all existing improvements in the Premises shall be
deemed to be "building standard".
12. Peaceful Enjoyment. Lessee shall and may peacefully have, hold and
enjoy the Premises for the Term, subject to the terms and conditions of this
Lease, provided that Lessee pays the rentals and other sums herein recited and
performs all of its covenants and agreements herein contained. It is understood
and agreed that this covenant and any and all other covenants of Lessor
contained in this Lease shall be binding upon Lessor and its successors and
assigns, but only with respect to breaches occurring during its and their
respective ownership of Lessor's interest hereunder.
13. Alterations, Additions and Improvements. Lessee shall not make or
allow to be made any alterations or physical additions in or to the Premises
without first obtaining the written consent of Lessor, which consent shall not
be unreasonably withheld or delayed, except that Lessee shall not be required to
obtain Lessor's consent for alterations or additions to the Premises the cost of
which do not exceed $10,000.00 in the aggregate, provided such alterations or
additions do not affect the structural integrity of the Building or the
mechanical systems thereof. Lessor shall not be liable as a result of any such
consent for completeness, design sufficiency, or compliance with any law,
ordinance, order, rule, or regulation and Lessee shall indemnify, defend and
hold Lessor harmless from all claims, demands, damages, causes of action or
litigation, arising out of or resulting from such consent. Prior to performing
any alterations or additions with the request for consent, Lessee must submit to
Lessor detailed plans and specifications for the proposed alterations or
physical additions. Any and all alterations, additions or improvements, other
than that portion of the initial tenant improvements which are to be provided by
Lessor pursuant to the terms of Exhibit "B" hereto, shall be made at Lessee's
sole expense. All such alterations, additions or improvements shall, upon
completion, become the property of Lessor and shall be surrendered to Lessor
upon the termination of this Lease by lapse of time or otherwise; provided,
however this clause shall not apply to removable equipment, trade fixtures, or
furniture owned by Lessee and which can be removed without damage to the
Building or the Premises, or if there will be damage, said damages are repaired
by Lessee at Lessee's expense and Lessor approves the repairs, provided there is
no default by Lessee in any of the terms and conditions of the Lease.
14. Exterior Repairs. Lessor will keep the exterior of the Building,
including any doors, windows, or glass, in repair, provided Lessee shall give
Lessor written notice of the necessity for such repairs, and provided that the
damage thereto shall not have been caused by the negligence of
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Lessee, its agents, employees, licensees or invitees, in which event Lessee
shall be responsible therefor for the cost, except as may be provided for in the
Lease. Lessor shall be under no liability for repair, maintenance, alteration or
any other action with reference to any plumbing, electrical or other mechanical
installation within or serving the Premises or any part thereof, except for the
service lines leading to the Premises. Lessor agrees that Lessee will receive
the benefit of all warranties received by Lessor on the improvements and
mechanical systems.
15. Operation by Lessee. Lessee agrees to (a) keep the inside of all
glass in the doors and windows of the Premises clean; (b) keep all interior
surfaces of the Premises clean; (c) replace promptly, at its expense, any
cracked or broken window glass inside the Premises with glass of like kind and
quality; (d) maintain the Premises in a clean, orderly and sanitary condition
and free of insects, rodents, vermin and other pests; (e) keep any garbage,
trash, rubbish or refuse in rat-proof containers within the interior of the
Premises until removed from the area; (f) have such garbage, trash, rubbish and
refuse removed at its expense on a regular basis from location points and at
such times as designated by Lessor, if said service is not provided by Lessor;
(g) keep all mechanical apparatus free of vibration, noise or pollution which
may be transmitted beyond the Premises; (h) comply with all laws, ordinances,
rules and regulations of the Fire Underwriters Rating Bureau now or hereafter in
affect; (i) conduct its business in all respects in a manner in accordance with
normal customary industry practices and (j) the terms of this Section 15. Lessor
understands that Lessee intends to work with hazardous materials, but that such
use will comply with all present and future federal, state and local government
laws, ordinances, orders, rules and regulations.
In addition, Lessee shall not (a) place or maintain any merchandise or
other articles in any vestibule or entry of the Premises, on the footwalks
adjacent thereto or elsewhere on the exterior of the Premises or Building
without the written reasonable consent of Lessor; (b) permit undue accumulation
of garbage, trash, rubbish or other refuse within or without the Premises; (c)
cause or permit objectionable odors to emanate or be dispelled from the
Premises; (d) occupy, use or permit the use or occupancy of any portion of the
Premises for any business or purpose which is immoral, disreputable or in
violation of any legal direction of any public officer; or (e) occupy, use or
permit the use or occupancy of any portion of the Premises for any business or
purpose which, in the opinion of Lessor, reasonably formed, constitutes a public
or private nuisance.
Lessor shall have the right, upon written approval by Lessee, to
provide for rubbish and refuse removal services as required of Lessee above, and
Lessee agrees to reimburse Lessor for the cost incurred in providing such
service, provided the cost of the service provided by Lessor is competitively
priced, within 30 days after receipt of a statement setting forth the cost of
such service.
Lessee agrees to discharge all waste materials from the Premises in
compliance with the rules and regulations as set forth in The Woodlands Metro
Center Municipal Utility District Policy Manual - Industrial Waste Discharges -
Permits and Charges - No. R&S-50, issued July 12, 1979, with an effective date
of July 12, 1979, as it may be amended from time to time. Lessee shall haul away
for disposal at its own expense, any waste material not meeting the standards
for discharge set forth in the above-referenced manual.
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Lessee shall comply, at Lessee's cost and expense, with all private
restrictions encumbering the Land and all present and future laws, ordinances,
orders, rules, regulations and requirements of all federal, state, and municipal
governments, including all municipal and road utility districts and municipal
utility districts, and all departments, commissions, boards and officers
thereof, and any other body exercising similar functions, which now or hereafter
may be applicable to the Premises, the improvements in the Premises, or to the
use or manner of use of the Premises or the improvements, including but not
limited to, all environmental laws and the Americans With Disabilities Act. In
the event of a violation of any environmental law by Lessee and cleanup of
contamination is required, in addition to all other remedies of Lessor under
this Lease or at law or in equity, Lessee shall conduct a Standard 1 cleanup so
that there is a total and complete removal of all contaminates from the
Premises. Lessee agrees that no such cleanup shall be subject to a risk
reduction standard and no deed recordation notice shall be recorded against the
Premises.
Lessee also agrees to comply with the Rules and Regulations of the
Building, a copy of which is attached as Exhibit "C". Lessor may amend said
Rules and Regulations, from time to time, if reasonably necessary for the
safety, care, or cleanliness of the Building, provided that no amendment shall
alter any covenant or provision contained in this Lease. Lessee agrees to comply
with any amendment which is made to said rules and Regulations in compliance
with the terms of this subsection after Lessee receives written notice of the
amendment.
16. Interior Repairs and Maintenance. Except as provided for in the
Lease, Lessee will, at Lessee's cost and expense, keep the interior of the
Premises, together with all electrical, plumbing and other mechanical
installations therein, all heating and air conditioning equipment, and all
interior windows or doors serving the Premises, in good order and repair, and
will make all replacements thereto as its expense. Lessee will surrender the
Premises at the expiration or earlier termination of this Lease, in as good
condition as when received, excepting depreciation caused by ordinary wear and
tear or casualty covered by insurance. Lessee will not overload the electrical
wiring serving the Premises or within the Premises, and will install at its
expense, but only after obtaining Lessor's reasonable written approval, any
additional electrical service which may be required in connection with Lessee's
use or occupancy. Notwithstanding anything herein to the contrary, Lessor, and
not Lessee, shall be liable for any and all interior repairs which may result
from any structural failure of the Building, unless caused by Lessee, its
agents, employees or invitees. Lessee will repair promptly, at its expense, any
damage to the Premises caused by bringing into the Premises any property for
Lessee's use, or by the installation or removal of such property, regardless of
fault or by whom such damage was caused, unless caused by Lessor, its agents,
employees or contracts. Upon execution of this Lease, Lessee, at its own cost
and expense, shall enter into a regularly scheduled preventative
maintenance/service contract with Lessor, or a maintenance contractor approved
by Lessor, for servicing all hot water, heating, and air-conditioning systems
and equipment within the Premises. If Lessee fails to make such repairs and/or
to perform the maintenance and repairs to the Premises which are Lessee's
obligation under this Lease, Lessor may make same, and Lessee agrees to pay, as
additional rent, the cost thereof, plus 10% overhead, to Lessor promptly upon
Lessor's demand therefor.
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17. Roof and Walls. Lessor or its designee shall have the exclusive
right (a) to erect in connection with the construction thereof temporary
scaffolds and other aids to construction on the exterior of the Premises,
provided that access to the Premises shall not be denied; and (b) to install,
maintain, use, repair and replace within the Premises, pipes, ducts, conduits,
wires and all other mechanical equipment serving other parts of the Building,
the same to be in locations within the Premises as will not materially interfere
with Lessee's use thereof. Lessee shall have no right to penetrate or erect
improvements on the roof without the prior written consent of Lessor, which
consent shall not be unreasonably withheld or delayed, and any approval by
Lessor will require Lessee executing Lessor's license agreement. Lessee shall be
liable in damages to Lessor for any breach of this provision, including damages
for loss of any and all warranties.
18. Signs and Advertising. Lessee will not place or suffer to be placed
or maintained on or displaced to the exterior of the Premises, any sign,
advertising matter or other thing of any kind, and will not place or maintain
any decoration, lettering or advertising matter on the glass of any window or
door of the Premises without first obtaining the written approval of Lessor,
which consent shall not be unreasonably withheld or delayed. Lessee will
maintain any approved sign, decoration, lettering, advertising matter or other
thing in good condition and repair at all times.
19. Entry by Lessor. Lessee shall permit Lessor or Lessor's agents,
representatives, or employees to enter upon the Premises at reasonable times,
and upon having given Lessee reasonable advance notice, (a) to inspect the
Premises, to determine whether Lessee is in compliance with the terms of this
Lease; (b) to show the Premises to prospective purchasers, lessees, mortgagees,
bene ficiaries under trust deeds, or insurers (but as to prospective lessees
only during the last 6 months of the Term), and (c) to make repairs,
improvements, additions and alterations thereto, as Lessor is permitted to make
according to the terms of the Lease. Any inspections of the Premises pursuant to
this subsection shall be at Lessor's cost and expense; provided, however, in the
event it is determined by Lessor that an environmental study should be conducted
on the Premises and said environmental study determines that Lessee has not
complied with all then existing environmental laws, Lessee shall reimburse
Lessor for the cost of the study within 15 days after receipt of an invoice
setting forth the cost, and Lessee shall promptly take all action necessary, at
Lessee's sole expense, to remedy any noncompliance by Lessee discovered by such
study in accordance with Section 15 above.
20. Liens. In the event that any mechanic's, materialmen's, or other
lien shall at any time be filed against the Premises, the Building or the Land
purporting to be for work, labor, services or materials performed for or
furnished to Lessee or anyone holding the Premises through or under Lessee, or
arising out of any alleged act or omission of Lessee, Lessee shall forthwith
cause the same to be properly bonded or released. If Lessee shall fail to cause
such lien to be bonded or released within 15 days after being notified of the
filing thereof, then, in addition to any other right or remedy of Lessor, Lessor
may, but shall not be obligated to, discharge the same by posting a bond or
paying the amount claimed to be due, and the amount so paid by Lessor, and all
costs and expenses incurred by Lessor in procuring the discharge of such lien,
including reasonable attorney's fees, shall be due and payable by Lessee to
Lessor as additional rent on the first day of the next succeeding month.
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Lessor shall not be liable for any labor or materials furnished to Lessee upon
credit, and that no mechanics', materialmen's or other liens for any such labor
or materials shall attach to or affect the estate or interest of Lessor in and
to the Land or Building.
21. Subordination. Lessee agrees that this Lease is and shall be
subordinate to any mortgage or deed of trust which may now or hereafter encumber
the Building or the Land, and to all renewals, modifications, consolidations,
replacements and extensions thereof, provided, however, that the holder of any
such mortgage or deed of trust shall agree that Lessee shall not be disturbed in
its possession of the Premises or its rights hereunder terminated or amended by
the mortgagee, any purchaser at or in lieu of foreclosure or other party so long
as Lessee is not in default under this Lease. Lessor agrees to use reasonable
efforts to obtain a nondisturbance agreement in a commercially reasonable form
from its lender at the time a mortgage or deed of trust is placed upon the
Building or Land. In confirmation of such subordination, Lessee shall at
Lessor's request execute promptly any appropriate certificate or instrument that
Lessor may reasonably request. In the event of the enforcement by the trustee or
the beneficiary under a mortgage or deed of trust of the remedies provided for
by law or by such mortgage or deed of trust, Lessee will, upon request of any
person or party succeeding to the interest of Lessor as a result of such
enforcement, automatically become the lessee of such successor in interest
without change in the terms or other provisions of this Lease; provided,
however, that such successor in interest shall not be bound by (i) any payment
of Base Rent or Additional Rent for more than one month in advance except
prepayments in the nature of security for the performance by Lessee of its
obligations under this Lease; (ii) any amendment or modifications under this
Lease made without the written consent of such trustee, beneficiary, or
successor in interest; (iii) any default by the prior owner or landlord in the
observance or performance of any of its covenants or obligations hereunder any
right of offset which Lessee may have had against the prior owner or landlord.
Upon request by any successor in interest, Lessee shall execute and deliver an
instrument or instruments confirming the attornment herein provided for.
Within 15 days after Lessor's request, Lessee agrees to execute an
estoppel certificate or other agreement certifying to Lessor and/or any
mortgagee of the Building such facts and agreeing to such reasonable notice
provisions as such mortgagee may request in connection with Lessor's financing,
subject, however, to the non-disturbance rights of Lessee above-described. If
Lessee fails or refuses to give a certificate hereunder within the time period
herein specified, then the information contained in such certificate as
submitted by Lessor shall be deemed correct for all purposes, and all notice
provisions and other matters in the certificate shall be deemed agreed to, but
Lessor shall have the right to treat such failure or refusal as default by
Lessee.
This Lease and all rights of Lessee hereunder are further subject and
subordinate to the extent that the same relate to the Premises to all ground or
underlying leases covering the Land/or any part thereof which may now or
hereinafter affect the Land or the Building, and any renewals or modifications
thereof; provided, however that the holder of any ground lease or underlying
leases covering the Land or the Building shall agree that Lessee shall not be
disturbed in its possession of
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the Premises or its rights hereunder terminated or amended by such holder as
long as Lessee is not in default under this Lease.
22. Condemnation. If the whole or any part of the Premises shall be
taken under the power of eminent domain, this Lease shall terminate as to the
part so taken on the date Lessee is required to yield possession thereof to the
condemning authority. Lessor shall, with reasonable diligence, make such repairs
and alterations as may be necessary in order to restore the part not taken to a
useful condition, and the Base Rent shall be reduced proportionately to the
portion of the Premises so taken. If the amount of the Premises so taken
substantially impairs the usefulness of the Premises for the purposes set forth
in Section 4 , either party may terminate this Lease within 30 days after Lessee
is dispossessed, effective as of the date when Lessee is required to yield
posses sion. All compensation awarded for any taking shall belong to and be the
property of Lessor.
23. Fire and Casualty. In the event of a fire or other casualty in the
Premises, Lessee shall immediately give notice thereof to Lessor. If the
Premises, through no fault or neglect of Lessee, its agents, employees,
invitees, licensees or visitors, shall be destroyed by fire or other casualty so
as to render the Premises untenantable, the rental herein shall be reduced
proportionally to the portion of the Premises rendered untenantable until such
time as the Premises are made tenantable by Lessor. If from such cause the same
shall be so damaged that Lessor shall decide not to rebuild, then all rent and
other sums owed hereunder up to the time of such destruction or casualty shall
be paid by Lessee, and thenceforth this Lease shall cease and come to an end.
Notwithstanding anything contained herein to the contrary, if within 60 days of
the fire or casualty it is determined that the Premises cannot be restored
within 150 days from the date of the fire or casualty, Lessor shall give written
notice to Lessee. Lessee shall have the right within 60 days from the date of
Lessor's notice to terminate the Lease. Further, notwithstanding anything
contained herein to the contrary, in the event the Building shall be destroyed
or damaged prior to the final 2 years of the then current Lease Term to such
extent that rebuilding or repairing can be completed within 150 days from the
date of the damage, Lessor shall, at its sole cost and expense, diligently
proceed forthwith to rebuild and repair said Premises as closely as possible to
the Building to be constructed in accordance with Exhibit "B", except that
Lessor shall not be obligated for such repair in an amount in excess of the
insurance proceeds recovered as a result of such damage or which could have been
recovered had Lessor maintained the insurance Lessor was required to maintain in
this Lease. If the Premises should be substantially damaged by fire or other
casualty during the final 2 years of the Lease Term, Lessor shall not be
required to rebuild or repair such damage and at Lessor or Lessee's option, by
written notice to the other within 60 days after the date of the damage, this
Lease shall terminate and all Base Rent and Additional Rent shall be abated as
of the date of the damage. However, if during the last 2 years of the then
current Lease Term, Lessor shall exercise said right of termination and at that
time Lessee shall have the right to renew the Lease Term, Lessee may render
Lessor's notice of termination nugatory and reinstate Lessor's obligation to
rebuild, provided that Lessee, within 15 days of receipt of Lessor's notice of
termination, exercises its right to renew the Term of the Lease.
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24. Casualty Insurance. Lessor shall, at all times during the Term,
maintain a policy or policies of insurance with the premiums thereon fully paid
in advance, issued by and binding upon some solvent insurance company, licensed
to do business in the State of Texas, insuring Lessor's interest in the Building
against loss or damage by fire and other hazards within the coverage of a Texas
standard form of fire and extended coverage policy, for the full replacement
value thereof, with payments for losses thereunder payable solely to Lessor or
its designee. Lessee shall maintain in force a like policy insuring Lessee's
interest in any furniture, equipment, machinery, goods or supplies which Lessee
may bring or obtain upon the Premises.
25. Liability Insurance. Lessee shall maintain, at its expense, at all
times during the Term, a policy or policies of commercial general liability
insurance, with the premiums thereon fully paid in advance, issued by (i) an
insurance company or companies rated "A-" or higher under the most current
edition of A.M. Best's Key Rating Guide, (ii) a Lloyds of London underwriter, or
(iii) an insurance company agreed to by Lessor. All insurers must be licensed to
do business in the State of Texas. The insurance shall afford protection of not
less than $1,000,000 combined single limit bodily injury and property damage per
occurrence. The policy or policies shall name Lessor as an additional insured.
As to any injury or damage occurring in or on the Premises, Lessee's insurance
shall be primary. Lessee's policy shall contain an agreement by the insurer that
such policy, or policies may not be cancelled or materially modified without 30
days' prior notice to Lessor. Lessee shall provide Lessor a copy of the required
policy or policies, or a certificate evidencing the required coverage, before
beginning any work in the Premises or taking occupancy of same. Additionally,
Lessee shall provide Lessor evidence of the renewal of each policy at least 30
days before the expiration of the policy.
26. Release of Claims; Waiver of Subrogation. Anything in this Lease to
the contrary notwithstanding, Lessor and Lessee each waive any and all right of
recovery, claim, action or cause of action against the other and its partners
(if any), and the agents, officers, and employees of the other party or its
partners, for any loss or damage:
(i) to the Premises, the Building, or any improvements
thereto, or any personal property of such party
therein, by reason of fire, the elements or any other
cause which could have been insured against under a
Texas standard form of fire and extended coverage
insurance policy, or
(ii) arising out of any business interruption, including
but not limited to loss of profits, by reason of
fire, the elements or any other cause,
regardless of cause or origin, including the sole or concurrent negligence of
the other party or its partners, or the agents, officers, or employees of the
other party or its partners. Lessor and Lessee covenant that no insurer shall
hold any right of subrogation against the other party for losses which must be
insured against by the terms of this Lease. This Section shall survive the
termination of this Lease.
11
<PAGE>
27. Release and Indemnification by Lessee. Subject to Section 26 above,
Lessee releases and agrees to defend, indemnify and hold Lessor and its
partners, and the agents, officers and employees of Lessor or its partners,
harmless from and against all claims or causes of action for damage or injury or
death to persons or property occurring on or in the Premises, including, but not
limited to, any claims or causes of action caused by or resulting from (i) the
negligence, but not the gross negligence or willful misconduct of Lessor or its
partners, or the agents, officers, or employees of Lessor or its partners, or
(ii) strict liability or product liability. Subject to Section 26 above, Lessor
releases and agrees to defend, indemnify and hold Lessee and its partners, and
the agents, officers and employees of Lessee or its partners, harmless from and
against all claims or causes of action for damage or injury or death to persons
or property occurring on or in the Premises, including, but not limited to, any
claims or causes of action caused by or resulting from (i) the negligence, but
not the gross negligence or willful misconduct of Lessee or its partners, or the
agents, officers, or employees of Lessee or its partners, or (ii) strict
liability or product liability. This Section shall survive the termination of
this Lease.
28. Holding Over. In the event of holding over by Lessee after the
expiration or termination of the Term and without the written consent of Lessor,
Lessee shall be a tenant at will and shall pay monthly rent equal to 150% of the
amount of all Base Rent, and Additional Rent pay able during the last month of
the Term. Further, Lessee shall indemnify Lessor against all actual damages by
any other lessee to whom Lessor may have leased all or any part of the Premises.
Lessor may terminate the tenancy by giving written notice to Lessee. No holding
over by Lessee, either with or without the consent and acquiescence of Lessor,
shall operate to extend the Lease for a longer period than l month. Any holding
over with the consent of Lessor in writing shall thereafter constitute this
Lease a lease from month to month.
29. Default by Lessee. If (a) Lessee fails to timely pay any sum to be
paid by Lessee under this Lease and such default continues for 5 business days
after Lessor delivers written notice of such failure to pay to Lessee or
deposits written notice in the U. S. Mail addressed to Lessee's address set
forth in Section 35; (b) Lessee fails to perform any of its other duties or
obligations under this Lease and such default continues for 20 days after Lessor
delivers written notice to Lessee or deposits written notice in the U. S. Mail
addressed to Lessee's address set forth in Section 35, provided such notice sets
forth the nature and extent of such default. The period of time to cure such a
default described in this subparagraph (b) shall be extended, provided Lessee
commences to cure such default within said 20 days and continues to completion
with due diligence, speed and continuity, said period of extension, however, not
to exceed 40 days from the expiration of the 20 days; (c) any of the following
actions occur and Lessee fails to vigorously contest and cause same to be
removed, dismissed, or vacated within 30 days from the date of entry or filing:
(i) Lessee's interest under this Lease is levied on under execution or other
legal process, or (ii) any petition is filed by or against Lessee to declare
Lessee a bankrupt or to delay, reduce or modify Lessee's debts or obligations,
or (iii) any petition under the Bankruptcy Code is filed or other action taken
to reorganize or modify Lessee's capital structure, or (iv) Lessee is declared
insolvent according to law, or (v) any general assignment of Lessee's property
is made for the benefit of creditors, or (vi) a
12
<PAGE>
receiver or trustee is appointed for Lessee or its property; (d) Lessee vacates
or abandons the Premises and does not pay rent provided for herein; (e) if
Lessee is a corporation, Lessee ceases to exist as a corporation in good
standing in the State of Texas; or (f) if Lessee is a partnership or other
entity, Lessee is dissolved or otherwise liquidated, then Lessor may treat the
occurrence of any one or more of the foregoing events as a breach of this Lease.
Upon the occurrence of any of the foregoing events, at Lessor's option, Lessor
shall have any one or more of the following described remedies, in addition to
all other rights and remedies provided at law or in equity:
A. Lessor may terminate this Lease and forthwith repossess the
Premises and recover damages in a sum of money equal to the total of (i) the
cost of recovering the Premises, including the cost of the removal and storage
of any of Lessee's possessions left within the Premises, (ii) the unpaid Base
Rent and Additional Rent earned at the time of termination, plus interest
thereon at the lesser of 18% or the then maximum interest rate permitted to be
charged by applicable law ("Interest") from the due date until paid, (iii) the
balance of the Base Rent and Additional Rent for the remainder of the Term,
discounted to its present value at the rate of 6% per annum, less the fair
market rental value (allowing a reasonable period for reletting) of the Premises
for said period (provided said sum shall not be less than zero), and (iv) any
other sum of money and damages owed by Lessee to Lessor.
B. Without terminating this Lease, Lessor may terminate
Lessee's right of possession and repossess the Premises by forcible detainer
suit or otherwise, without demand or notice of any kind to Lessee. If Lessor
pursues this remedy, Lessor may, but shall not be obligated to, relet the
Premises for Lessee's account, for such rent and upon such terms and conditions
as Lessor deems satisfactory. For the purpose of such reletting, Lessor is
authorized to decorate or to make any repairs, changes, alterations or
modifications in or to the Premises as it deems necessary to prepare the
Premises to relet at Lessee's expense. If Lessor fails to relet the Premises,
then Lessee shall pay to Lessor as damages a sum equal to the amount of the Base
Rent and Additional Rent provided for in this Lease for such period or periods.
If Lessor relets the Premises and fails to realize a sufficient sum from such
reletting after deducting (a) the due and unpaid Base Rent and Additional Rent,
(b) the accrued Interest thereon, (c) the cost of recovering possession, (d) the
costs and expenses of all decorations, repairs, changes, alteration and
modifications, and (e) the expense of such reletting and the collection of the
rent accruing therefrom, then Lessee shall pay to Lessor any such deficiency
upon demand from time to time. Lessor may file one or more suits to recover any
sums falling due under this Section from time to time. Any reletting shall not
be an election by Lessor to terminate this Lease unless Lessor gives a written
notice of such intention to Lessee. Notwithstanding any such reletting without
termination, Lessor may at any time thereafter elect to terminate this Lease for
such previous default.
C. Lessor may change the locks on the Premises. The Lessor
will not have to give the Lessee a new key unless the Lessee cures the
default(s); the new key will be provided only during Lessor's regular business
hours.
13
<PAGE>
30. Waiver. Failure of Lessor to declare any default immediately upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Lessor shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either in law or at equity. Likewise, failure of Lessee to declare
any default immediately upon occurrence thereof, or delay in taking any action
in connection therewith, shall not waive such default, but Lessee shall have the
right to declare any such default at any time and take such action as might be
lawful or authorized hereunder, either in law or at equity.
31. Lien for Rent. Lessee hereby grants to Lessor a lien on all
property of Lessee now or hereafter placed in or upon the Premises, including,
but not limited to, all goods, wares, fixtures, machinery, equipment,
furnishings, and other articles of personal property , and all proceeds from the
sale or lease thereof (except such part of any property as may be exchanged,
replaced or sold from time to time in the ordinary course of business, operation
or trade), and such property shall be and remain subject to such lien of Lessor
for payment of all rent and other sums agreed to be paid by Lessee herein. This
Lease shall constitute a security agreement under the Texas Uniform Commercial
Code ("TUCC") so that Lessor shall have and may enforce a security interest in
all property of Lessee now or hereafter placed in or on the Premises, including
but not limited to all goods, wares, fixtures, machinery, equipment, furnishings
and other articles of personal property now or hereafter placed in or upon the
Premises by Lessee, and all proceeds from the sale or lease thereof. Lessee
agrees to execute as debtor such financing statement or statements as Lessor may
now or hereafter reasonably request in order that such security interest or
interests may be perfected pursuant to said TUCC. Lessor may at its election at
any time file a copy of this Lease as a financing statement. Lessor, as secured
party, shall be entitled to all of the rights and remedies afforded a secured
party under said TUCC, which rights and remedies shall be in addition to and
cumulative of the landlord's liens and rights provided by law or by the other
terms and provisions of this Lease.
Notwithstanding anything contained herein to the contrary, Lessor
agrees to subordinate its liens to bona fide liens to secure loans for the
purchase of furniture, equipment, and inventory using the subordination
agreement substantially in the form attached hereto as Exhibit "D".
32. Assignment by Lessor. Lessor shall have the right to sell, transfer
or assign, in whole or in part, all of its rights and obligations hereunder and
in the Building and the Land. In such event and upon the assumption by such
transferee of Lessor's obligations hereunder, no further liability or obligation
shall thereafter accrue against Lessor hereunder.
33. Assignment by Lessee. Lessee shall not assign this Lease or any
interest therein, nor sublet the Premises or any part thereof or any right or
privilege appurtenant thereto, nor permit any other person, firm or entity to
occupy or use the Premises or any portion thereof without first obtaining the
written consent of Lessor, which consent shall not be unreasonably withheld or
delayed. Lessor shall have the right, at its option, to terminate this Lease as
to any portion of the Premises covered by a proposed assignment or sublease, or
to approve any such assignment or sublease only upon the condition that (a) 50%
of all rentals, after all reasonable expenses associated with the assignment or
sublease are deducted, paid by the assignee or sublessee in excess of the
14
<PAGE>
rentals due from Lessee hereunder, shall be paid directly to Lessor, the
proposed assignee or sublessee is financially capable of assuming Lessee's
obligations hereunder, in the sole judgment of Lessor, and (b) the proposed
assignee or sublessee agrees to use the Premises only for the uses permitted by
Lessee under this Lease, and to comply with all of the other terms and
conditions of this Lease. Notwithstanding anything contained herein to the
contrary, if Lessor elects to terminate the Lease pursuant to this Section 33,
Lessee, no more than once during the initial Term, may rescind its request to
assign the Lease or sublet the Premises within 10 business days after Lessor's
notice of termination. Consent by Lessor to one assignment, subletting,
occupation or use by another person shall not be deemed to be a consent to any
subsequent assignment, subletting, occupation or use by the same or another
person. Consent to an assignment or sublease shall not release Lessee from
liability for the continued performance of the terms and provisions to be kept
and performed by Lessee hereunder, unless Lessor specifically and in writing
releases Lessee from said liability. In addition, an amendment, modification, or
extension of the Lease after the assignment or sublease shall not release Lessee
from liability for the continued performance of the terms and provisions to be
performed by Lessee hereunder. Any assignment or subletting by operation of law
or otherwise, (including without limitation, a transfer of controlling interest
in Lessee to any other person, firm or entity) without the prior written
reasonable consent of Lessor, shall be void and shall, at the option of Lessor,
terminate this Lease. Lessee covenants and agrees that when the prior written
consent of Lessor is obtained, and in the event the subletting or assignment is
to be arranged through public advertisement or listing of any kind, Lessee will
treat all applications for sublease or assignment in a uniform manner and will
award leases according to objective standards. No decision on any application
shall be made on the grounds of the applicant's race, color, religion, sex,
handicap, familial status, or national origin.
Notwithstanding anything contained to the contrary, it is agreed that
the requirement for prior written consent in this Section 33, an assignment or
subletting by operation of the transfer of the controlling interest in Lessee
relates to the protection of Lessor's economic rights and interests under this
Lease. The requirement for receiving Lessor's prior written consent shall not be
necessary if any such transfer does not have an adverse impact on Lessor's
economic rights and interests. "Transfer of the controlling interest", for
purposes of this Section 33 is defined to mean the transfer or accumulation, by
or in any one entity or person, of twenty percent (20%) or more of the corporate
shares or the voting rights that accompany ownership of corporate shares.
34. Notices. Any notice required or permitted to be given pursuant to
the terms of this Lease shall be sent by certified or registered U.S. mail to
Lessor at 2201 Timberloch Place, The Woodlands, Texas 77380, Attn: Property
Management, and to Lessee at 8707 Technology Forest Place, The Woodlands, Texas
77380. The place to which such notices shall be sent may be changed by either
party giving notice of such change to the other party in the manner hereinabove
provided. A notice shall be deemed given and received on the 3rd business day
following deposit in the U. S.
Mail as provided above.
35. Severability. If any of the provisions of this Lease shall
contravene or be invalid under the laws of the particular state, county, or
jurisdiction where applied, such contravention or
15
<PAGE>
invalidity shall not invalidate the Lease or any other portions thereof and the
remainder of this Lease or the application thereof to other persons or
circumstances shall not be affected thereby.
36. Corporate Authority. If Lessee signs as a corporation, each of the
persons executing this Lease on behalf of Lessee represents and warrants that
Lessee is a duly organized and existing corporation, that Lessee has and is
qualified to do business in Texas, that the corporation has full right and
authority to enter into this Lease, and that all persons signing on behalf of
the corporation were authorized to do so by appropriate corporate actions.
37. Title. This Lease is subject to all matters of record in the Real
Property Records of Montgomery County, Texas. By execution of this Lease, Lessee
consents to all plats and replats of the Land, if any, in compliance with all
applicable laws.
38. Not an Offer. The submission of this Lease to Lessee shall not be
construed as an offer, nor shall Lessee have any rights with respect thereto
unless Lessor executes a copy of this Lease and delivers the same to Lessee.
39. Exhibits, Riders and Addenda. This Lease also includes and
incorporates herein for all purposes all attached Exhibits, Riders, and Addenda,
if any.
40. Joint and Several Tenancy. If more than one person executes this
Lease as Lessee, their obligations hereunder are joint and several, and any act
or notice of or to, or refund to, or the signature of, any one or more of them,
in relation to the renewal or termination of this Lease, or under or with
respect to any of the terms hereof shall be fully binding on each and all of the
persons executing this Lease as a Lessee.
41. Binding Effect. This Lease shall be binding upon and inure to the
benefit of the heirs, successors or assigns of Lessor and Lessee, subject to the
limitation on subleasing and assignment herein contained.
42. Entire Agreement. This Lease shall constitute the sole and only
agreement of Lessor and Lessee with regard to the Lease of the Premises, and
shall supercede any prior or contemporaneous oral or written agreements. This
Lease may not be altered, changed or amended, except by an instrument in
writing, signed by both parties hereto.
43. Pronouns. Pronouns which refer to either Lessor or Lessee shall be
construed to mean the appropriate number and gender intended.
44. Force Majeure. If either party shall be delayed or prevented from
the performance of any act required hereunder by reason of acts of God, strikes,
lockouts, labor troubles, inability to procure materials, restrictive
governmental laws or regulations or other cause without fault and beyond the
control of the party obligated (Lessee's financial inability, such as inability
to obtain financing or lack of capital, excepted), performance of such act shall
be excused for the period of
16
<PAGE>
the delay, and the period for the performance of any such act shall be extended
by a period equal to the period of such delay; provided, however, nothing in
this Section shall excuse Lessee from the prompt payment of any rental or other
charge required of Lessee hereunder, except as may be expressly provided
elsewhere in this Lease.
45. General. Time is of the essence of this Lease. All rights and
remedies of Lessor and Lessee under this Lease shall be cumulative and none
shall exclude any other rights or remedies allowed by law. This Lease shall be
declared to be a Texas lease, and all of the terms hereof shall be construed
according to the laws of the State of Texas. Said Lease shall be performable
only in Montgomery County, Texas, and venue for any action hereunder shall lie
exclusively in Montgomery County, Texas or in the Southern District of Texas,
Houston Division, as appropriate.
IN TESTIMONY WHEREOF, the parties hereto have executed this Lease in
multiple counterparts, each of which shall constitute an original but
collectively shall constitute only one document, such execution to be effective
on the date first above written.
LESSOR
Date: April 4, 1997 THE WOODLANDS CORPORATION
By: s/s: Michael H. Richmond
-------------------
Name: Michael H. Richmond
Title: Executive Vice President
Originator
Legal
Financial
- ------------ ---------
LESSEE
Date: April 4, 1997 ARONEX PHARMACEUTICALS, INC.
By: s/s: James M. Chubb
--------------
Name: James M. Chubb
Title: President
17
<TABLE>
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
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.
<CAPTION>
Average
Days Shares Shares Loss Per
Shares Outstanding X Days Outstanding Loss Share
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1996:
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 20,837,352
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 21,357,122
10,680,653 1 10,680,653
10,680,903 3 32,042,709
10,710,132 4 42,840,528
10,718,504 6 64,311,024
10,727,170 4 42,908,680
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 43,107,964
10,784,842 1 10,784,842
10,812,921 1 10,812,921
10,832,546 2 21,665,092
10,847,725 3 32,543,175
10,848,023 5 54,240,115
10,849,767 7 75,948,369
10,851,626 3 32,554,878
10,858,605 1 10,858,605
10,862,095 2 21,724,190
10,962,004 1 10,962,004
10,962,593 4 43,850,372
10,965,241 2 21,930,482
10,965,939 1 10,965,939
10,967,993 6 65,807,958
10,972,354 5 54,861,770
10,977,356 2 21,954,712
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 28,945,572
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 28,971,798
14,488,079 3 43,464,237
14,526,802 3 43,580,406
182 2,097,932,529/182 11,527,102 (4,400,000) (0.38)
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
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.
Average
Days Shares Shares Loss Per
Shares Outstanding X Days Outstanding Loss Share
Six Months Ended June 30, 1997:
14,597,247 8 116,777,976
14,606,972 12 175,283,664
14,612,023 4 58,448,092
14,612,499 21 306,862,479
14,615,983 6 87,695,898
14,616,981 1 14,616,981
14,624,239 5 73,121,195
14,625,111 2 29,250,222
14,627,695 7 102,393,865
14,628,567 6 87,771,402
14,640,311 6 87,841,866
14,643,658 6 87,861,948
14,644,672 1 14,644,672
14,644,816 7 102,513,712
14,644,982 2 29,289,964
14,645,277 4 58,581,108
14,665,277 22 322,636,094
14,665,665 9 131,990,985
14,674,453 19 278,814,607
14,678,042 6 88,068,252
14,680,055 7 102,760,385
14,680,344 19 278,926,536
14,687,394 1 14,687,394
181 2,650,839,297/181 14,645,521 (6,294,000) (0.43)
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
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.
Average
Days Shares Shares Loss Per
Shares Outstanding X Days Outstanding Loss Share
Quarter Ended June 30, 1996:
10,847,725 5 54,238,625
10,848,023 7 75,936,161
10,849,767 3 32,549,301
10,851,626 1 10,851,626
10,858,605 2 21,717,210
10,862,095 1 10,862,095
10,962,004 4 43,848,016
10,962,593 2 21,925,186
10,965,241 1 10,965,241
10,965,939 6 65,795,634
10,967,993 5 54,839,965
10,972,354 2 21,944,708
10,977,356 7 76,841,492
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 83,976,462
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
14,456,806 2 28,913,612
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 43,444,500
14,483,680 1 14,483,680
14,484,059 2 28,968,118
14,485,899 3 43,457,697
14,488,079 3 43,464,237
14,526,802 1 14,526,802
91 1,128,757,071 /91 12,404,122 (2,327,000) (0.19)
Quarter Ended June 30, 1997: 0
14,644,816 2 29,289,632
14,644,982 2 29,289,964
14,645,277 4 58,581,108
14,665,277 22 322,636,094
14,665,665 9 131,990,985
14,674,453 19 278,814,607
14,678,042 6 88,068,252
14,680,055 7 102,760,385
14,680,344 19 278,926,536
14,687,394 1 14,687,394
91 1,335,044,957 /91 14,670,824 (3,201,000) (0.22)
</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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,233,000
<SECURITIES> 29,233,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,542,000
<PP&E> 4,772,000
<DEPRECIATION> 3,030,000
<TOTAL-ASSETS> 38,196,000
<CURRENT-LIABILITIES> 3,568,000
<BONDS> 0
<COMMON> 15,000
0
0
<OTHER-SE> 34,595,000
<TOTAL-LIABILITY-AND-EQUITY> 34,610,000
<SALES> 0
<TOTAL-REVENUES> 1,439,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,690,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,000
<INCOME-PRETAX> (6,294,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,294,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,294,000)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
</TABLE>
