<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-22987
------------------------
MEGABIOS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3156660
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
863A MITTEN RD., BURLINGAME, CA 94010
(Address of principal offices) (Zip Code)
650-697-1900
(Registrant's telephone number, including area code)
------------------------
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(b) of
the Act: None
Securities registered pursuant to Section 12(g) of
the Act: Common Stock, Par Value $.001
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K /X/
The aggregate market value of the common Stock held by non-affiliates of the
registrant, based upon the last sale price of the Common Stock reported on the
National Association of Securities Dealers Automated Quotation System on
September 10, 1998 was $57,612,718.
The number of registrant's Common Stock outstanding, as of September 10,
1998 was 12,884,204.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement which will be filed with the
Commission pursuant to Section 14A in connection with the 1998 meeting of
stockholders are incorporated herein by reference in Part III of this Report.
- --------------------------------------------------------------------------------
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) INDEX TO FINANCIAL STATEMENTS
The Financial Statements required by this item are submitted in a separate
section beginning on page 30 of this Report.
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets
Statements of Operations
Statement of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
28
<PAGE>
(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- --------- --------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
(1) 3.1 Amended and Restated Certificate of Incorporation of the Registrant
(1) 3.2 Bylaws of the Registrant
4.1 Reference is made to Exhibits 3.1 and 3.2
(1) 4.2 Specimen stock certificate
(1) 4.3 Amended and Restated Investor Rights Agreement, dated as of May 23, 1997 among the Registrant
and the investors named therein
(1) 4.4 Preferred Stock Warrant issued to Imperial Bank, dated June 1, 1995
(1) 4.5 Series C Preferred Stock Warrant issued to Phoenix Leasing Incorporated, dated April 30, 1996
(1) 4.6 Stock purchase Agreement between Registrant and Pfizer Inc., dated May 30, 1996
(1) 10.1 1997 Equity Incentive Plan
(1) 10.2 Form of Incentive Stock Option Grant
(1) 10.3 Form of Non-Incentive Stock Option
(1) 10.4 1997 Employee Stock Purchase Plan
(1) 10.5 Form of Indemnification Agreement entered into between the Registrant and its directors and
executive officers
(1) 10.6 Letter Agreement between the Registrant and Benjamin F. McGraw, III, Pharm.D.
(1) 10.7 Letter Agreement between the Registrant and Rodney Pearlman, Ph.D.
10.8 Letter Agreement between the Registrant and Bennet Weintraub
10.9 Letter Agreement between the Registrant and John Warner, Ph.D.
(1) 10.10 Lease Agreement between the Registrant and Provident Life and Accident Insurance Company
("Provident"), dated December 21, 1993
(1) 10.11 First Amendment to Lease Agreement between the Registrant and SFO Associates LLC (successor in
interest to Provident)
(1) 10.12 Lease Agreement between the Registrant and SFO Associates LLC, dated March 18, 1997
(1) 10.13 Credit Agreement between the Registrant and Imperial Bank, dated as of August 31, 1995
(1) 10.14 Lease Agreement between the Registrant and LMSI, dated May 13, 1994, as amended as of May 13,
1994
(1) 10.15 Senior Loan and Security Agreement between the Registrant and Phoenix Leasing Incorporated,
dated as of April 22, 1996
(1) 10.16* Research and License Agreement between the Registrant and Glaxo Wellcome Group Limited, dated
April 11, 1994, as amended as of May 31, 1996
(1) 10.17* Exclusive License Agreement between the Registrant and Regents of the University of
California, dated May 9, 1996, as amended May 15, 1997
(1) 10.18* Collaborative Research Agreement between the Registrant and Pfizer Inc., dated May 31, 1996
(1) 10.19* License and Royalty Agreement between Registrant and Pfizer Inc., dated June 1, 1996
(1) 10.20* Research and License Agreement between the Registrant and Eli Lilly and Company, effective May
23, 1997
</TABLE>
28a
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- --------- --------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
10.21 Promissory Note for $8,000,000 from Megabios Corp. to Imperial Bank, dated
May 13, 1998
23.1 Consent of Ernst & Young LLP, Independent Auditors
(1) 27.1 Financial Data Schedule
</TABLE>
- ------------------------
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-32593) or amendments thereto and incorporated herein by reference.
* Confidential treatment granted pursuant to a Confidential Treatment Order
for portions of this document.
(b) REPORTS ON FORM 8-K.
There were no reports on Form 8-K filed by the Registrant during the last
quarter of the fiscal year ended June 30, 1998.
28b
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this Amended Annual Report on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
Dated: October 7, 1998 MEGABIOS CORP.
By: /s/ BENJAMIN F. MCGRAW III
--------------------------------------------
Benjamin F. McGraw III
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Benjamin F. McGraw III and Bennet Weintraub, and
each or any one of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Amended Annual Report, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board of
/s/ BENJAMIN F. MCGRAW III Directors, President and
- ------------------------------ Chief Executive Officer October 7, 1998
Benjamin F. McGraw III (Principal Executive
Officer)
Vice President Finance and
/s/ BENNET WEINTRAUB Chief Financial Officer
- ------------------------------ (Principal Accounting October 7, 1998
Bennet Weintraub Officer)
/s/ FRANK J. CAUFIELD
- ------------------------------ Director October 7, 1998
Frank J. Caufield
/s/ PATRICK G. ENRIGHT
- ------------------------------ Director October 7, 1998
Patrick G. Enright
/s/ A. GRANT HEIDRICH
- ------------------------------ Director October 7, 1998
A. Grant Heidrich
/s/ RUSSELL C. HIRSCH, M.D.,
PH.D.
- ------------------------------ Director October 7, 1998
Russell C. Hirsch, M.D., Ph.D.
/s/ RAJU KUCHERLAPATI, PH.D.
- ------------------------------ Director October 7, 1998
Raju Kucherlapati, Ph.D.
</TABLE>
29
<PAGE>
EXHIBIT 10.8
[MEGABIOS CORP. LOGO] BENJAMIN F. MCGRAW, III
Chairman, President & CEO
18 May, 1998
Bennet L. Weintraub
3012 Hillside Drive
Burlingame, CA 94010
Dear Bennet:
This letter is an offer from Megabios Corp. (the "Company") to you for the
position of Vice President and Chief Financial Officer reporting to me. The
offer consists of the following:
1. Annual salary of $170,000.
2. Eligibility for any Bonus Program applicable to officers of the Company.
3. Incentive stock option grant: 80,000 options, each entitling you to
purchase one share of the Company's common stock. The exercise price of
this option is set by the Board of Directors based on the price at which
equity trades on NASDAQ on the date of Board approval. The option will
vest over a four-year period beginning with the effective date of your
employment.
4. The Company will loan you $160,000 for the purpose of exercising
Megabios Corp. stock options.
5. Contingent on your achieving certain performance criteria established by
the Company, you will be eligible to receive up to an aggregate of
$70,000 in bonus compensation payable in such amounts and at such times
as the Compensation Committee may designate over your first four years
of employment with the Company. Such bonus shall be in addition to any
bonus for which you will become eligible under any Bonus Program
generally applicable to officers of the Company.
6. You will be enrolled in the Company's corporate health care plan and are
entitled to all the corporate benefits for a Vice President level
position.
7. The Company will provide you time off without pay during the period from
June 8 through June 19.
<PAGE>
8. The effective date of your employment will be no later than May 26,
1998. This offer will remain in effect until May 25, 1998. Please
acknowledge your acceptance by signing below and returning this letter
to Michael Coyne.
9. You acknowledge that your employment relationship with the Company is
based on the mutual consent of the employee and the Company. This means
that you may resign your employment with the Company at any time.
Similarly, the Company may terminate your employment at any time and for
any reason whatsoever, with or without cause or advance notice. This
at-will employment relationship cannot be changed except in writing
signed by a Company officer.
10. You acknowledge that this letter constitutes the complete, final, and
exclusive embodiment of the entire agreement between you and the Company
with regard to your employment at Megabios Corp. It is entered into
without reliance on any promise or representation, written or oral,
other than those expressly contained herein, and it supersedes any other
such promises, warranties or representations. This offer letter of
employment may not be modified or amended except in writing signed by
both you and a duly authorized officer of the Company.
Bennett, we are very excited about working with you. Should you have any
questions about any part of this offer, please do not hesitate to discuss
them with me.
Sincerely Accepted:
/s/ Benjamin F. McGraw, III /s/ Bennet L. Weintraub
-------------------------------------
Benjamin F. McGraw, III Bennet L. Weintraub
Chairman, President & CEO
<PAGE>
EXHIBIT 10.9
[MEGABIOS CORP. LOGO] BENJAMIN F. MCGRAW, III
CHAIRMAN, PRESIDENT & CEO
April 22, 1998 Revised
John F. Warner, Ph.D.
101 Parkside Dr., Unit #88
Port Moody, B.C. Canada V3H 4W6
Dear John:
This letter is an offer from Megabios Corp. (the "Company") to you for the
position of Vice President of Research reporting to Rodney Pearlman, Vice
President Research & Development. The offer consists of the following:
1. Annual salary of $170,000.
2. Incentive stock option grant: 65,000 options, each entitling you to
purchase one share of the Company's common stock. The exercise price of
this option is set by the Board of Directors based on the price at which
equity was most recently sold. The option will vest over a four-year
period beginning with the effective date of your employment.
3. The company will reimburse you for relocating you and your household
goods to the San Francisco Bay area, and will sponsor temporary housing
benefits for up to six months. In addition, the Company will provide
housing assistance as outlined on the attached Relocation Program Summary.
4. The Company will pay you a one time signing bonus of $30,000 from which
applicable state and federal taxes will be withheld.
5. You will be designated an Officer of the Company pending approval by the
Board of Directors, with associated "change of control" package.
6. You will be enrolled in the Company's corporate health care plan and are
entitled to all the corporate benefits for a Vice President level position.
7. The Company will reimburse Renee Best for receipted reasonable and
customary expenses associated with her job search in the San Francisco Bay
Area up to $3,000.
<PAGE>
8. The Company will reimburse you for reasonable and customary expenses
associated with income tax preparation for the 1998 tax year.
9. In addition to paid time-off benefits normally provided to you as an
employee, the Company will provide an extra two weeks paid time-off during
1998.
10. The Company will reimburse Renee Best for reasonable and customary
medical and dental insurance premiums for up to 6 months or until she is
eligible for insurance through an employer, whichever is sooner.
11. The effective date of your employment will be no later than June 15,
1998. ThIS offer will remain in effect until April 27, 1998. Please
acknowledge your acceptance by signing below and returning this letter
to Michael Coyne.
12. You acknowledge that your employment relationship with the Company is
based on the mutual consent of the employee and the Company. This means
that you may resign your employment with the Company at any time.
Similarly, the Company may terminate your employment at any time and for
any reason whatsoever, with or without cause or advance notice. This
at-will employment relationship cannot be changed except in writing
signed by a Company officer.
13. You acknowledge that this letter constitutes the complete, final, and
exclusive embodiment of the entire agreement between you and the Company
with regard to your employment at Megabios Corp. It is entered into
without reliance on any promise or representation, written or oral, other
than those expressly contained herein, and it supersedes any other such
promises, warranties or representations. This offer letter of employment
may not be modified or amended except in writing signed by both you and
a duly authorized officer of the Company.
John, we are very excited about working with you. Should you have any
questions about any part of this offer, please do not hesitate to discuss
them with me.
Sincerely, Accepted:
/s/ Benjamin F. McGraw, III /s/ John F. Warner
-----------------------------
Benjamin F. McGraw, III John F. Warner, Ph.D.
Chairman, President & CEO
2
<PAGE>
EXHIBIT 10.21
[LOGO]
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$8,000,000.00 05-13-1998 06-12-2002 00700005958 345
- ------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Borrower: MEGABIOS CORP. Lender: Imperial Bank
863-A Millen Road Emerging Growth Industries Group
Burlingame, CA 94010 - Menio Park
226 Airport Parkway
San Jose, CA 95110-1024
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Amount: $8,000,000.00 Initial Rate: 9.000% Date of Note:
May 13, 1998
PROMISE TO PAY. MEGABIOS CORP. ("Borrower") promises to pay to Imperial Bank
("Lender"), of order, in lawful money of the United States of America, the
principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much
as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date
of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
Disbursements under the Note shall be available through December 31,
1998 ("Draw Period"). During the draw period, interest only shall be due
monthly beginning June 12, 1998. On June 30, 1998 and December 31, 1998
the outstanding balance of the disbursements at the end of each period
shall be payable monthly in 42 equal payments of principal plus accrued
interest beginning July 12, 1998 and January 12, 1999, respectively. All
principal and accrued but unpaid interest shall in any event be due and
payable on or before June 12, 2002.
The annual interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank
Prime Rate (The "Index"). The Prime Rate is the rate announced by Lender as
its Prime Rate of interest from time to time. Lender will tell Borrower the
current index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. The index currently is 8.500%. The
interest rate to be applied to the unpaid principal balance of this Note will
be at a rate of 0.500 percentage points over the index, resulting in an
initial rate of 9.000%. NOTICE: Under no circumstances will the interest rate
on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full
prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $250.00. Other than Borrower's obligation to pay
any minimum interest charge. Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest. Rather,
they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late. Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property. Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within ten (10)
days; or (b) if the cure requires more than ten (10) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.500 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SANTA
CLARA COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE /S/[ILLEGIBLE])
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further
loan advances. Advances under this Note may be requested orally by Borrower
or by an authorized person. All oral requests shall be confirmed in writing
on the day of the request. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances
under the line of credit until Lender receives from Borrower at Lender's
address shown above written notice of revocation of their authority: BENJAMIN
F. MCGRAW, III, PRESIDENT/CEO. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an authorized
person or (b) credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internet records, including daily
computer print-outs. Lender will have no obligation to advance funds under
this Note if: (a) Borrower or any guarantor is in default under the terms of
this Note or any agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection with the signing of this Note; (b)
Borrower or any guarantor ceases doing business or is insolvent; (c) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions
of the Credit Terms and Conditions dated May 13, 1998 and all amendments
thereto and replacements therefor.
<PAGE>
PROMISSORY NOTE Page 2
(Continued)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 document ("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, or their successor section ("CCP"), 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 located
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 for 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 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 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
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
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior 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 proceedings 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, 1280 through 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.
ADDENDUM TO PROMISSORY NOTE. The attached Addendum dated May 13, 1998 is
hereby incorporated and made a part hereof.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification is
made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
MERGABIOS CORP.
By: /s/ Benjamin F. McGraw
-----------------------------------------
Benjamin F. McGraw, III, President/CEO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pal. & T.M. Off.,
Ver. 3.24b (c) 1998 CFi PRoServices, Inc.
All rights reserved. CA-O20E3.24F3.24a
MEGABIOS.LN
<PAGE>
AMENDED ADDENDUM TO CREDIT TERMS AND CONDITIONS
DATED MAY 13, 1998
MEGABIOS CORP.
This Amended Addendum ("Addendum") is made and entered into as of May 13,
1998, between MEGABIOS CORP. ("Borrower") and IMPERIAL BANK ("Bank"). This
Addendum amends and supplements the Credit Terms and Conditions dated May 19,
1995 ("Agreement"). In the event of any inconsistency between the terms
herein and the terms of the Agreement, the terms herein shall in all cases
govern and control. All capitalized terms herein, unless otherwise defined
herein, shall have the meaning set forth in the Agreement. The Addendum dated
May 19, 1995 to the Agreement is hereby amended in full to read as follows:
COMMITMENTS
1. An $8,000,000 Credit Facility for the purchase of capital equipment,
tenant improvements, and general corporate purposes.
2. Existing $249,999 Term Loan.
TERMS
1. Draws under the Credit Facility shall be available through 12/31/98,
with borrowed amounts converted semi-annually to a 42-month term
payout of equal principal amortization plus accrued interest.
2. Term Loan to be repaid in six equal monthly payments of principal
plus accrued interest.
COLLATERAL
Bank to have a perfected first priority security interest in all
corporate assets, excluding leased or financed equipment and patents,
copyrights, trademarks, trade secrets, or other intellectual property.
The existing Deed of Trust dated 8/15/95 shall be used to secure only
the existing $249,999 Term Loan.
BORROWING FORMULA
1. 100% against invoice price of equipment purchases, less tax,
freight, and installation. 100% against invoice price of tenant
improvements up to $1,250,000, excluding miscellaneous soft costs.
Additionally, up to $4,000,000 of non-invoice supported advances
shall be allowed.
2. Unavailable for additional borrowings.
PRICING
1. Interest Rate: Prime + 0.5%
Facility Fee: $10,000.
2. Interest Rate: Prime + 2.0%
Facility Fee: None.
<PAGE>
COVENANTS
A. Measured on a monthly basis unless stated otherwise:
1) Minimum unrestricted cash and short-term investments not less than
the greater of (a) the last two quarters of Net Cash Burn(1) as
adjusted on a two quarter rolling average, or (b) 90% of the total
principal drawn through 12/31/98.
2) Minimum Tangible Net Worth of 90% of the total principal drawn
through 12/31/98.
(1) Net Cash Burn shall be defined as the change in cash,
short-term investments, and marketable securities for the
fiscal quarter then ended less the net new equity received by
Borrower for the fiscal quarter then ended. In the event the
unrestricted cash plus short-term investments balance drops
below the greater of (i) 150% of the total principal drawn
through 12/31/98 or (ii) the last four quarters of Net Cash
Burn, the Net Cash Burn covenant shall be monitored and
adjusted on a monthly basis.
B. Borrower to provide to Bank:
1) Unqualified audited financial statements within 90 days after each
fiscal year end.
2) Company prepared quarterly financial statements within 45 days of
each fiscal quarter. In the event the unrestricted cash plus
short-term investments balance drops below the greater of (i) 150% of
the total principal drawn through 12/31/98 or (ii) the last four
quarters of Net Cash Burn, financial statements to be provided
30 days of each month end.
3) Compliance Certificate within 30 days of each month end.
4) Budgets, sales projections, operating plan, or other financial
exhibits which Bank may reasonably request.
C. Other Covenants:
1) Borrower's primary deposit and operating accounts to be maintained
at Bank.
2) Borrower shall not without Bank's prior approval:
a. Enter into any mergers or acquisitions or major debt
agreements, except for (i) equipment leases; (ii) contingent
obligations of Borrower consisting of guarantees (and other
credit support) of the obligations of vendors and suppliers of
Borrower in respect of transactions entered into in the ordinary
course of business; (iii) indebtedness with respect to capital
lease obligations (including leases of real property); (iv)
prepaid royalties and deferred revenue in connection with
prepaid support services; (v) extensions, renewals, refundings,
refinancings, modifications, amendments and restatements of any
of the items of permitted indebtedness (i) through (iv) above,
provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome
terms upon Borrower.
b. Pay cash dividends or repurchase stock; provided that Borrower
may redeem or repurchase its securities in connection with any
agreement between Borrower and any officer, director or employee
of Borrower.
c. Loan money to others; provided, however, this Section C(2)(c)
shall not prohibit:
(i) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business.
(ii) investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar
transactions in the ordinary course of business;
(iii) investments (including debt obligations) received in
connection with the bankruptcy or reorganization or
customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
<PAGE>
(iv) investments consisting of (a) compensation of employees,
officers and directors of Borrower so long as the Board
of Directors of Borrower determines that such
compensation is in the best interests of Borrower, (b)
travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of
business, (c) loans to employees, officers or directors
relating to the purchase of equity securities of
Borrower, and (d) other loans to officers and employees
approved by the Board of Directors.
Provided that immediately before and after giving effect thereto
(i) no event of default has occurred and is continuing or will
exist or result therefrom and (ii) unrestricted cash balances
exceed $15,000,000, Bank's prior approval shall not be required
for actions contained in this Section C(2).
3) Without Bank's prior written approval, Borrower shall not:
a. Hypothecate existing assets, except for the following Permitted
Liens:
(i) liens for taxes not delinquent;
(ii) liens in Bank's favor;
(iii) liens existing as of the closing date;
(iv) liens securing capital lease obligations on assets
subject to such capital leases;
(v) liens on equipment leased by Borrower pursuant to an
operating lease (including sale-leaseback transactions)
in the ordinary course of business (including proceeds
thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such equipment
(including liens arising from UCC financing agreements
regarding leases permitted by this Addendum;
(vi) liens arising from judgments, decrees or attachments to
the extent and only so long as such judgment, decree or
attachment has not caused or resulted in an Event of
Default;
(vii) easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other
similar liens affecting real property not interfering in
any material respect with the ordinary conduct of
business of Borrower;
(viii) liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(ix) liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of
setoff or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor
deposit accounts or other funds maintained with a
creditor depository institution;
(x) liens, not otherwise permitted, which liens do not in the
aggregate exceed $150,000 at any time;
(xi) liens securing permitted indebtedness; and
(xii) liens incurred in connection with the extension, renewal,
or refinancing of the indebtedness secured by liens of
the type described in clauses (i) through (xi) above;
provided, however, that any extension, renewal or
replacement liens shall be limited to property encumbered
by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does
not increase.
b. Guarantee loans of others.
4) Borrower shall notify Bank in writing of any legal action commenced
against it which may result in damages over $100,000 as not covered
by Borrower's general liability insurance. Borrower shall provide
Bank with such notice immediately upon Borrower's receipt of notice
of such legal action.
5) Borrower shall provide Bank proof of insurance on all tangible
corporate assets and a Lender's Loss Payable Clause with Bank as loss
payee as its interests appear.
<PAGE>
GOVERNING LAW; JUDICIAL REFERENCE
1. GOVERNING LAW. This Agreement shall be deemed to have been made in
the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
2. JUDICIAL REFERENCE.
a) Other than (i) nonjudicial 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 Agreement, the General Security Agreement,
any note executed by Borrower in connection with this transaction and any
other document executed by Borrower in connection with any loans by Bank to
Borrower ("Loan Documents"), 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 any Loan Document 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,
or their successor section ("CCP"), which shall constitute the exclusive
remedy for the settlement of any controversy, dispute or claim concerning any
Loan Document, 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 located 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 for 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 CPP Section 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 Section
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 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
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as appropriate.
b) 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
<PAGE>
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.
c) 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 laws, 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.
d) 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, Section 1280
through Section 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.
MEGABIOS CORP.
By: /s/ Benjamin F. McGraw
-----------------------------------
Benjamin F. McGraw, III
Title: Chairman, President & CEO
--------------------------------
By: -----------------------------------
Title: --------------------------------
IMPERIAL BANK
By: /s/ David Sousa
-----------------------------------
Title: AVP
--------------------------------
<PAGE>
Amendment to Credit Terms and Conditions
This Amendment ("Amendment") dated as of May 13, 1998 amends that certain
Credit Terms and Conditions dated June 2, 1995 ("Credit Terms and
Conditions") with attached addendum dated May 19, 1995 (herein referred to as
"Addendum" and together with the Credit Terms and Conditions the
"Agreement"), by and between Imperial Bank ("Bank") and Megabios Corp.
("Borrower") as follows:
1. The last paragraph of the Credit Terms and Conditions is hereby amended
in full to read as follows:
"See Addendum, as may be amended or replaced from time to time, attached
hereto and incorporated herein by this reference for additional terms.
In the event of a conflict between this Agreement and the Addendum, the
terms in the Addendum prevail."
2. Except as provided above, the Agreement remains unchanged.
3. This Amendment is effective as of May 13, 1998, and the parties hereby
confirm that the Agreement as amended is in full force and effect.
MEGABOIS CORP.
By: /s/ Benjamin F. McGraw
-----------------------------------
Name: Benjamin F. McGraw, III
---------------------------------
Title: Chairman, President & CEO
--------------------------------
IMPERIAL BANK
By: /s/ David Sousa
-----------------------------------
Name: David Sousa
---------------------------------
Title: AVP
--------------------------------
<PAGE>
ADDENDUM TO PROMISSORY NOTE
This Addendum dated May 13, 1998 ("Addendum") is made and entered into
by and between Imperial Bank ("Bank") and Megabios Corp. ("Borrower"). This
Addendum amends and supplements that certain Promissory Note date May 13,
1998 ("Note") between Bank and Borrower. In the event of any inconsistency
between the terms herein and the terms of the Note, the terms herein shall in
all cases govern and control. All capitalized terms herein, unless otherwise
defined herein, shall have the meaning set forth in the Note.
1. The section of the Note entitled "DEFAULT" is hereby amended in full to
read as follows:
"Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment within five days when due. (b)
Borrower fails to comply with or to perform when due any other term,
obligation, covenant, or condition contained in this Note or any
agreement related to this Note or in any other agreement or loan
Borrower has with Lender which is not cured within 30 days. (c) Any
representation or statement made or furnished to Lender by Borrower is
false or misleading in any material respect either now or at the time
made or furnished. (d) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower which is not cured or dismissed
within 30 days under any bankruptcy or insolvency laws. (e) Any creditor
tries to take any of Borrower's property on or in which Lender has a
lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor does or any of the
other events described in this default section occurs with respect to
any guarantor of this Note. (g) A material adverse change occurs in
Borrower's financial condition."
2. The sentence following the "*" in the section of the Note entitled
"LENDERS RIGHTS" is hereby amended to read as follows:
"This includes, subject to any limits under applicable law, Lender's
reasonable attorneys' fees and Lender's reasonable legal expenses
whether or not there is a lawsuit, including reasonable attorney's fees
and reasonable legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services."
3. The section of the Note entitled "LINE OF CREDIT" is hereby amended in
full to read as follows:
"This Note evidences a straight line of credit. Once the total amount of
principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested orally by Borrower
or by an authorized person. All oral
<PAGE>
requests shall be confirmed in writing on the day of the request. All
communications, instructions, or directions by telephone or otherwise
to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the
line of credit until Lender receives from Borrower at Lender's address
shown written notice of revocation of their authority: BENJAMIN F.
MCGRAW, III, PRESIDENT/CEO. Borrower agrees to be liable for all sums
either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any Borrower's accounts with Lender
in accordance with the instructions of an authorized person. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including
daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender and such default is continuing and has not
been cured within the stated cure periods, including any agreement made
in connection with the signing of this Note; (b) Borrower or any
guarantor ceases doing business or is insolvent; (c) any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with Lender; or (d)
Borrower has applied funds provided pursuant to this Note for purposes
other than those authorized by Lender."
4. Except as provided above, the Note remains unchanged.
5. This Amendment is effective as of May 13, 1998 and the parties hereby
confirm that the Note as amended is in full force and effect.
Megabios Corp.
By: /s/ Benjamin F. McGraw, III
----------------------------------
Title: Chairman, President & CEO
-------------------------------
Imperial Bank
By: /s/ David Sousa
----------------------------------
Title: AVP
-------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statement (Form
S-8 No. 333-39795) pertaining to the 1997 Equity Incentive Plan, the Employee
Stock Purchase Plan and Non-Plan Option Grants of Megabios Corp., of our
report dated July 31, 1998, with respect to the financial statements of
Megabios Corp. included in the Annual Report (Form 10-K) for the year ended
June 30, 1998.
/s/ Ernst & Young LLP
Palo Alto, California
October 1, 1998
