- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Quarterly Period Ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission File No. 0-20111
ARONEX PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 76-0196535
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8707 Technology Forest Place, The Woodlands, Texas 77381-1191
(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 March 31, 1998
Common Stock, $.001 par value 15,467,281 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ARONEX PHARMACEUTICALS, INC.
Quarterly Period March 31, 1998
INDEX
Page
Factors Affecting Forward Looking Statements.................................. 3
PART I. Financial Information
Item 1 Financial Statements................................................. 3
Balance Sheets - December 31, 1997 and March 31, 1998
(unaudited).................................. ....................... 4
Statements of Operations:
Three Months Ended March 31, 1997 and March 31, 1998
(unaudited) and for the Period from Inception
(June 13, 1986) through March 31, 1998 (unaudited)................. 5
Statements of Cash Flows:
Three Months Ended March 31, 1997 and March 31, 1998
(unaudited) and for the Period from Inception
(June 13, 1986) through March 31, 1998 (unaudited)................. 6
Notes to Financial Statements - March 31, 1998....................... 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 9
PART II. Other Information
Item 6 Exhibits and Reports on Form 8-K.................................... 11
SIGNATURES ........................................................... 12
- 2-
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
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, 1997, 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,
1997 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
The information presented in the accompanying financial statements is
unaudited, but in the opinion of management, reflects all adjustments (which
include only normal recurring adjustments) necessary to present fairly such
information.
- 3-
<PAGE>
<TABLE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
BALANCE SHEETS
(All amounts in thousands, except share data)
ASSETS
<CAPTION>
March 31,
December 31, (Unaudited)
1997 1998
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................... $ 2,029 $ 3,306
Short-term investments......................... 17,783 17,235
Accounts receivable............................ 100 --
Prepaid expenses and other assets.............. 474 825
---------- ---------
Total current assets...................... 20,386 21,366
Long-term investments............................. 10,142 5,111
Furniture, equipment and leasehold improvements,
net.......................................... 1,107 2,099
Deposits.......................................... 490 --
---------- ---------
Total assets.............................. $ 32,125 $ 28,576
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......... $ 1,977 $ 3,135
Accrued payroll................................ 554 743
Advance from Genzyme........................... 2,000 2,000
Current portion of notes payable............... 191 95
Current portion of obligations under capital
leases................... 18 18
---------- ---------
Total current liabilities................. 4,740 5,991
Long-term liabilities:
Obligations under capital leases, net of
current portion.............................. 6 3
---------- ---------
Total long-term liabilities............... 6 3
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, 15,459,166 and 15,467,281 shares
issued and outstanding, respectively......... 15 15
Additional paid-in capital..................... 96,606 96,609
Common stock warrants.......................... 967 967
Treasury stock................................. (11) (11)
Deferred compensation.......................... (907) (796)
Unrealized loss on investments................. (87) (87)
Deficit accumulated during development stage... (69,204) (74,115)
-------- ---------
Total stockholders' equity................ 27,379 22,582
-------- ---------
Total liabilities and stockholders' equity..... $ 32,125 $ 28,576
======== =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
- 4-
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
<TABLE>
STATEMENTS OF OPERATIONS
(All amounts in thousands, except loss per share data)
(Unaudited)
<CAPTION>
Period from
Inception
(June 13,
Three Months Ended 1986)
March 31, through
March 31,
1997 1998 1998
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Interest income.......................................... $ 592 $ 417 $ 5,998
Research and development grants and contracts............ 286 103 5,153
------------ ------------ -----------
Total revenues...................................... 878 520 11,151
------------ ------------ -----------
Expenses:
Research and development................................. 3,485 4,522 57,657
Purchase of in-process research and development.......... -- -- 11,625
General and administrative............................... 456 904 14,708
Interest expense and other............................... 30 5 1,276
------------ ------------ -----------
Total expenses...................................... 3,971 5,431 85,266
------------ ------------ -----------
Net loss.................................................... $ (3,093) $ (4,911) $ (74,115)
============ ============ ===========
Basic and diluted loss per share............................ $ (0.21) $ (0.32)
============ ============
Weighted average shares used in computing basic and
diluted loss per share................................... 14,620 15,461
</TABLE>
The accompanying notes are an integral part of these
financial statements.
- 5-
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(June 13, 1986)
Three Months Ended through
March 31, March 31,
1997 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . ................................................ $ (3,093) $ (4,911) $ (74,115)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities-
Depreciation and amortization.................................. 259 169 4,195
Loss (gain) on disposal of assets.............................. -- (2) 198
Compensation expense related to stock and stock options........ 193 111 3,347
Charge for purchase of in-process research and development..... -- -- 11,547
Unrealized loss on investment.................................. (31) -- (87)
Acquisition costs, net of cash received........................ -- -- (270)
Loss in affiliate.............................................. -- -- 500
Changes in assets and liabilities:
Increase in prepaid expenses and other assets............... (587) (351) (640)
Decrease in accounts receivable............................. 78 100 --
Increase in accounts payable and accrued expenses........... 249 1,347 3,805
Increase in deferred revenue................................ -- -- (353)
Accrued interest payable converted to stock.................... -- -- 97
------------ ------------ ------------
Net cash used in operating activities................ (2,932) (3,537) (51,776)
Cash flows from investing activities:
Net sales (purchases) of investments................................ 1,876 5,579 (16,611)
Purchase of furniture, equipment and leasehold improvements......... (93) (1,165) (5,286)
Proceeds from sale of assets........................................ -- 6 60
Deposits ......................................................... -- 490 --
Investment in affiliate............................................. -- -- (500)
------------ ------------ ------------
Net cash provided by (used in) investing activities.. 1,783 4,910 (22,337)
Cash flows from financing activities:
Proceeds from notes payable......................................... -- -- 4,672
Repayment of notes payable and principal payments under capital
lease obligations................................................. (63) (99) (2,557)
Purchase of treasury stock.......................................... -- -- (11)
Proceeds from issuance of stock..................................... 80 3 75,317
------------ ------------ ------------
Net cash provided by (used in) financing activities.. 17 (96) 77,419
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents................... (1,132) 1,277 3,306
Cash and cash equivalents at beginning of period....................... 4,179 2,029 --
------------ ------------ ------------
Cash and cash equivalents at end of period............................. $ 3,047 $ 3,306 $ 3,306
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............................ $ 20 $ 5 $ 544
Supplemental schedule of noncash financing activities:
Conversion of notes payable and accrued interest to common stock $ -- $ -- $ 3,043
</TABLE>
The accompanying notes are an integral part of these financial
statements.
- 6-
<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. Organization and Basis of Presentation
Aronex Pharmaceuticals, Inc. ("Aronex Pharmaceuticals" 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 (the "Mergers"). Aronex Pharmaceuticals 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, third-party reimbursement 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"). 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 March 31, 1998 and the related statements of
operations and cash flows for the three month periods ending March 31, 1998 and
1997 and the period from inception (June 13, 1986) through March 31, 1998 are
unaudited. These interim financial statements should be read in conjunction with
the December 31, 1997 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
The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income. SFAS 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. Comprehensive income (loss) was
$(3,124,000) and $(4,911,000) for the three months ended March 31, 1997 and
1998, respectively.
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 March 31, 1998, 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
$17,235,000, 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
$3,500,000, 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
$1,698,000, a fair market value of $1,611,000 and a gross unrealized loss of
$87,000 at March 31, 1998. The Company currently has no trading securities.
<PAGE>
4. Federal Income Taxes
At December 31, 1997, the Company had net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $79.0 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 the above NOL and tax credit carryforwards to
reduce future taxable income and tax liabilities may be limited. As a result of
the merger 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 United States 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.
Due to the possibility of not reaching a level of profitability that will allow
for the utilization of the Company's deferred tax assets, a valuation allowance
has been established to offset these tax assets. The Company has not made any
federal income tax payments since inception.
- 8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Overview
Since its inception in 1986, Aronex Pharmaceuticals, Inc. ("Aronex
Pharmaceuticals" or the "Company") has primarily devoted its resources to fund
research, drug identification and development. The Company has been unprofitable
to date and expects to incur 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 net losses
of approximately $74.1 million from inception through March 31, 1998. The
Company has primarily financed its research and development activities and
operations 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 Month Periods Ended March 31, 1997 and 1998
Interest income on cash, cash equivalents and investments was $417,000 and
$592,000 for the three months ended March 31, 1998 and 1997, respectively. The
decrease of $175,000 was primarily due to a decrease of funds available for
investment in 1998.
Revenues from research and development grants and contracts were $103,000
and $286,000 for the three months ended March 31, 1998 and 1997, respectively, a
decrease of $183,000. In the first quarter of 1997, research and development
revenue was composed of (i) $150,000 in revenue from the initiation of a license
agreement with Boehringer Mannheim GmbH and (ii) $136,000 in development revenue
from Targeted Genetics, Incorporated ("Targeted"). The three year agreement with
Targeted ended in the second quarter of 1997. Research and development revenue
for the first quarter of 1998 represents Small Business Innovative Research
("SBIR") grant revenue relating to Zintevir(TM).
Research and development expenses were $4,522,000 in the first quarter of
1998 compared to $3,485,000 in the first quarter of 1997. The increase of
$1,037,000 was primarily due to (i) an increase of $1,094,000 in clinical
investigation cost, the majority of which relates to the Company's lead product
NYOTRAN(TM) and (ii) an increase of $318,000 in medical affairs salaries and
payroll costs as the number of personnel in this department increased
significantly. These increases were partially offset by a decrease of
approximately $400,000 in research expenses in the first quarter of 1998.
General and administrative expenses were $904,000 in the first quarter of
1998 and $456,000 in the first quarter of 1997, an increase of $448,000. This
increase was primarily due to (i) an increase of $384,000 in salary and payroll
costs and (ii) an increase of $40,000 in business travel relating mainly to
business development activities. Several new positions have been added since the
first quarter of 1997, including a Vice President of Marketing and Business
Development in the third quarter of 1997 and a Chief Executive Officer in the
fourth quarter of 1997. Additionally, the Company's President, who resigned in
January 1998, is entitled to certain severance payments in accordance with a
termination and severance agreement with the Company. These severance payments,
which continue through January 1999, were recorded as compensation expense in
the first quarter of 1998.
Interest expense was $5,000 and $30,000 for the three months ended March
31, 1998 and 1997, respectively. The $25,000 decrease in interest expense
resulted primarily from a decrease in the balance of notes payable and capital
leases which were obtained to finance furniture and equipment.
Net loss for the first quarter of 1998 increased by $1,818,000 to
$4,911,000 in the first quarter of 1998, compared to $3,093,000 for the first
quarter of 1997, due mainly to the increase in research and development
expenses. The majority of research and development expenses related to advancing
the Company's two lead products, NYOTRAN(TM) and ATRAGEN(R) .
- 9-
<PAGE>
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 March 31, 1998. 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 ATRAGEN(R) , 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 March 31, 1998, the Company received
aggregate net proceeds of approximately $6.5 million from the exercise of
certain warrants issued in its 1995 merger with Oncologix. Prior to the Mergers,
Triplex had raised $22.0 million from sales of equity securities and $7.5
million from collaborative agreements and SBIR grants, of which $6.7 million
remained as cash, cash-equivalents and investments at the effective time of the
Mergers. From its inception until March 31, 1998, the Company also received an
aggregate of $4.8 million cash from collaborative arrangements and SBIR grants.
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 $2.9 million and $3.5
million was used in operating activities during the first quarter of 1997 and
1998, respectively. The Company had cash, cash-equivalents and short-term and
long-term investments of $25.7 million as of March 31, 1998, consisting
primarily of cash and money market accounts and U.S. government securities and
investment grade corporate bonds.
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
Federal Drug Administration 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 in 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.
- 10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Termination and Severance Agreement dated January
15, 1998, between the Company and James. M. Chubb.
10.2 Consulting Agreement dated January 1, 1998, between the
Company and Gabriel Lopez- Berestein.
10.3 Consulting Agreement dated April 1, 1998, between the Company
and Roman Perez-Solar.
11.1 Statement regarding computation of per share earnings.
27.1 Financial data schedule.
(b) Reports on Form 8-K
None
- 11-
<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: May 11, 1998 By:/S/GEOFFREY F. COX
------------------
Geoffrey F. Cox, Ph.D.
Chief Executive Officer
Dated: May 11, 1998 By:/S/TERANCE A. MURNANE
---------------------
Terance A. Murnane
Controller
(Principal Financial and Accounting Officer)
- 12-
EMPLOYMENT TERMINATION AND SEVERANCE AGREEMENT
THIS EMPLOYMENT TERMINATION AND SEVERANCE AGREEMENT (this "Termination
Agreement") is entered into as of January 15, 1998, by and between Aronex
Pharmaceuticals, Inc. ("Aronex"), and James M. Chubb, an individual residing at
183 Bristol Bend Circle, The Woodlands, Texas 77382 ("Employee").
WHEREAS, Aronex and Employee have previously entered into an Amended
and Restated Employment Agreement dated January 15, 1996 (the "Employment
Agreement");
WHEREAS, Employee intends to resign from his employment with Aronex
effective January 15, 1998 (the "Effective Date "); and
WHEREAS, Aronex and Employee now wish to terminate the Employment
Agreement and release each other from any claims arising thereunder effective
upon the Effective Date;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Termination. The Employment Agreement is terminated effective as of
the Effective Date and none of the parties shall have any further rights or
obligations thereunder after the Effective Date except as expressly specified
herein.
2. Severance. For and in consideration of Employee's execution of this
Termination Agreement, Aronex will, subject to the further provisions of this
Termination Agreement, (i) pay Employee monthly payments of $19,583 (Employee's
current Base Salary) for the period beginning as of January 15, 1998 and
continuing through January 15, 1999, payable as and when Employee would
otherwise be paid his salary under Section 4.1 of the Employment Agreement
(collectively, the "Severance Payments"), (ii) continue to pay through January
15, 1999 the premiums required for Employee's continued coverage under (A) the
Company's group medical and dental plans for Employee and Employee's family, (B)
the disability insurance presently maintained by the Company for the benefit of
Employee and (C) the life insurance presently maintained by the Company for the
benefit of Employee and Employee's beneficiaries, (iii) provide Employee with
basic outplacement services (consisting of office space and administrative
assistance) through Lee Hecht Harrison or a reasonably equivalent outplacement
services provider selected by Aronex, (iv) continue to pay Employee's regular
annual membership dues to maintain Employee's membership at The Woodlands
Country Club through January 15, 1999, (v) extend (and hereby does extend) the
period during which options granted to Employee under Aronex's Amended and
Restated 1989 Stock Option Plan (the "Plan") may vest until January 31, 2000,
with the same effect under the terms of such options as if Employee remained an
employee of Aronex through such date, and (vi) extend (and hereby does extend)
the period during which Employee may exercise options granted to Employee under
the Plan, to the extent such options are vested as of the Effective Date or
become vested pursuant to the preceding clause of this Termination Agreement,
until February 28, 2000. The Severance Payments shall not be subject to any
reduction or right of offset as a result of Employee's employment by another
entity during the term of this Termination Agreement, and the Severance Payments
and the benefits contemplated by clause (ii) above shall not be subject to any
reduction or right of offset as a result of Employee's death or disability,
provided in each such case that Employee has complied with the terms of Section
3 hereof and the terms of Section 5 hereof and the agreements referenced therein
(insofar as such terms of Section 5 and the agreements referenced therein relate
to Employee's obligations regarding confidentiality, nondisclosure and
inventions).
<PAGE>
3. Release of Aronex by Employee. (a) Employee, on behalf of himself,
his heirs, beneficiaries and personal representatives, hereby releases, acquits
and forever discharges Aronex, its of officers, employees, former employees,
stockholders, directors, agents and assigns, and all other persons, firms or
corporations in control of, under the direction of, or in any way associated
with Aronex (collectively, the "Aronex Affiliates"), of and from all claims,
charges, complaints, liabilities, obligations, promises, agreements, contracts,
damages, actions, causes of action, suits, accrued benefits or other liabilities
of any kind or character, whether known or hereafter discovered, arising from,
growing out of, or in any way connected with or related to Employee's employment
with, and/or termination of employment from, Aronex and the Aronex Affiliates,
including, but not limited to, allegations of wrongful termination,
discrimination, breach of contract, intentional infliction of emotional
distress, invasion of privacy, promissory estoppel, whistleblowing, fraud,
termination for refusal to perform an illegal act, defamation, any action in
tort or contract, any action for unpaid wages, attorney's fees, or punitive
damages, and any violation of any federal, state, or local law, including but
not limited to, any violation of Title VII of the Civil Rights Acts of 1964 and
1991, as amended, 42 U.S.C. 2000e et seq., the Civil Rights Act of 1866, 42
U.S.C. 1981 et seq., the Equal Pay Act, 29 U.S.C. 206, the Employee Retirement
Income Security Act of 1974, as amended (ERISA), 29 U.S.C. 1001 et seq., the
Americans with Disabilities Act, 42 U.S.C. 12101 et. seq., the Fair Labor
Standards Act, as amended, 29 U.S.C. 621 et seq., the Age Discrimination in
Employment Act, as amended, 29 U.S.C. 621 et seq., the Family and Medical Leave
Act of 1993, 29 U.S.C. 2601 et seq., the Worker Adjustment and Restraining
Notification Act (WARN), 29 U.S.C. 2101 et seq., the Texas Commission on Human
Rights Act, as amended, Texas Labor Code 21.001 et seq., the Texas Payday Act,
Texas Labor Code 61.001 et seq., the Texas Workers' Compensation Statute, Texas
Labor Code 451.001 et seq. and any other civil rights act, and all amendments
made to any such laws from time to time, provided that the foregoing release
shall not apply to the express obligations of Aronex under this Termination
Agreement.
(b) Employee agrees not to commence any legal proceeding or lawsuit
against Aronex or any Aronex Affiliate arising out of or based upon Employee's
employment with Aronex or any Aronex Affiliate or because of the termination of
Employee's employment with Aronex or any Aronex Affiliate.
(c) The consideration cited above and the promises contained herein
are made for the purpose of purchasing the peace of Aronex and the Aronex
Affiliates and are not to be construed as an admission of liability or as
evidence of unlawful conduct by Aronex or any Aronex Affiliate, all such
liability being herein expressly denied.
(d) Employee voluntarily accepts the Severance Payments as sufficient
payment for the full, final and complete release stated herein, and agrees that
no other promises or representations have been made to Employee by Aronex or an
Aronex Affiliate or any other person purporting to act on the behalf of Aronex
or an Aronex Affiliate, except as expressly stated herein.
(e) Employee understands that this is a full, complete, and final
release of Aronex and the Aronex Affiliates. As evidenced by the signature
below, Employee expressly promises and represents to Aronex and the Aronex
Affiliates that he has completely read this Agreement and understands its terms,
contents, conditions, and effects. Employee stipulates and agrees that Aronex
and Aronex Affiliates do not owe Employee anything in addition to what Employee
will be receiving pursuant to Section 2 of this Termination Agreement.
(f) Employee hereby waives all rights to recall, reinstatement,
reemployment and past or future wages from Aronex and the Aronex Affiliates and
further, acknowledges that Employee is not entitled to any continued
participation in, or benefits under, any employee benefit plan or compensation
program of Aronex or any Aronex Affiliate, including, without limitation, any
profit, bonus or commission arrangement, the Plan, the Employment Agreement and
any other employment agreement (whether written or oral) with the Company,
except as may otherwise be required by ERISA or as otherwise expressly set forth
herein.
<PAGE>
4. Release of Employee by Aronex. Aronex, on behalf of itself and the
Aronex Affiliates, hereby releases, acquits and forever discharges Employee, his
heirs, beneficiaries and personal representatives, of and from all claims,
charges, complaints, liabilities, obligations, promises, agreements, contracts,
damages, actions, causes of action, suits, accrued benefits or other liabilities
of any kind or character, whether known or hereafter discovered, arising from,
growing out of, or in any way connected with or related to Employee's employment
with, and/or termination of employment from, Aronex and the Aronex Affiliates,
provided that the foregoing release shall not apply to the express obligations
of Employee under this Termination Agreement or as contemplated by Section 5
below.
5. Acknowledgment of Remaining Obligations Under Employment Agreement.
Employee acknowledges that he is subject to agreements regarding
confidentiality, nondisclosure, inventions and noncompetition pursuant to the
provisions of Sections 8 and 9 of the Employment Agreement and the
confidentiality and non-disclosure agreement referenced therein, which
provisions and obligations remain in full force and effect following this
Termination Agreement.
6. Statements to Third Parties. Aronex agrees that it will not make
any statements to third parties which are intended to disparage, discredit or
injure the reputation of Employee. Employee agrees that he will not make any
statements to third parties which are intended to disparage, discredit or injure
the reputation of Aronex or any Aronex Affiliate.
7. No Assignment of Claims. Employee hereby warrants that he has not
assigned, transferred or conveyed at any time to any individual or entity any
alleged right, claim or cause of action against Aronex or any Aronex Affiliate.
Employee agrees to and does hereby indemnify and hold Aronex and the Aronex
Affiliates harmless from any claims, liabilities, damages, demands, losses,
costs, debts and causes of action whatsoever, including without limitation
attorney's fees, whether known or unknown, which may be asserted by parties for
breach of the foregoing warranty.
8. No Duress, Etc. Employee hereby warrants to Aronex that he has
completely read this Termination Agreement prior to executing it, and has had a
reasonable period of time within which to consider this Agreement and to
understand its terms, contents, conditions and effects and has entered into this
Termination Agreement knowingly and voluntarily. Employee understands that he
has the right to consult an attorney of his choice and represents that he has
consulted with an attorney. Employee states that he is not presently affected by
any disability which would prevent him from knowingly and voluntarily executing
this Termination Agreement, and further states that the promises made herein are
not made under duress, coercion or undue influence. Employee understands that
Employee has twenty-one days within which to consider and execute this
Agreement, and that this Agreement is revocable by Employee for a period of
seven days following the date of execution of this Agreement, and if not so
revoked, this Agreement will automatically become effective and enforceable on
the eighth day following the date of its execution.
<PAGE>
9. Amendment. This Termination Agreement may not be amended or
modified in any respect except by an agreement in writing executed by the
parties in the same manner as this Agreement.
10. Successors. This Termination Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by each of the parties and
their respective successors and assigns.
11. Invalid Provisions. If any provision of this Termination Agreement
is held to be illegal, invalid or unenforceable under present or future law
effective during the term hereof, such provision shall be fully severable. This
Termination Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof and the
remaining portions hereof shall remain in full force and effect and shall not be
effected by the illegal, invalid or unenforceable provision or by its severance
here from. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically, as part of this Termination
Agreement, a provision similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
12. Descriptive Headings. The descriptive headings of the several
sections of this Termination Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
13. Governing Law. This Termination Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas.
14. Entire Agreement. This Termination Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
of this Termination Agreement and supersedes and is in full substitution for any
and all prior agreements and understandings whether written or oral between said
parties relating to the subject matter of this Termination Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Termination
Agreement effective as of the date first above written.
EMPLOYEE:
James M. Chubb
ARONEX PHARMACEUTICALS, INC.
By:
Geoffrey Cox
Chairman of the Board and
Chief Executive Officer
CONSULTING AGREEMENT
This Consulting Agreement is made and entered into as of the 1st day
of January, 1998, by and between Aronex Pharmaceuticals, Inc., a Delaware
corporation (hereinafter referred to as "Company") and Gabriel Lopez-Berestein
(hereinafter referred to as a "Consultant").
WHEREAS, Consultant desires to provide special expertise and knowledge
to Company in the area of biochemistry and/or drug development and to consult
with Company on such specific research projects in the area as may be agreed
upon from time to time in writing between the Company and Consultant, which
written agreement(s) shall be incorporated herein by reference and made a part
hereof (hereinafter "Consulting Subjects"); and
WHEREAS, Company desires to retain Consultant as an independent
contractor upon the terms and conditions hereinafter set forth to provide
consulting and advisory services to Company based on Consultant's special
knowledge and expertise in the Consulting Subjects;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Company and Consultant agree as follows:
1. Expertise of Consultant.
1.1 Consultant represents that he has special expertise and knowledge
concerning the Consulting Subjects and that he is willing to and wishes to
provide his consultation and advisory services to Company in connection with
such area or areas.
1.2 Consultant hereby represents and warrants to Company that
Consultant is not a party to any agreement with any other entity and is not
bound by any obligations to any other entity which will prevent or encumber
Consultant from performing such services for Company, except for those
agreements, if any, identified on Exhibit A hereto and approved by the Company.
2. Independent Contractor.
2.1 Consultant hereby agrees to perform for Company or any affiliate,
parent or subsidiary of Company and to provide to Company or any affiliate,
parent or subsidiary of Company his personal consultation and advisory services
in the Consulting Subjects in accordance with the terms of this Agreement. To
the extent services pursuant to this Agreement are performed for or at the
request of an affiliate, parent, or subsidiary, the term "Company" as used
herein shall include such entity.
2.2 Throughout the entire term of this Agreement, Consultant shall be
an independent contractor with the full power and authority to select the means,
method and manner of performing his services hereunder; provided, however, that
Consultant will perform consulting and advisory or other services in the areas
designated by Company. Consultant will in no way be considered to be an agent,
employee or servant of Company. Consultant shall have no authority to bind
Company in any capacity for any purpose.
2.3 It is not the purpose or intention of this Agreement or the
parties to create, and the same shall not be construed as creating, any
partnership, joint venture, agency, or employment relationship. However, as
specified below, due to the nature of this independent contractor relationship,
it is the intent of the parties that, during the term of this Agreement,
Consultant shall owe to Company fiduciary duties of the utmost loyalty and
fidelity.
<PAGE>
3. General Duties and Compensation.
3.1 During the term of this Agreement, Consultant shall, at such times
and locations as are reasonably requested by Company and at either the Company,
The University of Texas System Cancer Center and M.D. Anderson Hospital and
Tumor Institute or such other location agreed upon between Consultant and
Company, provide personal consultation and advisory services as may from time to
time be agreed upon between the Company and Consultant, perform and supervise
the performance by others of research with respect to (a) Consulting Subjects,
and (b) any other areas of interest upon which Consultant and Company shall
mutually agree. Consultant shall be so available during the term of this
Agreement for such periods as may be agreed upon from time to time between
Company and Consultant, as and when specific research projects are agreed upon.
3.2 For the performance of his obligations under this Agreement,
Company shall pay the Consultant a fee at the rate of $156,000.00 per year,
one-half of which shall be payable in cash and one-half of which shall be
payable in the form of a grant of the Company's Common Stock. The cash portion
of such fee shall be payable monthly on the 15th day of each month during the
term of this Agreement. The Common Stock portion of such fee for each calendar
year during the term of this Agreement shall be payable on January 15th of such
year, and shall vest with respect to 1/12 of the shares of Common Stock so
granted on the 15th day of each month of such calendar year, subject to
forfeiture of the then unvested portion of such shares upon the expiration of
the term or other termination of this Agreement prior to the end of such
calendar year. The number of shares of Common Stock to be granted shall be
determined by reference to the fair market value of the Common Stock as of
January 1st of the year in which such grant is made, which shall be (i) $4.25
per share of Common Stock for the grant to be made with respect to the 1998
calendar year and (ii) the Average Closing Price (as defined below) for any
subsequent calendar year during the term of this Agreement. For purposes of this
Agreement, the "Average Closing Price" as of January 1st of any year shall mean
the average closing price of the Company's Common Stock reported on the Nasdaq
Stock Market or any national securities exchange on which the Common Stock is
then listed during the period of 10 consecutive trading days ending one day
before such date. In addition, Company shall reimburse Consultant for reasonable
and necessary expenses which are incurred in connection with his providing of
consulting services and with respect to which Consultant promptly provides to
Company a detailed expense account, provided that any item of expense over
$1,500 has been approved by the Company in advance and in writing.
3.3 Consultant shall himself pay, and Company shall have no liability
for, all social security, federal income taxes, unemployment insurance,
workmen's compensation insurance, pensions, annuities or other liabilities or
taxes incurred by or on behalf of or for the benefit of Consultant or any of his
agents, employees or servants who are not employed by the Company arising out of
the performance by Consultant of his obligations under this Agreement.
4. Duty of Faithfulness owed by Consultant to Company During Term of
Agreement.
4.1 During the term of this Agreement or any extension thereof,
Consultant shall faithfully perform and provide the services contemplated by
this Agreement for Company, and Consultant shall not perform the same or similar
services for any other entity.
<PAGE>
4.2 In addition to the other obligations agreed to by Consultant in
this Agreement, Consultant agrees that following the termination of this
Agreement he shall not at any time directly or indirectly (a) induce, entice,
solicit any employee or consultant of the Company to leave his employment, or
(b) contact, communicate or solicit any customer of the Company derived from any
customer list, customer lead, mail, printed matter or information secured from
the Company or its present or past employees, or (c) in any other manner use any
customer lists or customer leads, mail, telephone numbers, printed materials or
material of the Company relating thereto.
5. Disclosure and Ownership of Information.
5.1 For the purposes of this Agreement, "Proprietary Information"
shall mean all information, ideas, concepts, improvements, discoveries and
inventions (including those relating to research, development, financial and
sales data, pricing or trading terms, evaluations, opinions, interpretations,
the identity of customers or of their requirements or of key contacts within the
customer's organizations, and marketing and merchandising technique(s) (i)
possessed, acquired or developed by Company at any time, irrespective of their
subject or nature, or (ii) conceived, made, developed or acquired by Consultant
or disclosed or made known to Consultant, individually or jointly with others,
in connection with or as a result of Consultant's performance under this
Agreement that relate to the business, products or services of Company and/or to
the Consulting Subjects. The term "Proprietary Information" shall include
without limitation all test data, documents, memoranda, notes, records, files,
correspondence, drawings, manuals, models, specifications, designs, computer
programs, maps and all other writings or materials of any type embodying any of
such Proprietary Information.
5.2 All Proprietary Information is and shall be the sole and exclusive
property of the Company.
5.3 (a) During the term of this Agreement, Consultant shall promptly
disclose in writing to Company all Proprietary Information conceived, developed,
made or acquired by Consultant, either individually or jointly with others,
whether patentable or not, and whether or not reduced to practice, irrespective
of whether Consultant utilized Company's time, data, facilities or material and
irrespective of whether such Proprietary Information is conceived, developed,
discovered or acquired by Consultant on the job, at home, or elsewhere.
(b) Consultant hereby specifically agrees to sell, assign and transfer
to Company or its nominee, and by the execution of this Agreement does hereby
sell, assign and transfer to Company or its nominee, all of his world-wide
right, title and interest in and to all of the Proprietary Information described
in Section 5.3(a), and any United States or foreign applications for patents
copyrights, certificates of invention and other industrial rights that may be
filed thereon, including divisions, continuations, continuations in part,
reissues or extension thereon. Both during the term of this Agreement and
thereafter, Consultant agrees to at any time assist Company and/or its nominee
in the protection of such Proprietary Information assigned herein to Company or
its nominee, both in the United States and foreign countries, including but not
limited to, the execution of all lawful oaths and all assignment documents
requested by Company or its nominee in the preparation, prosecution, issuance
and enforcement of any applications for United States or foreign patents,
including divisions, continuations, continuations in part, or reissued and/or
extensions thereof, of any industrial property rights and certificates of
invention; and/or any United States or foreign rights protecting proprietary or
confidential information. If such assistance takes place after the term of this
Agreement has expired, Consultant shall be paid by Company at a reasonable rate
(taking into consideration the services performed by Consultant as well as
Consultant's normal and customary rates) for any time actually spent so
assisting Company or its nominee.
<PAGE>
5.4 Consultant recognizes that the protection of the Proprietary
Information of Company against unauthorized disclosure and use is of critical
importance to Company, and therefore Consultant agrees to use his best efforts
and exercise utmost diligence to protect and safeguard the Proprietary
Information of Company and its affiliates, if any, and, except as may be
expressly required by Company in connection with Consultant's performance of his
obligations to Company under this Agreement, Consultant shall not, either during
the term of this Agreement or thereafter, directly or indirectly, use for his
own benefit or for the benefit of another, or disclose to another, any of such
Proprietary Information.
5.5 Upon termination of this Agreement, or at any other time upon
request, Consultant shall immediately deliver to Company all documents embodying
any of Company's Proprietary Information, including all test data.
5.6 If during the term of this Agreement, Consultant creates any work
of authorship fixed in any tangible medium of expression that is the subject
matter of copyright and that relates to Company's (or its affiliate's, if any)
business, products, or services, Company shall be deemed the author of such work
if the work is prepared by Consultant in the scope of his or her consultancy by
virtue of the work being a work made for hire or, if the work was not prepared
by Consultant within the scope of his or her employment or consultancy but was
specially ordered by Company as a contribution to a collective work, as a part
of a motion picture or other audio-visual work, as a translation, as a
supplementary work, as a compilation or as an instructional test, then the work
shall be considered to be work made for hire and Company shall be the author of
the work. With regard to any other work of authorship fixed in any tangible
medium of expression that is the subject matter of copyright and which relates
specifically to the business, products or services of the Company or to the
Consulting Subjects, Consultant agrees to, and does hereby, assign to Company
all worldwide right, title and interest in and to such works. Both during the
term of this Agreement and thereafter, Consultant agrees to assist Company and
its nominee, at any time, in the protection of Company's worldwide right, title
and interest in and to the work and all rights of copyright therein, including
but not limited to, the execution of all formal assignment documents requested
by Company or its nominee and the execution of all lawful oaths and applications
of registration of copyright in the United States and foreign countries.
With regard to any work of authorship described above, the Company
agrees that it will consider and approve in its sole discretion such works for
publication purposes upon the request of Consultant, provided that any such
publications (i) shall be limited to scientific publications, (ii) shall
identify clearly the relationship of Consultant to the Company, and (iii) shall
not be permitted if there would be, as a result of such publication, any risk
presented to potentially patentabl developments, until steps have been taken to
protect such developments.
5.7 Notwithstanding anything in this Article 5 to the contrary, the
Company acknowledges that Consultant is currently, and will be throughout the
term of this Agreement, an employee of The University of Texas System Cancer
Center, M. D. Anderson Hospital and Tumor Institute ("Anderson"), and that
nothing herein shall interfere or conflict with any existing employment
agreements or relationships between Consultant and Anderson. The Company further
acknowledges that the term "Proprietary Information", as defined in Section 5.1
hereof and as used in this Article 5, shall not include any information, ideas,
concepts, improvements, discoveries and inventions which Consultant,
individually or jointly, conceives, makes, develops or acquires, or which is
disclosed or made known to Consultant, while Consultant is working under the
Research and Development Contract between the Company and Anderson, or on any
other sponsored research and development agreement applicable to Anderson, but
shall only apply to such information, ideas, concepts, improvements, discoveries
and inventions conceived, made, developed or required, individually or jointly,
or made known or disclosed to Consultant, while Consultant is engaged in
performing services to Company under this Agreement.
<PAGE>
6. Term and Termination.
6.1 The initial term of this Agreement (the "Initial Term") shall be
for a period of three years from the effective date of this Agreement. Upon
expiration of the Initial Term (and upon expiration of the term of any
subsequent extension), the term of this Agreement shall be automatically renewed
and extended for an additional one-year period, unless one of the parties shall
give written notice to the other of its intention to terminate this Agreement at
least 30 days prior to the expiration of the Initial Term or any subsequent
one-year extension, in which case this Agreement shall terminate on the
expiration of the Initial Term or subsequent one-year extension, as the case may
be.
6.2 Termination of this Agreement shall not affect Company's
obligation to pay for services previously performed by Consultant and shall not
affect Consultant's continuing obligations to Company in Sections 3.3, 4.2, and
5.1 through 5.6 above, whether such termination is made voluntarily or
involuntarily, by Company or Consultant, with or without cause.
7. Terms Applicable to the Issuance of Common Stock.
7.1 Unless the offering, sale and delivery of shares of Common Stock
issuable to Consultant pursuant to this Agreement have been registered and
continue to be so at the date of exercise hereof under the Securities Act of
1933 (the "Act"), Consultant agrees that the shares of Common Stock which
Consultant acquires thereby shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the shares of Common Stock under the Act and applicable state
securities laws or an applicable exemption from the registration requirements of
the Act and any applicable state securities laws. Consultant also agrees that
the shares of Common Stock which he may acquire pursuant to this Agreement will
not be sold or disposed of in any manner which would constitute a violation of
any other applicable securities laws, whether federal or state. In addition,
Consultant agrees (A) that the certificates representing the shares of Common
Stock issued under this Agreement may bear such legend or legends as the Company
deems appropriate in order to assure compliance with applicable securities laws,
and (B) that the Company may give instruction to its transfer agent, if any, to
stop transfer of the shares of Common Stock issued under this Agreement on the
stock transfer records of the Company, if such proposed transfer would in the
opinion of counsel satisfactory to the Company constitute a violation of any
applicable securities law or any such agreements.
7.2 Consultant hereby represents and warrants that no provision in, or
activity contemplated by this Agreement, including without limitation the
compensation to be received by him pursuant to Section 3.2, violates or
conflicts with any agreement, regulation or policy by which he is bound or to
which he is subject, whether related to his employment or otherwise, except as
disclosed on Exhibit A hereto and agreed to by the Company. Consultant agrees
that if any such violation or conflict exists or arises in the future, he will
be solely responsible for the satisfactory resolution thereof, without recourse
to the Company, including without limitation any required forfeitures or
dispositions of compensation, options or stocks. Consultant agrees to disclose
to his employer the compensation arrangements contained in this Agreement, and
to provide the Company an acknowledgment thereof by such employer or other
evidence of such disclosure.
<PAGE>
8. Miscellaneous.
8.1 This Agreement shall inure to the benefit of and be binding upon
the respective heirs, executors, successors, representatives and assigns (and,
to the extent the last sentence of Section 2.1 applies, affiliates, parents and
subsidiaries) of the parties, as the case may be; provided, however, the
obligations of each party herein to the other herein are personal and may not be
assigned without the express written consent of such other party.
8.2 The laws of the State of Texas will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or the place of performance thereof, and the courts in Houston, Harris County,
Texas shall have personal jurisdiction over Company and the Consultant to hear
all disputes arising out of this Agreement and venue shall be proper with such
courts to hear such disputes. In the event either Company or the Consultant is
not able to effect service of process upon the other in any litigation brought
in such courts with respect to such disputes, it is agreed that the Secretary of
State for the State of Texas shall be an agent of Company and the Consultant to
receive service of process.
8.3 Notices or payments given by one party to the other hereunder
shall be deemed to have been properly given or paid if deposited with the United
States Postal Service, registered or certified mail, addressed to the Consultant
at the address listed below his signature on the last page hereof, and to the
Company at the following address, or in either case to such other address as the
party receiving notice shall have designated by written notice to the other
party: Aronex Pharmaceuticals, Inc. 8707 Technology Forest Place The Woodlands,
Texas 77381
8.4 This Agreement replaces all previous agreements and discussions
relating to the subject matters hereof and constitutes the entire agreement
between Company and Consultant with respect to the subject matters of this
Agreement. Without limiting the foregoing, this Agreement supersedes and
terminates, effective January 1, 1998, the Consulting Agreement dated July 1,
1988 between the Company and Consultant, as amended by the first, second and
third amendments thereto. This Agreement may not be modified in any respect by
any verbal statement, representation or agreement made by any employee, officer
or representative of Company, or by any written document unless it is signed by
an officer of Company.
8.5 If any term or provision of this Agreement is deemed invalid,
contrary to or prohibited under applicable laws or regulations of any
jurisdiction, such provision shall be revised to the extent permitted by law and
the remaining provisions hereof shall not be invalidated.
8.6 Both Consultant and Company recognize that irreparable injury or
damage will result to the business of the other in the event of the breach of
any covenant herein, and each such party therefore agrees that in the event of
such breach by it, the other party shall be entitled, in addition to any legal
or equitable remedies and damages available, to an injunction to restrain the
violation of this Agreement by the breaching party and all other persons acting
for or on behalf of the breaching party.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals effective the date first stated above.
ARONEX PHARMACEUTICALS, INC.
Gabriel Lopez-Berestein Geoffrey Cox
Chairman of the Board and
Chief Executive Officer
CONSULTING AGREEMENT
This Consulting Agreement is made and entered into as of the 1st day
of April, 1998, by and between Aronex Pharmaceuticals, Inc., a Delaware
corporation (hereinafter referred to as the "Company") and Roman Perez-Soler,
M.D. (hereinafter referred to as the "Consultant").
WHEREAS, the Consultant desires to provide special expertise and
knowledge to the Company in the area of oncology and clinical research and to
consult with the Company on such specific research projects in the area as may
be agreed on from time to time in writing between the Company and the
Consultant, which written agreement(s) shall be incorporated herein by reference
and made a part hereof (hereinafter, the "Consulting Subjects"); and
WHEREAS, the Company desires to retain the Consultant as an
independent contractor on the terms and conditions hereinafter set forth to
provide consulting and advisory services to the Company based on the
Consultant's special knowledge and expertise in the Consulting Subjects;
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises and representations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Consultant agree as follows:
1. Expertise of Consultant.
1.1 The Consultant represents that he has special expertise and
knowledge concerning the Consulting Subjects and that he is willing to and
wishes to provide his consultation and advisory services to the Company in
connection with such area or areas.
1.2 The Consultant hereby represents and warrants to the Company that
the Consultant is not a party to any agreement with any other entity and is not
bound by any obligations to any other entity which will prevent or encumber the
Consultant from performing such services for the Company, except for those
agreements, if any, identified on Exhibit A hereto and approved by the Company.
2. Independent Contractor.
2.1 The Consultant hereby agrees to perform for the Company or any
affiliate, parent or subsidiary of the Company and to provide to the Company or
any affiliate, parent or subsidiary of the Company his personal consultation and
advisory services in the Consulting Subjects in accordance with the terms of
this Agreement. To the extent services pursuant to this Agreement are performed
for or at the request of an affiliate, parent, or subsidiary, the term "Company"
as used herein shall include such entity.
2.2 Throughout the entire term of this Agreement, the Consultant shall
be an independent contractor with the full power and authority to select the
means, method and manner of performing his services hereunder; provided,
however, that the Consultant will perform consulting and advisory or other
services in the areas designated by the Company. The Consultant will in no way
be considered to be an agent, employee or servant of the Company. The Consultant
shall have no authority to bind the Company in any capacity for any purpose.
2.3 It is not the purpose or intention of this Agreement or the
parties to create, and the same shall not be construed as creating, any
partnership, joint venture, agency, or employment relationship. However, as
specified below, due to the nature of this independent contractor relationship,
it is the intent of the parties that, during the term of this Agreement, the
Consultant shall owe to the Company fiduciary duties of the utmost loyalty and
fidelity.
<PAGE>
3. General Duties and Compensation.
3.1 During the term of this Agreement, the Consultant shall, at such
times and locations as are reasonably requested by the Company and at either the
Company's offices, The University of Texas System Cancer Center and M.D.
Anderson Hospital and Tumor Institute or such other location or laboratory
facilities agreed on between the Consultant and the Company, provide personal
consultation and advisory services as may from time to time be agreed on between
the Company and the Consultant, perform and supervise the performance by others
of research with respect to (a) Consulting Subjects, and (b) any other areas of
interest on which the Consultant and the Company shall mutually agree. The
Consultant shall be so available during the term of this Agreement for such
periods as may be agreed on from time to time between the Company and the
Consultant, as and when specific research projects are agreed on.
3.2 For the performance of his obligations under this Agreement, the
Company shall pay the Consultant a fee at the rate of $48,000.00 per year,
one-half of which shall be payable in cash and one-half of which shall be
payable in the form of a grant of the Company's common stock, par value $.001
per share (the "Common Stock"). The cash portion of such fee shall be payable
monthly on the 15th day of each month during the term of this Agreement. The
Common Stock portion of such fee for each year during the term of this Agreement
shall be payable on April 15th of such year, and shall vest with respect to 1/12
of the shares of Common Stock so granted on the 15th day of each month of such
year, subject to forfeiture of the then unvested portion of such shares on the
expiration of the term or other termination of this Agreement prior to the end
of such year. The number of shares of Common Stock to be granted shall be
determined by reference to the fair market value of the Common Stock as of April
1st of the year in which such grant is made, which shall be (i) $3.50 per share
of Common Stock for the grant to be made with respect to the 1998 calendar year
and (ii) the Average Closing Price (as defined below) for any subsequent
calendar year during the term of this Agreement. For purposes of this Agreement,
the "Average Closing Price" as of April 1st of any year shall mean the average
closing price of the Company's Common Stock reported on the Nasdaq Stock Market
or any national securities exchange on which the Common Stock is then listed
during the period of 10 consecutive trading days ending one day before such
date. In addition, the Company shall reimburse the Consultant for reasonable and
necessary expenses which are incurred in connection with his providing of
consulting services and with respect to which the Consultant promptly provides
to the Company a detailed expense account, provided that any item of expense
over $1,500 has been approved by the Company in advance and in writing.
3.3 The Consultant shall himself pay, and the Company shall have no
liability for, all social security, federal income taxes, unemployment
insurance, workmen's compensation insurance, pensions, annuities or other
liabilities or taxes incurred by or on behalf of or for the benefit of the
Consultant or any of his agents, employees or servants who are not employed by
the Company arising out of the performance by the Consultant of his obligations
under this Agreement.
4. Duty of Faithfulness owed by Consultant to Company During Term of
Agreement.
4.1 During the term of this Agreement or any extension thereof, the
Consultant shall faithfully perform and provide the services contemplated by
this Agreement for the Company, and the Consultant shall not perform the same or
similar services for any other entity.
<PAGE>
4.2 In addition to the other obligations agreed to by the Consultant
in this Agreement, the Consultant agrees that following the termination of this
Agreement, he shall not at any time directly or indirectly (a) induce, entice,
solicit any employee or consultant of the Company to leave his employment, or
(b) contact, communicate or solicit any customer of the Company derived from any
customer list, customer lead, mail, printed matter or information secured from
the Company or its present or past employees, or (c) in any other manner use any
customer lists or customer leads, mail, telephone numbers, printed materials or
material of the Company relating thereto.
5. Disclosure and Ownership of Information.
5.1 For the purposes of this Agreement, "Proprietary Information"
shall mean all information, ideas, concepts, improvements, discoveries and
inventions (including those relating to research, development, financial and
sales data, pricing or trading terms, evaluations, opinions, interpretations,
the identity of customers or of their requirements or of key contacts within the
customer's organizations, and marketing and merchandising techniques (i)
possessed, acquired or developed by the Company at any time, irrespective of
their subject or nature, or (ii) conceived, made, developed or acquired by the
Consultant or disclosed or made known to the Consultant, individually or jointly
with others, in connection with or as a result of the Consultant's performance
under this Agreement that relate to the business, products or services of the
Company and/or to the Consulting Subjects. The term "Proprietary Information"
shall include, without limitation, all test data, documents, memoranda, notes,
records, files, correspondence, drawings, manuals, models, specifications,
designs, computer programs, maps and all other writings or materials of any type
embodying any of such Proprietary Information.
5.2 All Proprietary Information is and shall be the sole and exclusive
property of the Company.
5.3 (a) During the term of this Agreement, the Consultant shall
promptly disclose in writing to the Company all Proprietary Information
conceived, developed, made or acquired by the Consultant, either individually or
jointly with others, whether patentable or not, and whether or not reduced to
practice, irrespective of whether the Consultant utilized the Company's time,
data, facilities or material and irrespective of whether such Proprietary
Information is conceived, developed, discovered or acquired by the Consultant on
the job, at home, or elsewhere.
(b) The Consultant hereby specifically agrees to sell, assign and
transfer to the Company or its nominee, and by the execution of this Agreement
does hereby sell, assign and transfer to the Company or its nominee, all of his
worldwide right, title and interest in and to all of the Proprietary Information
described in Section 5.3(a), and any United States or foreign applications for
patents, copyrights, certificates of invention and other industrial rights that
may be filed thereon, including divisions, continuations, continuations in part,
reissues or extension thereon. Both during the term of this Agreement and
thereafter, the Consultant agrees to at any time assist the Company and/or its
nominee in the protection of such Proprietary Information assigned herein to the
Company or its nominee, both in the United States and foreign countries,
including, but not limited to, the execution of all lawful oaths and all
assignment documents requested by the Company or its nominee in the preparation,
prosecution, issuance and enforcement of any applications for United States or
foreign patents, including divisions, continuations, continuations in part, or
reissued and/or extensions thereof, of any industrial property rights and
certificates of invention; and/or any United States or foreign rights protecting
proprietary or confidential information. If such assistance takes place after
the term of this Agreement has expired, the Consultant shall be paid by the
Company at a reasonable rate (taking into consideration the services performed
by the Consultant as well as the Consultant's normal and customary rates) for
any time actually spent so assisting the Company or its nominee.
<PAGE>
5.4 The Consultant recognizes that the protection of the Proprietary
Information of the Company against unauthorized disclosure and use is of
critical importance to the Company, and therefore, the Consultant agrees to use
his best efforts and exercise utmost diligence to protect and safeguard the
Proprietary Information of the Company and its affiliates, if any, and, except
as may be expressly required by the Company in connection with the Consultant's
performance of his obligations to the Company under this Agreement, the
Consultant shall not, either during the term of this Agreement or thereafter,
directly or indirectly, use for his own benefit or for the benefit of another,
or disclose to another, any of such Proprietary Information.
5.5 On termination of this Agreement, or at any other time on request,
the Consultant shall immediately deliver to the Company all documents embodying
any of the Company's Proprietary Information, including all test data.
5.6 If during the term of this Agreement, the Consultant creates any
work of authorship fixed in any tangible medium of expression that is the
subject matter of copyright and that relates to the Company's (or its
affiliate's, if any) business, products, or services, the Company shall be
deemed the author of such work if the work is prepared by the Consultant in the
scope of his or her consultancy by virtue of the work being a work made for hire
or, if the work was not prepared by the Consultant within the scope of his or
her employment or consultancy but was specially ordered by the Company as a
contribution to a collective work, as a part of a motion picture or other
audio-visual work, as a translation, as a supplementary work, as a compilation
or as an instructional test, then the work shall be considered to be work made
for hire and the Company shall be the author of the work. With regard to any
other work of authorship fixed in any tangible medium of expression that is the
subject matter of copyright and which relates specifically to the business,
products or services of the Company or to the Consulting Subjects, the
Consultant agrees to, and does hereby, assign to the Company all worldwide
right, title and interest in and to such works. Both during the term of this
Agreement and thereafter, the Consultant agrees to assist the Company and its
nominee, at any time, in the protection of the Company's worldwide right, title
and interest in and to the work and all rights of copyright therein, including,
but not limited to, the execution of all formal assignment documents requested
by the Company or its nominee and the execution of all lawful oaths and
applications of registration of copyright in the United States and foreign
countries.
With regard to any work of authorship described above, the Company
agrees that it will consider and approve in its sole discretion such works for
publication purposes on the request of the Consultant, provided that any such
publications (i) shall be limited to scientific publications, (ii) shall
identify clearly the relationship of the Consultant to the Company, and (iii)
shall not be permitted if there would be, as a result of such publication, any
risk presented to potentially patentable developments, until steps have been
taken to protect such developments.
5.7 Notwithstanding anything in this Article 5 to the contrary, the
Company acknowledges that the Consultant is currently, and will be throughout
the term of this Agreement, an employee of The University of Texas System Cancer
Center, M. D. Anderson Hospital and Tumor Institute ("Anderson"), and that
nothing herein shall interfere or conflict with any existing employment
agreements or relationships between the Consultant and Anderson. The Company
further acknowledges that the term "Proprietary Information," as defined in
Section 5.1 hereof and as used in this Article 5, shall not include any
information, ideas, concepts, improvements, discoveries and inventions which the
Consultant, individually or jointly, conceives, makes, develops or acquires, or
which is disclosed or made known to the Consultant, while the Consultant is
working under the Research and Development Contract between the Company and
Anderson, or on any other sponsored research and development agreement
applicable to Anderson, but shall only apply to such information, ideas,
concepts, improvements, discoveries and inventions conceived, made, developed or
required, individually or jointly, or made known or disclosed to the Consultant,
while the Consultant is engaged in performing services to the Company under this
Agreement.
<PAGE>
6. Term and Termination.
6.1 The initial term of this Agreement (the "Initial Term") shall be
for a period of one year from the effective date of this Agreement. On
expiration of the Initial Term (and on expiration of the term of any subsequent
extension), the term of this Agreement shall be automatically renewed and
extended for an additional one-year period, unless one of the parties shall give
written notice to the other of its intention to terminate this Agreement at
least 30 days prior to the expiration of the Initial Term or any subsequent
one-year extension, in which case this Agreement shall terminate on the
expiration of the Initial Term or subsequent one-year extension, as the case may
be.
6.2 Not used.
6.3 Termination of this Agreement shall not affect the Company's
obligation to pay for services previously performed by the Consultant and shall
not effect the Consultant's continuing obligations to the Company in Sections
3.3, 4.2, and 5.1 through 5.6 above, whether such termination is made
voluntarily or involuntarily, by the Company or the Consultant, with or without
cause.
7. Terms Applicable to the Issuance of Common Stock.
7.1 Unless the offering, sale and delivery of shares of Common Stock
issuable to the Consultant pursuant to this Agreement have been registered and
continue to be so at the date of exercise hereof under the Securities Act of
1933, as amended (the "Act"), the Consultant agrees that the shares of Common
Stock which the Consultant acquires thereby shall be acquired for investment
without a view to distribution, within the meaning of the Act, and shall not be
sold, transferred, assigned, pledged or hypothecated in the absence of an
effective registration statement for the shares of Common Stock under the Act
and applicable state securities laws or an applicable exemption from the
registration requirements of the Act and any applicable state securities laws.
The Consultant also agrees that the shares of Common Stock which he may acquire
pursuant to this Agreement will not be sold or disposed of in any manner which
would constitute a violation of any other applicable securities laws, whether
federal or state. In addition, the Consultant agrees (A) that the certificates
representing the shares of Common Stock issued under this Agreement may bear
such legend or legends as the Company deems appropriate in order to assure
compliance with applicable securities laws, and (B) that the Company may give
instruction to its transfer agent, if any, to stop transfer of the shares of
Common Stock issued under this Agreement on the stock transfer records of the
Company, if such proposed transfer would in the opinion of counsel satisfactory
to the Company constitute a violation of any applicable securities law or any
such agreements.
<PAGE>
7.2 The Consultant hereby represents and warrants that no provision
in, or activity contemplated by this Agreement, including, without limitation,
the compensation to be received by him pursuant to Section 3.2, violates or
conflicts with any agreement, regulation or policy by which he is bound or to
which he is subject, whether related to his employment or otherwise, except as
disclosed on Exhibit A hereto and agreed to by the Company. The Consultant
agrees that if any such violation or conflict exists or arises in the future, he
will be solely responsible for the satisfactory resolution thereof, without
recourse to the Company, including, without limitation, any required forfeitures
or dispositions of compensation, stock options or shares of restricted stock (or
other unrestricted shares held by the Consultant). The Consultant agrees to
disclose to his employer the compensation arrangements contained in this
Agreement, and to provide the Company an acknowledgment thereof by such employer
or other evidence of such disclosure.
8. Miscellaneous.
8.1 This Agreement shall inure to the benefit of and be binding on the
respective heirs, executors, successors, representatives and assigns (and, to
the extent the last sentence of Section 2.1 applies, affiliates, parents and
subsidiaries) of the parties, as the case may be; provided, however, the
obligations of each party herein to the other herein are personal and may not be
assigned without the express written consent of such other party.
8.2 The laws of the State of Texas will govern the interpretation,
validity and effect of this Agreement without regard to the place of execution
or the place of performance thereof, and the courts in Houston, Harris County,
Texas shall have personal jurisdiction over the Company and the Consultant to
hear all disputes arising out of this Agreement and venue shall be proper with
such courts to hear such disputes. In the event either the Company or the
Consultant is not able to effect service of process on the other in any
litigation brought in such courts with respect to such disputes, it is agreed
that the Secretary of State for the State of Texas shall be an agent of the
Company and the Consultant to receive service of process.
8.3 Notices or payments given by one party to the other hereunder
shall be deemed to have been properly given or paid if deposited with the United
States Postal Service, registered or certified mail, addressed to the Consultant
at the address listed below his signature on the last page hereof, and to the
Company at the following address, or in either case to such other address as the
party receiving notice shall have designated by written notice to the other
party:
Aronex Pharmaceuticals, Inc.
8707 Technology Forest Place
The Woodlands, Texas 77381-1191
Attention: Chairman
8.4 This Agreement replaces all previous agreements and discussions
relating to the subject matters hereof and constitutes the entire agreement
between the Company and the Consultant with respect to the subject matters of
this Agreement. Without limiting the foregoing, this Agreement supersedes and
terminates, effective April 1, 1998, the Consulting Agreement dated July 1,
1996, as amended, between the Company and the Consultant. This Agreement may not
be modified in any respect by any verbal statement, representation or agreement
made by any employee, officer representative of the Company or by any written
document unless it is signed by an officer of the Company.
<PAGE>
8.5 If any term or provision of this Agreement is deemed invalid,
contrary to or prohibited under applicable laws or regulations of any
jurisdiction, such provision shall be revised to the extent permitted by law and
the remaining provisions hereof shall not be invalidated.
8.6 Both the Consultant and the Company recognize that irreparable
injury or damage will result to the business of the other in the event of the
breach of any covenant herein, and each such party therefore agrees that in the
event of such breach by it, the other party shall be entitled, in addition to
any legal or equitable remedies and damages available, to an injunction to
restrain the violation of this Agreement by the breaching party and all other
persons acting for or on behalf of the breaching party.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals effective the date first stated above.
ARONEX PHARMACEUTICALS, INC.
By:
Roman Perez-Soler, M.D.
Address: Geoffrey F. Cox, Ph.D
The University of Texas Chairman of the Board and
M.D. Anderson Cancer Center Chief Executive Officer
1515 Holcombe Blvd.
Houston, Texas 77030
ARONEX PHARMACEUTICALS, INC.
Exhibit 11.1
Statement Regarding Computation of Per Share Earnings
The following reflects the information used in calculating the number of shares
in the computation of net loss per share for each of the periods set forth in
the Statements of Operations.
<TABLE>
<CAPTION>
Average Loss
Days Shares Per
Shares Outstanding Shares X Days Outstanding Loss Share
<S> <C> <C> <C>
Quarter Ended March 31, 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 5 73,224,080
90 1,315,794,340 /90 14,619,937 (3,093,000) (0.21)
Quarter Ended March 31, 1998:
15,459,166 11 170,050,826
15,460,684 71 1,097,708,564
15,465,729 1 15,465,729
15,467,281 7 108,270,967
90 1,391,496,086 /90 15,461,068 (4,911,000) (0.32)
</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 THREE MONTHS ENDED March 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,306,000
<SECURITIES> 22,346,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,366,000
<PP&E> 5,914,000
<DEPRECIATION> 3,815,000
<TOTAL-ASSETS> 28,576,000
<CURRENT-LIABILITIES> 5,991,000
<BONDS> 0
<COMMON> 15,000
0
0
<OTHER-SE> 22,567,000
<TOTAL-LIABILITY-AND-EQUITY> 28,576,000
<SALES> 0
<TOTAL-REVENUES> 520,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (4,911,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,911,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,911,000)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
