UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File number: 0-19750
MATRIX PHARMACEUTICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2957068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34700 Campus Drive, Fremont, California 94555
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 742-9900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
Number of shares of Common Stock, $.01 par value, outstanding as of September
30, 1997: 21,886,946.
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MATRIX PHARMACEUTICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Risk Factors 12
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Balance Sheets
<CAPTION>
(In thousands)
September 30, December 31,
1997 1996
--------- ---------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,062 $ 20,138
Short-term investments 56,548 38,997
Inventories -- 758
Other current assets 3,277 2,283
--------- ---------
Total current assets 63,887 62,176
Property and equipment, net 23,704 17,152
Non-current investments 20,016 55,449
Deposits and other assets, net 370 173
--------- ---------
$ 107,977 $ 134,950
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,399 $ 2,636
Special charges 2,867 --
Accrued compensation 1,337 1,045
Accrued clinical trials 1,361 1,239
Other accrued liabilities 1,285 2,135
Current portion of debt and capital lease obligations 779 660
--------- ---------
Total current liabilities 12,028 7,715
Long Term liabilities:
Debt and capital lease obligations, less current portion 11,089 11,724
Deferred other income 2,054 --
--------- ---------
Total long-term liabilities 13,143 11,724
Stockholders' equity
Capital stock 224,895 222,256
Notes receivable from shareholders (2,313) --
Other (494) (856)
Deficit accumulated during the development stage (139,282) (105,889)
--------- ---------
Total stockholders' equity 82,806 115,511
--------- ---------
$ 107,977 $ 134,950
========= =========
<FN>
See accompanying notes
</FN>
</TABLE>
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
Costs and expenses:
Research and development 7,182 6,110 21,525 18,114
Selling, general and administrative 3,808 2,732 12,221 7,036
Special charges 4,518 -- 4,518 --
-------- -------- -------- ---------
Total costs and expenses 15,508 8,842 38,264 25,150
-------- -------- -------- ---------
Loss from operations (15,508) (8,842) (38,264) (25,150)
Interest and other income, net 1,644 2,030 4,871 4,054
-------- -------- -------- ---------
Net loss $(13,864) $ (6,812) $(33,393) $(21,096)
======== ======== ======== =========
Net loss per share $ (0.64) $ (0.32) $ (1.56) $ (1.07)
======== ======== ======== =========
Weighted average number
of shares outstanding 21,706 21,248 21,414 19,689
======== ======== ======== =========
<FN>
See accompanying notes
</FN>
</TABLE>
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
For the Nine Months
Ended September 30
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 33,393) ($ 21,096)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation, amortization and other 1,051 1,030
Changes in assets and liabilities:
Inventories 758 --
Special charges 2,867 --
Deferred other income 2,613 --
Other changes in assets and liabilities (422) (2,121)
---------- ----------
Net cash (used) by operating activities (26,526) (22,187)
Cash flows from investing activities:
Capital expenditures (7,410) (1,908)
Investment in available-for-sale securities (16,000) (144,531)
Proceeds of available-for-sale securities -- 42,832
Maturities of investments 34,000 21,734
---------- ----------
Cash flows provided (used) by investing activities 10,590 (81,873)
Cash flows from financing activities:
Payments on debt and capital lease obligations (563) (336)
Net cash proceeds from issuance of:
Debt and capital lease financing 24 --
Capital stock 399 68,404
---------- ----------
Cash flows provided (used) by financing activities (140) 68,068
---------- ----------
Net decrease in cash and cash equivalents (16,076) (35,992)
Cash and cash equivalents at the beginning of period 20,138 55,675
---------- ----------
Cash and cash equivalents at the end of period $ 4,062 $ 19,683
Supplemental schedule of noncash investing and financing activities:
Notes receivable from shareholders in exchange for
capital stock $ 2,313 $ --
========== ==========
<FN>
See accompanying notes
</FN>
</TABLE>
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MATRIX PHARMACEUTICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
1. Basis of presentation
The results of operations for the interim periods shown in
this report are not necessarily indicative of results to be expected
for the year ending December 31, 1997. In the opinion of management,
the information contained herein reflects all adjustments necessary to
make the results of operations for the interim periods a fair statement
of such operations. All such adjustments are of a normal recurring
nature.
These condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 1996, which were included in
the Company's Annual Report on Form 10-K, filed with the Securities and
Exchange Commission.
2. Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary after elimination of all
material intercompany balances and transactions.
3. Net loss per share
Net loss per share is computed using the weighted average
number of shares of common stock outstanding during the period. Common
stock equivalents relating to outstanding options and warrants to
purchase common stock are excluded from the computation as their impact
is antidilutive. In February 1997, the Financial Accounting Standards
Board issued the Statement of Financial Accounting Standard No. 128
"SFAS 128", "Earnings per Share," which the Company is required to
adopt for its fiscal year ending December 31, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. The Company's
compliance with SFAS 128 is not expected to have a material impact on
the Company's calculation of per share earnings or loss.
4. Cash and cash equivalents, short-term investments, and non-current
investments
The Company invests its excess cash in government and
corporate securities. Highly liquid investments with maturities of
three months or less at the date of acquisition are considered by the
Company to be cash equivalents. Investments with maturities beyond
three months at the date of acquisition and that mature within one year
from the balance sheet date are considered to be short-term
investments. Investments with maturities longer than one year from the
balance sheet date are classified as short-term investments or
non-current investments based on the Company's intended holding period.
The Company maintains its cash, cash equivalents and
investments in several different instruments held by a bank and a
brokerage house. This diversification of risk is consistent with the
Company's investment policy which is to maintain liquidity and ensure
the safety of principal.
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The Company determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as
of each balance sheet date. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest and other income.
Realized gains and losses and declines in value judged to be
other-than-temporary are also included in interest and other income.
The cost of securities sold is based on the specific identification
method. Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to
maturity and are carried at amortized cost.
Debt securities which are not classified as held-to-maturity
and which are not held for resale in anticipation of short-term market
movements are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and
losses, net of tax, reported in a separate component of stockholders'
equity.
5. Litigation
On December 21, 1994, Collagen Corporation ("Collagen") filed
a lawsuit against the Company in Santa Clara County Superior Court
alleging misappropriation of trade secrets concerning the Company's
manufacturing process for collagen and seeking unspecified damages and
injunctive relief. The Company denied all allegations of the complaint
and subsequently filed a cross-complaint against Collagen and Howard
Palefsky, Collagen's former Chairman and Chief Executive Officer,
seeking recovery of damages for defamation, violations of state law
unfair competition.
On May 23, 1997, the lawsuit between the parties was settled
on mutually agreeable terms and dismissed with prejudice. All claims by
and against all parties have been released. Matrix agreed that for a
period of five years it shall not manufacture or sell products directly
competitive with Collagen's current core products. Collagen has granted
Matrix a non-exclusive license to certain Collagen intellectual
property for certain non-monetary consideration.
6. Notes receivable from stockholders
In March 1997, the Board of Directors authorized a special
risk sharing arrangement designated as the Shared Investment Program
("Program"). Under the Program, the Company's executive officers and
other key managerial personnel were given the opportunity to purchase
shares of Common Stock in an individually designated amount per
participant determined by the Compensation Committee of the Board of
Directors. A total of 370,000 shares were purchased under the Program
by nine eligible employees at $6.25 per share, the fair market value of
the Common Stock on June 25, 1997, for aggregate consideration of
$2,312,500. The purchase price was paid through the participant's
delivery of a full-recourse promissory note payable to the Company.
Each note bears interest at 6.69% compounded semi-annually and has a
maximum term of nine years. The notes are secured by a pledge of the
purchased shares. Notes receivable from participants in this program
total $2,312,500 at September 30, 1997 and are included in the equity
section in the accompanying balance sheet.
7. New accounting pronouncements
In June 1997, the Financial Accounting Standards Board issued
the Statement of Financial Accounting Standard No. 130 "SFAS 130",
"Reporting Comprehensive Income," which the Company is required to
adopt for its fiscal year ending December 31, 1998. This Statement
requires
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that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. In June 1997, the Financial Accounting Standards
Board issued the Statement of Financial Accounting Standard No. 131
"SFAS 131", "Disclosures about Segments of an Enterprise and Related
Information," which the Company is required to adopt for its fiscal
year ending December 31, 1998. This Statement establishes standards for
the way that public business enterprises report information about
operating segments in annual financial statements and in interim
financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas,
and major customers. Both standards will require additional
disclosures, but will not have a material effect on the Company's
financial position or results of operations.
8. Special charges
During the third quarter of 1997, the Company recorded pre-tax
restructuring costs of $4,518,000 in connection with the decision to
suspend further development and commercialization of AccuSite(TM)
(fluorouracil/epinephrine) Injectable Gel. Management suspended the
Accusite program after being notified that the Food and Drug
Administration "FDA" is not prepared to approve AccuSite as a treatment
for genital warts. Although Matrix plans to meet with the FDA at their
earliest possible convenience, the Company expects that the concerns
raised by the agency will be difficult to overcome and does not plan to
invest significant additional resources in the AccuSite program. In
September, restructuring costs were incurred to conclude the clinical
trials and commercial programs associated with AccuSite and allow the
Company to focus its resources on its oncology drug development
programs. Pursuant to the plan, the Company has effected a workforce
reduction of approximately 70 employees of which 48 positions related
to manufacturing, for a total severance expense of $1,478,000.
Additional expenses included the write-off of inventory related to
AccuSite of $1,245,000, costs totaling $1,194,000 associated with the
shut down of Northern California facilities and write off of
manufacturing equipment, costs associated with the closing of clinical
trials with respect to AccuSite of $414,000, and sales and marketing
costs associated with AccuSite of $187,000. The remaining reserve
balance, net of third quarter payments made through September 30, 1997
is included in current liabilities.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains, in addition to historical
statements, forward-looking statements, including without limitation, statements
regarding the timing and outcome of regulatory reviews and clinical trials.
Forward-looking statements are based on management's current expectations and
are subject to a number of risks and uncertainties that could cause actual
results to differ materially from expected results. For additional information,
including risk factors, such as no assurance of regulatory approvals;
uncertainties associated with clinical trials; history of losses; future
profitability uncertain; additional financing requirements and uncertain access
to capital markets; limited sales and marketing experience; limited
manufacturing experience; dependence on sources of supply; rapid technological
change; substantial competition; uncertainty regarding patents and proprietary
rights; uncertainty of pharmaceutical pricing; and no assurance of adequate
reimbursement, please see the "Risk Factors" section included in the Company's
1996 Form 10-K and in this Form 10-Q as well as other factors discussed below
and elsewhere in this report.
Results of Operations
Three Months and Nine Months Ended September 30, 1997 and 1996
Since the Company's inception in 1985, the primary focus of its
operations has been research and development and, to date, it has not received
any revenues from the commercial sale of products. The Company has a history of
operating losses and expects to incur substantial additional losses over the
next several years as it continues to develop its current and future products.
For the period from its inception to September 30, 1997, the Company has
incurred a cumulative net loss of $139,282,000. .
Research and development expenses for the third quarter of 1997
increased by 18% to $7,182,000 as compared to $6,110,000 for the third quarter
of 1996. For the first nine months of 1997, research and development expenses
increased by 19% to $21,525,000 compared to $18,114,000 in 1996. The quarterly
increase was primarily due to increases in manufacturing research and
development and clinical personnel costs, increased clinical trial costs to
support the IntraDose(TM) Injectable Gel cancer program and AccuSite(TM)
Injectable Gel study for genital warts. The increase for the quarter was
partially offset by a decline in operations supplies for operations during the
quarter ended September 30, 1997 as compared to the same period in the prior
year. The year-to-date increase was primarily due to increases in manufacturing
research and development and clinical personnel costs and increased clinical
trial costs to support the IntraDose Injectable Gel cancer program.
Selling, general and administrative expenses for the third quarter of
1997 increased by 39% to $3,808,000 as compared to $2,732,000 for the third
quarter of 1996. For the first nine months of 1997, selling, general and
administrative expenses increased by 74% to $12,221,000 versus $7,036,000 for
the same period in 1996. This increase was primarily due to higher legal
expenses related to the Collagen litigation which was settled during the second
quarter of 1997 and represents 50% of the year-to-date percentage increase. The
remaining quarterly and year-to-date increases were primarily due to higher
personnel expenses, recruiting and relocation expenses, and product marketing
expenses for AccuSite, prior the decision to halt this development program.
During the third quarter of fiscal 1997, the Company recorded pre-tax
restructuring costs of $4,518,000 in connection with the decision to suspend
further development and commercialization of
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AccuSite. Management suspended the Accusite program after being notified that
the FDA is not prepared to approve AccuSite as a treatment for genital warts.
Although Matrix plans to meet with the FDA at their earliest possible
convenience, the Company expects that the concerns raised by the agency will be
difficult to overcome and does not plan to invest significant additional
resources in the AccuSite program. In September, restructuring costs were
incurred to conclude the clinical trials and commercial programs associated with
AccuSite and allow the Company to focus its resources on its oncology drug
development programs. Pursuant to the plan, the Company has effected a workforce
reduction of approximately 70 employees, of which 48 positions related to
manufacturing, for a total severance package of $1,478,000. Additional expenses
included the write-off of inventory related to AccuSite of $1,245,000, costs
totaling $1,194,000 associated with the shut down of Northern California
facilities and write off of manufacturing equipment, the closing of clinical
trials with respect to AccuSite of $414,000, and sales and marketing costs
associated with AccuSite of $187,000. The remaining reserve balance, net of
third quarter payments made through September 30, 1997, is included in current
liabilities.
Net interest and other income decreased by 19% to $1,644,000 for the
third quarter of 1997 as compared to $2,030,000 for the third quarter of 1996.
For the first nine months of 1997, net interest and other income increased by
20% to $4,871,000 compared to $4,054,000 in 1996. The decrease for the three
months ended September 30, 1997 compared to the same period in the prior year
was due to lower interest income as a result of decline in average cash
balances. The increase for the nine months ended September 30, 1997 reflected
rental income from inception of a lease at the Company's San Diego facility
which began in the third quarter of 1996.
Liquidity and Capital Resources
At September 30, 1997, the Company had $80,600,000 in cash, cash
equivalents and marketable securities, compared to $114,600,000 at December 31,
1996. During the nine months ended September 30, 1997, the net decrease of
$34,000,000 includes cash receipts of interest and rental income of $4,800,000
and $2,800,000 as part of a non-compete agreement. Cash disbursements were used
primarily to fund operating activities, inventory and capital purchases.
Special charges of $4,500,000 were recorded during the third quarter of
1997 in connection with the decision to suspend further development and
commercialization of AccuSite. See "Results of Operations". Total cash payments
for restructuring are approximately $2,700,000, of which $2,300,000 remained
payable at September 30, 1997. The remaining amount is expected to be paid
during the fourth quarter 1997.
The Company is continuing to pursue registrations in Europe and will
evaluate options for commercializing AccuSite in Europe. However, in the absence
of U.S. approval, the Company believes that it may not be cost effective to
manufacture the product for Europe alone. Currently, AccuSite has received
marketing approval in the United Kingdom, Ireland, and the Netherlands and
selling and marketing activities of the product commenced during the first
quarter of 1997 in the United Kingdom. However, as part of the restructuring
discussed above, management has withdrawn AccuSite from the United Kingdom. The
Company has filed separate regulatory submissions for AccuSite in Germany,
France and Italy. Additionally, the regulatory approval in the United Kingdom
was submitted in certain other countries of the European Union under the mutual
recognition process. In June 1997, AccuSite was recommended for marketing
authorization in Belgium, Denmark, Finland, Ireland, Luxembourg, and the
Netherlands through the mutual recognition process. However, there can be no
assurance that the Company will receive approval in such countries.
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In October 1997, the Company received $9,950,000, net of commitment
fees, as part of a five year equipment financing agreement maturing in 2002. The
agreement is secured by all of the equipment purchased by the Company between
October 21, 1995 and March 31, 1998. The loan payments will be rendered in
monthly installments of $161,000, beginning in November 1997, which will include
9% interest, computed daily.
The Company has financed its operations and capital asset acquisitions
from its inception through the sale of equity securities, interest income, and
capital lease and debt financing. The Company expects to finance its continued
operating requirements principally with cash on hand as well as additional
capital that may be generated through equity and debt financings and
collaborative agreements.
The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the Company's research and
development programs, preclinical testing and clinical trial activities, the
timing and cost of obtaining regulatory approvals, the levels of resources that
the Company devotes to the development of manufacturing and marketing
capabilities, technological advances and the status of competitors.
In December 1995, the Company purchased a research and manufacturing
facility in San Diego, California for $13,100,000. This facility requires
validation and process installation investments which the Company has committed
capital expenditures of approximately $8,900,000, of which $4,600,000 has been
paid through September 30, 1997.
The Company expects to incur substantial additional costs relating to
the continued clinical development of its oncology products, continued research
and development programs, the development of manufacturing capabilities, and
general working capital requirements. The Company anticipates that its existing
and committed capital resources, including the proceeds of its April 1996 public
offering and October 1997 equipment financing, will enable it to maintain its
current and planned operations at least through 1999. The Company may require
additional outside financing to complete the process of bringing current
products to market, and while the Company is not aware of any limitations on
future sources of capital, there can be no assurance that such financing will be
available on favorable terms, if at all.
Capital expenditures for environmental control efforts were not
material during the first nine months of 1997 and 1996.
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PART II. OTHER INFORMATION
RISK FACTORS
No Assurance of Regulatory Approvals
The preclinical and clinical testing, manufacturing, and marketing of
the Company's products are subject to extensive regulation by numerous
governmental authorities in the United States and other countries, including,
but not limited to, the FDA. Among other requirements, FDA approval of the
Company's products, including a review of the manufacturing processes and
facilities used to produce such products, will be required before such products
may be marketed in the United States. Similarly, marketing approval by a foreign
governmental authority is typically required before such products may be
marketed in a particular foreign country. Matrix has no products approved by the
FDA and one product approved by foreign authorities and does not expect to
achieve profitable operations unless other product candidates now under
development receive FDA and foreign regulatory approval and are thereafter
commercialized successfully.
In order to obtain FDA approval of a product, the Company must
demonstrate to the satisfaction of the FDA that such product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's current good manufacturing
practice ("cGMP") regulations, which must be followed at all times. The Company
has had only limited experience in submitting and pursuing regulatory
applications. The process of obtaining FDA approvals can be costly, time
consuming, and subject to unanticipated delays. There can be no assurance that
such approvals will be granted to the Company on a timely basis, or at all.
The process of obtaining FDA regulatory approval involves a number of
steps that, taken together, may involve seven years or more from the initiation
of clinical trials and require the expenditure of substantial resources. Among
other requirements, this process requires that the product undergo extensive
preclinical and clinical testing and that the Company file an NDA requesting FDA
approval. When a product contains more than one component that contributes to
the product's effect, as do many of the Company's current product candidates,
the FDA may request that additional data be submitted in order to demonstrate
the contribution of each such component to clinical efficacy. In addition, when
there has been a manufacturing change in a product component (either in the
process by which the component is manufactured or the site at which it is
manufactured) during product development, as is the case with the collagen gel
used in the Company's AccuSite product, the FDA may request that additional data
be submitted to demonstrate that the manufacturing change has not affected the
clinical performance of the product. In addition, the manufacturing facilities
for a product must be inspected and accepted by the FDA as being in compliance
with cGMP regulations prior to approval of the product. There can be no
assurance that the Company's manufacturing facilities will be accepted by the
FDA, and failure to receive or maintain such acceptance would have a material
adverse effect on the Company's business.
Matrix has used three different sources of collagen gel in the products
on which it has conducted clinical trials: Koken Co., Ltd. ("Koken"), Collagen
Corporation ("Collagen") and its own production. The Company intends to use
collagen gel of its own manufacture in products it markets commercially if FDA
approval is received. However, as noted above, when there has been a
manufacturing change in a product, such as a change in the supplier of a
component, the FDA may request that additional data be
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submitted to demonstrate that the manufacturing change has not affected the
clinical performance of the product as shown in earlier clinical trials.
Accordingly, Matrix has conducted a series of preclinical studies to show
comparability of products made from Collagen, Koken and Matrix collagen gel, a
human pharmacokinetic study to show comparability of products made with Matrix
and Collagen collagen gel, and Phase III clinical trials showing comparability
in clinical performance of a product made with Koken collagen gel and a product
made with Collagen collagen gel. The Company also conducted a Phase III(b)
clinical trial to demonstrate the comparable clinical performance of a product
made with Matrix collagen gel to a product made with Collagen collagen gel. The
Company believes that all studies conducted to date have supported the
comparable clinical performance of products made with collagen gel from all
three sources, but there can be no assurance that the FDA will agree. In
addition, there can be no assurance that the FDA will not require further
clinical demonstrations either of the comparability of a product made with
Matrix collagen gel to product made with Collagen collagen gel or Koken collagen
gel, or the safety and efficacy of a product made with Matrix collagen gel. If
questions arise during the FDA review process about comparability or about the
safety and efficacy of a product made with collagen, it could delay the approval
process or prevent approval and will increase the costs of obtaining such
approval.
The Company's analysis of the results of its clinical studies submitted
as part of an NDA is subject to review and interpretation by the FDA, which may
differ from the Company's analysis. There can be no assurance that the Company's
data or its interpretation of data will be accepted by the FDA. In addition,
delays or rejections may be encountered based upon changes in applicable law or
FDA policy during the period of product development and FDA regulatory review.
Any failure to obtain, or delay in obtaining, FDA approvals would adversely
affect the ability of the Company to market its proposed products. Moreover,
even if FDA approval is granted, such approval may include significant
limitations on indicated uses for which a product could be marketed.
Both before and after approval is obtained, a product, its
manufacturer, and the holder of the NDA for the product are subject to
comprehensive regulatory oversight. Violations of regulatory requirements at any
stage, including the preclinical and clinical testing process, the approval
process or thereafter (including after approval), may result in adverse
consequences, including the FDA's delay in approving or refusal to approve a
product, withdrawal of an approved product from the market, and/or the
imposition of criminal penalties against the manufacturer and/or the NDA holder.
In addition, later discovery of previously unknown problems relating to a
marketed product may result in restrictions on such product, manufacturer, or
the NDA holder, including withdrawal of the product from the market. Also, new
government requirements may be established that could delay or prevent
regulatory approval of the Company's products under development. See
"--Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate
Reimbursement.
The Company's NDA for AccuSite was accepted for filing by the FDA in
November 1995. In December 1996, the Company announced that it received an
action letter from the FDA identifying issues that will need to be resolved
before the Company's NDA for AccuSite can be approved for the treatment of
genital warts. In March 1997, Matrix filed an amendment to its NDA that the
Company believed addressed the questions raised in the action letter and during
the subsequent meeting. In September 1997, the Company received a second action
letter from the FDA which maintained the agency's previous non-approvability
stance toward AccuSite.
The second FDA action letter focused on the persistence, in certain
AccuSite-treated patients, of a bump-like thickening or swelling (induration) at
the site of injection. The agency feels the persistence of induration, although
it typically resolved naturally, may be an indicator of localized inflammation.
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Although Matrix plans to meet with the FDA at their earliest possible
convenience, the Company expects that the concerns raised by the agency will be
difficult to overcome and does not plan to invest significant additional
resources in the AccuSite program. The AccuSite program will be abandoned if
such efforts require the commitment of significant resources. The failure to
commercialize AccuSite in the United States and Europe is expected to have a
material adverse impact on the future revenues of the Company.
The Company is continuing to pursue registrations in Europe and will
evaluate options for commercializing AccuSite in Europe. However, in the absence
of U.S. approval, the Company believes that it may not be cost effective to
manufacture the product for Europe alone. The Company filed its Market
Authorization Application "MAA" for AccuSite in the United Kingdom in August
1995 and subsequently filed an MAA in Germany, France and Italy. In May 1996,
the Company was notified by the Medicines Control Agency in the United Kingdom
that a product license had been granted for AccuSite for the treatment of
genital warts. In December 1996, the Company submitted an application for mutual
recognition of the United Kingdom approval by various members of the European
Union to which it did not make a national submission. In June 1997, AccuSite was
recommended for marketing authorization in Belgium, Denmark, Finland, Ireland,
Luxembourg and the Netherlands through the mutual recognition process. As of the
end of September, the Company has received marketing authorization for AccuSite
in Ireland and the Netherlands. However, there can be no assurance that Belgium,
Denmark, Finland, and Luxembourg will formally recognize the approval obtained
in the United Kingdom. During the regulatory process, the MAA was withdrawn from
Spain, Greece, Portugal, and Austria, and a national application was withdrawn
from Sweden. As with the United States FDA review process, there are numerous
risks associated with the MAA review. Additional data may be requested by the
regulatory agency reviewing the MAA to demonstrate the contribution of a product
component to the clinical safety and efficacy of a product or to compare the
efficacy of the product to other treatments, or to confirm the comparable
performance of materials produced by a changed manufacturing process or at a
changed manufacturing site.
The processes required by European regulatory authorities before the
Company's products can be marketed in Western Europe are similar to those in the
United States. First, appropriate preclinical laboratory and animal tests as
well as analytical product quality tests must be done, followed by submission of
a clinical trial exemption ("CTX") or similar documentation before human
clinical trials can be initiated. Upon completion of adequate and
well-controlled clinical trials in humans that establish that the drug is safe
and efficacious, regulatory approval of a MAA must be obtained from the relevant
regulatory authorities.
Uncertainties Associated with Clinical Trials
Matrix has conducted and plans to continue to undertake extensive and
costly clinical testing to assess the safety and efficacy of its potential
products. Failure to comply with FDA regulations applicable to such testing can
result in delay, suspension, or cancellation of such testing, and/or refusal by
the FDA to accept the results of such testing. In addition, the FDA or the
Company may modify or suspend clinical trials at any time if it concludes that
the subjects or patients participating in such trials are being exposed to
unacceptable health risks. Further, there can be no assurance that human
clinical testing will show any current or future product candidate to be safe
and effective or that data derived therefrom will be suitable for submission to
the FDA.
The Company is currently conducting multiple clinical trials in the
United States and certain foreign countries, including four ongoing Phase III
trials. The rate of completion of the Company's
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clinical trials is dependent upon, among other factors, the rate of patient
enrollment. Patient enrollment is a function of many factors, including the size
of the patient population, the nature of the protocol, the proximity of patients
to clinical sites and the eligibility criteria for the study. The Company has
experienced slower than planned enrollment of patients with its ongoing Phase
III trials. Further delays in completing enrollment in these trials or delays in
other clinical studies may result in increased costs and delays, which could
have a material adverse effect on the Company. Generally similar considerations
apply to clinical testing that is subject to regulatory oversight by foreign
authorities and/or that is intended to be used in connection with foreign
marketing applications.
History of Losses; Future Profitability Uncertain
Matrix was incorporated in 1985 and has experienced significant losses
since that date. As of September 30, 1997, the Company's accumulated deficit was
approximately $139,282,000 million. The Company has not generated revenues from
its products and expects to incur significant additional losses over the next
several years. The Company's ability to achieve a profitable level of operations
is dependent in large part on successfully developing products, obtaining
regulatory approvals for its products, and making the transition to an
organization producing commercial products and entering into agreements for
product commercialization. No assurance can be given that the Company's product
development efforts will be completed, that required regulatory approvals will
be obtained, that any products will be manufactured and marketed successfully,
or that profitability will be achieved.
Additional Financing Requirements and Uncertain Access to Capital Markets
The Company has expended and will continue to expend substantial funds
to complete the research, development and marketing of its products. The Company
may require additional funds for these purposes through additional equity or
debt financings, collaborative arrangements with corporate partners or from
other sources. No assurance can be given that such additional funds will be
available on acceptable terms, if at all. If adequate funds are not available
from operations or additional sources of financing, the Company's business could
be materially and adversely affected. Based on its current operating plan, the
Company anticipates that its existing capital resources will be adequate to
satisfy its capital needs through 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Limited Manufacturing and Marketing Experience
The Company intends to market and sell certain of its products, if
successfully developed and approved, through a direct sale organization or
co-promotion or distribution agreements. For AccuSite, the Company has entered
into a sales and marketing agreement with Savage Laboratories, the U.S.
marketing division of Altana, Inc., to sell, market and distribute AccuSite to
dermatology and obstetrics and gynecology audiences in the United States. The
Company has similar agreements in place for AccuSite with pharmaceutical
companies in Italy, Spain, and Portugal. However, management suspended the
Accusite program after being notified that the Food and Drug Administration
(FDA) is not prepared to approve AccuSite as a treatment including the
withdrawal of AccuSite from the United Kingdom, where it has been marketed since
January 1997. In order to market its products directly, a sales force with
technical expertise must be developed. There can be no assurance that the
Company will be able to establish a successful direct sales organization or
co-promotion or distribution arrangements. In addition, there can be no
assurance that there will be sufficient sales of products to fund related
expenses, many of which must be incurred before sales commence. Failure to
establish a marketing and
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<PAGE>
sales capability in the United States and/or outside the United States may have
a material adverse effect on the Company.
The Company's ability to conduct clinical trials on a timely basis, to
obtain regulatory approvals and to commercialize its products will depend in
part upon its ability to manufacture its products, either directly or through
third parties, at a competitive cost and in accordance with applicable FDA and
other regulatory requirements, including cGMP regulations. The Company is
currently manufacturing clinical supplies at its manufacturing facilities in San
Jose and Milpitas, California. The Company plans to decommission these
facilities by March 31, 1998.
In December 1995, the Company purchased a research and manufacturing
facility in San Diego, California to meet its anticipated long-term commercial
scale production requirements. The Company expects that the San Diego facility
and contract manufacturers should provide sufficient production capacity to meet
clinical requirements. The Company estimates that this facility will not be
available for commercial production until late 1998. There can be no assurance
that the Company will be able to validate this facility in a timely manner or
that this facility will be adequate for Matrix's long-term needs without delay
to the Company's ability to meet product demand or that the Company will be able
to manufacture in a cost effective manner. Matrix expects to continue to use
selected contract manufacturers, in addition to its own manufacturing
capability, for some or all of its product components. Failure to establish
additional manufacturing capacity on a timely basis may have a material adverse
effect on the Company.
Dependence on Sources of Supply
Several of the materials used in the Company's products are available
from a limited number of suppliers. These items, including collagen gel and
various bulk drug substances used in the Company's products, have generally been
available to Matrix and others in the pharmaceutical industry on commercially
reasonable terms. If the Company's manufacturing facilities are not able to
produce sufficient quantities of collagen gel in accordance with applicable
regulations, the Company would have to obtain collagen gel from another source
and gain regulatory approval for that source. There can be no assurance that the
Company would be able to locate an alternative, cost-effective source of supply
of collagen gel. Matrix has negotiated and intends to continue to negotiate
supply agreements, as appropriate, for the raw materials and components utilized
in its products. Matrix is also in the process of attempting to obtain approval
of second sources for as many as possible of these supplies. Any interruption of
supply could have a material adverse effect on the Company's ability to
manufacture its products, and thus the ability to complete the clinical trials
or to commercialize products. In addition, the Company's ability to
commercialize its IntraDose Injectable Gel product in the United States could be
limited by the issuance in 1996 of a U.S. patent for cisplatin, a
chemotherapeutic drug that is the active compound in IntraDose, if the
newly-issued patent were upheld and if IntraDose were found to infringe that
patent, and if the Company were unable to obtain a license under that patent.
See "--Uncertainty Regarding Patents and Proprietary Rights."
Uncertainty Regarding Patents and Proprietary Rights
The Company's success depends in part on its ability to obtain patent
protection for its products and to preserve its trade secrets and operate
without infringing on the proprietary rights of third parties. No assurance can
be given that the Company's pending patent applications will be approved or that
any patents will provide competitive advantages for the Company's products or
will not be successfully challenged or circumvented by its competitors. The
Company has not conducted an exhaustive patent
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<PAGE>
search and no assurance can be given that patents do not exist or could not be
filed which would have a material adverse effect on the Company's ability to
market its products or maintain its competitive position with respect to its
products. The Company's patents may not prevent others from developing
competitive products using related technology. Other companies obtaining patents
claiming products or processes useful to the Company may bring infringement
actions against the Company. As a result, the Company may be required to obtain
licenses from others to develop, manufacture or market its products. There can
be no assurance that the Company will be able to obtain any such licenses on
commercially reasonable terms, if at all. The Company also relies on trade
secrets and proprietary know-how which it seeks to protect, in part, by
confidentiality agreements with its employees, consultants, suppliers and
licensees. There can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known or be independently
developed by competitors.
No assurance can be given that any patent issued to, or licensed by,
the Company will provide protection that has commercial significance. In this
regard, the patent position of pharmaceutical compounds and compositions is
particularly uncertain. Even issued patents may later be modified or revoked by
the United States Patent and Trademark Office ("PTO") in proceedings instituted
by Matrix or others. During an opposition proceeding in Japan, the Company
became aware of a reference which may affect the scope of its United States
Patent claims which cover the collagen gel matrix products. The Company has
brought this reference to the attention of the PTO for a determination of the
extent to which the claims should be modified in light of this reference. The
patent has been reexamined by the PTO and the reissuance has been allowed. The
Company believes, although no assurance can be given, that the modified claims
will not materially adversely affect the Company's proprietary protection for
its products. In addition, no assurance can be given that the Company's patents
will afford protection against competitors with similar compounds or
technologies, that others will not obtain patents claiming aspects similar to
those covered by the Company's patents or applications, or that the patents of
others will not have an adverse effect on the ability of the Company to do
business. Moreover, the Company believes that obtaining foreign patents may be
more difficult than obtaining domestic patents because of differences in patent
laws, and recognizes that its patent position therefore may be stronger in the
United States than abroad. In addition, the protection provided by foreign
patents, once they are obtained, may be weaker than that provided by domestic
patents.
In addition, no assurance can be given that the Company's patents will
afford protection against competitors with similar compounds or technologies,
that others will not obtain patents claiming aspects similar to those covered by
the Company's patents or applications, or that the patents of others will not
have an adverse effect on the ability of the Company to do business. In 1996,
for instance, a composition-of-matter patent for the cytotoxic drug cisplatin
was granted in the United States to a pharmaceutical company whose use patent on
cisplatin as an anti-tumor agent expired in December 1996. The Company, on
advice of patent counsel, believes the new patent for cisplatin, the active
agent in the Company's IntraDose product, was improperly awarded and should be
found invalid. However, if the new patent on cisplatin is upheld and if
IntraDose were found to infringe that patent, there can be no assurance that the
Company would be able to obtain a license to the patent in order to
commercialize IntraDose in the United States.
Rapid Technological Change and Substantial Competition
The pharmaceutical industry is subject to rapid and substantial
technological change. Technological competition in the industry from
pharmaceutical and biotechnology companies, universities, governmental entities
and others diversifying into the field is intense and is expected to
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<PAGE>
increase. Most of these entities have significantly greater research and
development capabilities, as well as substantially more marketing, financial and
managerial resources than the Company, and represent significant competition for
the Company. Acquisitions of, or investments in, competing biotechnology
companies by large pharmaceutical companies could increase such competitors'
financial, marketing and other resources. There can be no assurance that
developments by others will not render the Company's products or technologies
noncompetitive or that the Company will be able to keep pace with technological
developments. Competitors have developed or are in the process of developing
technologies that are, or in the future may be, the basis for competitive
products. Some of these products may have an entirely different approach or
means of accomplishing similar therapeutic effects than products being developed
by the Company. These competing products may be more effective and less costly
than the products developed by the Company. In addition, conventional drug
therapy, surgery and other more familiar treatments and modalities will offer
competition to the Company's products.
Any product which the Company succeeds in developing and for which it
gains regulatory approval must then compete for market acceptance and market
share. Accordingly, important competitive factors, in addition to completion of
clinical testing and the gaining of regulatory approval, will include product
efficacy, safety, timing and scope of regulatory approvals, availability of
supply, marketing and sales capability, reimbursement coverage, pricing and
patent protection.
Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate Reimbursement
The future revenues and profitability of and availability of capital
for biopharmaceutical companies may be affected by the continuing efforts of
governmental and third party payers to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
prospects. Additionally, the cost of prescription drugs is receiving substantial
attention in the United States Congress. Legislation enacted in 1990, and
amended and strengthened in 1992, requires pharmaceutical manufacturers to
rebate to the government a portion of their revenues from drugs furnished to
Medicaid patients. In 1992, legislation was enacted that extends these
requirements to cover outpatient pharmaceuticals, and also mandates a reduction
in pharmaceutical prices charged to certain federally-funded facilities as well
as to certain hospitals serving a disproportionate share of low-income patients.
It is likely that Congressional attention will continue to focus on the cost of
drugs generally, and particularly on increases in drug prices in excess of the
rate of inflation, given recent government initiatives pertaining to the overall
reform of the U.S. health care system, and those specifically directed at
lowering total costs. The Company cannot predict the likelihood of passage of
federal and state legislation related to health care reform or lowering drug
costs.
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of such products and related treatment are obtained from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). Third-party payors are increasingly
challenging the prices charged for medical products and services. Also, the
trend towards managed health care in the United States and the concurrent growth
of organizations such as HMOs, which could control or significantly influence
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may all
result in lower prices for the Company's products. The cost containment measures
that health care payors and providers are instituting and the
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<PAGE>
effect of any health care reform could adversely affect the Company's ability to
sell its products and may have a material adverse effect on the Company.
Dependence Upon Qualified and Key Personnel
Because of the specialized nature of the Company's business, the
Company's ability to maintain its competitive position depends on its ability to
attract and retain qualified management and scientific personnel. Competition
for such personnel is intense. There can be no assurance that the Company will
be able to continue to attract or retain such persons.
Product Liability Exposure; Limited Insurance Coverage
The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of products during research or
commercialization results in adverse effects. While the Company will continue to
attempt to take appropriate precautions, there can be no assurance that it will
avoid significant product liability exposure. The Company maintains product
liability insurance for clinical studies and commercial product. However, there
can be no assurance that such coverage will be adequate or that adequate
insurance coverage for future clinical or commercial activities will be
available at all, or at acceptable cost, or that a product liability claim would
not materially adversely affect the business or financial condition of the
Company.
Hazardous Materials and Product Risks
The Company's research and development involves the controlled use of
hazardous materials, such as cytotoxic drugs, other toxic and carcinogenic
chemicals and various radioactive compounds. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by federal, state and local regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could be extensive. The
Company is also subject to substantial regulation relating to occupational
health and safety, environmental protection, hazardous substance control, and
waste management and disposal. The failure to comply with such regulations could
subject the Company to, among other things, fines and criminal liability.
Certain of the chemotherapeutic agents employed by the Company in its
Therapeutic Implant, ADV and Therapeutic Adhesive products are known to have
toxic side effects, particularly when used in traditional methods of
administration. Each product incorporating such a chemotherapeutic agent will
require separate FDA approval as a new drug under the procedures specified
above. Bovine collagen is a significant component of the Company's protein
matrix. Two rare autoimmune connective tissue conditions, polymyositis and
dermatomyositis ("PM/DM"), have been alleged to occur with increased frequency
in patients who have received cosmetic collagen treatments. Based upon the
occurrence of these conditions, the FDA requested a major manufacturer of bovine
collagen products for cosmetic applications to investigate the safety of such
uses of its collagen. In October 1991, an expert panel convened by the FDA to
examine this issue found no statistically significant relationships between
injectable collagen and the occurrence of autoimmune disease, but noted that
certain limitations in the available data made it difficult to establish a
statistically significant association.
In addition, bovine sourced materials are of some hypothetical concern
because of transmission of Bovine Spongiform Encelphalopaty ("BSE"). The Company
has taken all precautions to minimize the
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<PAGE>
risk of contamination of its collagen with BSE including the use of U.S sourced
cow hides. Materials made of cow hides are considered to be the lowest risk of
transmission of BSE.
Volatility of Stock Price; No Dividends
The market prices for securities of biopharmaceutical and biotechnology
companies (including the Company) have historically been highly volatile, and in
addition, the market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Future announcements concerning the Company, its
competitors or other biopharmaceutical products, governmental regulation,
developments in patent or other proprietary rights, litigation or public concern
as to the safety of products developed by the Company or others and general
market conditions may have a significant effect on the market price of the
Common Stock. The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying any dividends in the foreseeable future.
Anti-Takeover Provisions
The ability of the Board of Directors of the Company to issue shares of
Preferred Stock without stockholder approval and a stockholder rights plan
adopted by the Company may, alone or in combination, have certain anti-takeover
effects. The Company also is subject to provisions of the Delaware General
Corporation Law which may make certain business combinations more difficult.
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<PAGE>
MATRIX PHARMACEUTICAL, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Exhibit Table
10.52 Imperial Bank Credit Agreement (October 8, 1997)
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the
quarter ended September 30, 1997.
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<PAGE>
MATRIX PHARMACEUTICAL, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATRIX PHARMACEUTICAL, INC.
Date: By: /s/ James R. Glynn
----------------------- -----------------------
James R. Glynn
Chief Operating Officer
Chief Financial Officer
(Signing on behalf of the registrant and as
principal executive and financial officer)
Page 22
[LOGO]
IMPERIAL BANK
Member FDIC
CREDIT AGREEMENT
This Agreement is made by and between Matrix Pharmaceutical, Inc.
("Borrower") and Imperial Bank, a California banking corporation, ("Bank").
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows'
1. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
1.01 Existence and Rights. Borrower is a corporation duly organized and
existing and in good standing under the laws of Delaware, without limit as to
the duration of its existence and is authorized and in good standing to do
business in the State of California; Borrower has corporate powers and adequate
authority, rights and franchises to own its property and to carry on its
business as now conducted, and is duly qualified and in good standing in each
State in which the character of the properties owned by it therein or the
conduct of its business makes such qualification necessary; and Borrower has the
power and adequate authority to make and carry out this Agreement.
1.02 Agreement Authorized. The execution, delivery and performance of
this Agreement are duly authorized and do not require the consent or approval of
any governmental body or other regulatory authority; are not in contravention of
or in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, or Articles of Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms; subject only to bankruptcy, insolvency
or similar laws affecting creditors rights generally.
1.03 No Conflict. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any of
its property may be bound or affected, and do not cause any lien, charge or
other encumbrance to be created or imposed upon any such property by reason
thereof.
1.04 Litigation. There is no litigation or other proceeding pending or
threatened against or affecting Borrower which if determined adversely to
Borrower or its interest would have a material adverse effect on the financial
condition of Borrower, and Borrower is not in default with respect to any order,
writ, injunction, degree or demand of any court or other governmental or
regulatory authority which could reasonably be expected to have a material
adverse effect on Borrower.
1.05 Financial Condition. The balance sheet of Borrower as of June 30,
1997, a copy of which has heretofore been delivered to Bank by Borrower, and all
other statements and data submitted in writing by Borrower to Bank in connection
with this request for credit are true and correct, and said balance sheet truly
presents the financial condition of Borrower as of the date thereof, and has
been prepared in accordance with generally accepted accounting principles on a
basis consistently maintained. Since such date, there have been no material
adverse changes in the financial condition or business of Borrower. Borrower has
no knowledge of any material liabilities, contingent or otherwise, at such date
not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which could reasonably be expected to may have a materially adverse effect upon
its financial condition, operations or business as now conducted.
<PAGE>
CREDIT AGREEMENT
October 8, 1997
1.06 Title to Assets. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted by
Section 3.03 hereof.
1.07 Tax Status. Borrower has no material liability for any delinquent
state, local or federal taxes, and, if Borrower has contracted with any
government agency, Borrower has no liability for renegotiation of profits.
1.08 Trademarks, Patents. To the best of Borrower's knowledge, Borrower,
as of the date hereof, owns or is licensed or otherwise has the right to use all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others except where the foregoing could reasonably be expected to have a
material adverse effect on Borrower.
1.09 Regulation U. None of the proceeds of any loan from the Bank to
Borrower shall be used to purchase or carry margin stock (as defined within
Regulation U of the Board of Governors of the Federal Reserve system).
2. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, it will, unless Bank shall otherwise consent
in writing:
2.01 Rights and Facilities. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2.02 Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment and as to property insurance have Bank named as loss payee in an
Lenders "Loss Payable" Endorsement Form 438BFU or equivalent.
2.03 Taxes and Other Liabilities. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
a. The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
b. It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed
by it adequate with respect thereto.
2
<PAGE>
CREDIT AGREEMENT
October 8, 1997
2.04 Financial Covenants. Borrower to maintain "Liquid Assets," of not
less than the greatest of (a) an amount equal to two and one half (2.5) times
the most recent quarterly "Cash Burn Rate," (b) two (2.0) times total
liabilities (excluding Borrower's existing outstanding mortgage obligation as
shown in its financial statement dated June 30, 1997, and any amounts due Bank,
or (c) $22,000,000. "Liquid Assets" is defined as the sum of cash, cash
equivalents, and short term investments. "Cash Burn Rate" is defined as the
decrease in Liquid Assets during the three months ending as of the date of
calculation, and will be calculated and reported as of the last day of each
month.
In the event of a default of the foregoing:
a. Borrower may cure such default by providing cash collateral to
Bank in an amount equal to the balance of the loan.
b. In the event of a full cash collateralization as a cure of
default, Bank agrees to release its interest in the secured
collateral and promptly execute and deliver to Borrower all
documents necessary to evidence the release or termination of any
liens or security interests existing in favor of Bank relating to
the Collateral.
All financial covenants and financial information referenced herein shall
be interpreted and prepared in accordance with generally accepted
accounting principles applied on a basis consistent with previous years.
Compliance with financial covenants shall be calculated and monitored on a
monthly basis.
2.05 Records and Reports. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained.
a. Monthly Financial Statement. Within thirty (30) days after the
close of each month of each fiscal year of Borrower, commencing
with the month next ending, a balance sheet and profit and loss
statement as of the close of such period and covering operations
for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail, prepared in accordance with
generally accepted accounting principles on a basis consistently
maintained by Borrower and certified by an appropriate officer of
Borrower.
b. Quarterly 10(Q) (as filed with the SEC) within 45 days after the
close of each quarter end.
c. Annual 10(K) (as filed with the SEC) within 90 days after the
close of fiscal year end.
d. Other Information. Such other information relating to the
operations, properties, business or condition of Borrower as the
Bank reasonably may request from time to time;
e. Management Letter. In connection with each fiscal year end
financial statement furnished to Bank hereunder, any management
letter of Borrower's independent certified public accountant.
2.06 Notice of Default. Promptly notify Bank in writing of the
occurrence of any Event of Default hereunder or any event which upon notice and
lapse of time would be an Event of Default.
3
<PAGE>
CREDIT AGREEMENT
October 8, 1997
2.0 Operating Accounts. Based upon Borrower's satisfactory review of
Bank's products and services, and Bank's competitive pricing of those products
and services, Borrower to maintain all primary accounts and banking relationship
with Bank within 90 days from funding any loans, and during the term of any
loans from Bank to Borrower. Borrower shall maintain or cause to be maintained,
on deposit with Imperial Bank, non-interest bearing demand deposit balances
sufficient to compensate Bank for all services provided by Bank. Balances shall
be calculated after reduction for the reserve requirement of the Federal Reserve
Board and uncollected funds. Any deficiencies shall be charged directly to the
Borrower on a monthly basis.
2.08 Attorney's Fees. Pay promptly to Bank without demand after notice,
with interest thereon from the date of expenditure at the rate applicable to any
loans from Bank to Borrower, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising any such loan
after the occurrence of an Event of Default, whether or not suit is filed. If
suit is brought to enforce any provision of this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
3. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, it will
not, without Bank's written consent:
3.01 Type of business: Management. Make any substantial change in the
character of its business.
3.02 Outside Indebtedness. Other than in the ordinary course of business
and consistent with past practices, create, incur, assume or permit to exist any
indebtedness for borrowed moneys, other than loans from the Bank, exceed
obligations now existing as shown in the financial statement dated June 30,
1997, excluding those obligations being refinanced by Bank or loans incurred
after March 31, 1998.
3.03 Liens and Encumbrances. Other than in the ordinary course of
business and consistent with past practices, create, incur, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any asset now
owned, other than liens for taxes not delinquent and liens in Bank's favor,
except for those already existing as of June 30, 1997, including but not limited
to liens in favor of the Federal Deposit Insurance Corporation or liens or
encumbrances incurred after March 31, 1998.
3.04 Liens, Investments, Secondary Liabilities. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business and consistent with past practices or make any investment
in the securities of any person inconsistent with existing investment policy; or
guarantee or otherwise become liable upon the obligation of any person or other
entity, except by endorsement of negotiable instruments for deposit or
collection in the ordinary and normal course of its business and consistent with
past practices.
3.05 Acquisition or Sale of Business; Merger or Consolidation. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary course of its business consistent with
past practices or for the betterment of the business; or sell, lease assign or
transfer any substantial part of its business or fixed assets, or any property
or other assets necessary for the continuance of its business as now conducted,
including without limitation the selling of any dividends, property or other
asset accompanied by the leasing back of the same except in the ordinary course
of business consistent with past practices.
4
<PAGE>
CREDIT AGREEMENT
October 8, 1997
4. EVENTS OF DEFAULT
The occurrence of any of the following events (each an "Event of
Default") shall, at Bank's option, terminate Bank's commitment to lend and make
all sums of principal and interest then remaining unpaid on all Borrower's
indebtedness to Bank immediately due and payable, all without demand,
presentment or notice, all of which are hereby expressly waived:
4.01 Failure to Pay. Failure to pay any installment of principal or
interest on any indebtedness of Borrower to Bank within five business days of
when due.
4.02 Breach of Covenant. Failure of Borrower to perform any other term
or condition of this Agreement binding upon Borrower.
4.03 Breach of Warranty. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
material respect.
4.1 Insolvency; Receiver or Trustee. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
4.05 Judgments, Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving an amount in excess of $100,000 shall
be entered or filed against Borrower or any of its assets and shall remain
unvacated, unbonded or unstayed for a period later than five days prior to the
date of any proposed sale thereunder.
4.06 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be not be vacated within thirty (30) days.
4.07 Collateral. The assignment or transfer of existing liens on
equipment in favor of the Federal Deposit Insurance Corporation to any
institution or creditor other than Bank.
5. MISCELLANEOUS PROVISIONS
5.01 Loan Fees. Borrower will pay Bank, upon execution hereof, a loan
fee in the sum of $50,000.
5.02 Failure or Indulgence Not Waiver. No failure or delay on the part
of Bank or any holder of any note issued by Borrower to Bank, in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement or any note
issued in connection with a loan that Bank may make hereunder, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
5.03 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
5
<PAGE>
CREDIT AGREEMENT
October 8, 1997
5.04 Inurement. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
5.05 Applicable Law. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
5.06 Offset. In addition to and not in limitation of all rights of
offset that Bank or other holder of any note issued by Borrower in favor of Bank
may have under applicable law, Bank or other holder of such notes shall, upon
the occurrence of any Event of Default or any event which with the passage of
time or notice would constitute such an Event of Default, have the right to
appropriate and apply to the payment of the outstanding under any such note any
and all balances, credits, deposits, accounts or monies of Borrower then or
thereafter with Bank or other holder, within ten (10) days after the Event of
Default, and notice of the occurrence of any Event of Default by Bank to
Borrower.
5.07 Severability. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
5.08 Time of the Essence. Time is hereby declared to be of the essence
of this Agreement and of every part hereof.
5.09 Accounting. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
5.10 Modification. This Agreement may be modified only by a writing
signed by both parties hereto.
This Agreement is executed on behalf of the parties by duly authorized
representatives as of October 8, 1997.
IMPERIAL BANK ("Bank")
By: /s/ Tim Bubnack
---------------------------
Tim Bubnack, Vice President
Date: ---------------------------
MATRIX PHARMACEUTICAL, INC. ("Borrower")
By: /s/ James Glynn
---------------------------
James Glynn, Chief Executive Officer
6
<PAGE>
IMPERIAL BANK
INNOVATIVE BUSINESS BANKING
Member FDIC
NOTE
$10,000,000 San Diego, California October 8, 1997
On October 15, 2002, and as hereafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its San Diego Regional office, the principal sum of
$10,000,000 or such sums up to the maximum if so stated, as the Bank may now or
hereafter advance to or for the benefit of the undersigned in accordance with
the terms hereof, together with interest thereon from the date of disbursement
on the unpaid principal balance at the rate of nine percent (9.00%). Interest
shall be computed at the above rate on the basis of the actual number of days
during which the principal balance is outstanding, divided by 360, which shall,
for interest computation purposes, be considered one year. Interest shall be
payable monthly, included with principal, beginning November 15, 1997, and if
not so paid shall become a part of the principal. All payments shall be applied
first to interest and the remainder, if any, on principal. Principal and
interest shall be payable in installments of $160,890.78, or more, each
installment on the 15th day of each month, beginning November 15, 1997. Advances
not to exceed any unpaid balance owing at any one time equal to the maximum
amount specified above, may be made at the option of the Bank.
Borrower may, at any time, prepay all or any portion of the outstanding
principal balance of this note without penalty or premium. Any partial
prepayment shall be applied to the installments in inverse order of maturity.
Should default be made in the payment of principal or interest when due, or in
the performance or observance, when due, of any item, covenant or condition of
any deed of trust, security agreement or other agreement (including amendments
or extensions thereof) securing or pertaining to this note, at the option of the
holder hereof and without notice or demand, the entire balance of principal and
accrued interest then remaining unpaid shall (a) become immediately due and
payable, and (b) thereafter bear interest, until paid in full, at the increased
rate of 3% per year in excess of the rate provided for above, as it may vary
from time to time.
Defaults shall include, but not be limited to, the failure of the maker(s) to
pay principal or interest when due; the filing as to each. person obligated
hereon, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; or the death of any
Obligor.
If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 3% of the payments so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all costs and
expenses of collection and reasonable attorneys' fees incurred by the holder
hereof on account of such collection, plus interest at the rate applicable to
principal, whether or not suit is filed hereon. Each Obligor shall be jointly
and severally liable hereon and consents to renewals, replacements and
extensions of time for payment hereof, before, at or after maturity; consents to
acceptance, release or substitution of security for this note; and waives demand
and protest and the right to assert any statute of limitations. The indebtedness
evidenced hereby shall be payable in lawful money of the United States. In any
action brought under or arising out of this note, each Obligor, including any
successor(s) or assign(s), hereby consents to the application of California law,
to the jurisdiction of any competent court within the State of California and to
service of process by any means authorized by California law.
No single or partial exercise of any power hereunder or under any deed of the
security agreement or other agreement in connection herewith shall preclude
other or further exercises thereof, or the exercise of any other such power. The
holder hereof shall at all times have the right to proceed against any portion
of the security for this note in such order and in such manner as such holder
may consider appropriate, without waiving any rights with respect to any of the
security. Any delay or omission on the part of the holder hereof in exercising
any right hereunder, or under any deed of trust, security agreement or other
agreement, shall not operate as a waiver of any such right, or any other right,
under this note or any deed of trust, security agreement or other agreement in
connection herewith.
See attached Reference Provision incorporated herein by this reference.
MATRIX PHARMACEUTICAL, INC.
- ------------------------------------- ---------------------------------------
BY /s/ Jim Glynn
- ------------------------------------- ---------------------------------------
Jim Glynn, CEO/SFO/Secretary
<PAGE>
The following Reference Provision is by this reference incorporated in the Note
dated October 8, 1997, executed by MATRIX PHARMACEUTICAL, INC.
REFERENCE PROVISION
1. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Note
("Agreement"), which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to the Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure ("CCP"), or their successor section, which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is locate or Los Angeles County if none
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers of a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP s.s. 170.6. The referee shall (a) be requested to set the matter
for hearing within sixty (60) days after the Claim Date and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP s.s. 644 in any court in the State of California having jurisdiction. Any
party may apply for a reference proceeding at any time after thirty (30) days
following the notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial. All discovery
permitted by this Agreement shall be completed no later than fifteen (15) days
before the first hearing date established by the referee. The referee may extend
such period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the
<PAGE>
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, s.s. 1280 through s.s. 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
MATRIX PHARMACEUTICAL, INC.
By: /s/ Jim Glynn
----------------------------
Jim Glynn, CEO/CFO/Secretary
<PAGE>
IMPERIAL BANK
INNOVATIVE BUSINESS BANKING
Member FDIC
GENERAL SECURITY AGREEMENT
(Tangible and Intangible Personal Property)
This Agreement is executed on October 8, 1997, by MATRIX PHARMACEUTICAL, INC.
(hereinafter called "Obligor"). In consideration of financial accommodations
given, to be given or continued, the Obligor grants to IMPERIAL BANK
(hereinafter called "Bank") a security interest in (a) all property (i)
delivered to Bank by Obligor, (ii} which shall be in Bank's possession or
control in any matter or for any purpose, {iii) described below, (iv) now owned
or hereafter acquired by Obligor of the type or class described below and/or in
any supplementary schedule hereto, or in any financing statement filed by Bank
and executed by or on behalf of Obligor; (b) the proceeds, increase and products
of such property, all accessions thereto, and all property which Obligor may
receive on account of such collateral which Obligor will immediately deliver to
Bank (collectively referred to as "Collateral") to secure payment and
performance of all of Obligor's present or future debts or obligations to Bank,
whether absolute or contingent (hereafter referred to as "Debt"). Unless
otherwise defined, words used herein have the meanings given them in the
California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
- --------------------------------------------------------------------------------
Year Make/Manufacturer Model Identification License or New or Used
and Serial No. Registration No.
- --------------------------------------------------------------------------------
Engine or other equipment:
------------------------------------------------------
(For aircraft - original ink signature on Copy to FAA)
B. DEPOSIT ACCOUNTS:
Type Account Number Amount $
----------------- ------------------ -----------------
In name of Depository
--------------------------- --------------------------------
AND ALL EXTENSIONS OR RENEWALS THEREOF.
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
All equipment acquired by Obligor subsequent to October 21, 1995, and prior to
March 31, 1998, wherever located, including but not limited to those items of
equipment described on attached Exhibit "A" including all proceeds thereof.
The collateral not in Bank's possession will be located at: 34700 Campus Dr.,
Fremont, CA 94555; 600 Valley Way, Milpitas, CA 95035; 4757 Nexus Centre Dr.,
San Diego, CA 92121; or 2350 Qume Dr., Suite M, San Jose, CA 95131
[ ] If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower").
- ------------------------------------------------------------------
All the terms and provisions on the reverse side hereof are incorporated herein
as though set forth in full, and constitute a part of this Agreement.
Signature
Name (indicate title, if applicable) Address
MATRIX PHARMACEUTICAL By: /s/ Jim Glynn 34700 Campus Dr.
- --------------------- ---------------------------- -------------------
Jim Glynn, CEO/CFO/Secretary Fremont, CA 94555
- --------------------- ---------------------------- -------------------
- --------------------- ---------------------------- -------------------
Page 1 of 2
L552E (Rev 10/92)
20862433
<PAGE>
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs of
collecting the Debt, of protecting insuring or realizing on Collateral, and any
reasonable expenditure of Bank pursuant hereto, including attorneys' fees and
expenses, with interest at the rate applicable to the Debt, whichever is less,
from the date of expenditure, and (c) any deficiency after realization of
Collateral.
2. Oligor will use the proceeds of any can that becomes Debt hereunder for the
purposes indicated on the application therefore, and will promptly contract to
purchase and pay the purchase price of any property which becomes Collateral
hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor possession (unless specifically otherwise
agreed by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the locations disclosed
to Bank and will not remove the Collateral from the locations.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary, clean, feed, shelter, water, medicate, fertilize, cultivate,
irrigate, prune and otherwise deal with the Collateral in all such ways as
are considered good practice by owners of like property, use it lawfully
and only as permitted by insurance policies, and permit Bank to inspect the
Collateral at any time.
(d) Not sell, contract to sell, lease, encumber or transfer the Collateral
(other than inventory Collateral) until the Debt has been paid, even though
Bank has security interest in proceeds of such Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and collect
the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as received in a
demand deposit account with Bank, containing only such proceeds and deliver
statements identifying units of inventory disposed of, accounts which gave
rise to proceeds, and all acquisitions and returns of inventory as required
by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank and
deliver to Bank all non-cash proceeds other than inventory received in
trade.
(d) If not in default, may obtain release of Bank's interest in individual
units of inventory upon request, therefore, payment to Bank of the release
price of such units shown on any Collateral schedule supplementary hereto,
and compliance herewith as to proceeds thereof.
5. [INTENTIONALLY OMITTED]
6. Obligor owns all Collateral absolutely, and no other person has or claims any
interest in any Collateral, except as disclosed to and accepted by Bank in
writing. Obligor will defend any proceeding which may affect title to or Bank's
security interest in any Collateral, and will indemnify and hold Bank free and
harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor possession, the
realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel the
insurance on Obligor default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail to
deliver the required policy or policies to the Bank, Bank may, at Obligor cost
and expense, without any duty to do so, get and pay for insurance naming as the
insured, at Bank's option, either both Obligor and Bank, or only Bank, and the
cost thereof shall be secured by this Security Agreement, and shall be repayable
as provided in Paragraph 1 above.
9. Obligor will give Bank any information it reasonably requires relating to the
Collateral or Obligor's operations, properties, business or condition. All
information at any time supplied to Bank by Obligor (including, but not limited
to, the value and condition of Collateral, financial statements, financing
statements, and statements made in documentary Collateral) is correct and
complete, and Obligor will notify Bank of any adverse change in such
information. Obligor will promptly notify Bank of any change of Obligor's
residence, chief executive office or mailing address.
10. Upon the occurrence of any Event of Default under the Credit Agreement or
hereunder, Bank is irrevocably appointed Obligor attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as Obligor may
exercise, to use such equipment as Obligor might use, to enter Obligor premises
to give notice of Bank's security interest, and to collect Collateral and
proceeds and to execute and file in Obligor name any financing statements and
amendments thereto required to perfect Bank's security interest hereunder, all
to protect and preserve the Collateral and Bank's rights hereunder. Bank may:
(a) Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
(b) Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable thereon or take
security for the payment thereof, and compromise disputes in connection
therewith;
(c) Use or operate Collateral for the purpose of preserving Collateral or
its value and for preserving or liquidating Collateral.
11. [INTENTIONALLY OMITTED]
12. Upon the occurrence of any Event of Default under the Credit Agreement or
hereunder, at Bank's option, without demand or notice, all or any part of the
Debt shall immediately become due. Bank shall have all rights given by law, and
may sell, in one or more sales, Collateral in any county where Bank has an
office. Bank may purchase at such sale. Sales for cash or on credit to a
wholesaler, retailer or user of the Collateral, or at public or private auction,
are all to be considered commercially reasonable. Bank may require Obligor to
assemble the Collateral and make it available to Bank at the entrance to the
location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor failure to pay or perform this or any agreement with Bank or
breach of any warranty herein, or Borrower failure to pay or perform any
agreement with Bank.
(b) [INTENTIONALLY OMITTED]
(c) Any actual material deterioration of the Collateral or in the market
price thereof which causes it, in Bank's judgment, to become unsatisfactory
as security.
(d) Any levy or seizure against Borrower or any material portion of the
Collateral.
(e) Death, termination of business, assignment for creditors, insolvency,
appointment of receiver, or the filing of any petition under bankruptcy or
debtors relief laws of, by or against Obligor or Borrower or any guarantor
of the Debt.
(f) Any warranty or representation which is false or is believed in good
faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of Bank
to exercise any right or remedy shall not waive any obligation of Obligor or
Borrower or right of Bank to modify this Agreement, or waive any other similar
default.
14. On transfer of all or any part of the Debt, Bank may transfer all or any
part of the Collateral. Bank may deliver all or any part of the Collateral to
any Obligor at any time. Any such transfer or delivery shall discharge Bank from
all liability and responsibility with respect to such Collateral transferred or
delivered. This Agreement benefits Bank's successors and assigns and binds
Obligor heirs, legatees, personal representatives, successors and assigns.
Obligor agrees not to assert against any assignee of Bank any claim or defense
that may exist against Bank. Time is of the essence. This Agreement and
supplementary schedules hereto contain the entire security agreement between
Bank and Obligor. Obligor will execute any additional agreements, assignments or
documents reasonably required by Bank to carry this Agreement into effect.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of California, to the jurisdiction of whose courts the Obligor
hereby agrees to submit. Obligor agrees that service of process may be
accomplished by any means authorized by California law. All words used herein in
the singular shall be considered to have been used in the plural where the
context and construction so require.
Page 2 of 2
L552E (Rev 10/92)
210862433
<PAGE>
<TABLE>
<CAPTION>
================================================================================ THIS SPACE FOR USE OF FILING OFFICER
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant the Uniform Commercial
Code and will remain effective, with certain exceptions, for 5 years from date
of filing.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A. NAME & TEL.# OF CONTACT AT FILER B. FILING OFFICE ACCT.# (optional)
(optional) Bubnack/#1100/JL
- ------------------------------------------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
IMPERIAL BANK
ATTN: LENDING SERVICES
9920 S LA CIENEGA BLVD SUITE 628
INGLEWOOD CA 90301
- ------------------------------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable) [ ] LESSOR/LESSEE [ ]CONSIGNOR/CONSIGNEE [ ] NON-UCC FILING
====================================================================================================================================
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb)
- ------------------------------------------------------------------------------------------------------------------------------------
la. ENTTY'S NAME
MATRIX PHARMACEUTICAL, INC.
OR ------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
34700 Campus Drive Fremont CA 94555
- ------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D. # OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR ------------------------------------------------------------------------------------------------------------------------------
2B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D. # OPTIONAL 2e. TYPE OF ENTITY 2f ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b).
- ------------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
IMPERIAL BANK
OR ------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
701 "B" Street San Diego CA 92101-8120
====================================================================================================================================
4. This FINANCING STATEMENT covers the following types or items of property.
All equipment acquired by Debtor subsequent to October 21, 1995, and prior to March 31, 1998, wherever located including all
proceeds thereof.
====================================================================================================================================
5. CHECK [ ] THIS FINANCING STATEMENT is signed by the Secured Party instead 7. If filed in Florida (check one)
BOX of the Debtor to perfect a security interest (a) in collateral [ ] Documentary [ ] Documentary stamp
(if applicable) already subject to a security interest on another jurisdiction stamp tax paid tax not applicable
when it was brought into this state, or when the debtor's
location was changed to this state or (b) in accordance with
other statutory provisions (additional data may be required)
====================================================================================================================================
6. REQUIRED SIGNATURE(S) MATRIX PHARMACEUTICAL, INC. 8. [ ] This FINANCING STATEMENT is to be filed
(for record) (or recorded) in the REAL
ESTATE RECORDS
By: /s/ J.R. GLYNN Attach Addendum [if applicable]
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Glynn, CEO/CFO Secretary 9. Check to REQUEST SEARCH CERTIFICATE(S) on
Debtor(s)
[ADDITIONAL FEE] (optional)
[X] All Debtors [ ] Debtor 1 [ ] Debtor 2
====================================================================================================================================
(1) FILING OFFICER COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) (TRANS) (REV. 12/18/95) Imperial Bank Los Angeles, CA 90009
P.O. Box 92991 310-417-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIS SPACE FOR USE OF FILING OFFICER
================================================================================
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant the Uniform Commercial
Code and will remain effective, with certain exceptions, for 5 years from date
of filing.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A. NAME & TEL.# OF CONTACT AT FILER B. FILING OFFICE ACCT.# (optional)
(optional) Bubnack/#1100/JL
- ------------------------------------------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
IMPERIAL BANK
ATTN: LENDING SERVICES
9920 S LA CIENEGA BLVD SUITE 628
INGLEWOOD CA 90301
- ------------------------------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable) [ ] LESSOR/LESSEE [ ]CONSIGNOR/CONSIGNEE [ ] NON-UCC FILING
====================================================================================================================================
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb)
- ------------------------------------------------------------------------------------------------------------------------------------
la. ENTTY'S NAME
MATRIX PHARMACEUTICAL, INC.
OR ------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
34700 Campus Drive Fremont CA 94555
- ------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D. # OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR ------------------------------------------------------------------------------------------------------------------------------
2B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D. # OPTIONAL 2e. TYPE OF ENTITY 2f ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b).
- ------------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
IMPERIAL BANK
OR ------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
701 "B" Street San Diego CA 92101-8120
====================================================================================================================================
4. This FINANCING STATEMENT covers the following types or items of property.
All equipment acquired by Debtor subsequent to October 21, 1995, and prior to March 31, 1998, wherever located including all
proceeds thereof.
====================================================================================================================================
5. CHECK [ ] THIS FINANCING STATEMENT is signed by the Secured Party instead 7. If filed in Florida (check one)
BOX of the Debtor to perfect a security interest (a) in collateral [ ] Documentary [ ] Documentary stamp
(if applicable) already subject to a security interest on another jurisdiction stamp tax paid tax not applicable
when it was brought into this state, or when the debtor's
location was changed to this state or (b) in accordance with
other statutory provisions (additional data may be required)
====================================================================================================================================
6. REQUIRED SIGNATURE(S) MATRIX PHARMACEUTICAL, INC. 8. [ ] This FINANCING STATEMENT is to be filed
(for record) (or recorded) in the REAL
ESTATE RECORDS
By: /s/ J.R. GLYNN Attach Addendum [if applicable]
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Glynn, CEO/CFO Secretary 9. Check to REQUEST SEARCH CERTIFICATE(S) on
Debtor(s)
[ADDITIONAL FEE] (optional)
[X] All Debtors [ ] Debtor 1 [ ] Debtor 2
====================================================================================================================================
(2) ACKNOWLEDGEMENT OFFICER COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) Imperial Bank Los Angeles, CA 90009
(TRANS) (REV. 12/18/95) P.O. Box 92991 310-417-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIS SPACE FOR USE OF FILING OFFICER
================================================================================
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant the Uniform Commercial
Code and will remain effective, with certain exceptions, for 5 years from date
of filing.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A. NAME & TEL.# OF CONTACT AT FILER B. FILING OFFICE ACCT.# (optional)
(optional) Bubnack/#1100/JL
- ------------------------------------------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
IMPERIAL BANK
ATTN: LENDING SERVICES
9920 S LA CIENEGA BLVD SUITE 628
INGLEWOOD CA 90301
- ------------------------------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable) [ ] LESSOR/LESSEE [ ]CONSIGNOR/CONSIGNEE [ ] NON-UCC FILING
====================================================================================================================================
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb)
- ------------------------------------------------------------------------------------------------------------------------------------
la. ENTTY'S NAME
MATRIX PHARMACEUTICAL, INC.
OR ------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
34700 Campus Drive Fremont CA 94555
- ------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D. # OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR ------------------------------------------------------------------------------------------------------------------------------
2B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D. # OPTIONAL 2e. TYPE OF ENTITY 2f ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b).
- ------------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
IMPERIAL BANK
OR ------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
701 "B" Street San Diego CA 92101-8120
====================================================================================================================================
4. This FINANCING STATEMENT covers the following types or items of property.
All equipment acquired by Debtor subsequent to October 21, 1995, and prior to March 31, 1998, wherever located including all
proceeds thereof.
====================================================================================================================================
5. CHECK [ ] THIS FINANCING STATEMENT is signed by the Secured Party instead 7. If filed in Florida (check one)
BOX of the Debtor to perfect a security interest (a) in collateral [ ] Documentary [ ] Documentary stamp
(if applicable) already subject to a security interest on another jurisdiction stamp tax paid tax not applicable
when it was brought into this state, or when the debtor's
location was changed to this state or (b) in accordance with
other statutory provisions (additional data may be required)
====================================================================================================================================
6. REQUIRED SIGNATURE(S) MATRIX PHARMACEUTICAL, INC. 8. [ ] This FINANCING STATEMENT is to be filed
(for record) (or recorded) in the REAL
ESTATE RECORDS
By: /s/ J.R. GLYNN Attach Addendum [if applicable]
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Glynn, CEO/CFO Secretary 9. Check to REQUEST SEARCH CERTIFICATE(S) on
Debtor(s)
[ADDITIONAL FEE] (optional)
[X] All Debtors [ ] Debtor 1 [ ] Debtor 2
====================================================================================================================================
(3) SEARCH REQUEST COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) Imperial Bank Los Angeles, CA 90009
(TRANS) (REV. 12/18/95) P.O. Box 92991 310-417-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIS SPACE FOR USE OF FILING OFFICER
================================================================================
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant the Uniform Commercial
Code and will remain effective, with certain exceptions, for 5 years from date
of filing.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A. NAME & TEL.# OF CONTACT AT FILER B. FILING OFFICE ACCT.# (optional)
(optional) Bubnack/#1100/JL
- ------------------------------------------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
IMPERIAL BANK
ATTN: LENDING SERVICES
9920 S LA CIENEGA BLVD SUITE 628
INGLEWOOD CA 90301
- ------------------------------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable) [ ] LESSOR/LESSEE [ ]CONSIGNOR/CONSIGNEE [ ] NON-UCC FILING
====================================================================================================================================
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb)
- ------------------------------------------------------------------------------------------------------------------------------------
la. ENTTY'S NAME
MATRIX PHARMACEUTICAL, INC.
OR ------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
34700 Campus Drive Fremont CA 94555
- ------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D. # OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR ------------------------------------------------------------------------------------------------------------------------------
2B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D. # OPTIONAL 2e. TYPE OF ENTITY 2f ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b).
- ------------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
IMPERIAL BANK
OR ------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
701 "B" Street San Diego CA 92101-8120
====================================================================================================================================
4. This FINANCING STATEMENT covers the following types or items of property.
All equipment acquired by Debtor subsequent to October 21, 1995, and prior to March 31, 1998, wherever located including all
proceeds thereof.
====================================================================================================================================
5. CHECK [ ] THIS FINANCING STATEMENT is signed by the Secured Party instead 7. If filed in Florida (check one)
BOX of the Debtor to perfect a security interest (a) in collateral [ ] Documentary [ ] Documentary stamp
(if applicable) already subject to a security interest on another jurisdiction stamp tax paid tax not applicable
when it was brought into this state, or when the debtor's
location was changed to this state or (b) in accordance with
other statutory provisions (additional data may be required)
====================================================================================================================================
6. REQUIRED SIGNATURE(S) MATRIX PHARMACEUTICAL, INC. 8. [ ] This FINANCING STATEMENT is to be filed
(for record) (or recorded) in the REAL
ESTATE RECORDS
By: /s/ J.R. GLYNN Attach Addendum [if applicable]
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Glynn, CEO/CFO Secretary 9. Check to REQUEST SEARCH CERTIFICATE(S) on
Debtor(s)
[ADDITIONAL FEE] (optional)
[X] All Debtors [ ] Debtor 1 [ ] Debtor 2
====================================================================================================================================
(4) DEBTOR COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) Imperial Bank Los Angeles, CA 90009
(TRANS) (REV. 12/18/95) P.O. Box 92991 310-417-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIS SPACE FOR USE OF FILING OFFICER
================================================================================
FINANCING STATEMENT -- FOLLOW INSTRUCTIONS CAREFULLY
This Financing Statement is presented for filing pursuant the Uniform Commercial
Code and will remain effective, with certain exceptions, for 5 years from date
of filing.
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
A. NAME & TEL.# OF CONTACT AT FILER B. FILING OFFICE ACCT.# (optional)
(optional) Bubnack/#1100/JL
- ------------------------------------------------------------------------------------------------------------------------------------
C. RETURN COPY TO: (Name and Mailing Address)
IMPERIAL BANK
ATTN: LENDING SERVICES
9920 S LA CIENEGA BLVD SUITE 628
INGLEWOOD CA 90301
- ------------------------------------------------------------------------------------------------------------------------------------
D. OPTIONAL DESIGNATION (If applicable) [ ] LESSOR/LESSEE [ ]CONSIGNOR/CONSIGNEE [ ] NON-UCC FILING
====================================================================================================================================
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (la or lb)
- ------------------------------------------------------------------------------------------------------------------------------------
la. ENTTY'S NAME
MATRIX PHARMACEUTICAL, INC.
OR ------------------------------------------------------------------------------------------------------------------------------
1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
34700 Campus Drive Fremont CA 94555
- ------------------------------------------------------------------------------------------------------------------------------------
1d. S.S. OR TAX I.D. # OPTIONAL 1e. TYPE OF ENTITY 1f. ENTITY'S STATE 1g ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b)
------------------------------------------------------------------------------------------------------------------------------
2a. ENTITY'S NAME
OR ------------------------------------------------------------------------------------------------------------------------------
2B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
2d. S.S. OR TAX I.D. # OPTIONAL 2e. TYPE OF ENTITY 2f ENTITY'S STATE 2g. ENTITY'S ORGANIZATIONAL I.D. #, if any
ADD'NL INFO RE OR COUNTRY OF
ENTITY DEBTOR ORGANIZATION [ ] NONE
====================================================================================================================================
3. SECURED PARTY'S (ORIGINAL S/P or ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or 3b).
- ------------------------------------------------------------------------------------------------------------------------------------
3a. ENTITY'S NAME
------------------------------------------------------------------------------------------------------------------------------
IMPERIAL BANK
OR ------------------------------------------------------------------------------------------------------------------------------
3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
3c. MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
701 "B" Street San Diego CA 92101-8120
====================================================================================================================================
4. This FINANCING STATEMENT covers the following types or items of property.
All equipment acquired by Debtor subsequent to October 21, 1995, and prior to March 31, 1998, wherever located including all
proceeds thereof.
====================================================================================================================================
5. CHECK [ ] THIS FINANCING STATEMENT is signed by the Secured Party instead 7. If filed in Florida (check one)
BOX of the Debtor to perfect a security interest (a) in collateral [ ] Documentary [ ] Documentary stamp
(if applicable) already subject to a security interest on another jurisdiction stamp tax paid tax not applicable
when it was brought into this state, or when the debtor's
location was changed to this state or (b) in accordance with
other statutory provisions (additional data may be required)
====================================================================================================================================
6. REQUIRED SIGNATURE(S) MATRIX PHARMACEUTICAL, INC. 8. [ ] This FINANCING STATEMENT is to be filed
(for record) (or recorded) in the REAL
ESTATE RECORDS
By: /s/ J.R. GLYNN Attach Addendum [if applicable]
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Glynn, CEO/CFO Secretary 9. Check to REQUEST SEARCH CERTIFICATE(S) on
Debtor(s)
[ADDITIONAL FEE] (optional)
[X] All Debtors [ ] Debtor 1 [ ] Debtor 2
====================================================================================================================================
(5) SECURED PARTY COPY - NATIONAL FINANCING STATEMENT (FORM UCC1) Imperial Bank Los Angeles, CA 90009
(TRANS) (REV. 12/18/95) P.O. Box 92991 310-417-5600
</TABLE>
<PAGE>
[GRAPHIC OMITTED]
IMPERIAL BANK
Member FDIC
CORPORATE RESOLUTION REGARDING CREDIT
OFFICE: San Diego Regional Address: 701 "B" Street
San Diego, CA 92101
RESOLVED, that MATRIX PHARMACEUTICAL, INC.
borrow from IMPERIAL BANK, hereinafter referred to as "Bank", from time to.
time, such sums of money as, in the judgement of the officer or officers
hereinafter authorized, this corporation may require; provided that the
aggregate amount of such borrowing, pursuant to this resolution, shall not at
any one time exceed the principal sum of --- TEN MILLION AND 00/100 --- DOLLARS
($_________________________________), in addition to such amount as may be
otherwise authorized;
RESOLVED FURTHER, that any one of the following named officers
---------------
(Specify Number)
Jim Glynn the CEO/CFO/Secretary
- ---------------------------------- ----------------------------------------
the
- ---------------------------------- ----------------------------------------
the
- ---------------------------------- ----------------------------------------
the
- ---------------------------------- ----------------------------------------
the
- ---------------------------------- ----------------------------------------
of this corporation (the officer or officers acting in combination, authorized
to act pursuant hereto being hereinafter designated as "authorized officers"),
be and they are hereby authorized, directed and empowered, for and on behalf and
in the name of this corporation (1) to execute and deliver to the Bank such
notes or other evidences of indebtedness of this corporation for the monies so
borrowed, with interest thereon, as the Bank may require, and to execute and
deliver, from time to time, renewals or extensions of such notes or other
evidences of indebtedness; (2) to grant a security interest in, transfer, or
otherwise hypothecate or deed in trust for Bank's benefit and deliver by such
instruments in writing or otherwise as may be demanded by the Bank, any of the
property of this corporation as may be required by the Bank to secure the
payment of any notes or other indebtedness of this corporation or third parties
to the Bank, whether arising pursuant to this resolution or otherwise; and (3)
to perform all acts and execute and deliver all instruments which the Bank may
deem necessary to carry out the purposes of this resolution;
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized and empowered, and that any one of said authorized officers be and
he/she is hereby authorized and empowered (1) to discount with or sell to the
Bank conditional sales contracts, notes, acceptances, drafts, bailment
agreements, leases, receivables and evidences of indebtedness payable to this
corporation, upon such terms as may be agreed upon by them and the Bank, and to
endorse in the name of this corporation said notes, acceptances, drafts,
bailment agreements, leases, receivables and evidences of indebtedness so
discounted, and to guarantee the payment of the same to the Bank, and (2) to
apply for and obtain from the Bank letters of credit and in connection therewith
to execute such agreement, applications, guarantees, indemnities and other
financial undertakings as Bank may require;
RESOLVED FURTHER, that said authorized officers are also authorized to
direct the disposition of the proceeds of any such obligation, and to accept or
direct delivery from the Bank of any property of this corporation at any time
held by the Bank;
RESOLVED FURTHER, that the authority given hereunder shall be deemed
retroactive and any and all acts authorized hereunder performed prior to the
passage of this resolution are hereby ratified and affirmed;
RESOLVED FURTHER, that this resolution will continue in full force and
effect until the Bank shall receive official notice in writing from this
corporation of the revocation thereof by a resolution duly adopted by the Board
of Directors of this corporation, and that the certification of the Secretary of
this corporation as to the signatures of the above named persons shall be
binding on this corporation.
I, Jim Glynn, Secretary of the above named corporation, duly organized and
existing under the laws of the State of Delaware, do hereby certify that the
foregoing is a full, true and correct copy of a resolution of the Board of
Directors of said corporation, duly and regularly passed and adopted by the
Board of Directors of said corporation.
I further certify that said resolution is still in full force and effect
and has not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for this corporation
by virtue of said resolution.
EXECUTED ON October 8, 1997
AUTHORIZED SIGNATURES:
Signature: /s/ J.R. Glynn
----------------------------
Jim Glynn
/s/ J.R. Glynn
Signature: ---------------------------- ------------------------------------
(Secretary)
Signature: ---------------------------- Jim Glynn
Signature: ----------------------------
Signature: ----------------------------
L 550 (Rev 7/97)
<PAGE>
[GRAPHIC OMITTED]
IMPERIAL BANK
Member FDIC
AGREEMENT TO PROVIDE INSURANCE
(REAL OR PERSONAL PROPERTY)
TO: IMPERIAL BANK Date: October 8, 1997
701 "B" Street
San Diego, CA 92101 Borrower: Matrix Pharmaceutical, Inc.
In consideration of a loan in the amount of $10,000,000.00, secured by all
tangible personal property including equipment.
I/We agree to obtain adequate insurance coverage to remain in force during the
term of the loan.
I/We also agree to advise the below named agent to add Imperial Bank as loss
payee on the new or existing insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
a) The amount of the loan, OR
b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the
real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Imperial
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent: Telephone No.:
Agent's Address:
MATRIX PHARMACEUTICAL, INC.
Signature of Obligor: By: /s/ J.R. Glynn
---------------------------------
Jim Glynn, CEO/CFO/Secretary
Signature of Obligor:
---------------------------------
================================================================================
- --------------------------------------------------------------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date:
------------------------------
Person Spoken to:
--------------------------------------------------------------
Policy Number:
--------------------------------------------------------------
Effective From: To:
------------------------------ -------------------------
Verified By:
--------------------------------------------------------------
- --------------------------------------------------------------------------------
L 245 E (7/97)
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] ITEMIZATION OF AMOUNT FINANCED
IMPERIAL BANK DISBURSEMENT INSTRUCTIONS
- ---------------------------
INNOVATIVE BUSINESS BANKING
Member FDIC
================================================================================
Name(s) MATRIX PHARMACEUTICAL, INC. Date October 8, 1997
------------------------------------------ -----------------------
------------------------------------------
$_______________ paid to you directly by Cashiers Check No. _______________
$10,000,000.00 credited to deposit account No. __________________________
$_______________ paid on Loan(s) No. ______________________________________
$_______________ amounts paid to Bank for: ________________________________
$_______________ __________________________________________________________
Amounts paid to others on your behalf:
$_______________ to _______________________________ Title Insurance Company
$_______________ to Public Officials
$_______________ to _______________________________________________________
$_______________ to _______________________________________________________
$_______________ to _______________________________________________________
$_______________ to _______________________________________________________
$10,000,000.00 SUBTOTAL (NOTE AMOUNT)
LESS $ 0.00 Prepaid Finance Charge (Loan fee(s))
$10,000,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
MATRIX PHARMACEUTICAL, INC.
By:/s/ J.R. Glynn
------------------------------------ --------------------------------------
Jim Glynn, CEO/CFO/Secretary
------------------------------------ --------------------------------------
- --------------------------------------------------------------------------------
L 531 E (8/97)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,062
<SECURITIES> 56,548
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 63,887
<PP&E> 27,811
<DEPRECIATION> 4,107
<TOTAL-ASSETS> 107,977
<CURRENT-LIABILITIES> 12,028
<BONDS> 11,089
0
0
<COMMON> 224,895
<OTHER-SE> 142,089
<TOTAL-LIABILITY-AND-EQUITY> 107,977
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 736
<INCOME-PRETAX> (33,393)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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