-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JdNqMnW1R2RX8UzQVEfU5pgUIFM6DmyvEOUSF68UyGaiafLWq0zHg2Ljvk7dyHyv bPk8fepfLpakY7LxOBZkBw== 0000910484-99-000032.txt : 19990607 0000910484-99-000032.hdr.sgml : 19990607 ACCESSION NUMBER: 0000910484-99-000032 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990525 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARONEX PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000854691 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 760196535 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-72451 FILM NUMBER: 99640833 BUSINESS ADDRESS: STREET 1: 8707 TECHNOLOGY FOREST PLACE CITY: THE WOODLANDS STATE: TX ZIP: 77381-1191 BUSINESS PHONE: 2813671666 MAIL ADDRESS: STREET 1: 8707 TECHNOLOGY FOREST PLACE CITY: THE WOODLANDS STATE: TX ZIP: 77381-1191 8-K 1 ARONEX PHARMACEUTICALS, INC. FORM 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ FORM 8-K Current Report Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 21, 1999 ARONEX PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 0-20111 76-0196535 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.) incorporation or organization)
8707 Technology Forest Place The Woodlands, Texas 77381-1191 (Address of principal executive offices and zip code) (281) 367-1666 (Registrant's telephone number, including area code) ------------------------------------ ================================================================================ ITEM 5. OTHER EVENTS On May 21, 1999, Aronex Pharmaceuticals, Inc. (the "Company") entered into an Amendment No. 4 to License and Development Agreement with Genzyme Corporation ("Genzyme") to convert a $2.5 million payment into a three-year convertible note bearing interest at 10% annum. The $2.5 million payment obligation to Genzyme was triggered on March 29, 1999 when the Company regained the worldwide commercial rights of ATRAGEN(R), an injectable formulation of all-trans-retinoic acid (ATRA or tretinoin), from Genzyme. In connection with the Amendment, the Company entered into a 10% Convertible Note payable to Genzyme for $2.5 million. Genzyme has the right to convert the principal of the Note into shares of common stock of the Company at a conversion price of $4.35. Additionally, Genzyme was given a Common Stock Purchase Warrant entitling it to purchase 50,000 shares of the Company's common stock at an exercise price of $4.00 per share over a five-year term.
ITEM 7. EXHIBITS Exhibit 10.1 -- Amendment No. 4 to License and Development Agreement dated May 21, 1999 by and between Aronex Pharmaceuticals, Inc. and Genzyme Corporation. Exhibit 10.2 -- 10% Convertible Note dated May 21, 1999 by Aronex Pharmaceuticals, Inc. made payable to Genzyme Corporation for $2.5 million. Exhibit 10.3 -- Common Stock Purchase Warrant for 50,000 shares of Common Stock of Aronex Pharmaceuticals, Inc. issued in the name of Genzyme Corporation.
-2- 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 hereunto duly authorized. ARONEX PHARMACEUTICALS, INC. Date: May 27, 1998 By: /s/ Terance A. Murnane ------------------------- Ternace A. Murnane Controller and Secretary -3- EX-10.1 2 EXHIBIT 10.1 LICENSE AND DEVELOPMENT AGREEMENT Exhibit 10.1 AMENDMENT NO. 4 TO LICENSE AND DEVELOPMENT AGREEMENT This Amendment No. 4 to License and Development Agreement (this "Amendment") is made as of the 21st day of May, 1999 (the "Effective Date") by and between Aronex Pharmaceuticals, Inc., a Delaware corporation ("Aronex"), and Genzyme Corporation, a Massachusetts corporation ("Genzyme"). Capitalized terms used without definition in this Amendment shall have the meanings given to such terms in the Development Agreement (as defined below). RECITALS WHEREAS, Aronex (f/k/a Argus Pharmaceuticals, Inc.) and Genzyme entered into a License and Development Agreement dated September 10, 1993 (as subsequently amended by amendments dated September 8, 1995, September 10, 1996 and March 27, 1997, the "Development Agreement") relating to the development, license, manufacture, marketing and sale of pharmaceutical compositions incorporating "AR-623" (also known as "Atragen(TM)"); WHEREAS, Genzyme has elected to terminate its Option and relinquish its rights thereunder, effective as of March 24, 1999 (the "Election"); WHEREAS, as a result of the Election by Genzyme, Aronex is obligated pursuant to Section 2.4 of the Development Agreement to pay Genzyme the sum of $2,000,000 (the "Repayment Amount") on or before April 24, 1999, which has been extended to the Effective Date, plus an additional amount of $500,000 (the "Minimum Royalty Amount") of minimum royalty payments by April 24, 2000; and WHEREAS, Aronex and Genzyme desire to amend the Development Agreement (i) to restructure the Repayment Amount and the Minimum Royalty Amount owing by Aronex as a result of such Election under Section 2.4 thereof into a convertible note to be issued to Genzyme by Aronex, (ii) to issue Genzyme a warrant to purchase 50,000 shares of Aronex Common Stock, and (iii) to provide Genzyme with registration rights with respect to shares it may receive upon conversion of such convertible note as well as shares issuable upon exercise of the warrant; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, Aronex and Genzyme agree as follows: -4- 1. RESTRUCTURING OF REPAYMENT AMOUNT AND MINIMUM ROYALTY AMOUNT. The parties agree that the Repayment Amount and the Minimum Royalty Amount required to be paid by Aronex to Genzyme as a result of the Election shall be due and payable pursuant to the terms of a three-year Convertible Note from Aronex in the form of Exhibit 2.4(a) hereto. Such Convertible Note shall provide for interest of 10% per annum, to be payable in semi-annual payments and the principal amount thereof to be due on the expiration of three years. In addition, part or all of the principal of the Convertible Note may be converted, at Genzyme's election, into shares of Common Stock of Aronex at a purchase price of $4.35 per share, at any time and from time to time, prior to the repayment thereof. As a result, Section 2.4 of the Development Agreement is hereby amended by adding the following paragraph at the end thereof: "Notwithstanding anything contained in this Section 2.4 to the contrary, the obligation of Aronex to pay (i) $2,000,000 within thirty days of the Option Expiration Date and (ii) $500,000 minimum royalty within the first twelve months following the due date of the $2,000,000 amount, is hereby canceled and terminated in exchange for the issuance by Aronex and delivery to Genzyme of (i) a Convertible Note (the "Convertible Note") in the principal amount of $2,500,000 in the form attached hereto as Exhibit 2.4(a) and (ii) a Common Stock Purchase Warrant (the "Warrant") to purchase 50,000 shares of the Common Stock of Aronex, par value $.001 per share (the "Common Stock"), at a purchase price of $4.00 per share in the form attached hereto as Exhibit 2.4(b)." 2. REGISTRATION RIGHTS. The following section shall be added to the Development Agreement as Section 11 thereof: "11. Registration Rights. (a) Shelf Registration. Within sixty days from the receipt of notice from Genzyme of its interest to either exercise the Warrant or convert a portion of the principal amount of the Convertible Note, Aronex shall use its reasonable best efforts to prepare for filing with the Securities and Exchange Commission (the "Commission"), and cause to be declared effective, a "shelf" registration statement (the "Shelf Registration") pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), providing for the sale by the Stockholder (as hereafter defined) of the Registrable Shares (as hereinafter defined). Aronex agrees to use its reasonable best efforts to keep such Shelf Registration continuously effective for a period ending on the earliest of (a) the tenth anniversary of the effective date of such Shelf Registration, (b) the date on which all Registrable Shares covered thereby have been sold thereunder, or (c) the date upon which all Registrable Shares are freely transferable without restriction under the Securities Act. For the purpose of this Section 11, "reasonable best efforts" -5- shall mean the best efforts of Aronex consistent with sound and reasonable business practices and judgment. "Registrable Shares" means any shares of Common Stock issuable upon conversion of the Convertible Note, (ii) any shares of Common Stock issuable upon exercise of the Warrant, and (iii) any other shares of Common Stock issued in respect of the shares referred to in (i) or (ii) (because of stock splits, stock dividends, subdivisions, combinations, reclassifications, recapitalizations, or similar events), provided, however, that any such shares shall cease to be Registrable Shares when such shares become eligible for resale under Rule 144(k) of the Securities Act by persons who are not affiliates of Aronex or upon (a) any transfer that results in the purchaser of such shares receiving shares that are not "restricted securities" within the meaning of Rule 144 or (b) any transfer to a person or entity that, by virtue of Section 11(g) hereof is not entitled to the rights set forth in this Section 11. "Stockholder" means Genzyme and any persons or entities to whom the rights granted under this Section 11 are transferred in accordance with Section 11(g). (b) Registration Procedures. In connection with Aronex's obligations with respect to the Shelf Registration, Aronex shall use its reasonable best efforts to effect the registration in furtherance of the sale of the Registrable Shares in accordance with the intended method or methods of distribution thereof described in the Shelf Registration. In connection therewith, Aronex shall, as promptly as may be practicable: (i) prepare and file with the Commission a registration statement with respect to the Registrable Shares on any form for which Aronex then qualifies or which counsel for Aronex shall deem appropriate and which form shall be available for the disposition of the Registrable Shares in accordance with the intended method or methods of disposition thereof; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the applicable period specified in Section 11(a) above or as may be reasonably requested by Stockholder in order to incorporate information concerning Stockholder or its intended method of distribution, and otherwise to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (iii) furnish to Stockholder, prior to the filing thereof with the Commission, a copy of such registration statement and each amendment thereof and each supplement, if any, to the prospectus included therein and Aronex shall use its -6- reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as Stockholder may reasonably propose; (iv) furnish to Stockholder a copy of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto but excluding all documents incorporated by reference therein unless specifically so requested by Stockholder) and such reasonable number of copies of the prospectus included in such registration statement (including each preliminary prospectus) as Stockholder may reasonably request; (v) use reasonable best efforts to register or qualify the Registrable Shares under such other securities laws or blue sky laws of such jurisdictions as Stockholder shall reasonably request, and take any and all such actions as may be reasonably necessary or advisable to enable Stockholder to consummate the disposition in such jurisdictions of such Registrable Shares; (vi) notify Stockholder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the period that Aronex is required to keep the registration statement effective, of the happening of any event as a result of which the prospectus included in such registration statement (as then in effect) contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare, file with the Commission and furnish Stockholder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that as thereafter declared to the purchasers of such shares, such prospectus shall not include an entire statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (vii) advise Stockholder, promptly after receiving notice thereof, of any stop order issued or threatened by the Commission and use its reasonable best efforts to take all actions required to prevent the entry of such stop order, or to remove it if entered; and (viii) use its reasonable best efforts to cause all Registrable Shares included in such registration statement to be listed, by the date of the first sale of Registrable Shares pursuant to such registration statement, on each securities exchange or market on which the Common Stock of Aronex is then listed or proposed to be listed. (ix) shall (a) make reasonably available for inspection by Stockholder, and any attorney, accountant or other agent retained by Stockholder all relevant financial and other records, pertinent corporate documents and properties of Aronex and (b) cause Aronex's officers, directors, employees, accountants and auditors to supply all -7- relevant information reasonably requested by Stockholder or any such attorney, accountant or agent in connection with such registration statement, in each case as may be reasonably necessary to enable such persons to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act. (x) shall use its reasonable best efforts to take all other steps necessary effect the registration of the Registrable Shares contemplated hereby. (c) Expenses. All expenses incident to Aronex's performance of or compliance with the provisions of this Section 11 will be borne by Aronex. Notwithstanding the foregoing, Stockholder shall pay any and all underwriting fees, discounts or commissions attributable to the sale of Registrable Shares. (d) Indemnification. (i) Upon the registration of Registrable Shares pursuant to Section 11 hereof, Aronex shall, and it hereby agrees to, indemnify and hold harmless, to the extent permitted by law, Stockholder, its officers and directors, each underwriter of such Registrable Shares, if any, and each person who controls such person (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees and expenses) to which Stockholder, its officers, directors, each underwriter, or such controlling persons may become subject, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any such registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Stockholder, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; except (A) insofar as the same arise out of or are based upon an untrue statement or omission or alleged omission so made based upon information furnished by Stockholder, underwriter or controlling person in writing specifically for use in such registration statement or prospectus or (B) insofar as the same are caused by Stockholder's or such underwriter's failure to deliver a copy of such registration statement or prospectus or any amendments or supplements thereto after Aronex has furnished Stockholder or such underwriter with a sufficient number of copies of the same. -8- (ii) In connection with any registration statement under which Registrable Shares are registered under the Securities Act and pursuant to which Stockholder offers and sells Registrable Shares, Stockholder shall, and it hereby agrees to, indemnify and hold harmless, to the extent permitted by law, each of Aronex, its officers and directors, and each person who controls Aronex (within the meaning of the Securities Act) and, if the offering is an underwritten offering, the underwriters, against all losses, claims, damages, liabilities and expenses (including reasonable attorneys' fees and expenses) to which Aronex, its officers and directors, underwriters, or controlling persons may become subject, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any such registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and will reimburse Aronex and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, insofar as (A) the same arise out of or are based upon any untrue statement or omission or alleged omission so made based upon information furnished by Stockholder, or an underwriter or controlling person of Stockholder, in writing specifically for use in such registration statement or prospectus or (B) the same are caused by Stockholder's or such underwriter's failure to deliver a copy of such registration statement or prospectus or any amendments or supplements thereto after Aronex has furnished Stockholder or such underwriter with a sufficient number of copies of the same and provided, further, that the liability of Stockholder under this Section 11 shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of Registrable Shares sold by Stockholder under such registration statement bears to the total public offering price of all securities sold thereunder, but not to exceed the amount of the proceeds received by Stockholder from the sale of the Registrable Shares covered by such registration statement. (iii)Any person entitled to indemnification hereunder will (A) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification (but the failure to give such notice will not affect the right to indemnification hereunder, unless the indemnifying party is materially prejudiced by such failure) and (B) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel selected -9- by the indemnifying party and reasonably satisfactory to the indemnified party. If such defense is not assumed by the indemnifying party or if the indemnifying party is not permitted to assume such defense then (x) the indemnified party shall select counsel, which counsel must be reasonably satisfactory to the indemnifying party and (y) the indemnifying party will not be subject to any liability for any settlement made without its consent (which consent will not be unreasonably withheld). No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonably judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which case the indemnifying party shall be obligated to pay the fees and expenses of one additional counsel, who must be reasonably satisfactory to the indemnifying party. (iv) Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 11(d)(i) or 11(d)(ii) are unavailable or are insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 11(d)(iv) were determined by pro rata allocation (even if Stockholder or any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to in this Section 11(d)(iv). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) -10- shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (v) The indemnification and contribution obligations and each other provision set forth in this Section 11(d) shall remain in full force and effect regardless of any investigation made by or on behalf of Aronex, Stockholder, any officer or employee of Aronex or Stockholder, any underwriter, any officer or employee of such underwriter, or any controlling person of any of the foregoing and shall survive the transfer and registration of Registrable Shares by Stockholder. (e) Rule 144 Reporting. With a view to making available to Stockholder the benefits of Rule 144 promulgated by the Commission under the Securities Act, Aronex agrees to use its reasonable best efforts to: (i) make and keep adequate current public information with respect to Aronex available, as those terms are used in Rule 144 under the Securities Act; (ii) file with the Commission in a timely manner all reports and other documents required of Aronex under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (iii)furnish to Stockholder promptly upon request a written statement by Aronex as to its compliance with the reporting requirements of Rule 144 and the Exchange Act, a copy of the most recent annual or quarterly report of Aronex, and such other reports and documents of Aronex as Stockholder may reasonably request in order to permit Stockholder to avail itself of any rule or regulation of the Commission allowing Stockholder to sell its Registrable Shares without registration. (f) Amendments and Waivers. Any provision of this Section 11 may be amended or waived if, but only if, in the case of an amendment, such amendment is in writing and is signed by Aronex and Stockholder. No failure or delay by Aronex or Stockholder in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (g) Transfers of Certain Rights. (i) The rights granted to Stockholder under this Section 11 may be transferred or succeeded to only by (i) an affiliate of Stockholder, (ii) a person or entity that acquires substantially all of the assets of Stockholder, or (iii) any other person or entity that acquires at least 25% of the Registrable Shares; provided, however, that Aronex is given written notice prior to or -11- promptly following such transfer stating the name and address of the transferee and identifying the securities with respect to which such rights are being assigned. Such notice shall include or be accompanied by a written undertaking by the transferee to comply with the obligations imposed on Stockholders under this Section 11. (ii) A transferee to whom rights are transferred pursuant to this Section 11(g) may not again transfer such rights to any other person or entity, other than as provided in Section 11(g)(i) above." 3. NO OTHER AMENDMENTS. Except as specifically amended hereby, the Development Agreement shall continue in full force and effect. IN WITNESS WHEREOF the parties hereto have executed this Amendment in one or more copies effective as of the Effective Date. ARONEX PHARMACEUTICALS, INC. By: /s/ Geoffrey F. Cox --------------------------------- Name: Geoffrey F. Cox --------------------------------- Title: Chairman of the Board & Chief Executive Officer --------------------------------- GENZYME CORPORATION By: /s/ Richard Douglas --------------------------------- Name: Richard Douglas --------------------------------- Title: Senior Vice President, Corporate Development --------------------------------- -12- EX-10.2 3 EXHIBIT 10.2 10% CONVERTIBLE NOTE Exhibit 10.2 No. ___ May 21, 1999 ARONEX PHARMACEUTICALS, INC. 10% CONVERTIBLE NOTE THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO ARONEX PHARMACEUTICALS, INC. ("COMPANY") OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. Aronex Pharmaceuticals, Inc., a Delaware corporation ("Company"), for value received, hereby promises to pay to Genzyme Corporation, or registered assigns, the principal amount of Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) on May 21, 2002, (the "Due Date") except for any portion of the principal amount of this Convertible Note which is converted to shares of Common Stock of the Company pursuant to the terms of Section 1, at the office of the Company in The Woodlands, Texas. Interest shall accrue and be payable from the date of issuance of this Convertible Note on the unpaid principal balance at a rate of ten percent (10%) per annum, payable semi-annually on each September 30 and March 30 following the issuance hereof. Except as otherwise provided herein, all sums of past-due principal and interest shall bear interest at a rate equal to 12% or at the maximum rate of interest permitted by applicable law, if lower. Payment shall be made prior to 12:00 noon, Boston, Massachusetts time, on the Due Date. When due, by wire transfer of immediately available funds and shall be in coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Convertible Note may not be prepaid by the Company at any time, in whole or in part. The following is a statement of rights of the holder of this Convertible Note and the conditions to which this Convertible Note is subject, to which the holder hereof, by the acceptance of this Convertible Note, assents: -13- 2. Optional Conversion Rights. The holder of this Convertible Note shall have the right to convert at any time during the term of this Convertible Note part or all of the principal amount hereof, together with accrued interest thereon, into shares of Common Stock of the Company (the "Conversion Shares") at a price per share equal to $4.35 (the "Conversion Price") subject to adjustment as provided in Section 9. Such right must be exercised by written notice given by the holder to the Company, which notice shall specify that portion of the principal amount and accrued interest which the holder elects to convert and the name of the person or entity for which a stock certificate should be issued. Any such notice given by a holder shall be final and irrevocable, and conversion shall occur at the time such notice is received by the Company with respect to that portion of this Convertible Note which the holder has elected to convert. The Company shall deliver a stock certificate to the holder within five business days following the date of conversion with respect to that number of Conversion Shares of Common Stock acquired by the holder pursuant to the terms hereof, and the Company shall have no further obligation to pay any principal amount of or accrued interest on the portion of this Convertible Note which was so converted by the holder. 3. Collection Fees. In the event of default hereunder and if this Convertible Note is placed in the hands of any attorney for collection (whether or not suit is filed), or if this Convertible Note is collected by suit or legal proceedings or through bankruptcy proceedings, the Company agrees to pay in addition to all sums then due hereon, including principal and interest, all reasonable attorney's fees. 4. Registered Owner; Transfer. The Company and any agent of the Company may treat the person or entity identified in the initial paragraph of this Convertible Note as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal or interest due hereon and for all other purposes, and neither the Company nor any such agent shall be affected by notice to the contrary. Subject to compliance with applicable federal and state securities laws, this Convertible Note is transferable only on the books of the Company (at its offices or agency to be maintained in The Woodlands, Texas) by the registered holder in person or by attorney on surrender of this Convertible Note properly endorsed. 5. No Recourse Against Individuals. This Convertible Note is the obligation of the Company only, and no recourse shall be had for the payment hereof or the interest hereon against any incorporator, shareholder, director or officer as such (whether past, present or future) of the Company or any successor entity whether by virtue of any constitution, statute or rule of law or equity, or by the enforcement of any assessment of penalty, or otherwise, all such liability of the incorporators, shareholders, directors and officers as such being expressly waived and released by the holder hereof by the acceptance of this Convertible Note. 6. Amendments and Waivers. The holder of this Convertible Note may waive or otherwise consent to the amendment of any of the provisions hereof. 7. Maximum Rate of Interest. Notwithstanding any provisions to the contrary in this Convertible Note, or in any of the documents relating hereto, in no event shall this Convertible Note or such documents require the payment or permit the collecting of interest in -14- excess of the maximum amount permitted by the laws of the State of Texas. If any such excess interest is contracted for, charged or received under this Convertible Note or under the terms of any of the documents relating hereto, or in the event the maturity of the indebtedness evidenced by this Convertible Note is accelerated in whole or in part, or in the event that all or part of the principal or interest of this Convertible Note shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Convertible Note or under any of the documents relating hereto, on the amount of principal actually outstanding from time to time under this Convertible Note, shall exceed the maximum amount of interest permitted by the laws of the State of Texas, then in any such event (a) the provisions of this paragraph shall govern and control, (b) neither the Company nor any other person or entity now or hereafter liable for the payment hereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by the laws of the State of Texas, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal amount hereof or refunded to the Company, at the holder's option, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful rate of interest allowed under the laws of the State of Texas as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Convertible Note or under such other documents which are made for the purpose of determining whether such rate exceeds the maximum lawful rate of interest, shall be made, to the extent permitted by the laws of the State of Texas, by amortizing, prorating, allocating and spreading during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from the Company or otherwise by the holder or holders hereof in connection with such indebtedness. 8. Restrictions on Transferability. This Convertible Note and the Conversion Shares which may be acquired upon conversion hereof have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except upon delivery to the Company of an opinion of counsel satisfactory to the Company that registration is not required for such transfer, or submission to the Company of such other evidence as may be reasonably satisfactory to the Company to the effect that any such transfer shall not be in violation of the Securities Act of 1933, as amended, or any applicable state or foreign securities laws or any rule or regulation promulgated thereunder. Notwithstanding the above, the holder of this Convertible Note has been provided certain registration rights with respect to the Conversion Shares which may be acquired upon conversion hereof pursuant to the Amendment No. 4 to License and Development Agreement of even date herewith between the Company and such holder (the "Fourth Amendment to License Agreement"). 9. Default; Acceleration. An Event of Default exists if the Company fails to pay interest within five days following the date due; fails to pay principal within three days following the date due; fails to perform any other obligations within twenty days of notice; is subject to a voluntary or involuntary bankruptcy proceeding and such involuntary proceeding is not stayed or dismissed within sixty days; if a default by the Company exists under the Development Agreement between the Company and Genzyme Corporation dated September 10, 1993, as amended, or the -15- Common Stock Purchase Warrant of even date herewith issued by the Company to Genzyme Corporation pursuant to the Amendment No. 4 to such Development Agreement, which default, in either case, has not been remedied by the Company prior to the expiration of any applicable grace period; or if the Common Stock of the Company is no longer listed for trading on The Nasdaq Stock Market or other national securities exchange. In the event of any default under this Convertible Note by the Company, provided there is no agreement for waiver thereof or the Company has not cured such default, then, at the option of the holder of the Convertible Note, the Convertible Note shall thereupon become and be due and payable, without any other presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. 10. Adjustment of Conversion Price. (a) The Conversion Price and the number of Conversion Shares and the number or amount of any other securities and property as hereinafter provided into which this Convertible Note may be convertible shall be subject to adjustment from time to time effective upon each occurrence of any of the following events. (b) If the Company shall declare or pay any dividend with respect to its Common Stock payable in shares of Common Stock, subdivide the outstanding Common Stock into a greater number of shares of Common Stock, or reduce the number of shares of Common Stock outstanding (by stock split, reverse stock split, reclassification or otherwise than by repurchase of its Common Stock) (any of such events being hereinafter called a "Stock Split"), the Conversion Price and number of Conversion Shares issuable upon conversion of this Convertible Note shall be appropriately adjusted so as to entitle the holder hereof to receive upon conversion of this Convertible Note, for the same aggregate consideration provided herein, the same number of shares of Common Stock (plus cash in lieu of fractional shares) as the holder would have received as a result of such Stock Split had such holder converted this Convertible Note in full immediately prior to such Stock Split. (c) If the Company shall merge or consolidate with or into one or more corporations or partnerships and the Company is the sole surviving corporation, or the Company shall adopt a plan of recapitalization or reorganization in which the Common Stock is exchanged for or changed into another class of stock or other security or property of the Company, the holder of this Convertible Note shall, for the same aggregate consideration provided herein, be entitled upon conversion of this Convertible Note to receive in lieu of the number of shares of Common Stock as to which this Convertible Note would otherwise be convertible, the number of shares of Common Stock or other securities (plus cash in lieu of fractional shares) or property to which such holder would have been entitled pursuant to the terms of the agreement or plan of merger, consolidation, recapitalization or reorganization had such holder converted this Convertible Note in full immediately prior to such merger, consolidation, recapitalization or reorganization. (d) If the Company is merged or consolidated with or into one or more corporations or partnerships under circumstances in which the Company is not the sole surviving corporation, or if the Company sells or otherwise disposes of substantially all its assets, and in connection with any -16- such merger, consolidation or sale the holders of Common Stock receive stock or other securities convertible into equity of the surviving or acquiring corporations or entities, or other securities or property after the effective date of such merger, consolidation or sale, as the case may be, the holder of this Convertible Note shall, for the same aggregate consideration provided herein, be entitled upon conversion of this Convertible Note to receive, in lieu of the shares of Common Stock as to which this Convertible Note would otherwise be convertible, shares of such stock or other securities (plus cash in lieu of fractional shares) or property as the holder of this Convertible Note would have received pursuant to the terms of the merger, consolidation or sale had such holder converted this Convertible Note in full immediately prior to such merger, consolidation or sale. In the event of any consolidation, merger or sale as described in this Section 9(d), provision shall be made in connection therewith for the surviving or acquiring corporations or partnerships to assume all obligations and duties of the Company hereunder or to issue a substitute note in lieu of this Convertible Note with all such changes and adjustments in the number or kind of shares of stock or securities or property thereafter subject to this Convertible Note or in the Conversion Price as shall be required in connection with this Section 9(d). (e) If the Company, at any time after the date hereof and before the Due Date, shall issue or sell or fix a record date for the issuance of rights, options, warrants or convertible or exchangeable securities to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share), that together with the value of any consideration paid for any such rights, options, warrants or convertible or exchangeable securities (as determined in good faith by the Board of Directors of the Company) is less than the fair market value of a share of Common Stock as of the date of such issuance or sale or on such record date; then, immediately after the date of such issuance or sale or on such record date, the holder shall have the right to receive, upon the same terms as the holders of Common Stock, the kind and amount of rights, options, warrants or convertible or exchangeable securities receivable in such offerings by a holder of the number of shares of Common Stock that the holder would have been entitled to receive upon conversion of this Convertible Note pursuant to Section 1 hereof had such Convertible Note been converted immediately before such issuance or the record date for such issuance. (f) If (other than in dissolution or liquidation) securities of the Company (other than shares of Common Stock or securities issued pursuant to a shareholder rights or similar plan) or assets are issued by way of a dividend on outstanding shares of Common Stock, then the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the last sale price of the Common Stock on such record date less the then fair market value as determined by the Board of Directors of the company of the portion of the securities or assets distributed applicable to one share of Common Stock, and the denominator of which shall be such last sale price. Such adjustment shall become effective immediately prior to the opening of business on the day following such record date. (g) If the Company (other than in connection with a sale described in Section 9(d)) proposes to liquidate and dissolve, the Company shall give notice thereof as provided in Section 10(b) hereof and shall permit the holder of this Convertible Note to convert any unconverted -17- portion hereof at any time within the 10 day period following delivery of such notice, if such holder should elect to do so, and participate as a stockholder of the Company in connection with such dissolution. (h) Whenever any adjustment is made as provided in any provision of this Section 9: (i) the Company shall compute the adjustments in accordance with this Section 9 and shall prepare a certificate signed by an officer of the Company setting forth the adjusted number of shares or other securities or property and Conversion Price, as applicable, and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Company or its designee; and (ii) a notice setting forth the adjusted number of shares or other securities or property and the Conversion Price, as applicable, shall forthwith be required, and as soon as practicable after it is prepared, such notice shall be delivered by the Company to the holder of record of this Convertible Note. (i) If at any time, as a result of any adjustment made pursuant to this Section 9, the holder of this Convertible Note shall become entitled, upon exercise hereof, to receive any shares other than shares of Common Stock or to receive any other securities, the number of such other shares or securities so receivable upon conversion of this Convertible Note shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Section 9 with respect to the Common Stock. 10. Special Agreements of the Company. (a) The Company covenants and agrees that it will reserve and set apart and have at all times a number of shares of authorized but unissued Common Stock then deliverable upon the conversion of this Convertible Note or any other rights or privileges provided for herein sufficient to enable it at any time to fulfill all its obligations hereunder; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of this Convertible Note at the Conversion Price then in effect, the Company will take such corporate action as may, in the reasonable opinion of its counsel, be necessary to increase its authorized shares but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. (b) In case the Company proposes (i) to pay any dividend upon the Common Stock or make any distribution or offer any subscription or other rights to the holders of Common Stock, or (ii) to effect any capital reorganization or reclassification of capital stock of the Company, -18- (iii) to effect the consolidation, merger, sale of all or substantially all of the assets, liquidation, dissolution or winding up of the Company, (iv) to effect a rights offering to its stockholders, or (v) to conduct a self-tender offer or other repurchase of outstanding shares of Company Common Stock, other than in connection with repurchases from employees upon termination of their employment, then the Company shall cause notice of any such intended action to be given to the holder of this Convertible Note not less than 15 nor more than 60 days prior to the date on which the transfer books of the Company shall close or a record be taken for such dividend or distribution, or the date when such capital reorganization, reclassification, consolidation, merger, sale, liquidation, dissolution or winding up shall be effected, or the date of such other event, as the case may be. 11. Notices. Any notice or other document required or permitted to be given or delivered to the holder of this Convertible Note shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid). (i) if to the Company, at Aronex Pharmaceuticals, Inc., 8707 Technology Forest Drive, The Woodlands, Texas 77381, Telecopy No.: (281) 367-1676, or such other address as it shall have specified to the holder of this Convertible Note in writing; or (ii) if to a holder, at its address set forth below, or such other address as it shall have specified to the Company in writing. Notices given under this Section 11 shall be deemed given only when actually received. 12. Governing Law. This Convertible Note shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the conflicts of law principles thereof. -19- IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed as of the 21st day of May, 1999. ARONEX PHARMACEUTICALS, INC. By: /s/ Geoffrey F. Cox ---------------------------------- Name: Geoffrey F. Cox ---------------------------------- Title: Chairman of the Board & Chief Executive Officer ---------------------------------- -20- EX-10.3 4 EXHIBIT 10.3 COMMON STOCK PURCHASE WARRANT Exhibit 10.3 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE DISPOSED OF UNLESS PURSUANT TO A REGISTERED OFFERING OR BY TRANSFER EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. ARONEX PHARMACEUTICALS, INC. Common Stock Purchase Warrant No. ___ 50,000 Shares This certifies that, for value received, Genzyme Corporation or registered assigns (the "holder"), upon due exercise of this Warrant, is entitled to purchase from Aronex Pharmaceuticals, Inc., a Delaware corporation (the "Company"), at any time on or after May 21, 1999 (the "Initial Exercise Date"), and before the close of business on May 21, 2004, or if not a trading date on the New York Stock Exchange, the next following trading date (the "Expiration Date"), all or any part of 50,000 fully paid and nonassessable Shares (the "Warrant Shares") of the Common Stock, par value $0.001 per share, of the Company ("Common Stock"), at a purchase price of $4.00 per share (the "Purchase Price"), both the Purchase Price and the number of Warrant Shares issuable upon exercise of this Warrant being subject to possible adjustment as provided below. This Warrant is hereinafter called the "Warrant." The holder hereof and all subsequent holders of this Warrant shall be entitled to all rights and benefits provided to the holder or holders hereof pursuant to the terms of this Warrant. SECTION 1. EXERCISE OF WARRANT. (a) The holder of this Warrant may, at any time on or after the Initial Exercise Date and on or before the Expiration Date, exercise this Warrant in whole at any time or in part (but not less than 10,000 Warrant Shares) from time to time for the purchase of the Warrant Shares or other securities which such holder is then entitled to purchase hereunder ("Warrant Securities") at the Purchase Price (as hereinafter defined). In order to exercise this Warrant in whole or in part, the holder hereof shall deliver to the Company (i) a written notice of such holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment of the aggregate purchase price of the Warrant Shares being purchased by certified or bank cashier's check, unless pursuant to a Cashless Exercise as described in subsection (b) below, and (iii) this Warrant. Upon receipt thereof, the Company shall, as promptly as practicable, execute or cause to be executed and deliver to such holder a certificate or certificates representing the aggregate number of Warrant Shares (or if applicable, other Warrant Securities) specified in said notice. The stock certificate or certificates so delivered shall be in the denomination of 100 shares each or such other denominations as may be specified in said notice and shall be registered in the name of such holder or such other name as shall be designated in said notice. -21- No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fraction of a share which would otherwise be issuable in an amount equal to the same fraction of the Current Market Price (as defined below) of the Common Stock on the day of exercise, as reasonably determined by the Company. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of said certificate or certificates, deliver to such holder a new Warrant evidencing the rights of such holder to purchase the remaining Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of such holder, appropriate notation may be made on this Warrant and same returned to such holder. The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, execution and delivery of share certificates under this Section, except that, if such share certificates are requested to be registered in a name or names other than the name of the holder of this Warrant, funds sufficient to pay all stock transfer taxes which shall be payable upon the execution and delivery of such share certificates shall be paid by the holder hereof at the time of delivering the notice of exercise mentioned above. The Company represents, warrants and agrees that all Warrant Shares issuable upon any exercise of this Warrant in accordance herewith shall be validly authorized and issued, fully paid and nonassessable. This Warrant shall not entitle the holder hereof to any of the rights of a stockholder of the Company prior to exercise in the manner herein provided. (b) Notwithstanding anything in subsection (a) to the contrary, the holder of this Warrant may elect to exercise this Warrant in part (but not for less than 10,000 Warrant Shares) or in whole, at any time on or after the Initial Exercise Date and on or before the Expiration Date, by the surrender of this Warrant (with the cashless exercise form at the end hereof duly executed) (a "Cashless Exercise") at the address set forth in Section 6 hereof. Such presentation and surrender shall be deemed a waiver of the holder's obligation to pay the Purchase Price, or the proportionate part thereof if this Warrant is exercised in part. In the event of a Cashless Exercise, the Holder shall exchange its Warrant for that number of Warrant Shares or Warrant Securities, as the case may be, subject to such Cashless Exercise multiplied by a fraction, the numerator of which shall be the difference between the then Current Market Price per share of the Common Stock and the per share Purchase Price, and the denominator of which shall be the then Current Market Price per share of the Common Stock. For purposes of any computation under this subsection, the then Current Market Price shall be based on the trading day prior to the Cashless Exercise. "Current Market Price" shall be deemed to be the last sale price of the Common Stock on the trading day prior to such date or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices of the Common Stock on such day, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any such exchange, the representative closing bid price of the Common Stock as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no longer reporting such information, or, if the Common Stock is not reported on NASDAQ, the high per share bid price for the Common Stock in the over- -22- the-counter market as reported by the National Quotation Bureau or similar organization, or if not so available, the fair market value of the Common Stock as determined in good faith by the Board of Directors. SECTION 2. TRANSFER, DIVISION AND COMBINATION. The Company shall keep at its principal executive office a register for the registration of, and registration of transfers of, the Warrants. The name and address of each holder of one or more Warrants, each transfer thereof and the name and address of each transferee of one or more Warrants shall be registered in such register. Prior to due presentment for registration of transfer, the person in whose name any Warrants shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Warrant promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Warrants. Subject to the provisions of Section 3, upon surrender of any Warrant at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Warrant or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Warrant or part thereof), the Company shall execute and deliver, at the Company's expense, one or more new Warrants (as requested by the holder thereof) in exchange therefor, exercisable for an aggregate number of Warrant Shares equal to the number of shares for which the surrendered Warrant is exercisable and issued to such person or persons as such holder may request, which Warrant or Warrants shall in all other respects be identical with this Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant, and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Warrant is, or is a nominee for, an original holder, such person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Warrant identical in all respects to such lost, stolen, destroyed or mutilated Warrant. SECTION 3. COMPLIANCE WITH SECURITIES ACT; RESTRICTIONS ON TRANSFER AND SALE. (a) Each certificate for Warrant Shares (or other Warrant Securities) initially issued upon the exercise of this Warrant and each certificate for Warrant Shares (or other Warrant Securities) issued to subsequent transferees of any such certificate shall (unless otherwise permitted by this Section 3) be stamped or otherwise imprinted with legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE DISPOSED OF UNLESS PURSUANT TO A REGISTERED OFFERING OR BY TRANSFER -23- EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS." (b) The holder understands that Warrant Shares (or other Warrant Securities) which may be acquired by it upon exercise of this Warrant shall be entitled to certain registration rights provided for in the Amendment No. 4 to the License and Development Agreement of even date herewith relating to the issuance of this Warrant between the Company and the holder. SECTION 4. ADJUSTMENT OF PURCHASE PRICE. (a) The Purchase Price and the number of Warrant Shares and the number or amount of any other securities and property as hereinafter provided for which this Warrant may be exercisable shall be subject to adjustment from time to time effective upon each occurrence of any of the following events. (b) If the Company shall declare or pay any dividend with respect to its Common Stock payable in shares of Common Stock, subdivide the outstanding Common Stock into a greater number of shares of Common Stock, or reduce the number of shares of Common Stock outstanding (by stock split, reverse stock split, reclassification or otherwise than by repurchase of its Common Stock) (any of such events being hereinafter called a "Stock Split"), the Purchase Price and number of Warrant Shares issuable upon exercise of this Warrant shall be appropriately adjusted so as to entitle the holder hereof to receive upon exercise of this Warrant, for the same aggregate consideration provided herein, the same number of shares of Common Stock (plus cash in lieu of fractional shares) as the holder would have received as a result of such Stock Split had such holder exercised this Warrant in full immediately prior to such Stock Split. (c) If the Company shall merge or consolidate with or into one or more corporations or partnerships and the Company is the sole surviving corporation, or the Company shall adopt a plan of recapitalization or reorganization in which the Common Stock is exchanged for or changed into another class of stock or other security or property of the Company, the holder of this Warrant shall, for the same aggregate consideration provided herein, be entitled upon exercise of this Warrant to receive in lieu of the number of shares of Common Stock as to which this Warrant would otherwise be exercisable, the number of shares of Common Stock or other securities (plus cash in lieu of fractional shares) or property to which such holder would have been entitled pursuant to the terms of the agreement or plan of merger, consolidation, recapitalization or reorganization had such holder exercised this Warrant in full immediately prior to such merger, consolidation, recapitalization or reorganization. (d) If the Company is merged or consolidated with or into one or more corporations or partnerships under circumstances in which the Company is not the sole surviving corporation, or if the Company sells or otherwise disposes of substantially all its assets, and in connection with any such merger, consolidation or sale the holders of Common Stock receive stock or other securities convertible into equity of the surviving or acquiring corporations or entities, or other securities or property after the effective date of such merger, consolidation or sale, as the case may be, the holder -24- of this Warrant shall, for the same aggregate consideration provided herein, be entitled upon exercise of this Warrant to receive, in lieu of the shares of Common Stock as to which this Warrant would otherwise be exercisable, shares of such stock or other securities (plus cash in lieu of fractional shares) or property as the holder of this Warrant would have received pursuant to the terms of the merger, consolidation or sale had such holder exercised this Warrant in full immediately prior to such merger, consolidation or sale. In the event of any consolidation, merger or sale as described in this Section 4(d), provision shall be made in connection therewith for the surviving or acquiring corporations or partnerships to assume all obligations and duties of the Company hereunder or to issue substitute warrants in lieu of this Warrant with all such changes and adjustments in the number or kind of shares of stock or securities or property thereafter subject to this Warrant or in the Purchase Price as shall be required in connection with this Section 4(d). (e) If the Company, at any time after the date hereof and before the Expiration Date, shall issue or sell or fix a record date for the issuance of rights, options, warrants or convertible or exchangeable securities to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share), that together with the value of any consideration paid for any such rights, options, warrants or convertible or exchangeable securities (as determined in good faith by the Board of Directors of the Company) is less than the fair market value of a share of Common Stock as of the date of such issuance or sale or on such record date; then, immediately after the date of such issuance or sale or on such record date, the holder shall have the right to receive, upon the same terms as the holders of Common Stock, the kind and amount of rights, options, warrants or convertible or exchangeable securities receivable in such offering by a holder of the number of shares of Common Stock that the holder would have been entitled to receive upon exercise of this Warrant pursuant to Section 1 hereof had such Warrant been exercised immediately before such issuance or the record date for such issuance. (f) If (other than in dissolution or liquidation) securities of the Company (other than shares of Common Stock or securities issued pursuant to a shareholder rights or similar plan) or assets are issued by way of a dividend on outstanding shares of Common Stock, then the Purchase Price shall be adjusted so that it shall equal the price determined by multiplying the Purchase Price by a fraction, the numerator of which shall be the last sale price of the Common Stock on such record date less the then fair market value as determined by the Board of Directors of the Company of the portion of the securities or assets distributed applicable to one share of Common Stock, and the denominator of which shall be such last sale price. Such adjustment shall become effective immediately prior to the opening of business on the day following such record date. (g) If the Company (other than in connection with a sale described in Section 4(d)) proposes to liquidate and dissolve, the Company shall give notice thereof as provided in Section 5(b) hereof and shall permit the holder of this Warrant to exercise any unexercised portion hereof at any time within the 10 day period following delivery of such notice, if such holder should elect to do so, and participate as a stockholder of the Company in connection with such dissolution. (h) Whenever any adjustment is made as provided in any provision of this Section 4: -25- (i) the Company shall compute the adjustments in accordance with this Section 4 and shall prepare a certificate signed by an officer of the Company setting forth the adjusted number of shares or other securities or property and Purchase Price, as applicable, and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Company or its designee; and (ii) a notice setting forth the adjusted number of shares or other securities or property and the Purchase Price, as applicable, shall forthwith be required, and as soon as practicable after it is prepared, such notice shall be delivered by the Company to the holder of record of each Warrant. (i) If at any time, as a result of any adjustment made pursuant to this Section 4, the holder of this Warrant shall become entitled, upon exercise hereof, to receive any shares other than shares of Common Stock or to receive any other securities, the number of such other shares or securities so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained in this Section 4 with respect to the Common Stock. SECTION 5. SPECIAL AGREEMENTS OF THE COMPANY. (a) The Company covenants and agrees that it will reserve and set apart and have at all times a number of shares of authorized but unissued Common Stock (and, if applicable, other Warrant Securities) then deliverable upon the exercise of the Warrants or any other rights or privileges provided for therein sufficient to enable it at any time to fulfill all its obligations thereunder; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant at the Purchase Price then in effect, the Company will take such corporate action as may, in the reasonable opinion of its counsel, be necessary to increase its authorized shares but unissued shares of Common Stock (and, if applicable, other Warrant Securities) to such number of shares as shall be sufficient for such purposes. (b) In case the Company proposes (i) to pay any dividend upon the Common Stock or make any distribution or offer any subscription or other rights to the holders of Common Stock, or (ii) to effect any capital reorganization or reclassification of capital stock of the Company, (iii) to effect the consolidation, merger, sale of all or substantially all of the assets, liquidation, dissolution or winding up of the Company, (iv) to effect a rights offering to its stockholders, or -26- (v) to conduct a self-tender offer or other repurchase of outstanding shares of Company Common Stock, other than in connection with repurchases from employees upon termination of their employment, then the Company shall cause notice of any such intended action to be given to each holder of the Warrants not less than 15 nor more than 60 days prior to the date on which the transfer books of the Company shall close or a record be taken for such dividend or distribution, or the date when such capital reorganization, reclassification, consolidation, merger, sale, liquidation, dissolution or winding up shall be effected, or the date of such other event, as the case may be. Section 6. Notices. Any notice or other document required or permitted to be given or delivered to holders of Warrants and holders of Common Stock (or other Warrant Securities) shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or (c) by a recognized overnight delivery service (with charges prepaid). (i) if to the Company, at Aronex Pharmaceuticals, Inc., 8707 Technology Forest Drive, The Woodlands, Texas 77381, Telecopy No.: (281) 367-1676, or such other address as it shall have specified to the holders of Warrants in writing; or (ii) if to a holder, at its address set forth below, or such other address as it shall have specified to the Company in writing. Notices given under this Section 6 shall be deemed given only when actually received. SECTION 7. AMENDMENT. This Warrant may not be amended, modified or otherwise altered in any respect except by the written consent of the registered holder of this Warrant and the Company. SECTION 8. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon and inure to the benefit of the Company and the holder of this Warrant and their respective successors and permitted assigns. SECTION 9. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the conflicts of law principles thereof. -27- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by its duly authorized officers and accepted by the holder of this Warrant this 21st day of May, 1999. Attest: ARONEX PHARMACEUTICALS, INC. By: /s/ Terance A. Murnane By: /s/ Geoffrey F. Cox ------------------------------- ----------------------- Name: Terance A. Murnane Name: Geoffrey F. Cox ------------------------------- ----------------------- Title: Secretary Title: Chairman of the Board ------------------------------- & Chief Executive Officer ------------------------- Holder: /s/ Richard Douglas - -------------------- Address for Notices: - -------------------- - -------------------- - -------------------- -28- SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________________ shares of the Common Stock, par value $.001 per share, of Aronex Pharmaceuticals, Inc. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated:__________________ Signature:____________________ Signature Guarantee: Address:______________________ ________________________ Social Security No. _____________ CASHLESS EXERCISE The undersigned ___________________, pursuant to the provisions of the foregoing Warrant, hereby elects to exchange its Warrant for ___________________ shares of Common Stock, par value $.001 per share, of Aronex Pharmaceuticals, Inc. pursuant to the Cashless Exercise provisions of the Warrant. Dated:__________________ Signature:____________________ Signature Guarantee: Address:______________________ ________________________ Social Security No.:_____________ ASSIGNMENT FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto ____________________ (SS#_________________) the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint _____________________, attorney, to transfer said Warrant on the books of Aronex Pharmaceuticals, Inc. Dated:__________________ Signature:____________________ Signature Guarantee: Address:______________________ ________________________ -29- PARTIAL ASSIGNMENT FOR VALUE RECEIVED _______________ hereby assigns and transfers unto ____________________ (SS#________________) the right to purchase _______ shares of the Common Stock, par value $.001 per share, of Aronex Pharmaceuticals, Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced thereby, and does irrevocably constitute and appoint ____________________, attorney, to transfer that part of said Warrant on the books of Aronex Pharmaceuticals, Inc. Dated:_______________ Signature:____________________ Signature Guarantee: Address:______________________ _____________________ -30- -----END PRIVACY-ENHANCED MESSAGE-----