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"):
(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.
(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:
(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.
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.
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.
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.