EMPLOYMENT AGREEMENT


     This Employment Agreement (this "Agreement"), dated as of June 12, 1998, is
entered into by and between Aronex Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and Terance A. Murnane (the "Executive").

                                   WITNESSETH:

     WHEREAS  the Company  desires to employ the  Executive,  and the  Executive
desires  to  continue  in the  employment  of the  Company,  upon the  terms and
conditions and in the capacities set forth herein;

     NOW,  THEREFORE,  in  consideration  of the premises and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the Company and the Executive hereby agree as follows:

     1.  Employment and Term of Employment.  Subject to the terms and conditions
of this  Agreement,  the Company hereby agrees to employ the Executive,  and the
Executive hereby agrees to serve the Company,  as Controller and Secretary for a
term (the "Term of Employment") beginning on the date first set forth above (the
"Effective  Date") and ending on the Expiration Date (defined below). As used in
this Agreement,  "Expiration  Date" means the first anniversary of the Effective
Date,  provided  that on each  anniversary  of the  Effective  Date  (each  such
anniversary being referred to as a "Renewal Date"), the Expiration Date shall be
automatically  extended one additional year unless,  not less than 10 days prior
to the relevant  Renewal Date,  (i) either party shall have given written notice
to the other that no such automatic extension shall occur after the date of such
notice or (ii)  either  party  shall have given a Notice of  Termination  to the
other pursuant to Section 5 hereof.  Notwithstanding  the  foregoing,  if either
party gives a valid Notice of Termination pursuant to Section 5 hereof, the Term
of Employment  shall not extend beyond the  termination  date  specified in such
Notice of Termination.

     2. Scope of  Employment  (a) During the Term of  Employment,  the Executive
agrees to (i) serve as  Controller  and  Secretary of the Company and shall have
and may  exercise  all the  powers,  duties  and  functions  as are  normal  and
customary to such position and that are consistent with the responsibilities set
forth with respect to such  position in the  Company's  by-laws and (ii) perform
such other  duties not  inconsistent  with his  position as are assigned to him,
from time to time, by the Board of Directors  (the  "Board") or Chief  Executive
Officer of the  Company.  During the Term of  Employment,  the  Executive  shall
devote substantially all of his business time,  attention,  skill and efforts to
the faithful performance of his duties hereunder.

          (b) During the Term of Employment,  the Executive  agrees to serve, if
     elected,  as an officer or director of any  subsidiary  or affiliate of the
     Company so long as such service is commensurate  with the Employee's duties
     and responsibilities to the Company.

     3.  Compensation.  During the Term of Employment,  in  consideration of the
Executive's  services hereunder,  including,  without limitation,  service as an
officer or director of the Company or of any  subsidiary  or affiliate  thereof,
and in consideration of the Executive's  agreements set forth in the Proprietary
Information  and  Inventions  and  Non-Competition  Agreement  dated May 6, 1991
between  the  Executive  and  the  Company  (the  "Proprietary  Information  and
Inventions Agreement"):


<PAGE>



          (a) the Executive  shall receive a salary at a rate  equivalent to the
     Executive's  current annual salary in effect on the Effective Date (payable
     at such regular intervals as other employees of the Company are compensated
     in accordance with the Company's employment practices),  which salary shall
     be  subject  to review  annually  by the Board and may be  adjusted  at its
     discretion, provided that such salary may not be reduced at any time.

          (b) the Executive shall be entitled to receive an annual cash bonus of
     up to 20% of the  Executive's  salary  based upon the  achievement  of such
     milestones as may be agreed upon by the Executive and the Board.

     4. Additional Compensation and Benefits. (a) As additional compensation for
the Executive's services under this Agreement and the Executive's agreements set
forth in the Proprietary  Information and Inventions Agreement,  during the Term
of  Employment,  the Company  agrees to provide the Executive  with the non-cash
benefits provided by the Company to its other officers and key employees as they
may exist from time to time.  Such benefits shall include such leave or vacation
time (not less than three weeks),  medical and dental insurance,  life insurance
and other health care benefits,  and  retirement and disability  benefits as may
hereafter be provided by the Company in accordance with its policies, as well as
any  stock  option  plan or  similar  employee  benefit  program  for  which key
executives are or shall become eligible.

          (b) The Executive is authorized to incur reasonable  business expenses
     for  promoting  the  business  and  reputation  of the  Company,  including
     (without limitation) reasonable expenditures for travel, lodging, meals and
     client,  patron,  customer and/or  business  associate  entertainment.  The
     Company  shall  reimburse  the  Executive  within  30 days  for  reasonable
     expenses  incurred  by  the  Executive  in  furtherance  of  the  Company's
     business,  provided that such expenses are incurred in accordance  with the
     Company's  policies and upon  presentation of  documentation  in accordance
     with expense  reimbursement  policies of the Company as they may exist from
     time to time,  and submission to the Company of adequate  documentation  in
     accordance  with  federal  income  tax   regulations   and   administrative
     pronouncements.

     5. Termination.

          (a) General. The Executive's  employment hereunder shall automatically
     terminate on the earlier of his death or the Expiration Date. The Executive
     may, at any time prior to the  Expiration  Date,  terminate his  employment
     hereunder  for any reason by  delivering a Notice of  Termination  (defined
     below) to the Board.  The Company may, at any time prior to the  Expiration
     Date,  terminate  the  Executive's  employment  hereunder for any reason by
     delivering a Notice of Termination to the Executive. The giving of a notice
     pursuant to clause (i) of the proviso contained in the penultimate sentence
     of Section I hereof shall not be deemed a  termination  of the  Executive's
     employment  by the party  giving such  notice.  As used in this  Agreement,
     "Notice of Termination"  means a notice in writing  purporting to terminate
     the Executive's  employment in accordance with this Section 5, which notice
     shall (i) specify the effective date of such  termination (not prior to the
     date of such notice) and (ii) in the case of a  termination  by the Company
     for Cause or Disability or a termination by the Executive for Disability or
     Good  Reason (in each case as such terms are defined  below),  set forth in
     reasonable  detail  the  reason  for such  termination  and the  facts  and
     circumstances claimed to provide a basis for such termination.

          (b) Automatic  Termination on Expiration  Date or Death.  In the event
     the Executive's  employment hereunder shall automatically  terminate on the
     Expiration  Date or as a result of the  Executive's  death,  the  Executive
     shall only be entitled to receive, to the extent applicable, (i) all unpaid
     compensation  accrued  as of the  termination  date  pursuant  to Section 3
     hereof,  (ii) all unused  vacation  time accrued by the Executive as of the
     termination  date,  (iii) all amounts owing to the  Executive  underSection
     4(b)  hereof and (iv) those  benefits  under  Section 4 which are  required
     under the  Employee  Retirement  Income  Security  Act of 1974,  as amended
     ("ERISA"),  or other laws.  The amounts  described in clauses (i), (ii) and
     (iii) of the  foregoing  sentence  shall be paid to the Executive in a lump
     sum payment promptly after the Expiration Date.
<PAGE>
          (c)  Termination by Company for Cause.  If the Company  terminates the
     Executive's  employment  for Cause the Executive  shall only be entitled to
     receive the  compensation  and other  payments  described in paragraph  (b)
     above,  such  compensation  and  other  payments  to  be  paid  as  if  the
     Executive's  employment had automatically  terminated without the giving of
     any Notice of Termination.  As used in this  Agreement,  "Cause" shall mean
     (i) any material  failure of the Executive to perform his duties  specified
     in Section 2 of this Agreement (other than any such failure  resulting from
     the Executive's  incapacity due to Disability) after written notice of such
     failure has been given to the Executive by the Board or the Company's Chief
     Executive  Officer and such failure shall have  continued for 30 days after
     receipt of such notice,  (ii) gross  negligence  or willful or  intentional
     wrongdoing or misconduct,  (iii) a material  breach by the Executive of the
     Proprietary  Information  and Inventions and  Non-Competition  Agreement of
     even date herewith  between the Executive and the Company or any subsequent
     such agreement between the Executive and the Company, or (iv) conviction of
     the Executive of a felony offense or a crime involving moral turpitude.

          (d)  Termination  for  Disability.   To  provide  for  the  event  the
     Executive's employment is terminated by either the Company or the Executive
     on account of Disability  (defined below), the Company shall provide or, as
     applicable,   cause  its  disability  insurance  carrier  to  provide,  the
     Executive  such  disability  benefits as may  hereafter  be provided by the
     Company in  accordance  with its  policies,  as they may exist from time to
     time. As used herein,  "Disability"  means any physical or mental condition
     of the Executive that (i) prevents the Executive from being able to perform
     the services required under this Agreement, (ii) has continued for at least
     180  consecutive  days during any 12-month  period and (iii) is  reasonably
     expected to continue.

          (e) Termination by Company  Without Cause.  If the Company  terminates
     the  Executive's  employment  for any  reason  other  than for  Cause or on
     account of Disability, the Company shall:

               (i) pay to the Executive,  for the period of 12 months commencing
          on the date of such  termination,  an amount equal to the  Executive's
          then current annual salary  (payable at such regular  intervals as the
          employees  of the  Company  are  compensated  in  accordance  with the
          Company's employment practices);

               (ii)  pay the  Executive  the  compensation  and  other  payments
          described in paragraph (b) above; and

               (iii)  continue,  for the period of 12 months  commencing  on the
          date of such  termination,  to provide the  benefits  contemplated  by
          Section 4(a) of this Agreement (provided that the continuation of such
          benefits  shall be  construed  so as not to extend the  period  during
          which the  Company  shall be required  to provide  benefits  under the
          Consolidated  Omnibus  Budget  Reconciliation  Act of  1985  ('COBRA")
          following the date of such termination).

          (f)  Termination by the Executive  with Good Reason.  If the Executive
     terminates his employment for Good Reason (as defined  below),  the Company
     shall:





<PAGE>
               (i) pay to the Executive,  for the period of 24 months commencing
          on the date of such  termination,  an amount equal to the  Executive's
          then current annual salary  (payable at such regular  intervals as the
          employees  of the  Company  are  compensated  in  accordance  with the
          Company's employment practices);

               (ii)  pay the  Executive  the  compensation  and  other  payments
          described in paragraph (b) above; and

               (iii)  continue,  for the period of 12 months  commencing  on the
          date of such  termination,  to provide the  benefits  contemplated  by
          Section 4(a) of this Agreement (provided that the continuation of such
          benefits  shall be  construed  so as not to extend the  period  during
          which the Company  shall be required to provide  benefits  under COBRA
          following the date of such termination).

As used in this Agreement, "Good Reason" shall mean a material diminution in the
title,  powers,  duties,  responsibilities  or  functions  of the  Executive  as
described in Section 2 hereof  within one year  following  the  occurrence  of a
Change of Control.

As used in this Agreement, a "Change of Control" shall mean:

               (i) the  acquisition  after the Effective Date by any individual,
          entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
          the  Securities  Exchange  Act of 1934,  as amended) (a  "Person")  of
          beneficial ownership of 50% or more of either (i) the then outstanding
          shares of common stock of the Company (the "Outstanding Common Stock")
          or (ii) the  combined  voting  power of the  then  outstanding  voting
          securities of the Company  entitled to vote  generally in the election
          of directors (the "Outstanding Voting Securities"),  provided that for
          purposes of this subsection (i), the following  acquisitions shall not
          constitute a Change of Control:  (A) any acquisition directly from the
          Company,  (B) any  acquisition by the Company,  (C) any acquisition by
          any employee  benefit plan (or related trust)  sponsored or maintained
          by the Company or any  corporation  controlled by the Company,  or (D)
          any  acquisition by any  corporation  pursuant to a transaction  which
          complies with clauses (A), (B) and (C) of subsection (ii) hereof; or

               (ii)  consummation  after the Effective Date of a reorganization,
          merger  or  consolidation  or  sale  or  other  disposition  of all or
          substantially   all  of  the  assets  of  the  Company  (a  "Corporate
          Transaction")   in  each  case,   unless,   following  such  Corporate
          Transaction,  (A) (1) all or substantially all of the persons who were
          the  beneficial  owners of the  Outstanding  Common Stock  immediately
          prior to such  Corporate  Transaction  beneficially  own,  directly or
          indirectly,  more  than 50% of the then  outstanding  shares of common
          stock of the  corporation  resulting from such Corporate  Transaction,
          and  (2)  all or  substantially  all  of  the  persons  who  were  the
          beneficial  owners of the Outstanding  Voting  Securities  immediately
          prior to such  Corporate  Transaction  beneficially  own,  directly or
          indirectly,  more than 50% of the  combined  voting  power of the then
          outstanding  voting  securities  entitled  to  vote  generally  in the
          election of directors of the corporation resulting from such Corporate
          Transaction (including,  without limitation,  a corporation which as a
          result of such  transaction  owns the Company or all or  substantially
          all of the  Company's  assets  either  directly or through one or more
          subsidiaries) in substantially the same proportions as their ownership
          of the Outstanding  Common Stock and the Outstanding Voting Securities
          immediately prior to such Corporate  Transaction,  as the case may be,
          (B) no  Person  (excluding  (1) any  corporation  resulting  from such
          Corporate  Transaction or any employee benefit plan (or related trust)
          of the  Company  or such  corporation  resulting  from such  Corporate
          Transaction and (2) any Person approved by the members of the Board in
          office immediately prior to such Corporate  Transaction)  beneficially
          owns,  directly  or  indirectly,  50% or more of the then  outstanding
          shares  of  common  stock  of  the  corporation  resulting  from  such
          Corporate  Transaction  or the  combined  voting  power  of  the  then
          outstanding voting securities of such corporation except to the extent
          that such ownership  existed prior to such Corporate  Transaction  and
          (C) at least a majority  of the members of the board of  directors  of
          the corporation resulting from such Corporate Transaction were members
          of the Board at the time of the execution of the initial  agreement or
          of the action of the Board providing for such Corporate Transaction.
<PAGE>
     6.  Non-exclusivity  of Rights.  Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,  bonus,
incentive  or  other  plan or  program  provided  by the  Company  or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
stock  option or other  agreements  with the  Company  or any of its  affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled  to  receive  under any plan or  program  of the  Company or any of its
affiliated  companies  at or  subsequent  to  the  date  of  termination  of the
Executive's  employment under this Agreement shall be payable in accordance with
such plan or program.

     7. Resolution of Disputes.

     (a)  Negotiation.  The parties  shall  attempt in good faith to resolve any
dispute  arising out of or relating to this Agreement  promptly by  negotiations
between the Executive and an executive  officer of the Company who has authority
to settle the controversy.  Any party may give the other party written notice of
any dispute not resolved in the normal course of business.  Within 10 days after
the effective date of such notice,  the Executive and an executive of officer of
the  Company  shall  meet at a  mutually  acceptable  time and place  within the
Houston,  Texas  metropolitan  area, and thereafter as often as they  reasonably
deem necessary,  to exchange relevant  information and to attempt to resolve the
dispute.  If the matter has not been  resolved  within 30 days of the  disputing
party's notice,  or if the parties fail to meet within 10 days, either party may
initiate arbitration of the controversy or claim as provided  hereinafter.  If a
negotiator  intends to be  accompanied  at a meeting by an  attorney,  the other
negotiator shall be given at least three business days, notice of such intention
and may also be accompanied by an attorney.  All  negotiations  pursuant to this
Section 7(a) shall be treated as compromise and settlement  negotiations for the
purposes of the federal and state rules of evidence and procedure.

     (b)  Arbitration.  Any dispute arising out of or relating to this Agreement
or the breach,  termination or validity thereof,  which has not been resolved by
non-binding  means as provided in Section 7(a) within 60 days of the  initiation
of  such  procedure,   shall  be  finally   settled  by  arbitration   conducted
expeditiously in accordance with the Center for Public  Resources,  Inc. ("CPR")
Rules  for  Non-Arbitration  of  Business  Disputes  by  three  independent  and
impartial  arbitrators,  of whom each party shall appoint one,  provided that if
one party has requested the other to participate in a non-binding  procedure and
the  other  has  failed  to  participate,  the  requesting  party  may  initiate
arbitration  before the expiration of such period.  Any such  arbitration  shall
take place in Harris  County,  Texas.  Any  arbitrator  not appointed by a party
shall be appointed  from the CPR Panels of Neutrals.  The  arbitration  shall be
governed by the United  States  Arbitration  Act and any judgment upon the award
decided upon by the arbitrators may be entered by any court having  jurisdiction
thereof.  Each party  hereby  acknowledges  that  compensatory  damages  include
(without  limitation) any benefit or right of  indemnification  given by another
party to the other under this Agreement.




<PAGE>



     8.  GOVERNING  LAW.  This  Agreement  shall be governed by and construed in
accordance with the internal laws of the State of Texas.  Venue and jurisdiction
of any act on relating to this agreement shall lie in Harris County, Texas.

     9.  Notice.  Any  notice,  payment,  demand or  communication  required  or
permitted  to  be  given  by  this  Agreement  shall  be  deemed  to  have  been
sufficiently given or served for all purposes if delivered personally or if sent
by registered or certified  mall,  return receipt  requested,  postage  prepaid,
addressed to such party at its address set forth below such party's signature to
this  Agreement or to such other address as shall have been furnished in writing
by such party for whom the  communication is intended.  Any such notice shall be
deemed to be given on the date so delivered.

     10.  Severability.  In the event any provisions hereof shall he modified or
held ineffective by any court, such adjudication  shall not invalidate or render
ineffective the balance of the provisions hereof.

     11.  Entire  Agreement.  This  Agreement,  together  with  the  Proprietary
Information and Inventions Agreement, constitutes the sole agreement between the
parties  with  respect to the  employment  of the  Executive  by the Company and
supersedes any and all other agreements, oral or written, between the parties.

     12.  Amendment  and Waiver.  This  Agreement may not be modified or amended
except by a writing  signed by the  parties.  Any waiver or breach of any of the
terms of this  Agreement  shall not  operate as a waiver of any other  breach of
such  terms or  conditions,  or any  other  terms or  conditions,  nor shall any
failure to enforce any  provisions  hereof operate as a waiver of such provision
or any other provision hereof.

     13. Assignment.  This Agreement is a personal  employment  contract and the
rights and  interests of the Executive  hereunder may not be sold,  transferred,
assigned or pledged.  The Company may assign its rights under this  Agreement to
(i) any entity  into or with which the Company is merged or  consolidated  or to
which the Company  transfers all or substantially  all of its assets or (ii) any
entity, which at the time of such assignment,  controls, is under common control
with, or is  controlled  by the Company,  provided that the Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise)  to all or  substantially  all of the business  and/or  assets of the
Company,  by  agreement  in form  and  substance  reasonably  acceptable  to the
Executive,  to expressly  assume and agree to perform this Agreement in the same
manner and to the same extent  that the Company  would be required to perform it
if not such succession had taken place.

     14.  Successors.  This  Agreement  shall be  binding  upon and inure to the
benefit of the  Executive  and his heirs,  executors,  administrators  and legal
representatives.  This Agreement  shall be binding upon and inure to the benefit
of the Company and its successors and assigns.

     15.  Section  Headings.  The section  headings in this  Agreement have been
inserted for convenience and shall not be used for  interpretive  purposes or to
otherwise construe this Agreement.





<PAGE>


     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above and intend that this Agreement have the effect of a
sealed instrument.

                                            By:/S/TERANCE A. MURNANE
                                            ------------------------
                                            Terance A. Murnane



                                            ARONEX PHARMACEUTICALS, INC.


                                            By:/S/GEOFFREY F. COX, Ph.D.
                                            ----------------------------
                                            Geoffrey F. Cox, Ph.D.