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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, 1998
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)
8707 Technology Forest Drive, The Woodlands, Texas 77381-1191
(Address of principal executive offices and 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, 1998
Common Stock, $.001 par value 15,497,443 shares
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
Quarterly Period June 30, 1998
<TABLE>
<CAPTION>
INDEX
Page
<S> <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS................................ 3
PART I. Financial Information
Item 1 Financial Statements............................................... 3
Balance Sheets - December 31, 1997 and June 30, 1998 (unaudited)... 4
Statements of Operations:
Six Months Ended June 30, 1997 and June 30, 1998
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1998 (unaudited)................................ 5
Statements of Cash Flows:
Six Months Ended June 30, 1997 and June 30, 1998
(unaudited) and for the Period from Inception (June 13, 1986)
through June 30, 1998 (unaudited)................................ 6
Notes to Financial Statements - June 30, 1998...................... 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
</TABLE>
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<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.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
BALANCE SHEETS
(All amounts in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
June 30,
December 31, 1998
1997 (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................. $ 2,029 $ 6,265
Short-term investments................................................ 17,783 13,457
Accounts receivable................................................... 100 --
Prepaid expenses and other assets..................................... 474 774
--------------- -------------
Total current assets............................................. 20,386 20,496
Long-term investments.................................................... 10,142 1,509
Furniture, equipment and leasehold improvements, net 1,107 2,161
Deposits................................................................. 490 --
--------------- -------------
Total assets..................................................... $ 32,125 $ 24,166
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................................. $ 1,977 $ 2,786
Accrued payroll....................................................... 554 822
Advance from Genzyme.................................................. 2,000 2,000
Current portion of notes payable...................................... 191 218
Current portion of obligations under capital leases................... 18 16
--------------- -------------
Total current liabilities........................................ 4,740 5,842
Long-term obligations:
Notes payable, net of current portion................................. -- 1,097
Obligations under capital leases, net of current portion.............. 6 --
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Total long-term obligations...................................... 6 1,097
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 15,497,443 shares issued and outstanding,
respectively..................................................... 15 15
Additional paid-in capital............................................ 96,606 97,635
Common stock warrants................................................. 967 50
Treasury stock........................................................ (11) (11)
Deferred compensation................................................. (907) (684)
Unrealized loss on investments....................................... (87) (87)
Deficit accumulated during development stage.......................... (69,204) (79,691)
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Total stockholders' equity...................................... 27,379 17,227
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Total liabilities and stockholders' equity........................... $ 32,125 $ 24,166
=============== =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF OPERATIONS
(All amounts in thousands, except loss per share data)
(Unaudited)
<TABLE>
<CAPTION>
Period
from
Inception
(June 13,
Six Months Ended Three Months Ended 1986)
June 30, June 30, through
June 30,
1997 1998 1997 1998 1998
--------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income.................... $ 1,123 $ 748 $ 531 $ 331 $ 6,329
Research and development
grants and contracts........... 316 193 30 90 5,243
--------- ---------- --------- --------- ----------
Total revenues............ 1,439 941 561 421 11,572
Expenses:
Research and development........... 6,652 9,867 3,167 5,345 63,002
Purchase of in-process
research and development....... -- -- -- -- 11,625
General and administrative......... 931 1,547 475 643 15,351
Interest expense and other......... 150 14 120 9 1,285
--------- ---------- --------- --------- ----------
Total expenses............ 7,733 11,428 3,762 5,997 91,263
--------- ---------- --------- --------- ----------
Net loss................................ $ (6,294) $ (10,487) $ (3,201) $ (5,576) $ (79,691)
--------- ========== --------- ========= ==========
Basic and diluted loss per share........ $ (0.43) $ (0.68) $ (0.22) $ (0.36)
===== ===== ===== =====
Weighted average shares used in
computing basic and diluted loss
per share.......................... 14,646 15,464 14,671 15,468
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Inception
(June 13, 1986)
Six Months Ended through
June 30, June 30,
1997 1998 1998
--------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . ................................................ $ (6,294) $ (10,487) $ (79,691)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities--
Depreciation and amortization.................................. 475 360 4,386
Loss (gain) on disposal of assets.............................. 107 (2) 198
Compensation expense related to stock and stock options........ 315 268 3,504
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............... (178) (300) (589)
Decrease in accounts receivable............................. 78 100 --
Increase (decrease) in accounts payable and accrued
expenses............................................ (63) 1,077 3,535
Increase in deferred revenue................................ -- -- (353)
Accrued interest payable converted to stock.................... -- -- 97
--------- --------- -----------
Net cash used in operating activities................ (5,591) (8,984) (57,223)
--------- --------- -----------
Cash flows from investing activities:
Net sales (purchases) of investments................................ 7,976 12,959 (9,231)
Purchase of furniture, equipment and leasehold improvements......... (206) (1,421) (5,542)
Proceeds from sale of assets........................................ 34 9 63
Decrease (increase) in deposits..................................... (147) 490 --
Investment in affiliate............................................. -- -- (500)
Net cash provided by (used in) investing activities.. 7,657 12,037 (15,210)
Cash flows from financing activities:
Proceeds from notes payable and capital leases...................... -- 1,369 6,041
Repayment of notes payable and principal payments under capital
lease obligations................................................. (155) (254) (2,712)
Purchase of treasury stock.......................................... -- -- (11)
Proceeds from issuance of stock..................................... 143 68 75,380
---------- --------- -----------
Net cash provided by (used in) financing activities .. (12) 1,183 78,698
---------- --------- -----------
Net increase in cash and cash equivalents.............................. 2,054 4,236 6,265
Cash and cash equivalents at beginning of period....................... 4,179 2,029 --
---------- --------- -----------
Cash and cash equivalents at end of period............................. $ 6,233 $ 6,265 $ 6,265
========== ========= ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............................ $ 43 $ 14 $ 799
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.
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<PAGE>
ARONEX PHARMACEUTICALS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
June 30, 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 ("Merger"). 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
its 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, 1998 and the related statements of operations
and cash flows for the six month periods ending June 30, 1998 and 1997 and the
period from inception (June 13, 1986) through June 30, 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
$(6,325,000) and $(10,487,000) for the six months ended June 30, 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 June 30, 1998, all
short-term investments are held to maturity securities consisting of high-grade
commercial paper and United States Government backed securities with a carrying
value of $13,457,000, which approximates fair market value and cost. Long-term
investments at June 30, 1998 are available for sale securities which are United
States mortgage backed securities with various maturity dates over the next
several years that have an amortized cost of $1,596,000, a fair market value of
$1,509,000 and a gross unrealized loss of $87,000 at June 30, 1998. 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, 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 its NOLs 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
income tax payments since inception.
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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
Pharmaceuticals" 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 $79.7 million through June 30, 1998. 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, 1997 and 1998
Interest income was $331,000 and $531,000 for the three months ended June
30, 1998 and 1997, respectively, a decrease of $200,000. Interest income was
$748,000 and $1,123,000 for the six months ended June 30, 1998 and 1997,
respectively, a decrease of $375,000. These decreases were primarily due to a
decrease of funds available for investment.
Revenues from research and development grants and contracts were $90,000
and $30,000 for the three months ended June 30, 1998 and 1997, respectively, an
increase of $60,000. Research and development grants and contracts were $193,000
and $316,000 for the six months ended June 30, 1998 and 1997, respectively, a
decrease of $123,000. For the six months ended June 30, 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) $166,000 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 six months ended June 30, 1998 represents Small
Business Innovative Grant Research ("SBIR") grant revenue relating to
ZintevirTM.
Research and development expenses were $5,345,000 and $3,167,000 for the
three months ended June 30, 1998 and 1997, respectively, an increase of
$2,178,000. Research and development expenses were $9,867,000 and $6,652,000 for
the six months ended June 30, 1998 and 1997, respectively, an increase of
$3,215,000. These increases were primarily due to increases of $1,675,000 and
$2,810,000 in clinical investigation costs for the three and six months ended
June 30, 1998, respectively. The majority of these costs relate to clinical
trials of the Company's lead products, NYOTRANTM and ATRAGEN(R). The increases
in research and development expenses also reflect increases of $456,000 and
$626,000 in medical affairs and regulatory salaries and payroll costs for the
three and six months ended June 30, 1998, respectively, as the number of
personnel in these departments increased significantly from the same periods in
1997. These increases were partially offset by decreases of $324,000 and
$648,000 in internal research expenses for the three and six months ended June
30, 1998 as a result of the elimination of the majority of the Company's
internal research efforts in the second quarter of 1997.
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<PAGE>
General and administrative expenses were $643,000 and $475,000 for the
three months ended June 30, 1998 and 1997, respectively, an increase of
$168,000. General and administrative expenses were $1,547,000 and $931,000 for
the six months ended June 30, 1998 and 1997, respectively, an increase of
$616,000. These increases were primarily due to (i) increases of $121,000 and
$506,000 in salaries and payroll costs; (ii) increases of $29,000 and $60,000 in
business travel relating mainly to business development activities and (iii)
increases of $53,000 and $25,000 in investor and public relations expenses for
the three and six month periods ended June 30, 1998, respectively. Several new
positions have been added since the first quarter of 1997 and a Chief Executive
Officer was added 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 and other was $9,000 and $120,000 for the three months
ended June 30, 1998 and 1997, respectively, a decrease of $111,000. Interest
expense and other was $14,000 and $150,000 for the six months ended June 30,
1998 and 1997, respectively, a decrease of $136,000. These decreases in interest
expense and other resulted primarily from a loss on disposal of equipment and
leasehold improvements of $107,000 in the quarter ended June 30, 1997 that were
formerly used in now-discontinued research activities. These decreases were
partially offset by a decrease in interest expense as a result of a decrease in
the average amount of outstanding debt relating to laboratory equipment obtained
through leases and loans.
Net loss was $5,576,000 and $3,201,000 for the three months ended June 30,
1998 and 1997, respectively, an increase of $2,375,000. Net loss for the six
months ended June 30, 1998 and 1997, respectively, was $10,487,000 and
$6,294,000, an increase of $4,193,000. 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, 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 Corporation ("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 June 30, 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. From its
inception until June 30, 1998, the Company also received an aggregate of $4.9
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 $8.9 million and $5.6
million was used in operating activities during the first six months of 1998 and
1997, respectively. The Company had cash, cash-equivalents and short-term and
long-term investments of $21.2 million as of June 30, 1998, 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
Food and 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
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<PAGE>
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.
Year 200
Year 2000 issues result from the inability of certain computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically the year 2000 is represented as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business.
The Company is in the process of assessing all financial and operational
systems and equipment to ensure year 2000 compliance, and plans to complete the
assessment by December 31, 1998. Based on reviews to date and preliminary
information, the Company does not anticipate that it will incur any significant
costs relating to the assessment and remediation of year 2000 issues. The
Company believes that the potential impact, if any, of its systems not being
year 2000 compliant should not impact the Company's ability to continue its
research and development activities. However, there can be no assurance that the
Company, its business partners, vendors or customers will successfully be able
to identify and remedy all potential year 2000 problems or that a system failure
resulting from a failure to identify any such problems would not have a material
adverse effect on the Company.
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<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 June 11, 1998 to consider and vote upon the following proposals:
(i) Election of Class I Directors. The following individuals were nominated and
elected as Class I directors, with the following numbers of shares voted
for and against and withheld for each director:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Ronald J. Brenner, Ph.D. 13,615,107 168,212
Martin P. Sutter 13,744,518 38,801
For Against Abstain
(ii) Approval and adoption of 1998 Stock Option Plan 11,376,223 2,291,320 49,623
(iii) Ratification and approval of Arthur Andersen LLP
as independent public accountants 13,711,914 51,431 19,974
</TABLE>
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Aronex Pharmaceuticals, Inc. 1998 Stock Option Plan.
10.2 Employment Agreement dated June 12, 1998 between the Company and
Praveen Tyle, Ph.D.
10.3 Employment Agreement dated June 12,1998 between the Company and
Paul A. Cossum, Ph.D.
10.4 Employment Agreement dated June 12, 1998 between the Company and
Terance A. Murnane.
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, 1998 By:/S/GEOFFREY F. COX
------------------
Geoffrey F. Cox, Ph.D.
Chief Executive Officer
Dated: August 12, 1998 By:/S/TERANCE A. MURNANE
---------------------
Terance A. Murnane
Controller
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ARONEX PHARMACEUTICALS, INC.
1998 STOCK OPTION PLAN
ARTICLE I
PLAN
1.1 PURPOSE. This Plan is a plan for employees and consultants of the
Company and its Affiliates and is intended to advance the best interests of the
Company, its Affiliates, and its stockholders by providing those persons who
have substantial responsibility for the management and growth of the Company and
its Affiliates with additional incentives and an opportunity to obtain or
increase their proprietary interest in the Company, thereby encouraging them to
continue in the employ of the Company or any of its Affiliates.
1.2 EFFECTIVE DATE OF PLAN. This Plan shall be effective March 19, 1998
(the "Effective Date"), if within one year of that date it shall have been
approved by at least a majority vote of stockholders voting in person or by
proxy at a duly held stockholders' meeting, or if the provisions of the
corporate charter, by-laws or applicable state law prescribes a greater degree
of stockholder approval for this action, the approval by the holders of that
percentage, at a duly held meeting of stockholders. No Option shall be granted
pursuant to this Plan after March 19, 2008.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.3 "CAUSE," when used in connection with the termination of an Employee's
employment or Consultant's engagement by the Company, means (i) any material
failure of the Employee or Consultant to perform his duties under any employment
or consulting agreement with the Company (other than any such failure resulting
from the Employee or Consultant's incapacity due to Disability), subject to any
written notice and opportunity to cure provided for by such employment or
consulting agreement, (ii) the Employee or Consultant's gross negligence or
willful or intentional wrongdoing or misconduct relating to his employment or
engagement by the Company, (iii) a material breach by the Employee or Consultant
of any proprietary information, inventions or non-competition agreement between
the Employee or Consultant and the Company, (iv) a material breach by the
Employee or Consultant of any insider trading, business ethics or similar policy
of the Company, or (iv) conviction of the Employee or Consultant of a felony
offense or a crime involving moral turpitude.
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2.4 "CHANGE OF CONTROL" means:
(i) the acquisition after the Effective Date by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended) (a "Person") of beneficial
ownership of 30 percent or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"), provided that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any acquisition
by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) hereof; or
(ii) individuals, who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the Effective Date whose nomination or election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual was a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
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(iii) consummation after the Effective Date of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction")
unless, in each case, following such Corporate Transaction, (A) (1) all or
substantially all of the persons who were the beneficial owners of the
Outstanding Common Stock immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60 percent of the then
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction, and (2) all or substantially all of the persons who
were the beneficial owners of the Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own directly or
indirectly, more than 60 percent of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership of the Outstanding
Common Stock and the outstanding Voting Securities immediately prior to
such Corporate Transaction, as the case may be, (B) no Person (excluding
(1) any corporation resulting from such Corporate Transaction or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction and (2) any Person approved by
the Incumbent Board) beneficially owns, directly or indirectly, 20 percent
or more of the then outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of
the then outstanding voting securities of such corporation except to the
extent that such ownership existed prior to such Corporate Transaction and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction were members of the
Incumbent Board at the time of the execution of the initial agreement or of
the action of the Board providing for such Corporate Transaction.
2.5 "CODE" means the internal Revenue Code of 1986, as amended.
2.6 "COMMITTEE" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The Committee
shall be comprised solely of at least two members who are Non-Employee Directors
and Outside Directors.
2.7 "COMPANY" means Aronex Pharmaceuticals, Inc., a Delaware corporation.
2.8 "CONSULTANT" means a person who is engaged by the Company or any
Affiliate to render consulting services and to whom an Option is granted.
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2.9 "DISABILITY" means a physical or mental infirmity which, in the opinion
of a physician selected by the Committee, shall prevent the Employee or
Consultant from earning a reasonable livelihood with the Company or any
Affiliate and which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months and
which: (a) was not contracted, suffered or incurred while the Employee or
Consultant was engaged in, or did not result from having engaged in, a felonious
criminal enterprise; (b) did not result from alcoholism or addiction to
narcotics; and (c) did not result from an injury incurred while a member of the
Armed Forces of the United States for which the Employee or Consultant receives
a military pension.
2.10 "EMPLOYEE" means a person employed by the Company or any Affiliate to
whom an Option is granted.
2.11 "FAIR MARKET VALUE" of the Stock as of any date means (a) the last
sale price of the Stock on that date (or, if there was no sale on such date, the
next preceding date on which there was such a sale) as reported on the principal
securities exchange on which the Stock is listed; or (b) if the Stock is not
listed on a securities exchange, the last sale price of the Stock on that date
(or, if there was no sale on such date, the next preceding date on which there
was such a sale) as reported on the Nasdaq Stock Market; or (c) if the Stock is
not listed on the Nasdaq Stock Market, the average of the high and low bid
quotations for the Stock on that date as reported by the National Quotation
Bureau Incorporated; or (d) if none of the foregoing is applicable, an amount at
the election of the Committee equal to (x) the average between the closing bid
and ask prices per share of Stock on the last preceding date on which those
prices were reported or (y) an amount as determined by the Committee in its sole
discretion.
2.12 "INCENTIVE OPTION" means an Option granted under this Plan which is
designated as an "Incentive Option" and satisfies the requirements of Section
422 of the Code.
2.13 "NON-EMPLOYEE DIRECTOR" means a "non-employee director" as that term
is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
2.14 "NONQUALIFIED OPTION" means an Option granted under this Plan other
than an Incentive Option.
2.15 "OPTION" means either an Incentive Option or a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.16 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
2.17 "OPTIONEE" means a person who is granted an Option under this Plan.
2.18 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving on
the Committee who satisfies the criteria of Section 162(m) of the Code.
2.19 "PLAN" means the Aronex Pharmaceuticals, Inc. 1998 Stock Option Plan,
as set out in this document and as it may be amended from time to time.
2.20 "STOCK" means the common stock of the Company, par value $.001 per
share, or, in the event that the outstanding shares of common stock are later
changed into or exchanged for a different class of stock or securities of the
Company or another corporation, that other stock or security.
2.21 "10% STOCKHOLDER" means an individual who, at the time the Option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any Affiliate. An individual shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants; and stock owned, directly or indirectly,
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by or for a corporation, partnership, estate, or trust, shall be considered as
being owned proportionately by or for its stockholders, partners or
beneficiaries.
ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options shall be
those key employees of the Company or any of its Affiliates as the Committee
shall determine from time to time. The individuals who shall be eligible to
receive Nonqualified Options shall be those key employees and consultants of the
Company or any of its Affiliates as the Committee shall determine from time to
time. No member of the Committee shall be eligible to receive any Option or to
receive stock, stock options, or stock appreciation rights under any other plan
of the Company or any of its Affiliates, if to do so would cause the individual
not to be a Non-Employee Director or an Outside Director. The Board of Directors
may designate one or more individuals who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.
ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS
4.1 AUTHORITY TO GRANT OPTIONS. The Committee may grant to those
individuals, as it shall from time to time determine, Options under the terms
and conditions of this Plan. Subject only to any applicable limitations set out
in this Plan, the number of shares of Stock to be covered by any Option to be
granted to an Employee or Consultant of the Company or any of its Affiliates
shall be as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect to
which Options may be granted under the Plan shall be 750,000 shares of Stock.
The shares may be treasury shares or authorized but unissued shares. The total
number of shares of Stock with respect to which Incentive Options may be granted
under the Plan shall be 750,000 shares. The maximum number of shares subject to
Options which may be issued to any Optionee under the Plan during any period of
three consecutive years is 250,000 shares. The number of shares stated in this
Section 4.2 shall be subject to adjustment in accordance with the provisions of
Section 4.5.
In the event that any outstanding Option shall expire or terminate for any
reason or any Option is surrendered, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option under the
Plan.
4.3 NON-TRANSFERABILITY. Options shall not be transferable by the Optionee
otherwise than (i) by will or under the laws of descent and distribution or (ii)
pursuant to 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, and shall be
exercisable, during the Optionee's lifetime, only by him.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
any Stock under any Option if issuing that Stock would constitute or result in a
violation by the Optionee or the Company of any provision of any law, statute,
or regulation of any governmental authority. Specifically, in connection with
any applicable statute or regulation relating to the registration of securities,
upon exercise of any Option, the Company shall not be required to issue any
Stock unless the Committee has received evidence satisfactory to it to the
effect that the holder of that Option will not transfer the Stock except in
accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies
with applicable law. The determination by the Committee on this matter shall be
final, binding and conclusive. The Company may, but shall in no event be
obligated to, register any Stock covered by this Plan pursuant to applicable
securities laws of any country or any political subdivision. In the event the
Stock issuable on exercise of an Option is not registered, the Company
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may imprint on the certificate evidencing the Stock any legend that counsel for
the Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option and the issuance of shares thereunder, to comply
with any law or regulation of any governmental authority.
4.5 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 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 Stock or its rights, 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 Stock outstanding, without receiving
compensation for it in money, services or property then (a) the number, class,
and per share price of shares of Stock subject to outstanding Options under this
Plan 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 equivalent total number and class of shares 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 of Stock then
reserved to be issued under the Plan shall be adjusted by substituting for the
total number and class of shares of Stock then reserved, that number and class
of shares of Stock that would have been received by the owner of an equal number
of outstanding shares of such class of Stock as the result of the event
requiring the adjustment.
If the Company is merged or consolidated with another corporation and the
Company is not the surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets while unexercised
Options remain outstanding under this Plan, (a) subject to the provisions of
clause (c) below, after the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case may be, each holder of an
outstanding Option shall be entitled, upon exercise of the Option, to receive,
in lieu of shares of Stock, the number and class or classes of shares of stock
or other securities or property to which the holder would have been entitled if,
immediately prior to the merger, consolidation, liquidation, sale or other
disposition, the holder had been the holder of record of a number of shares of
Stock equal to the number of shares as to which the Option shall be so
exercised; (b) the Committee shall waive any limitations set out in or imposed
under this Plan so that all Options, from and after a date prior to the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Committee, shall be
exercisable in full; and (c) all outstanding Options may be canceled by the
Committee as of the effective date of any merger, consolidation, liquidation,
sale or other disposition, if (i) notice of cancellation shall be given to each
holder of an Option and (ii) each holder of an Option shall have the right to
exercise that Option in full (without regard to any limitations set out in or
imposed under this Plan or the Option Agreement granting that Option) during a
period set by the Committee preceding the effective date of the merger,
consolidation, liquidation, sale or other disposition and, if in the event all
outstanding Options may not be exercised in full under applicable securities
laws without registration of the shares of Stock issuable on exercise of the
Options, the Committee may limit the exercise of the Options to the number of
shares of Stock, if any, as may be issued without registration. The method of
choosing which Options may be exercised, and the number of shares of Stock for
which Options may be exercised, shall be solely within the discretion of the
Committee.
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 for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.
4.6 CHANGES OF CONTROL. In the event of a Change of Control, the Committee
may, in its discretion, at the time an Option is granted or any time thereafter:
(i) provide for the acceleration of any time period
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relating to the exercise of the Option, (ii) provide for the purchase of the
Option upon the Optionee's request for an amount of cash or other property that
could have been received upon the exercise of the Option had the Option been
then currently exercisable, (iii) adjust the terms of the Option in a manner
determined by the Committee to reflect the Change of Control, (iv) cause the
Option to be assumed, or new rights substituted therefore, by another entity, or
(v) make such other provisions as the Committee may consider equitable and in
the best interest of the Company.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given Option
shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price at which Stock may be purchased under an Option
shall not be less than the greater of: (a) 100% of the Fair Market Value of the
shares of Stock on the date the Option is granted or (b) the aggregate par value
of the shares of Stock on the date the Option is granted. In the case of any 10%
Stockholder, the price at which shares of Stock may be purchased under an
Incentive Option shall not be less than 110% of the Fair Market Value of the
Stock on the date the Incentive Option is granted.
5.3 DURATION OF OPTIONS; TERMINATION. No Option shall be exercisable after
the expiration of 10 years from the date the Option is granted. In the case of a
10% Stockholder, no Incentive Option shall be exercisable after the expiration
of five years from the date the Incentive Option is granted. Unless otherwise
provided in the Option Agreement or by the Committee:
(a) If the employment or engagement of an Optionee by the Company
shall terminate for any reason other than Cause, Disability, the
voluntary retirement of the Optionee in accordance with the Company's
retirement policy as then in effect or the death of the Optionee: (i)
Options granted to such Optionee, to the extent that they were
exercisable at the time of such termination, shall remain exercisable
until the expiration of 90 days after such termination, on which date
they shall expire, and (ii) Options granted to such Optionee, 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 no Option shall be exercisable after the
expiration of its term.
(b) If the employment or engagement of an Optionee by the Company
shall terminate on account of the Disability, the voluntary retirement
of the Optionee in accordance with the Company's retirement policy as
then in effect or the death of the Optionee: (i) Options granted to
such Optionee, 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 Optionee, 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
no Option shall be exercisable after the expiration of its term.
(c) In the event of the termination of an Optionee's employment
or engagement for Cause, all outstanding Options granted to such
Optionee shall expire at the commencement of business on the date of
such termination.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to time, in
whole or in part, in the manner and subject to the conditions the Committee, in
its sole discretion, may provide in the Option Agreement, as long as the Option
is valid and outstanding. To the extent that the aggregate Fair Market Value
(determined as of the time an Incentive Option is granted) of the Stock with
respect to which Incentive Options first become exercisable by the Optionee
during any calendar year (under this Plan and any other incentive stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options
shall be treated as Nonqualified Options. In making this determination,
Incentive Options shall be taken into account in the order in which they were
granted.
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5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery of
written notice to the Company, to the attention of its Secretary, setting forth
the number of shares of Stock with respect to which the Option is to be
exercised, together with: (a) cash, wire transfer, certified check, bank draft,
or postal or express money order payable to the order of the Company for an
amount equal to the option price of the shares, or (b) if approved by the
Committee, Stock at its Fair Market Value on the date of exercise, and/or any
other form of payment which is acceptable to the Committee, and specifying the
address to which the certificates for the shares are to be mailed. Subject to
Sections 4.4 and 8.3, as promptly as practicable after receipt of written
notification and payment, the Company shall deliver to the Optionee certificates
for the number of shares with respect to which the Option has been exercised,
issued in the Optionee's name. If shares of Stock are used in payment of the
exercise price, the aggregate Fair Market Value of the shares of Stock tendered
must be equal to or less than the aggregate exercise price of the shares being
purchased upon exercise of the Option, and any difference must be paid by cash,
certified check, bank draft, or postal or express money order payable to the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Optionee, at the address specified by the
Optionee.
Whenever an Option is exercised by exchanging shares of Stock owned by the
Optionee, the Optionee shall deliver to the Company certificates registered in
the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition of an Option.
5.6 SUBSTITUTION OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in this Plan (including, without limitation, the terms and conditions with
respect to the price at which Stock may be purchased under an Option) to the
extent the Committee, at the time of grant, may deem appropriate to conform, in
whole or in part, to the provisions of the stock options in substitution for
which they are granted.
5.7 NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
ARTICLE VI
ADMINISTRATION
This Plan shall be administered by the Committee. All questions of
interpretation and application of this Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. This Plan shall be
administered in such a manner as to permit the Options granted under it which
are designated to be Incentive Options to qualify as Incentive Options. In
carrying out its authority under this Plan, the Committee shall have full and
final authority and discretion, including but not limited to the following
rights, powers and authorities, to:
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(a) determine the persons to whom and the time or times at which
Options will be made,
(b) determine the number of shares and the purchase price of
Stock covered in each Option, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each
Option, which need not be identical,
(d) accelerate the time at which any outstanding Option may be
exercised,
(e) define the effect, if any, on an Option of the death,
disability, retirement, or termination of employment of the Optionee,
(f) prescribe, amend and rescind rules and regulations relating
to administration of this Plan, and
(g) make all other determinations and take all other actions
deemed necessary, appropriate, or advisable for the proper
administration of this Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend this
Plan at any time, in its sole and absolute discretion; provided, however, that
to the extent required to maintain the status of any Incentive Option under the
Code, no amendment that would (a) change the aggregate number of shares of Stock
which may be issued under Incentive Options, (b) change the class of employees
eligible to receive Incentive Options, or (c) decrease the exercise price for
Incentive Options below the Fair Market Value of the Stock at the time it is
granted, shall be made without the approval of the Company's stockholders.
Subject to the preceding sentence, the Board shall have the power to make any
changes in this Plan and in the regulations and administrative provisions under
it or in any outstanding Incentive Option as in the opinion of counsel for the
Company may be necessary or appropriate from time to time to enable any
Incentive Option granted under this Plan to continue to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential Federal income tax treatment.
ARTICLE VIII
MISCELLANEOUS
8.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of any
Optionee under this Plan. All Optionees shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under this Plan.
8.2 NO EMPLOYMENT OBLIGATION. The granting of any Option shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Optionee. The right of the Company or any Affiliate to terminate the employment
of any person shall not be diminished or affected by reason of the fact that an
Option has been granted to him.
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8.3 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Optionee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option. In the alternative, the Company may require the Optionee
(or other person exercising the Option) to pay the sum directly to the employer
corporation. If the Optionee (or other person exercising the Option) is required
to pay the sum directly, payment in cash or by check of such sums for taxes
shall be delivered within ten days after the date of exercise or lapse of
restrictions. The Company shall have no obligation upon exercise of any Option
until payment has been received, unless withholding (or offset against a cash
payment) as of or prior to the date of exercise is sufficient to cover all sums
due with respect to that exercise. The Company and its Affiliates shall not be
obligated to advise an Optionee of the existence of the tax or the amount which
the employer corporation will be required to withhold.
8.4 WRITTEN AGREEMENT. Each Option shall be embodied in a written Option
Agreement which shall be subject to the terms and conditions of this Plan and
shall be signed by the Optionee and by a member of the Committee and an officer
of the Company on behalf of the Committee and the Company. The Option Agreement
may contain any other provisions that the Committee in its discretion shall deem
advisable which are not inconsistent with the terms of this Plan.
8.5 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further action his part to indemnity from the Company for, all expenses
(including attorneys' fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the
expenses--including, without limitation, matters as to which he shall be finally
adjudged in any action, suit or proceeding to have been found to have been
negligent in the performance of his duty as a member of the Committee or of the
Board of Directors. However, this indemnity shall not include any expenses
incurred by any member of the Committee and/or the Board of Directors in respect
of matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as a member of the Committee or the Board of Directors.
In addition, no right of indemnification under this Plan shall be available to
or enforceable by any member of the Committee or the Board of Directors unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each member of the Committee and the
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.
8.6 GENDER. If the context requires, words of one gender when used in this
Plan shall include the others and words used in the singular or plural shall
include the other.
8.7 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
8.8 OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect
any other stock option, incentive or other compensation or benefit plans in
effect for the Company or any Affiliate, nor shall this Plan preclude the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
8.9 OTHER OPTIONS. The grant of an Option shall not confer upon an Optionee
the right to receive any future or other Options under this Plan, whether or not
Options may be granted to similarly situated Optionees, or the right to receive
future Options upon the same terms or conditions as previously granted.
WOD01:4414.1
-10-
<PAGE>
8.10 ARBITRATION OF DISPUTES. Any controversy arising out of or relating to
the Plan or an Option Agreement shall be resolved by arbitration conducted
pursuant to the arbitration rules of the American Arbitration Association. The
arbitration shall be final and binding on the parties.
8.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
WOD01:4414.1
-11-
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of June 12, 1998, is
entered into by and between Aronex Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Praveen Tyle, Ph.D. (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to continue in the employment of the Company, upon the terms and
conditions and in the capacities set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree as follows:
1. Employment and Term of Employment. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, as Vice President, Pharmaceutical
Development and Operations for a term (the "Term of Employment") beginning on
the date first set forth above (the "Effective Date") and ending on the
Expiration Date (defined below). As used in this Agreement, "Expiration Date"
means the first anniversary of the Effective Date, provided that on each
anniversary of the Effective Date (each such anniversary being referred to as a
"Renewal Date"), the Expiration Date shall be automatically extended one
additional year unless, not less than 10 days prior to the relevant Renewal
Date, (i) either party shall have given written notice to the other that no such
automatic extension shall occur after the date of such notice or (ii) either
party shall have given a Notice of Termination to the other pursuant to Section
5 hereof. Notwithstanding the foregoing, if either party gives a valid Notice of
Termination pursuant to Section 5 hereof, the Term of Employment shall not
extend beyond the termination date specified in such Notice of Termination.
2. Scope of Employment. (a) During the Term of Employment, the Executive
agrees to (i) serve as Vice President, Pharmaceutical Development and Operations
of the Company and shall have and may exercise all the powers, duties and
functions as are normal and customary to such position and that are consistent
with the responsibilities set forth with respect to such position in the
Company's by-laws and (ii) perform such other duties not inconsistent with his
position as are assigned to him, from time to time, by the Board of Directors
(the "Board") or Chief Executive Officer of the Company. During the Term of
Employment, the Executive shall devote substantially all of his business time,
attention, skill and efforts to the faithful performance of his duties
hereunder. Provided that the Executive complies with the foregoing obligation
and the other obligations set forth in this Agreement, the Executive may serve
on a Scientific Advisory Board or in a similar role for one or more companies
other than the Company.
(b) During the Term of Employment, the Executive agrees to serve, if
elected, as an officer or director of any subsidiary or affiliate of the
Company so long as such service is commensurate with the Employee's duties
and responsibilities to the Company.
3. Compensation. During the Term of Employment, in consideration of the
Executive's services hereunder, including, without limitation, service as an
officer or director of the Company or of any subsidiary or affiliate thereof,
and in consideration of the Executive's agreements set forth in the Proprietary
Information and Inventions and Non-Competition Agreement dated March 5, 1998
between the Executive and the Company (the "Proprietary Information and
Inventions Agreement"):
<PAGE>
(a) the Executive shall receive a salary at a rate equivalent to the
Executive's current annual salary in effect on the Effective Date (payable
at such regular intervals as other employees of the Company are compensated
in accordance with the Company's employment practices), which salary shall
be subject to review annually by the Board and may be adjusted at its
discretion, provided that such salary may not be reduced at any time.
(b) the Executive shall be entitled to receive an annual cash bonus of
up to 20% of the Executive's salary based upon the achievement of such
milestones as may be agreed upon by the Executive and the Board.
4. Additional Compensation and Benefits. (a) As additional compensation for
the Executive's services under this Agreement and the Executive's agreements set
forth in the Proprietary Information and Inventions Agreement, during the Term
of Employment, the Company agrees to provide the Executive with the non-cash
benefits provided by the Company to its other officers and key employees as they
may exist from time to time. Such benefits shall include such leave or vacation
time (not less than three weeks), medical and dental insurance, life insurance
and other health care benefits, and retirement and disability benefits as may
hereafter be provided by the Company in accordance with its policies, as well as
any stock option plan or similar employee benefit program for which key
executives are or shall become eligible.
(b) The Executive is authorized to incur reasonable business expenses
for promoting the business and reputation of the Company, including
(without limitation) reasonable expenditures for travel, lodging, meals and
client, patron, customer and/or business associate entertainment. The
Company shall reimburse the Executive within 30 days for reasonable
expenses incurred by the Executive in furtherance of the Company's
business, provided that such expenses are incurred in accordance with the
Company's policies and upon presentation of documentation in accordance
with expense reimbursement policies of the Company as they may exist from
time to time, and submission to the Company of adequate documentation in
accordance with federal income tax regulations and administrative
pronouncements.
5. Termination.
(a) General. The Executive's employment hereunder shall automatically
terminate on the earlier of his death or the Expiration Date. The Executive
may, at any time prior to the Expiration Date, terminate his employment
hereunder for any reason by delivering a Notice of Termination (defined
below) to the Board. The Company may, at any time prior to the Expiration
Date, terminate the Executive's employment hereunder for any reason by
delivering a Notice of Termination to the Executive. The giving of a notice
pursuant to clause (i) of the proviso contained in the penultimate sentence
of Section I hereof shall not be deemed a termination of the Executive's
employment by the party giving such notice. As used in this Agreement,
"Notice of Termination" means a notice in writing purporting to terminate
the Executive's employment in accordance with this Section 5, which notice
shall (i) specify the effective date of such termination (not prior to the
date of such notice) and (ii) in the case of a termination by the Company
for Cause or Disability or a termination by the Executive for Disability or
Good Reason (in each case as such terms are defined below), set forth in
reasonable detail the reason for such termination and the facts and
circumstances claimed to provide a basis for such termination.
<PAGE>
(b) Automatic Termination on Expiration Date or Death. In the event
the Executive's employment hereunder shall automatically terminate on the
Expiration Date or as a result of the Executive's death, the Executive
shall only be entitled to receive, to the extent applicable, (i) all unpaid
compensation accrued as of the termination date pursuant to Section 3
hereof, (ii) all unused vacation time accrued by the Executive as of the
termination date, (iii) all amounts owing to the Executive under Section
4(b) hereof and (iv) those benefits under Section 4 which are required
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other laws. The amounts described in clauses (i), (ii) and
(iii) of the foregoing sentence shall be paid to the Executive in a lump
sum payment promptly after the Expiration Date.
(c) Termination by Company for Cause. If the Company terminates the
Executive's employment for Cause, the Executive shall only be entitled to
receive the compensation and other payments described in paragraph (b)
above, such compensation and other payments to be paid as if the
Executive's employment had automatically terminated without the giving of
any Notice of Termination. As used in this Agreement, "Cause" shall mean
(i) any material failure of the Executive to perform his duties specified
in Section 2 of this Agreement (other than any such failure resulting from
the Executive's incapacity due to Disability) after written notice of such
failure has been given to the Executive by the Board or the Company's Chief
Executive Officer and such failure shall have continued for 30 days after
receipt of such notice, (ii) gross negligence or willful or intentional
wrongdoing or misconduct, (iii) a material breach by the Executive of the
Proprietary Information and Inventions and Non-Competition Agreement of
even date herewith between the Execution e and the Company or any
subsequent such agreement between the Executive and the Company, or (iv)
conviction of the Executive of a felony offense or a crime involving moral
turpitude.
(d) Termination for Disability. To provide for the event the
Executive's employment is terminated by either the Company or the Executive
on account of Disability (defined below), the Company shall provide or, as
applicable, cause its disability insurance carrier to provide, the
Executive such disability benefits as may hereafter be provided by the
Company in accordance with its policies, as they may exist from time to
time. As used herein, "Disability" means any physical or mental condition
of the Executive that (i) prevents the Executive from being able to perform
the services required under this Agreement, (ii) has continued for at least
180 consecutive days during any 12- month period and (iii) is reasonably
expected to continue.
(e) Termination by Company Without Cause. If the Company terminates
the Executive's employment for any reason other than for Cause or on
account of Disability, the Company shall:
(i) pay to the Executive, for the period of 12 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above; and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
following the date of such termination).
<PAGE>
(f) Termination by the Executive with Good Reason. If the Executive
terminates his employment for Good Reason (as defined below), the Company
shall:
(i) pay to the Executive, for the period of 24 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above; and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under COBRA
following the date of such termination).
As used in this Agreement, "Good Reason" shall mean a material diminution in the
title, powers, duties, responsibilities or functions of the Executive as
described in Section 2 hereof within one year following the occurrence of a
Change of Control.
As used in this Agreement, a "Change of Control" shall mean:
(i) the acquisition after the Effective Date by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended) (a "Person") of
beneficial ownership of 50% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Voting Securities"), provided that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or (D)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (ii) hereof; or
(ii) consummation after the Effective Date of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate
Transaction") in each case, unless, following such Corporate
Transaction, (A) (1) all or substantially all of the persons who were
the beneficial owners of the Outstanding Common Stock immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of common
stock of the corporation resulting from such Corporate Transaction,
and (2) all or substantially all of the persons who were the
beneficial owners of the Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
of the Outstanding Common Stock and the Outstanding Voting Securities
immediately prior to such Corporate Transaction, as the case may be,
(B) no Person (excluding (1) any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company orsuch corporation resulting from such Corporate
Transaction and (2) any Person approved by the members of the Board in
office immediately prior to such Corporate Transaction) beneficially
owns, directly or indirectly, 50% or more of the then outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to such Corporate Transaction and
(C) at least a majority of the members of the board of directors of
the corporation resulting from such Corporate Transaction were members
of the Board at the time of the execution of the initial agreement or
of the action of the Board providing for such Corporate Transaction.
<PAGE>
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
stock option or other agreements with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the date of termination of the
Executive's employment under this Agreement shall be payable in accordance with
such plan or program.
7. Resolution of Disputes.
(a) Negotiate. The parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by
negotiations between the Executive and an executive officer of the Company
who has authority to settle the controversy. Any party may give the other
party written notice of any dispute not reveled in the normal course of
business. Within 10 days after the effective date of such notice, the
Executive and an executive officer of the Company shall meet at a mutually
acceptable time and place within the Houston, Texas metropolitan area, and
thereafter as often as they reasonably deem necessary, to exchange relevant
information and to attempt to resolve the dispute. If the matter has not
been resolved within 30 days of the disputing party's notice, or if the
parties fail to meet within 10 days, either party may initiate arbitration
of the controversy or claim as provided hereinafter. If a negotiator
intends to be accompanied at a meeting by an attorney, the other negotiator
shall be given at least three business days notice of such intention and
may also be accompanied by an attorney. All negotiations pursuant to this
Section 7(a) shall be treated as compromise and settlement negotiations for
the purposes of the federal and state rules of evidence and procedure.
(b) Arbitration. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof, which has not
been resolved by non-binding means as provided in Section 7(a) within 60
days of the initiation of such procedure, shall be finally settled by
arbitration conducted expeditiously in accordance with the Center for
Public Resources, Inc. ("CPR") Rules for Non-Administered Arbitration of
Business Disputes by three independent and impartial arbitrators, of whom
each party shall appoint one, provided that if one party has requested the
other to participate in a non-binding procedure and the other has failed to
participate, the requesting party may initiate arbitration before the
expiration of such period. Any such arbitration shall take place in Harris
County, Texas. Any arbitrator not appointed by a party shall be appointed
from the CPR Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act and any judgment upon the award decided upon
by the arbitrators may be entered by any court having jurisdiction thereof.
Each party hereby acknowledges that compensatory damages include (without
limitation) any benefit or right of indemnification given by another party
to the other under this Agreement
<PAGE>
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas. Venue and jurisdiction
of any act on relating to this agreement shall lie in Harris County, Texas.
9. Notice. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally or if sent
by registered or certified mall, return receipt requested, postage prepaid,
addressed to such party at its address set forth below such party's signature to
this Agreement or to such other address as shall have been furnished in writing
by such party for whom the communication is intended. Any such notice shall be
deemed to be given on the date so delivered.
1O. Severability. In the event any provisions hereof shall he modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. Entire Agreement. This Agreement, together with the Proprietary
Information and Inventions Agreement, constitutes the sole agreement between the
parties with respect to the employment of the Executive by the Company and
supersedes any and all other agreements, oral or written, between the parties.
12. Amendment and Waiver. This Agreement may not be modified or amended
except by a writing signed by the parties. Any waiver or breach of any of the
terms of this Agreement shall not operate as a waiver of any other breach of
such terms or conditions, or any other terms or conditions, nor shall any
failure to enforce any provisions hereof operate as a waiver of such provision
or any other provision hereof.
13. Assignment. This Agreement is a personal employment contract and the
rights and interests of the Executive hereunder may not be sold, transferred,
assigned or pledged. The Company may assign its rights under this Agreement to
(i) any entity into or with which the Company is merged or consolidated or to
which the Company transfers all or substantially all of its assets or (ii) any
entity, which at the time of such assignment controls, is under common control
with, or is controlled by the Company, provided that the Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably acceptable to the
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if not such succession had taken place.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns.
15. Section Headings. The section headings in this Agreement have been
inserted for convenience and shall not be used for interpretive purposes or to
otherwise construe this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
he date first written above and intended that this Agreement have the effect of
a sealed instrument.
By: /S/PRAVEEN TYLE, Ph.D.
--------------------------
Praveen Tyle, Ph.D.
ARONEX PHARMACEUTICALS, INC.
By: /S/GEOFFREY F. COX, Ph.D.
-----------------------------
Geoffrey F. Cox, Ph.D.
Chief Executive Officer
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of June 12, 1998, is
entered into by and between Aronex Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Paul A. Cossum, Ph.D. (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to continue in the employment of the Company, upon the terms and
conditions and in the capacities set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree as follows:
1. Employment and Term of Employment. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, as Vice President, Preclinical
Research and Development for a term (the "Term of Employment") beginning on the
date first set forth above (the "Effective Date") and ending on the Expiration
Date (defined below). As used in this Agreement, "Expiration Date" means the
first anniversary of the Effective Date, provided that on each anniversary of
the Effective Date (each such anniversary being referred to as a "Renewal
Date"), the Expiration Date shall be automatically extended one additional year
unless, not less than 10 days prior to the relevant Renewal Date, (i) either
party shall have given written notice to the other that no such automatic
extension shall occur after the date of such notice or (ii) either party shall
have given a Notice of Termination to the other pursuant to Section 5 hereof.
Notwithstanding the foregoing, if either party gives a valid Notice of
Termination pursuant to Section 5 hereof, the Term of Employment shall not
extend beyond the termination date specified in such Notice of Termination.
2. Scope of Employment. (a) During the Term of Employment, the Executive
agrees to (i) serve as Vice President, Preclinical Research and Development of
the Company and shall have and may exercise all the powers, duties and functions
as are normal and customary to such position and that are consistent with the
responsibilities set forth with respect to such position in the Company's
by-laws and (ii) perform such other duties not inconsistent with his position as
are assigned to him, from time to time, by the Board of Directors (the "Board")
or Chief Executive Officer of the Company. During the Term of Employment, the
Executive shall devote substantially all of his business time, attention, skill
and efforts to the faithful performance of his duties hereunder.
(b) During the Term of Employment, the Executive agrees to serve, if
elected, as an officer or director of any subsidiary or affiliate of the
Company so long as such service is commensurate with the Employee's duties
and responsibilities to the Company.
3. Compensation. During the Term of Employment, in consideration of the
Executive's services hereunder, including, without limitation, service as an
officer or director of the Company or of any subsidiary or affiliate thereof,
and in consideration of the Executive's agreements set forth in the Proprietary
Information and Inventions and Non-Competition Agreement dated June 12, 1998
between the Executive and the Company (the "Proprietary Information and
Inventions Agreement"):
<PAGE>
(a) the Executive shall receive a salary at a rate equivalent to the
Executive's current annual salary in effect on the Effective Date (payable
at such regular intervals as other employees of the Company are compensated
in accordance with the Company's employment practices), which salary shall
be subject to review annually by the Board and may be adjusted at its
discretion, provided that such salary may not be reduced at any time.
(b) the Executive shall be entitled to receive an annual cash bonus of
up to 20% of the Executive's salary based upon the achievement of such
milestones as may be agreed upon by the Executive and the Board.
4. Additional Compensation and Benefits. (a) As additional compensation for
the Executive's services under this Agreement and the Executive's agreements set
forth in the Proprietary Information and Inventions Agreement, during the Term
of Employment, the Company agrees to provide the Executive with the non-cash
benefits provided by the Company to its other officers and key employees as they
may exist from time to time. Such benefits shall include such leave or vacation
time (not less than three weeks), medical and dental insurance, life insurance
and other health care benefits, and retirement and disability benefits as may
hereafter be provided by the Company in accordance with its policies, as well as
any stock option plan or similar employee benefit program for which key
executives are or shall become eligible.
(b) The Executive is authorized to incur reasonable business expenses
for promoting the business and reputation of the Company, including
(without limitation) reasonable expenditures for travel, lodging, meals and
client, patron, customer and/or business associate entertainment. The
Company shall reimburse the Executive within 30 days for reasonable
expenses incurred by the Executive in furtherance of the Company's
business, provided that such expenses are incurred in accordance with the
Company's policies and upon presentation of documentation in accordance
with expense reimbursement policies of the Company as they may exist from
time to time, and submission to the Company of adequate documentation in
accordance with federal income tax regulations and administrative
pronouncements.
5. Termination.
(a) General. The Executive's employment hereunder shall automatically
terminate on the earlier of his death or the Expiration Date. The Executive
may, at any time prior to the Expiration Date, terminate his employment
hereunder for any reason by delivering a Notice of Termination (defined
below) to the Board. The Company may, at any time prior to the Expiration
Date, terminate the Executive's employment hereunder for any reason by
delivering a Notice of Termination to the Executive. The giving of a notice
pursuant to clause (i) of the proviso contained in the penultimate sentence
of Section I hereof shall not be deemed a termination of the Executive's
employment by the party giving such notice. As used in this Agreement,
"Notice of Termination" means a notice in writing purporting to terminate
the Executive's employment in accordance with this Section 5, which notice
shall (i) specify the effective date of such termination (not prior to the
date of such notice) and (ii) in the case of a termination by the Company
for Cause or Disability or a termination by the Executive for Disability or
Good Reason (in each case as such terms are defined below), set forth in
reasonable detail the reason for such termination and the facts and
circumstances claimed to provide a basis for such termination.
(b) Automatic Termination on Expiration Date or Death. In the event
the Executive's employment hereunder shall automatically terminate on the
Expiration Date or as a result of the Executive's death, the Executive
shall only be entitled to receive, to the extent applicable, (i) all unpaid
compensation accrued as of the termination date pursuant to Section 3
hereof, (ii) all unused vacation time accrued by the Executive as of the
termination date, (iii) all amounts owing to the Executive under Section
4(b) hereof and (iv) those benefits under Section 4 which are required
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other laws. The amounts described in clauses (i), (ii) and
(iii) of the foregoing sentence shall be paid to the Executive in a lump
sum payment promptly after the Expiration Date.
<PAGE>
(c) Termination by Company for Cause. If the Company terminates the
Executive's employment for Cause, the Executive shall only be entitled to
receive the compensation and other payments described in paragraph (b)
above, such compensation and other payments to be paid as if the
Executive's employment had automatically terminated without the giving of
any Notice of Termination. As used in this Agreement, "Cause" shall mean
(i) any material failure of the Executive to perform his duties specified
in Section 2 of this Agreement (other than any such failure resulting from
the Executives incapacity due to Disability) after written notice of such
failure has been given to the Executive by the Board or the Company's Chief
Executive Officer and such failure shall have continued for 30 days after
receipt of such notice, (ii) gross negligence or willful or intentional
wrongdoing or misconduct, (iii) a material breach by the Executive of the
Proprietary Information and Inventions and Non-Competition Agreement of
even date herewith between the Executive and the Company or any subsequent
such agreement between the Executive and the Company, or (iv) conviction of
the Executive of a felony offense or a crime involving moral turpitude.
(d) Termination for Disability. To provide for the event the
Executive's employment is terminated by either the Company or the Executive
on account of Disability (defined below), the Company shall provide or, as
applicable, cause its disability insurance carrier to provide, the
Executive such disability benefits as may hereafter be provided by the
Company in accordance with its policies, as they may exist from time to
time. As used herein, "Disability" means any physical or mental condition
of the Executive that (i) prevents the Executive from being able to perform
the services required under this Agreement, (ii) has continued for at least
180 consecutive days during any 12-month period and (iii) is reasonably
expected to continue.
(e) Termination by Company Without Cause. If the Company terminates
the Executive's employment for any reason other than for Cause or on
account of Disability, the Company shall:
(i) pay to the Executive, for the period of 12 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above; and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
following the date of such termination).
(f) Termination by the Executive with Good Reason. If the Executive
terminates his employment for Good Reason (as defined below), the Company
shall:
<PAGE>
(i) pay to the Executive, for the period of 24 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above: and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under COBRA
following the date of such termination).
As used in this Agreement, Good Reason" shall mean a material diminution in the
title, powers, duties, responsibilities or functions of the Executive as
described in Section 2 hereof within one year following the occurrence of a
Change of Control.
As used in this Agreement, a "Change of Control" shall mean:
(i) the acquisition after the Effective Date by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended) (a "Person") of
beneficial ownership of 50% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Voting Securities"), provided that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or (D)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (ii) hereof; or
(ii) consummation after the Effective Date of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate
Transaction") in each case, unless, following such Corporate
Transaction, (A) (1) all or substantially all of the persons who were
the beneficial owners of the Outstanding Common Stock immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of common
stock of the corporation resulting from such Corporate Transaction,
and (2) all or substantially all of the persons who were the
beneficial owners of the Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
of the Outstanding Common Stock and the Outstanding Voting Securities
immediately prior to such Corporate Transaction, as the case may be,
(B) no Person (excluding (1) any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction and (2) any Person approved by the members of the Board in
office immediately prior to such Corporate Transaction) beneficially
owns, directly or indirectly, 50% or more of the then outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to such Corporate Transaction and
(C) at least a majority of the members of the board of directors of
the corporation resulting from such Corporate Transaction were members
of the Board at the time of the execution of the initial agreement or
of the action of the Board providing for such Corporate Transaction.
<PAGE>
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
stock option or other agreements with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the date of termination of the
Executive's employment under this Agreement shall be payable in accordance with
such plan or program.
7. Resolution of Disputes.
(a) Negotiation. The parties shall attempt in good faith to resolve
any dispute arising out of or relating to this Agreement promptly by
negotiations between the Executive and an executive officer of the Company
who has authority to settle the controversy. Any party may give the other
party written notice of any dispute not resolved in the normal course of
business. Within 10 days after the effective date of such notice, the
Executive and an executive officer of the Company shall meet at a mutually
acceptable time and place within the Houston, Texas metropolitan area, and
thereafter as often as they reasonably deem necessary, to exchange relevant
information and to attempt to resolve the dispute. If the matter has not
been resolved within 30 days of the disputing party's notice, or if the
parties fail to meet within 10 days, either party may initiate arbitration
of the controversy or claim as provided hereinafter. If a negotiator
intends to be accompanied at a meeting by an attorney, the other negotiator
shall be given at least three business days' notice of such intention and
may also be accompanied by an attorney. All negotiations pursuant to this
Section 7(a) shall be treated as compromise and settlement negotiations for
the purposes of the federal and state rules of evidence and procedure.
(b) Arbitration. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof, which has not
been resolved by non-binding means as provided in Section 7(a) within 60
days of the initiation of such procedure, shall be finally settled by
arbitration conducted expeditiously in accordance with the Center for
Public Resources, Inc. ("CPR") Rules for Non-Administered Arbitration of
Business Disputes by three independent and impartial arbitrators, of whom
each party shall appoint one, provided that if one party has requested the
other to participate in a non-binding procedure and the other has failed to
participate, the requesting party may initiate arbitration before the
expiration of such period. Any such arbitration shall take place in Harris
County, Texas. Any arbitrator not appointed by a party shall be appointed
from the CPR Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act and any judgment upon the award decided upon
by the arbitrators may be entered by any court having jurisdiction thereof.
Each party hereby acknowledges that compensatory damages include (without
limitation) any benefit or right of indemnification given by another party
to the other under this Agreement.
<PAGE>
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas. Venue and jurisdiction
of any act on relating to this agreement shall lie in Harris County, Texas.
9. Notice. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally or if sent
by registered or certified mall, return receipt requested, postage prepaid,
addressed to such party at its address set forth below such party's signature to
this Agreement or to such other address as shall have been furnished in writing
by such party for whom the communication is intended. Any such notice shall be
deemed to be given on the date so delivered.
10. Severability. In the event any provisions hereof shall he modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof:
11. Entire Agreement. This Agreement, together with the Proprietary
Information and Inventions Agreement, constitutes the sole agreement between the
parties with respect to the employment of the Executive by the Company and
supersedes any and all other agreements, oral or written, between the parties.
12. Amendment and waiver. This Agreement may not be modified or amended
except by a writing signed by the parties. Any waiver or breach of any of the
terms of this Agreement shall not operate as a waiver of any other breach of
such terms or conditions, or any other terms or conditions, nor shall any
failure to enforce any provisions hereof operate as a waiver of such provision
or any other provision hereof.
13. Assignment. This Agreement is a personal employment contract and the
rights and interests of the Executive hereunder may not be sold, transferred,
assigned or pledged. The Company may assign its rights under this Agreement to
(i) any entity into or with which the Company is merged or consolidated or to
which the Company transfers all or substantially all of its assets or (ii) any
entity, which at the time of such assignment, controls, is under common control
with, or is controlled by the Company, provided that the Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably acceptable to the
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if not such succession had taken place.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns.
15. Section Headings. The section headings in this Agreement have been
inserted for convenience and shall not be used for interpretive purposes or to
otherwise construe this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above and intend that this Agreement have the effect of a
sealed instrument.
By: /S/PAUL A. COSSUM, Ph.D.
----------------------------
Paul A. Cossum, Ph.D.
ARONEX PHARMACEUTICALS, INC.
By: /S/GEOFFREY F. COX, Ph.D.
-----------------------------
Geoffrey F. Cox Ph.D.
Chief Executive Officer
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of June 12, 1998, is
entered into by and between Aronex Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Terance A. Murnane (the "Executive").
WITNESSETH:
WHEREAS the Company desires to employ the Executive, and the Executive
desires to continue in the employment of the Company, upon the terms and
conditions and in the capacities set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree as follows:
1. Employment and Term of Employment. Subject to the terms and conditions
of this Agreement, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, as Controller and Secretary for a
term (the "Term of Employment") beginning on the date first set forth above (the
"Effective Date") and ending on the Expiration Date (defined below). As used in
this Agreement, "Expiration Date" means the first anniversary of the Effective
Date, provided that on each anniversary of the Effective Date (each such
anniversary being referred to as a "Renewal Date"), the Expiration Date shall be
automatically extended one additional year unless, not less than 10 days prior
to the relevant Renewal Date, (i) either party shall have given written notice
to the other that no such automatic extension shall occur after the date of such
notice or (ii) either party shall have given a Notice of Termination to the
other pursuant to Section 5 hereof. Notwithstanding the foregoing, if either
party gives a valid Notice of Termination pursuant to Section 5 hereof, the Term
of Employment shall not extend beyond the termination date specified in such
Notice of Termination.
2. Scope of Employment (a) During the Term of Employment, the Executive
agrees to (i) serve as Controller and Secretary of the Company and shall have
and may exercise all the powers, duties and functions as are normal and
customary to such position and that are consistent with the responsibilities set
forth with respect to such position in the Company's by-laws and (ii) perform
such other duties not inconsistent with his position as are assigned to him,
from time to time, by the Board of Directors (the "Board") or Chief Executive
Officer of the Company. During the Term of Employment, the Executive shall
devote substantially all of his business time, attention, skill and efforts to
the faithful performance of his duties hereunder.
(b) During the Term of Employment, the Executive agrees to serve, if
elected, as an officer or director of any subsidiary or affiliate of the
Company so long as such service is commensurate with the Employee's duties
and responsibilities to the Company.
3. Compensation. During the Term of Employment, in consideration of the
Executive's services hereunder, including, without limitation, service as an
officer or director of the Company or of any subsidiary or affiliate thereof,
and in consideration of the Executive's agreements set forth in the Proprietary
Information and Inventions and Non-Competition Agreement dated May 6, 1991
between the Executive and the Company (the "Proprietary Information and
Inventions Agreement"):
<PAGE>
(a) the Executive shall receive a salary at a rate equivalent to the
Executive's current annual salary in effect on the Effective Date (payable
at such regular intervals as other employees of the Company are compensated
in accordance with the Company's employment practices), which salary shall
be subject to review annually by the Board and may be adjusted at its
discretion, provided that such salary may not be reduced at any time.
(b) the Executive shall be entitled to receive an annual cash bonus of
up to 20% of the Executive's salary based upon the achievement of such
milestones as may be agreed upon by the Executive and the Board.
4. Additional Compensation and Benefits. (a) As additional compensation for
the Executive's services under this Agreement and the Executive's agreements set
forth in the Proprietary Information and Inventions Agreement, during the Term
of Employment, the Company agrees to provide the Executive with the non-cash
benefits provided by the Company to its other officers and key employees as they
may exist from time to time. Such benefits shall include such leave or vacation
time (not less than three weeks), medical and dental insurance, life insurance
and other health care benefits, and retirement and disability benefits as may
hereafter be provided by the Company in accordance with its policies, as well as
any stock option plan or similar employee benefit program for which key
executives are or shall become eligible.
(b) The Executive is authorized to incur reasonable business expenses
for promoting the business and reputation of the Company, including
(without limitation) reasonable expenditures for travel, lodging, meals and
client, patron, customer and/or business associate entertainment. The
Company shall reimburse the Executive within 30 days for reasonable
expenses incurred by the Executive in furtherance of the Company's
business, provided that such expenses are incurred in accordance with the
Company's policies and upon presentation of documentation in accordance
with expense reimbursement policies of the Company as they may exist from
time to time, and submission to the Company of adequate documentation in
accordance with federal income tax regulations and administrative
pronouncements.
5. Termination.
(a) General. The Executive's employment hereunder shall automatically
terminate on the earlier of his death or the Expiration Date. The Executive
may, at any time prior to the Expiration Date, terminate his employment
hereunder for any reason by delivering a Notice of Termination (defined
below) to the Board. The Company may, at any time prior to the Expiration
Date, terminate the Executive's employment hereunder for any reason by
delivering a Notice of Termination to the Executive. The giving of a notice
pursuant to clause (i) of the proviso contained in the penultimate sentence
of Section I hereof shall not be deemed a termination of the Executive's
employment by the party giving such notice. As used in this Agreement,
"Notice of Termination" means a notice in writing purporting to terminate
the Executive's employment in accordance with this Section 5, which notice
shall (i) specify the effective date of such termination (not prior to the
date of such notice) and (ii) in the case of a termination by the Company
for Cause or Disability or a termination by the Executive for Disability or
Good Reason (in each case as such terms are defined below), set forth in
reasonable detail the reason for such termination and the facts and
circumstances claimed to provide a basis for such termination.
(b) Automatic Termination on Expiration Date or Death. In the event
the Executive's employment hereunder shall automatically terminate on the
Expiration Date or as a result of the Executive's death, the Executive
shall only be entitled to receive, to the extent applicable, (i) all unpaid
compensation accrued as of the termination date pursuant to Section 3
hereof, (ii) all unused vacation time accrued by the Executive as of the
termination date, (iii) all amounts owing to the Executive underSection
4(b) hereof and (iv) those benefits under Section 4 which are required
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other laws. The amounts described in clauses (i), (ii) and
(iii) of the foregoing sentence shall be paid to the Executive in a lump
sum payment promptly after the Expiration Date.
<PAGE>
(c) Termination by Company for Cause. If the Company terminates the
Executive's employment for Cause the Executive shall only be entitled to
receive the compensation and other payments described in paragraph (b)
above, such compensation and other payments to be paid as if the
Executive's employment had automatically terminated without the giving of
any Notice of Termination. As used in this Agreement, "Cause" shall mean
(i) any material failure of the Executive to perform his duties specified
in Section 2 of this Agreement (other than any such failure resulting from
the Executive's incapacity due to Disability) after written notice of such
failure has been given to the Executive by the Board or the Company's Chief
Executive Officer and such failure shall have continued for 30 days after
receipt of such notice, (ii) gross negligence or willful or intentional
wrongdoing or misconduct, (iii) a material breach by the Executive of the
Proprietary Information and Inventions and Non-Competition Agreement of
even date herewith between the Executive and the Company or any subsequent
such agreement between the Executive and the Company, or (iv) conviction of
the Executive of a felony offense or a crime involving moral turpitude.
(d) Termination for Disability. To provide for the event the
Executive's employment is terminated by either the Company or the Executive
on account of Disability (defined below), the Company shall provide or, as
applicable, cause its disability insurance carrier to provide, the
Executive such disability benefits as may hereafter be provided by the
Company in accordance with its policies, as they may exist from time to
time. As used herein, "Disability" means any physical or mental condition
of the Executive that (i) prevents the Executive from being able to perform
the services required under this Agreement, (ii) has continued for at least
180 consecutive days during any 12-month period and (iii) is reasonably
expected to continue.
(e) Termination by Company Without Cause. If the Company terminates
the Executive's employment for any reason other than for Cause or on
account of Disability, the Company shall:
(i) pay to the Executive, for the period of 12 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above; and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ('COBRA")
following the date of such termination).
(f) Termination by the Executive with Good Reason. If the Executive
terminates his employment for Good Reason (as defined below), the Company
shall:
<PAGE>
(i) pay to the Executive, for the period of 24 months commencing
on the date of such termination, an amount equal to the Executive's
then current annual salary (payable at such regular intervals as the
employees of the Company are compensated in accordance with the
Company's employment practices);
(ii) pay the Executive the compensation and other payments
described in paragraph (b) above; and
(iii) continue, for the period of 12 months commencing on the
date of such termination, to provide the benefits contemplated by
Section 4(a) of this Agreement (provided that the continuation of such
benefits shall be construed so as not to extend the period during
which the Company shall be required to provide benefits under COBRA
following the date of such termination).
As used in this Agreement, "Good Reason" shall mean a material diminution in the
title, powers, duties, responsibilities or functions of the Executive as
described in Section 2 hereof within one year following the occurrence of a
Change of Control.
As used in this Agreement, a "Change of Control" shall mean:
(i) the acquisition after the Effective Date by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended) (a "Person") of
beneficial ownership of 50% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Voting Securities"), provided that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, or (D)
any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (ii) hereof; or
(ii) consummation after the Effective Date of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate
Transaction") in each case, unless, following such Corporate
Transaction, (A) (1) all or substantially all of the persons who were
the beneficial owners of the Outstanding Common Stock immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of common
stock of the corporation resulting from such Corporate Transaction,
and (2) all or substantially all of the persons who were the
beneficial owners of the Outstanding Voting Securities immediately
prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
of the Outstanding Common Stock and the Outstanding Voting Securities
immediately prior to such Corporate Transaction, as the case may be,
(B) no Person (excluding (1) any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction and (2) any Person approved by the members of the Board in
office immediately prior to such Corporate Transaction) beneficially
owns, directly or indirectly, 50% or more of the then outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to such Corporate Transaction and
(C) at least a majority of the members of the board of directors of
the corporation resulting from such Corporate Transaction were members
of the Board at the time of the execution of the initial agreement or
of the action of the Board providing for such Corporate Transaction.
<PAGE>
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
stock option or other agreements with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the date of termination of the
Executive's employment under this Agreement shall be payable in accordance with
such plan or program.
7. Resolution of Disputes.
(a) Negotiation. The parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiations
between the Executive and an executive officer of the Company who has authority
to settle the controversy. Any party may give the other party written notice of
any dispute not resolved in the normal course of business. Within 10 days after
the effective date of such notice, the Executive and an executive of officer of
the Company shall meet at a mutually acceptable time and place within the
Houston, Texas metropolitan area, and thereafter as often as they reasonably
deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within 30 days of the disputing
party's notice, or if the parties fail to meet within 10 days, either party may
initiate arbitration of the controversy or claim as provided hereinafter. If a
negotiator intends to be accompanied at a meeting by an attorney, the other
negotiator shall be given at least three business days, notice of such intention
and may also be accompanied by an attorney. All negotiations pursuant to this
Section 7(a) shall be treated as compromise and settlement negotiations for the
purposes of the federal and state rules of evidence and procedure.
(b) Arbitration. Any dispute arising out of or relating to this Agreement
or the breach, termination or validity thereof, which has not been resolved by
non-binding means as provided in Section 7(a) within 60 days of the initiation
of such procedure, shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources, Inc. ("CPR")
Rules for Non-Arbitration of Business Disputes by three independent and
impartial arbitrators, of whom each party shall appoint one, provided that if
one party has requested the other to participate in a non-binding procedure and
the other has failed to participate, the requesting party may initiate
arbitration before the expiration of such period. Any such arbitration shall
take place in Harris County, Texas. Any arbitrator not appointed by a party
shall be appointed from the CPR Panels of Neutrals. The arbitration shall be
governed by the United States Arbitration Act and any judgment upon the award
decided upon by the arbitrators may be entered by any court having jurisdiction
thereof. Each party hereby acknowledges that compensatory damages include
(without limitation) any benefit or right of indemnification given by another
party to the other under this Agreement.
<PAGE>
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas. Venue and jurisdiction
of any act on relating to this agreement shall lie in Harris County, Texas.
9. Notice. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally or if sent
by registered or certified mall, return receipt requested, postage prepaid,
addressed to such party at its address set forth below such party's signature to
this Agreement or to such other address as shall have been furnished in writing
by such party for whom the communication is intended. Any such notice shall be
deemed to be given on the date so delivered.
10. Severability. In the event any provisions hereof shall he modified or
held ineffective by any court, such adjudication shall not invalidate or render
ineffective the balance of the provisions hereof.
11. Entire Agreement. This Agreement, together with the Proprietary
Information and Inventions Agreement, constitutes the sole agreement between the
parties with respect to the employment of the Executive by the Company and
supersedes any and all other agreements, oral or written, between the parties.
12. Amendment and Waiver. This Agreement may not be modified or amended
except by a writing signed by the parties. Any waiver or breach of any of the
terms of this Agreement shall not operate as a waiver of any other breach of
such terms or conditions, or any other terms or conditions, nor shall any
failure to enforce any provisions hereof operate as a waiver of such provision
or any other provision hereof.
13. Assignment. This Agreement is a personal employment contract and the
rights and interests of the Executive hereunder may not be sold, transferred,
assigned or pledged. The Company may assign its rights under this Agreement to
(i) any entity into or with which the Company is merged or consolidated or to
which the Company transfers all or substantially all of its assets or (ii) any
entity, which at the time of such assignment, controls, is under common control
with, or is controlled by the Company, provided that the Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably acceptable to the
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if not such succession had taken place.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns.
15. Section Headings. The section headings in this Agreement have been
inserted for convenience and shall not be used for interpretive purposes or to
otherwise construe this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above and intend that this Agreement have the effect of a
sealed instrument.
By:/S/TERANCE A. MURNANE
------------------------
Terance A. Murnane
ARONEX PHARMACEUTICALS, INC.
By:/S/GEOFFREY F. COX, Ph.D.
----------------------------
Geoffrey F. Cox, Ph.D.
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 Statement of Operations.
<TABLE>
<CAPTION>
Average
Days Shares Shares Loss Per
Shares Outstanding X Days Outstanding Loss Share
<S> <C> <C> <C> <C> <C>
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
<S> <C> <C> <C> <C> <C> <C>
181 2,650,839,297 /181 14,645,521 (6,294,000) (0.43)
Six Months Ended June 30, 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 98 1,515,793,538
15,497,443 1 15,497,443
182 2,814,516,100 /182 15,464,374 (10,487,000) (0.68)
Quarter Ended June 30, 1997: 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)
Quarter Ended June 30, 1998: 15,467,281 91 1,407,522,571
15,497,443 1 15,497,443
92 1,423,020,014 /92 15,467,609 (5,576,000) (0.36)
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
FINANCIAL DATA SCHEDULE
ARONEX PHARMACEUTICALS, INC. Exhibit 27.1
<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, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,265,000
<SECURITIES> 14,966,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,496,000
<PP&E> 4,780,000
<DEPRECIATION> 2,619,000
<TOTAL-ASSETS> 24,166,000
<CURRENT-LIABILITIES> 5,842,000
<BONDS> 0
<COMMON> 15,000
0
0
<OTHER-SE> 17,212,000
<TOTAL-LIABILITY-AND-EQUITY> 24,166,000
<SALES> 0
<TOTAL-REVENUES> 941,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,414,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,000
<INCOME-PRETAX> (10,487,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,487,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,487,000)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
