<PAGE>
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 March 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25544
Miravant Medical Technologies
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(Exact name of Registrant as specified in its charter)
Delaware 77-0222872
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7408 Hollister Avenue, Santa Barbara, California 93117
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(Address of principal executive offices, including zip code)
(805) 685-9880
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(Registrant's telephone number, including area code)
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 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1998
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Common Stock, $.01 par value 14,058,667
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Page
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Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets as of March 31, 1998 and
December 31, 1997............................................................3
Consolidated statements of operations for the three months ended
March 31, 1998 and 1997......................................................4
Consolidated statements of cash flows for the three months ended
March 31, 1998 and 1997......................................................5
Notes to consolidated financial statements ....................................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .........................................8
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................12
SIGNATURES.....................................................................12
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1998 1997
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(Unaudited)
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Assets
Current assets:
Cash and cash equivalents............................................... $ 37,389,000 $ 55,666,000
Investments in short-term marketable securities......................... 29,883,000 27,796,000
Accounts receivable..................................................... 1,929,000 1,833,000
Prepaid expenses and other current assets............................... 214,000 772,000
------------------ ------------------
Total current assets....................................................... 69,415,000 86,067,000
Property, plant & equipment:
Vehicles................................................................ 28,000 28,000
Furniture and fixtures.................................................. 1,728,000 1,578,000
Equipment............................................................... 4,003,000 3,752,000
Leasehold improvements.................................................. 3,323,000 3,071,000
Capital lease equipment................................................. 184,000 184,000
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9,266,000 8,613,000
Accumulated depreciation and amortization............................... 3,467,000 2,886,000
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5,799,000 5,727,000
Investment in affiliate.................................................... 441,000 895,000
Patents and other assets................................................... 969,000 342,000
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Total assets............................................................... $ 76,624,000 $ 93,031,000
================== ==================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable........................................................ $ 2,478,000 $ 4,290,000
Accrued payroll and expenses............................................ 1,169,000 1,022,000
Current portion of long-term obligations................................ -- --
Current portion of capital lease obligations............................ 9,000 21,000
------------------ ------------------
Total current liabilities.................................................. 3,656,000 5,333,000
Shareholders' equity:
Common stock, 50,000,000 shares authorized;
14,094,723 and 13,952,847 shares
issued and outstanding at March 31, 1998 and
December 31, 1997, respectively........................................ 164,715,000 170,451,000
Notes receivable from officers.......................................... (1,161,000) --
Deferred compensation................................................... (1,815,000) (1,899,000)
Accumulated deficit..................................................... (88,771,000) (80,854,000)
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Total shareholders' equity................................................. 72,968,000 87,698,000
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Total liabilities and shareholders' equity................................. $ 76,624,000 $ 93,031,000
================== ==================
See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended March 31,
1998 1997
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Revenues:
Product sales..................................................... $ -- $ --
Grants, licensing and royalty income.............................. 635,000 291,000
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635,000 291,000
Costs and expenses:
Cost of goods sold................................................ -- --
Research and development.......................................... 6,318,000 3,866,000
Selling, general and administrative............................... 3,047,000 2,264,000
Loss in investment in affiliate................................... 454,000 232,000
------------------ --------------------
Total costs and expenses............................................. 9,819,000 6,362,000
Loss from operations................................................. (9,184,000) (6,071,000)
Interest and other income (expense):
Interest and other income......................................... 1,268,000 636,000
Interest expense.................................................. (1,000) (2,000)
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Total interest and other income...................................... 1,267,000 634,000
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Net loss............................................................. $ (7,917,000) $ (5,437,000)
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Net loss per share - basic and diluted............................... $ (0.56) $ (0.44)
================== ====================
Shares used in computing net loss per share.......................... 14,103,532 12,371,238
================== ====================
See accompanying notes.
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MIRAVANT MEDICAL TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three months ended March 31,
1998 1997
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Operating activities:
Net loss.......................................................... $ (7,917,000) $ (5,437,000)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.................................. 586,000 212,000
Amortization of deferred compensation.......................... 646,000 282,000
Changes in operating assets and liabilities:
Accounts receivable......................................... (96,000) (220,000)
Prepaid expenses and other assets........................... (74,000) (459,000)
Accounts payable and accrued payroll and expenses........... (1,665,000) (369,000)
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Net cash used in operating activities............................. (8,520,000) (5,991,000)
Investing activities:
Purchases of marketable securities ............................... (12,008,000) (17,067,000)
Sales of marketable securities ................................... 9,921,000 17,100,000
Investment in affiliate........................................... 454,000 232,000
Purchases of property, plant and equipment........................ (653,000) (122,000)
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Net cash provided by (used in) investing activities............... (2,286,000) 143,000
Financing activities:
Proceeds from issuance of Common Stock, less issuance costs....... 2,670,000 291,000
Purchases of Common Stock......................................... (8,968,000) --
Loan payments to executive officers............................... (1,161,000) --
Payments of capital lease obligations............................. (12,000) (11,000)
Payments of long term obligations................................. -- (14,000)
---------------- -------------------
Net cash provided by (used in) financing activities............... (7,471,000) 266,000
Net decrease in cash and cash equivalents......................... (18,277,000) (5,582,000)
Cash and cash equivalents at beginning of period.................. 55,666,000 31,498,000
------------------- ----------------------
Cash and cash equivalents at end of period........................ $ 37,389,000 $ 25,916,000
=================== ======================
Supplemental disclosures:
State taxes paid.................................................. $ 59,000 $ 55,000
=================== ======================
Interest paid..................................................... $ 1,000 $ 3,000
=================== =======================
See accompanying notes.
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<PAGE>
MIRAVANT MEDICAL TECHNOLOGIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The information contained herein has been prepared in accordance with Rule
10-01 of Regulation S-X. The information at March 31, 1998, and for the
three month periods ended March 31, 1998 and 1997, is unaudited. In the
opinion of management, the information 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.
Interim results are not necessarily indicative of results for a full year.
For a presentation including all disclosures required by generally
accepted accounting principles, these financial statements should be read
in conjunction with the audited consolidated financial statements for the
year ended December 31, 1997 included in the Miravant Medical Technologies
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
2. Notes Receivable from Officers
In December 1997, the Compensation Committee of the Board of Directors
recommended and subsequently approved an equity loan program in varying
amounts for the Company's Chief Executive Officer, President and Chief
Financial Officer. The notes, which accrue interest at a fixed rate of
5.8% and are payable in five years, were awarded specifically for the
purpose of exercising options to acquire the Company's Common Stock and
for paying the related option exercise price and payroll taxes. The notes
are collateralized by the underlying shares acquired upon exercise. As of
March 31, 1998, the loans had been fully utilized by each of the officers
and the related notes have been classified as a reduction of shareholders'
equity.
3. Commitments and Contingencies
In February 1998, the Company agreed to guaranty a term loan in the amount
of $7,600,000 from a bank to a director of the Company. The loan is due
and payable on July 31, 1999, or sooner upon an event of default (as
defined in the loan agreement), bears interest at the bank's reference
rate, minus .5% per annum, payable quarterly, and is collateralized by all
of the director's shares of the Company's Common Stock. In connection with
the guaranty, the Company granted the bank a security interest in an
account maintained at the bank and agreed, upon an event of default, to
purchase the loan from the bank for a price generally equal to the then
outstanding principal, plus accrued interest, fees and costs. In the event
the Company purchases the loan, the director granted the Company the
option to acquire all of his shares of Common Stock at a price equal to
50% of the 20-day average closing price, net of the loan repayment. The
director also agreed to certain restrictions on the sale of such shares.
Under the loan agreement and the guaranty, the director and the Company
are subject to the maintenance of specified financial and other covenants.
In conjunction with the guaranty of this loan, the director paid the
Company a transaction fee of $152,000, which was paid in shares of the
Company's Common Stock and is included in other income for the period
ended March 31, 1998.
4. Per Share Data
The Company has adopted Statement of Financial Accounting Standards No.
128 "Earnings per Share" ("SFAS No. 128"), which supersedes Accounting
Principles Board Opinion No. 15 and which is effective for all periods
ending after December 31, 1997. SFAS No. 128 replaced the presentation of
primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic earnings per
share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share and reflects the potential
dilution that would occur if securities or other contracts to issue common
stock were exercised or converted to common stock. Common stock equivalent
shares from stock options and warrants have been excluded from this
computation as their effect is antidilutive. All previously stated
earnings per share amounts conform to the new SFAS No. 128 requirements.
Basic loss per common share for the quarters ended March 31, 1998 and 1997
were computed by dividing the net loss by the weighted average shares
outstanding during the period in accordance with SFAS No. 128. Since the
effect of the assumed exercise of stock options and other convertible
securities was antidilutive, basic and diluted loss per share as presented
on the consolidated statements of operations are the same.
5. New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). This statement establishes standards for reporting and
display of comprehensive income and its components. Components of
comprehensive income are net income and all other non-owner changes in
equity such as unrealized gains on available-for-sale securities that are
not included in net income. This statement requires that an enterprise:
(a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings in the equity
section of the balance sheet. While SFAS No. 130 is effective for
financial statements issued for periods beginning after December 15, 1997,
it had no material impact on the Company's results of operations or
related disclosures for the three months ended March 31, 1998 and 1997.
Financial Accounting Standards Board Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
is also effective beginning in 1998, requires the disclosure of financial
information on operating segments on the basis used by management in
evaluating segment performance and deciding how to allocate resources.
While the Company does not anticipate that SFAS No. 131 will have a
material impact on its financial reporting and disclosures, any changes,
if any, will first be reflected in the Company's 1998 Annual Report on
Form 10-K.
6. Subsequent Event
In April 1998, the Company entered into a revolving credit agreement with
its affiliate, Ramus Medical Technologies ("Ramus"), pursuant to which the
Company shall from time to time make loans to Ramus in an aggregate
outstanding principal amount not to exceed at any one time $2 million. The
unpaid principal amount of the loans, which are to be used to fund Ramus'
clinical trial and operating costs, accrues interest at a variable rate
(7.35% as of March 31, 1998) based on the Company's bank rate and matures
approximately one and a half years after the completion by Ramus of its
first surgical implant in a human involving coronary artery bypass surgery
in a formally conducted clinical trial. The loans are evidenced by a
promissory note, the balance of which shall be convertible under certain
circumstances at the option of the Company into shares of Ramus stock. Upon
the occurrence of specified milestones, the credit agreement provides for
the issuance to the Chief Executive Officer of Ramus a warrant to purchase
10,000 shares of the Company's Common Stock. If issued, the warrant will be
exercisable at a price generally equal to the average closing price of the
Common Stock over the twenty consecutive trading days immediately prior to
the date of issuance. As of April 30, 1998, Ramus had borrowed $500,000
under the credit agreement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although Miravant Medical
Technologies (the "Company") believes that its expectations are based on
reasonable assumptions, it can give no assurance that its goals will be
achieved. The important factors that could cause actual results to differ
materially from those in the forward looking statements herein include, without
limitation, the early stage of development of both the Company and its products,
the timing and uncertainty of results of both research and regulatory processes,
the extensive government regulation applicable to the Company's business, the
unproven safety and efficacy of the Company's drug and device products, the
Company's significant additional financing requirements, the uncertainty of
future capital funding, the highly competitive environment of the international
pharmaceuticals and medical device industries and the presence of a number of
competitors with significantly greater financial, technical and other resources
and extensive operating histories, the Company's potential exposure to product
liability or recall, uncertainties relating to patents and other intellectual
property, including whether the Company will obtain sufficient protection or
competitive advantage therefrom, the Company's dependence upon a limited number
of key personnel and consultants, the Company's significant reliance upon its
collaborative partners for achieving its goals, and other factors detailed in
the Company's report on Form 10-K for the year ended December 31, 1997.
GENERAL
Since its inception, the Company has been principally engaged in the
research and development of drugs and medical device products for use in
PhotoPoint(TM), the Company's proprietary technologies for photodynamic therapy.
The Company has been unprofitable since its founding and has incurred a
cumulative net loss of approximately $88.8 million as of March 31, 1998. The
Company expects to continue to incur substantial and increasing operating losses
for the next several years due to continued and increased spending on research
and development programs, the funding of preclinical and clinical testing and
regulatory activities and the costs of manufacturing, marketing, sales,
distribution and administrative activities.
The Company's revenues generally primarily reflect income earned from
licensing agreements, contracts, grants, and medical device products. For the
quarter ended March 31, 1998, the Company's revenues were generated from
clinical reimbursements and royalties from licensing agreements and revenues
from grants. Device product sales represent limited sales of PhotoPoint devices
(e.g. light producing devices and light delivery and measurement devices), sold
both domestically and internationally, to researchers and an OEM distributor. To
date, the Company has received no revenue from the sale of drug products, and
the Company is not permitted to engage in commercial sales of drugs or devices
until such time, if ever, as the Company receives requisite regulatory
approvals. As a result, the Company does not expect to record significant
product sales until such approvals are received.
Until the Company commercializes its product(s), the Company expects
revenues to continue to be attributable to licensing agreements, contracts,
grants and device product sales for research use. The Company anticipates that
future revenues and results of operations may continue to fluctuate
significantly depending on, among other factors, the timing and outcome of
applications for regulatory approvals, the Company's ability to successfully
manufacture, market and distribute its drug products and device products and/or
the establishment of collaborative arrangements for the manufacturing, marketing
and distribution of some of its products. The Company anticipates its operating
activities will result in substantial net losses for several more years.
The Company is currently conducting clinical trials in oncology and
ophthalmology. In dermatology, the Company is continuing to perform additional
preclinical studies as required by the Federal Drug Administration (FDA)
Division of Dermatology for the non life-threatening disorder of basal cell
carcinoma (BCC). Based upon an evaluation of all the criteria of the FDA
Division of Dermatology and various economic and development factors, including
cost, reimbursement, the available alternative therapies for this disorder and
the development of topical and other formulations for its PhotoPoint drugs, the
Company may or may not elect to further develop PhotoPoint procedures for BCC.
The Company has awarded, and may award in the future, stock options
that vest upon the achievement of certain milestones. Under APB Opinion No. 25,
such options are accounted for as variable stock options. As such, until the
milestone is achieved (but only after it is determined to be probable), deferred
compensation is recorded in an amount equal to the difference between the fair
market value of the Common Stock on the date of determination less the option
exercise price and is adjusted from period to period to reflect changes in the
market value of the Common Stock. Deferred compensation, as it relates to a
particular milestone, is amortized over the period between when achievement of
the milestone becomes probable and when the milestone is estimated to be
achieved. Amortization of deferred compensation could result in significant
additional compensation expense being recorded in future periods based on the
market value of the Common Stock from period to period.
Effective June 21, 1996, the Compensation Committee of the Board of
Directors adjusted the future vesting periods of the variable stock options
covering 400,000 shares of Common Stock. These variable stock options were
adjusted to change the vesting periods to specific dates as opposed to the
original vesting periods which were based upon the achievement of milestones; no
change was made to the exercise prices of these variable stock options. This
change in the vesting periods provides for the options to be accounted for as
non-variable options and therefore alleviates the impact of deferred
compensation fluctuating in future periods based on changes in the per share
market value from period to period. As of March 31, 1998, options covering
302,500 shares with an exercise price of $34.75 per share have vested and
options covering 75,000 shares have been canceled. The remaining unvested shares
will vest in the years 1998 through 2000.
RESULTS OF OPERATIONS
The following table provides a summary of the Company's revenues for
the three months ended March 31, 1998 and 1997:
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THREE MONTHS ENDED MARCH 31,
1998 1997
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CONSOLIDATED REVENUES
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Product sales............................... $ -- $ --
Grants and contracts........................ 141,000 --
Royalties................................... 49,000 66,000
License..................................... 445,000 225,000
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Total revenue............................... $ 635,000 $ 291,000
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REVENUES. For the three months ended March 31, 1998, revenues increased
to $635,000 from $291,000 for the three months ended March 31, 1997. The
increase is related to an increase in license revenues to $445,000 for the
period from $225,000 for the same period in 1997. License revenue represents the
billing for the specific reimbursement of clinical costs in conjunction with the
license agreement entered into in July 1995 with Pharmacia & Upjohn, Inc.
("Pharmacia & Upjohn"). Additionally, the Company recorded revenues of $141,000
associated with two on-going grants initially received in the third quarter of
1997. There were no active grants or grant revenue recorded during the first
three months of 1997. The Company anticipates recording license income for the
specific reimbursement of clinical costs throughout 1998. The level of such
license, grant and royalty income is likely to fluctuate materially from period
to period and in the future depending on the amount of clinical costs incurred
and/or reimbursed and the extent of development activities under the Pharmacia &
Upjohn license agreement, the amount of grant income awarded and expended and
the amount of device products sold by Laserscope, pursuant to a license
agreement entered into in 1992 which provides royalties from the sale of the
Company's previously designed device products.
COST OF GOODS SOLD. Reflective of the Company's decision to allocate
its manufacturing resources to supporting its preclinical and clinical testing
and decrease in custom device order activity, the Company did not incur any cost
of goods sold for the three months ended March 31, 1998 and March 31, 1997. The
Company expects gross margins to be insignificant until the Company commences
commercial sales of its products.
RESEARCH AND DEVELOPMENT. The Company's research and development
expenses for the three months ended March 31, 1998 increased to $6.3 million
from $3.9 million for the three months ended March 31, 1997. The increase in
research and development expenses relates primarily to costs associated with the
screening and treatment of qualified individuals for participation in the
clinical trials, the preparation for the Company's first New Drug Application
(NDA) filing for cutaneous metastatic breast cancer, currently anticipated to be
filed in 1998, and the preclinical work associated with the development of
existing and new compounds, formulations and clinical programs. In addition,
research and development expenses continue to increase in conjunction with the
Company's progression through the various stages of preclinical and clinical
trials and the increased costs associated with the purchase of raw materials and
supplies for the production of clinical devices and drug product for use in
these preclinical and clinical trials. The Company anticipates future research
and development expenses to increase as the Company continues to prepare for its
NDA filing and expands its research and development programs, which includes the
increased hiring of personnel and continued expansion of preclinical and
clinical testing. See "--General."
SELLING, GENERAL AND ADMINISTRATIVE. The Company's selling, general and
administrative expenses for the three months ended March 31, 1998 increased to
$3.0 million from $2.3 million for the three months ended March 31, 1997.
Selling, general and administrative costs increased for the first three months
of 1998 as compared to the same period in 1997 as a result of (i) the increase
in costs associated with professional services received from financial
consultants, attorneys, and public and media relations and (ii) payroll and
overhead costs due to the addition of administrative and corporate personnel.
The Company expects future selling, general and administrative expenses to
continue to grow as a result of the increased support required for research and
development activities, continuing corporate development and professional
services, compensation expense associated with stock options and financial
consultants and general corporate matters, as well as the other factors
described above.
LOSS IN INVESTMENT IN AFFILIATE. For the three months ended March 31,
1998 and 1997, the Company recorded as expense $454,000 and $232,000,
respectively, in connection with its investment in Ramus Medical Technologies in
December 1996. The amounts recorded represent the full amount of the affiliate's
losses for the quarters ended March 31, 1998 and 1997. The affiliate's losses
from operations are expected to be ongoing throughout 1998 and beyond, and the
level of such losses are expected to fluctuate depending on research and
development activities and preclinical and clinical trial progress.
INTEREST AND OTHER INCOME. For the three months ended March 31, 1998,
net interest and other income increased to $1.3 million compared to net interest
and other income of $634,000 for the three months ended March 31, 1997. The
increase in net interest and other income resulted primarily from the investment
of proceeds received from the Company's private equity offering in September
1997. Additionally, the Company also recorded as other income $152,000 as a
transaction fee for the guaranty of a loan to one of its directors. The
transaction fee was paid in the form of the Company's Common Stock which will be
retired.
The Company does not believe that inflation has had a material impact
on its results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Since inception through March 31, 1998, the Company has accumulated a
deficit of approximately $88.8 million and expects to continue to incur
substantial and increasing operating losses for the next several years. The
Company has financed its operations primarily through private placements of
common and preferred stock, private placements of convertible notes and short
term notes, its initial public offering, Pharmacia & Upjohn's purchase of Common
Stock and a secondary public offering. As of March 31, 1998, the Company had
received proceeds from the sale of equity securities and convertible notes of
approximately $181.5 million. The Company has available a $1.0 million bank line
of credit which has a variable rate of interest based on the bank's lending rate
(7.35% as of March 31, 1998), which expires on January 31, 1999, and is
collateralized by the Company's cash balances. The credit agreement subjects the
Company to certain customary restrictions, including a prohibition on the
payment of dividends. The Company presently has no outstanding borrowings under
the bank line of credit.
In connection with the licensing agreement with Pharmacia & Upjohn, the
Company has recorded as license income the reimbursement of clinical costs of
$445,000 for the three months ended March 31, 1998. The Company anticipates
recording license income for the specific reimbursement of clinical costs
throughout the remainder of 1998.
For the first three months of 1998, the Company required cash for
operations of approximately $8.5 million compared to $6.0 million for the same
period in 1997. The increase in cash used in operations was primarily due to an
increase in operating activities associated with the continued expansion of
preclinical and clinical testing, the increase in research and development
programs and personnel, the reduction of accounts payable and the increase in
general corporate activities. For the first three months of 1998, the Company
required cash from its financing activities of approximately $7.5 million as
compared to net cash received from financing activities of $266,000 for the same
period in 1997. The increase in cash used in financing activities is primarily
related to the repurchase made by the Company of its Common Stock and the
issuance of the executive equity loans during the first three months of 1998.
The Company invested a total of $653,000 in property, plant and
equipment during the first three months of 1998 compared to $122,000 during the
same period in 1997. During 1996, the Company entered into two new lease
agreements for additional facilities. The addition of these new facilities
increased the Company's equipment costs due to the expansion of its laboratories
and office space and the purchase of equipment for this new space. The Company
expects to continue to purchase property and equipment in the future as the
Company expands its preclinical, clinical and research and development
activities. Since inception, the Company has entered into capital lease
agreements for approximately $184,000 of equipment, consisting primarily of
laboratory equipment. The Company expects to continue to lease equipment from
time to time as needed, when and if financing resources become available at
acceptable terms to the Company.
The Company's capital funding requirements will depend on numerous
factors, including the progress and magnitude of the Company's research and
development programs and preclinical testing and clinical trials, the time
involved in obtaining regulatory approvals, the cost involved in filing and
maintaining patent claims, technological advances, competitor and market
conditions, the ability of the Company to establish and maintain collaborative
arrangements, the cost of manufacturing scale-up and the cost and effectiveness
of commercialization activities and arrangements.
The Company may require substantial funding to continue its research
and development activities, preclinical and clinical testing and manufacturing,
marketing, sales, distribution and administrative activities. The Company has
raised funds in the past through the public or private sale of securities, and
may contemplate raising funds in the future through public or private
financings, collaborative arrangements or from other sources. The success of
such efforts will depend in large part upon continuing developments in the
Company's preclinical and clinical testing. The Company continues to explore
and, as appropriate, enter into discussions with other companies regarding the
potential for equity investment, collaborative arrangements, license agreements
or development or other funding programs with the Company in exchange for
manufacturing, marketing, distribution or other rights to products developed by
the Company. However, there can be no assurance that discussions with other
companies will result in any investments, collaborative arrangements, agreements
or funding, or that the necessary additional financing through debt or equity
financing will be available to the Company on acceptable terms, if at all.
Further, there can be no assurance that any arrangements resulting from these
discussions will successfully reduce the Company's funding requirements. If
additional funding is not available to the Company when needed, the Company will
be required to scale back its research and development programs, preclinical and
clinical testing and administrative activities and the Company's business and
financial results and condition would be materially adversely affected.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
See Exhibit Index on page 13.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Miravant Medical Technologies
Date: May 14, 1998 By: /s/ John M. Philpott
--------------------
John M. Philpott
Chief Financial Officer
(on behalf of the Company and as
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Incorporating
Exhibit Reference
Number Description (if applicable)
- ------- ----------- ---------------
<S> <C>
3.1 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant
filed with the Delaware Secretary of State on September 12, 1997. [E][3.1]
3.2 Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant [C][3.11]
filed with the Delaware Secretary of State on July 24, 1995.
3.3 Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary [B][3.1]
of State on December 14, 1994.
3.4 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.2]
the Delaware Secretary of State on March 17, 1994.
3.5 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.3]
the Delaware Secretary of State on October 7, 1992.
3.6 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.4]
the Delaware Secretary of State on November 21, 1991.
3.7 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.5]
the Delaware Secretary of State on September 27, 1991.
3.8 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.6]
the Delaware Secretary of State on December 20, 1989.
3.9 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.7]
the Delaware Secretary of State on August 11, 1989.
3.10 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with [A][3.8]
the Delaware Secretary of State on July 13, 1989.
3.11 Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State [A][3.9]
on June 16, 1989.
3.12 Amended and Restated Bylaws of the Registrant. [E][3.12]
4.1 Specimen Certificate of Common Stock. [B][4.1]
4.2 Form of Convertible Promissory Note. [A][4.3]
4.3 Form of Indenture. [A][4.4]
4.4 Special Registration Rights Undertaking. [A][4.5]
4.5 Undertaking Agreement dated August 31, 1994. [A][4.6]
4.6 Letter Agreement dated March 10, 1994. [A][4.7]
4.7 Form of $10,000,000 Common Stock and Warrants Offering Investment Agreement. [A][4.8]
4.8 Form of $55 Common Stock Purchase Warrant. [D][4.1]
4.9 Form of $60 Common Stock Purchase Warrant. [D][4.2]
10.1 Amendment No. 6 dated as of January 1, 1998 to Employment Agreement between the Registrant
and Gary S. Kledzik.*
10.2 Amendment No. 11 dated as of January 1, 1998 to Employment Agreement between the
Registrant and David E. Mai.*
10.3 Amendment No. 3 dated as of January 1, 1998 to Employment Agreement between the Registrant
and John M. Philpott.*
10.4 Security Agreement dated February 17, 1998 between the Registrant and Sanwa Bank.
10.5 Continuing Guaranty dated February 17, 1998 between the Registrant and Sanwa Bank.
10.6 Addendum to Continuing Guaranty dated February 17, 1998 between the Registrant and Sanwa
Bank.
10.7 Indemnification Agreement dated February 27, 1998 between the Registrant and Michael D.
Farney.
11.1 Statement regarding computation of net loss per share.
27.1 Financial Data Schedule.
- -------------------------------------------
[A] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Registration Statement on Form S-1
(File No. 33-87138).
[B] Incorporated by reference from the exhibit referred to in brackets
contained in Amendment No. 2 to the Registrant's Registration
Statement on Form S-1 (File No. 33-87138).
[C] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended June
30, 1995, as amended on Form 10-Q/A dated December 6, 1995 (File No.
0-25544).
[D] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Registration Statement on Form S-3
(File No. 333-39905).
[E] Incorporated by reference from the exhibit referred to in brackets
contained in the Registrant's Form 10-Q for the quarter ended
September 30, 1997 (File No. 0-25544).
* Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE>
Exhibit 10.1
AMENDMENT NO. 6
TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 6 TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into at Santa Barbara,California, on the date hereinafter set forth by
and between Gary S. Kledzik, Ph.D. (hereinafter referred to as the "Employee")
and MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred
to as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of December 31, 1989, and Amendments No. 1 through 4 thereto (the
"Employment Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 1998, the section entitled EMPLOYEE
COMPENSATION on Exhibit A to the Employment Agreement is hereby amended to read
as follows:
EMPLOYEE COMPENSATION
THREE HUNDRED THOUSAND DOLLARS ($300,000) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATURES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
this 13th day of January, 1998.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ David E. Mai
----------------
David E. Mai
President
EMPLOYEE: /s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
<PAGE>
Exhibit 10.2
AMENDMENT NO. 11
TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 11 TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into at Santa Barbara, California, on the date hereinafter set forth by
and between DAVID E. MAI (hereinafter referred to as the "Employee") and
MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred to
as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of February 1, 1991, and Amendments No. 1 through 9 thereto (the
"Employment Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 1998, the section entitled EMPLOYEE
COMPENSATION on Exhibit A to the Employment Agreement is hereby amended to read
as follows:
EMPLOYEE COMPENSATION
TWO HUNDRED TWENTY FIVE THOUSAND ($225,000) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATURES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
this 13th day of January, 1998.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
C.E.O. and Chairman
EMPLOYEE: /s/ David E. Mai
----------------
David E. Mai
<PAGE>
Exhibit 10.3
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT (the "Amendment") is made
and entered into at Santa Barbara, California, on the date hereinafter set forth
by and between JOHN M. PHILPOTT (hereinafter referred to as the "Employee") and
MIRAVANT MEDICAL TECHNOLOGIES, a Delaware Corporation (hereinafter referred to
as the "Employer").
WHEREAS:
A. The Employer and the Employee are parties to an Employment Agreement
effective as of March 20, 1995, and Amendment No. 1 thereto (the "Employment
Agreement").
B. The parties hereto wish to amend the Employment Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises, promises and
representations hereinafter contained, it is agreed as follows:
1. Effective JANUARY 1, 1998, the section entitled EMPLOYEE
COMPENSATION on Exhibit A to the Employment Agreement is hereby amended to read
as follows:
EMPLOYEE COMPENSATION
ONE HUNDRED FORTY THOUSAND DOLLARS ($140,000) per annum.
2. In all other respects, the Employment Agreement is hereby ratified,
confirmed and approved in its entirety.
SIGNATUARES ON NEXT PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
this 10th day of January, 1998.
EMPLOYER:
MIRAVANT MEDICAL TECHNOLOGIES
a Delaware Corporation
By: /s/ Gary S. Kledzik, Ph.D.
--------------------------
Gary S. Kledzik, Ph.D.
C.E.O. and Chairman
EMPLOYEE: /s/ John M. Philpott
--------------------
John M. Philpott
<PAGE>
Exhibit 10.4
SECURITY AGREEMENT
This Security Agreement ("Agreement") is made and entered into as of February
17, 1998 by and between SANWA BANK CALIFORNIA (the "Bank") and MIRAVANT MEDICAL
TECHNOLOGIES (the "Grantor")
1. Grant of Security Interest. The Grantor hereby grants to the Bank a
security interest in and to all of the following property (hereinafter
collectively referred to as the "Collateral"):
A. Market Value Savings. The following described Market Value Savings:
0734-16600 together with all substitutions thereof and with all
interest accruing thereunder and therefrom.
B. Monies and Other Property in Possession. In addition to the above, all
monies, and property of the Grantor now or hereafter in the possession
of the Bank or the Bank's agents, or any one of them, including, but
not limited to, all deposit accounts, certificates of deposit, stocks,
bonds, indentures, warrants, options and other negotiable and
non-negotiable securities and instruments, together with all stock
rights, rights to subscribe, liquidating dividends, cash dividends,
payments, dividends paid in stock, new securities or other property to
which the Grantor may become entitled to receive on account of such
property.
The Bank's security interest in the Collateral shall be a continuing lien and
shall include all proceeds and products of the Collateral including but not
limited to, the proceeds of any insurance thereon.
2. The Indebtedness. The Collateral secures payment of all obligations and
indebtedness pursuant to that certain Guaranty in favor of the Bank dated
as of February 17, 1998, executed by Miravant Medical Technologies and with
a maximum principal liability of $7,600,000.00 plus interest, fees,
attorneys' fees and other costs and expenses related to the indebtedness
guarantied. The indebtedness and obligations secured hereby (hereinafter
referred to as the "Indebtedness") shall include any and all modifications,
extensions and renewals of such obligations or indebtedness and performance
of all the terms, covenants and agreements contained in this Security
Agreement and in any other document, instrument or agreement evidencing or
related to the Indebtedness or the Collateral.
The Indebtedness secured hereby shall not include any indebtedness incurred for
personal, family or household purposes except to the extent any disclosure
required under any consumer protection law (including but not limited to the
Truth in Lending Act) or any regulation thereto, as now existing or hereafter
amended, is or has been given.
3. Grantor's Representations and Warranties. The Grantor hereby makes the
following representations and warranties to the Bank, which representations
and warranties are continuing:
A. Status. The Grantor is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly
licensed, qualified to do business and in good standing in, and, where
necessary to maintain the Grantor's rights and privileges, has
complied with the fictitious name statute of every jurisdiction in
which the Grantor is doing business.
B. Authority. The execution, delivery and performance by the Grantor of
this Security Agreement and any instrument, document or agreement
required hereunder have been duly authorized and do not and will not:
(i) violate any provision of any law, rule, regulation, writ, judgment
or injunction presently in effect affecting the Grantor; (ii) require
any consent or approval of the stockholders or violate any provision
of the articles of incorporation or by-laws of the Grantor; or (iii)
result in a breach of or constitute a default under any material
agreement to which the Grantor is a party or by which the Grantor's
properties may be bound or affected.
C. Legal Effect. This Security Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will
constitute, legal, valid and binding obligations of the Grantor
enforceable against the Grantor in accordance with their respective
terms.
D. Fictitious Trade Styles. The Grantor currently uses no fictitious
trade styles in connection with its business operations. The Grantor
shall notify the Bank within thirty (30) days of the use of any
fictitious trade style at any future date, indicating the trade style
and state(s) of its use.
E. Title to Collateral; Permitted Liens. The Grantor has good and
marketable title to the Collateral and the same is not now and shall
not become subject to any security interest, encumbrance, lien or
claim of any third person other than: (i) liens and security interests
securing the Indebtedness or other indebtedness owed to the Bank; (ii)
liens for taxes, assessments or similar charges either not yet due or
being contested in good faith; (iii) liens of mechanics, materialmen,
warehousemen, carriers or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Grantor in
the ordinary course of business to secure indebtedness outstanding on
the date hereof or permitted to be incurred hereunder; (v) liens and
security interests which, as of the date hereof, have been disclosed
to and approved by the Bank in writing; and (vi) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of the
Grantor's assets (collectively, the "Permitted Liens").
F. Financial Statements. All financial statements, information and other
data now or hereafter submitted to the Bank by the Grantor in
connection with the transaction with respect to which this Security
Agreement is entered into are true, accurate and correct and have been
or will be prepared in accordance with generally accepted accounting
principles consistently applied. Since the most recent submission of
any such financial statement, information or other data to the Bank,
the Grantor represents and warrants that no material adverse change in
the financial condition or operations as disclosed therein or thereby
has occurred which has not been fully disclosed to the Bank in
writing.
G. Litigation. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the
knowledge of the Grantor, threatened against or affecting the Grantor
or the Grantor's properties before any court or administrative agency
which, if determined adversely to the Grantor, would have a material
adverse effect on the Grantor's financial condition, operations or the
Collateral.
H. Taxes. The Grantor has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and
penalties, other than taxes which are currently payable without
penalty or interest or those which are being duly contested in good
faith.
4. Grantor's Covenants. The Grantor covenants and agrees that, unless the Bank
otherwise consents in writing, the Grantor shall at all times:
A. Maintenance of Collateral. Except for Permitted Liens, keep and
maintain the Collateral free and clear of all levies, liens,
encumbrances and other security interests (including, but not limited
to, any lien of attachment, judgment or execution) and defend the
Collateral against any such levy, lien, encumbrance or security
interest; comply with all laws, statutes and regulations pertaining to
the Collateral and take such actions and execute such agreements and
other documents necessary to perfect, evidence and continue the Bank's
security interest in the Collateral and the priority thereof.
B. Covenants With Respect to Possessory Collateral. With respect to
Possessory Collateral, (which is defined to mean that portion of the
Collateral which consists of securities, certificates of deposit,
savings or checking accounts, notes and instruments and any other
similar collateral in which a security interest is normally perfected
through possession by the Bank or its agent), the Grantor covenants
and agrees:
(i) The Possessory Collateral shall at all times be of a
character and value acceptable to the Bank, as
determined by the Bank in its sole and absolute
judgment.
(ii) The Grantor shall not withdraw or seek to withdraw any
of the Possessory Collateral now or hereafter in the
possession of the Bank or the Bank's agents.
(iii) The Grantor shall make timely payments of all taxes,
charges, liens and assessments against the Possessory
Collateral.
C. Reporting Requirements. Promptly upon the Bank's request, deliver or
cause to be delivered to the Bank such information pertaining to the
Grantor, the Collateral or such other matters as the Bank may
reasonably request.
D. Payment of Obligations. Pay all of the Grantor's liabilities and
obligations when due.
E. Compensation of Employees. Compensate the Grantor's employees for
services rendered at an hourly rate at least equal to the minimum
hourly rate prescribed by any applicable federal or state law or
regulation.
F. Possessory Collateral Loan-to-Value Ratio. The Grantor covenants and
agrees that so long as all or any part of the Indebtedness shall
remain outstanding, the outstanding principal balance of the
obligations secured by this Agreement shall at no time be greater than
100.00% of the value of the Possessory Collateral at its then current
market value (as determined by the Bank) (the "Loan-to-Value Ratio").
To the extent that such Possessory Collateral Loan-to-Value Ratio is not
maintained, the Grantor shall promptly, upon the Bank's request: (i)
assign and pledge to the Bank such additional assets of a character
satisfactory to the Bank and having a market value sufficient to reinstate
and maintain such Possessory Collateral Loan-to-Value Ratio, or (ii) make
payment to the Bank in an amount sufficient to reduce the outstanding
principal balance of the Indebtedness so that such Possessory Collateral
Loan-to-Value Ratio is reinstated and maintained.
G. Notices. Give the Bank prompt written notice of: (i) any change in the
Grantor's place of business or the acquisition of more than one place
of business; (ii) any proposed or actual change in the Grantor's name,
identity or business nature; (iii) any change in the location of any
Collateral; (iv) any Event of Default; (v) litigation, arbitration or
administrative proceedings to which the Grantor is a party and which
affects the Collateral and in which the claim or liability exceeds
$5,000.00; and (vi) any other matter which has resulted in, or might
result in, a material adverse change in the Collateral or the
financial condition or business operations of the Grantor.
5. Bank's Rights Regarding Possessory Collateral. With respect to the
Possessory Collateral, at its option and without any obligation to do so,
the Bank may, either in the name of the Bank, the Bank's nominee or the
Grantor:
A. Collect, endorse and receive all sums including, but not limited to,
dividends, and interest, now or hereafter payable upon or on account
of the Possessory Collateral.
B. Enter into any agreement relating to or affecting the Possessory
Collateral and, in connection therewith, the Bank may surrender
control of any such Collateral, accept other property in exchange for
such Collateral and do and perform such acts as it deems proper. Any
money or property received in exchange for any such Collateral shall
be subject to and held by the Bank pursuant to the terms of this
Security Agreement.
C. Make any compromise or settlement with respect to the Possessory
Collateral that the Bank, in its sole and absolute discretion, deems
proper.
D. Insure and do such other acts as the Bank deems necessary, in its sole
discretion, to preserve or protect the Possessory Collateral.
E. Cause the Possessory Collateral to be transferred to the Bank's name
or the name of the Bank's nominee.
F. With respect to the Possessory Collateral, exercise all rights, powers
and remedies of an owner but excluding any voting rights.
6. Events of Default. Any one or more of the following described events shall
constitute an event of default ("Event of Default") hereunder:
A. Non-Payment. There shall occur a failure to pay when due any payment
of principal or interest or any other sum referred to in this Security
Agreement or under any other document, instrument or agreement
evidencing or relating to any indebtedness owed by the Grantor to the
Bank or owed to the Bank by any obligor on the Indebtedness.
B. Performance Under This and Other Agreements. The Grantor shall fail in
any material respect to perform or observe any term, covenant or
agreement contained in this Security Agreement or in any document,
instrument or agreement evidencing or relating to any indebtedness of
the Grantor or any indebtedness of any obligor on the Indebtedness
(whether such indebtedness is owed to the Bank or third persons), and
any such failure (exclusive of the payment of money to the Bank, which
failure shall constitute and be an immediate Event of Default if not
paid when due or when demanded to be due) shall continue for more than
30 days after written notice from the Bank to the Grantor or the
obligor on the Indebtedness of the existence and character of such
Event of Default.
C. Representations and Warranties; Financial Statements. Any
representation or warranty made under or in connection with this
Security Agreement or any financial statement or information given in
connection with the transaction with respect to which this Security
Agreement is entered into shall prove to have been incorrect in any
material respect when made or given or when deemed to have been made
or given.
D. Insolvency. The Grantor or any obligor on or any guarantor of the
Indebtedness shall: (i) become insolvent or be unable to pay its debts
as they mature; (ii) make an assignment for the benefit of creditors
or to an agent authorized to liquidate any substantial amount of its
properties or assets; (iii) file a voluntary petition in bankruptcy or
seeking reorganization or to effect a plan or other arrangement with
creditors; (iv) file an answer admitting the material allegations of
an involuntary petition relating to bankruptcy or reorganization or
join in any such petition; (v) become or be adjudicated a bankrupt;
(vi) apply for or consent to the appointment of, or consent that an
order be made appointing, any receiver, custodian or trustee, for
itself or any of its properties, assets or businesses; or (vii) any
receiver, custodian or trustee shall have been appointed for all or a
substantial part of its properties, assets or businesses and shall not
be discharged within 30 days after the date of such appointment.
E. Execution. Any writ of execution or attachment or any judgment lien
shall be issued against the Collateral and shall not be discharged or
bonded against or released within 30 days after the issuance or
attachment of such writ or lien.
F. Impairment of Collateral. There shall occur any deterioration or
impairment of all or any part of the Collateral or any decline or
depreciation in the value or market price of the Collateral which
causes the Collateral, in the sole and absolute judgment of the Bank,
to become unacceptable as to character or value.
G. Revocation or Limitation of Guaranty. Any guaranty given with respect
to the Indebtedness shall be revoked or limited or its enforceability
or validity shall be contested by any guarantor, by operation of law,
legal proceeding or otherwise or any guarantor who is a natural person
shall die.
H. Suspension. The Grantor or any obligor on the Indebtedness shall
voluntarily suspend the transaction of business or allow to be
suspended, terminated, revoked or expired any permit, license or
approval of any federal, state or municipal agency or authority
necessary to conduct such person's business as now conducted.
I. Change in Ownership. There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 10% of the
issued and outstanding capital stock of the Grantor or any obligor on
the Indebtedness, if a corporation, or there shall occur a change in
any general partner or a change affecting the control of the Grantor
or any obligor on the Indebtedness, if a partnership.
7. Bank's Rights and Remedies on Default. Upon the occurrence of any Event
of Default, the Bank may, at its sole and absolute election, without
demand and only upon such notice as may be required by law:
A. Acceleration. Declare the Indebtedness and any or all other
indebtedness owing to the Bank by the Grantor or any obligor on the
Indebtedness (however such indebtedness may be evidenced or secured)
immediately due and payable, whether or not otherwise due and payable.
B. Cease Extending Credit. Cease extending credit to or for the account
of the Grantor or any obligor on the Indebtedness under any agreement
now existing or hereafter entered into with the Bank.
C. Termination. Terminate any agreement as to any future obligation of
the Bank without affecting the Grantor's obligations to the Bank or
the Bank's rights and remedies under this Security Agreement or under
any other document, instrument or agreement.
D. Protection of Security Interest in Collateral. Make such payments and
do such acts as the Bank, in its sole judgment, considers necessary
and reasonable to protect its security interest in the Collateral. The
Grantor hereby irrevocably authorizes the Bank to pay, purchase,
contest or compromise any encumbrance, lien or claim which the Bank,
in its sole judgment, deems to be prior or superior to its security
interest. Further, the Grantor hereby agrees to pay to the Bank, upon
demand therefor, all expenses and expenditures (including attorneys'
fees) incurred in connection with the foregoing.
E. Foreclosure. Enforce any security interest or lien given or provided
for under this Security Agreement or under any other document relating
to the Collateral, in such manner and such order, as to all or any
part of the Collateral, as the Bank, in its sole judgment, deems to be
necessary or appropriate and the Grantor hereby waives any and all
rights, obligations or defenses now or hereafter established by law
relating to the foregoing. In the enforcement of its security interest
in the Collateral, the Bank is authorized to enter upon the premises
where any Collateral is located and take possession of the Collateral
or any part thereof, together with the Grantor's records pertaining
thereto, or the Bank may require the Grantor to assemble the
Collateral and records pertaining thereto and make such Collateral and
records available to the Bank at a place designated by the Bank. The
Bank may sell the Collateral or any portions thereof, together with
all additions, accessions and accessories thereto, giving only such
notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the
Collateral present at the time of sale, which sale shall be on such
terms and conditions and conducted in such manner as the Bank
determines in its sole judgment to be commercially reasonable. Any
deficiency which exists after the disposition or liquidation of the
Collateral shall be a continuing liability of any obligor on or any
guarantor of the Indebtedness and shall be immediately paid to the
Bank.
F. Application of Proceeds. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied
as follows: first, to the costs and expenses of collection, including
court costs and reasonable attorneys' fees, whether or not suit is
commenced by the Bank; next, to those costs and expenses incurred by
the Bank in protecting, preserving, enforcing, collecting, selling or
disposing of the Collateral; next, to the payment of accrued and
unpaid interest on all of the Indebtedness; next, to the payment of
the outstanding principal balance of the Indebtedness; and last, to
the payment of any other indebtedness owed by the Grantor to the Bank.
Any excess Collateral or excess proceeds existing after the
disposition or liquidation of the Collateral will be returned or paid
by the Bank to the Grantor.
G. Non-Exclusivity of Remedies. Exercise one or more of the Bank's rights
set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other
agreement now existing or hereafter entered into between the Bank and
the Grantor or any obligor on or guarantor of the Indebtedness, or
otherwise.
8. Miscellaneous Provisions.
A. Amounts Payable Under this Security Agreement. If the Grantor fails to
pay on demand the amount of any obligations referred to in this
Security Agreement, the Bank may pay such amount at its option and
without any obligation to do so and without waiving any default
occasioned by the Grantor's failure to pay such amount. All amounts so
paid by the Bank, together with reasonable attorneys' fees and all
other costs, charges and expenses relating to the Indebtedness, shall
be a part of the Indebtedness and shall bear interest at the highest
rate chargeable on any Indebtedness until paid in full.
B. Other Terms. Terms not otherwise defined in this Security Agreement
shall have the meanings attributed to such terms in the California
Uniform Commercial Code.
C. Reliance. Each warranty, representation, covenant and agreement
contained in this Security Agreement shall be conclusively presumed to
have been relied upon by the Bank regardless of any investigation made
or information possessed by the Bank and shall be cumulative and in
addition to any other warranties, representations, covenants or
agreements which the Grantor shall now or hereafter give, or cause to
be given, to the Bank.
D. Attorneys' Fees. In the event of any action in relation to this
Security Agreement, the Collateral or any document, instrument or
agreement secured hereby or related hereto, the prevailing party, in
addition to all other sums to which it may be entitled, shall be
entitled to reasonable attorneys' fees.
E. Notices. All notices, payments, requests, information and demands
which either party hereto may desire, or be required to give or make
to the other party, shall be given or made to such party by hand
delivery or through deposit in the United States mail, postage
prepaid, or by Western Union telegram, addressed to the address set
forth below such party's signature to this Security Agreement or to
such other address as may be specified from time to time in writing by
either party to the other.
F. Waiver. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement
mentioned herein shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under any other
document, instrument or agreement mentioned herein preclude other or
further exercise thereof or the exercise of any other right; nor shall
any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver
of any other right or default or constitute a waiver of any other
default of the same or any other term or provision.
G. Assignment. This Security Agreement shall be binding upon and inure to
the benefit of the Grantor and the Bank and their respective
successors and assigns, except that the Grantor shall not have the
right to assign the Grantor's rights hereunder or any interest herein
without the Bank's prior written consent. The Bank may sell or assign
all or any portion of its rights and benefits hereunder and, in
connection therewith, may deliver to such prospective buyer or
assignee financial statements and other relevant information
pertaining to the Grantor or any obligor on the Indebtedness.
H. Severability. Should any one or more provisions of this Security
Agreement be determined to be illegal or unenforceable, all other
provisions shall remain effective.
I. Jurisdiction. This Security Agreement and the rights of the parties
hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein, shall be
governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby
submit.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed as of the date first hereinabove written.
<PAGE>
BANK:
SANWA BANK CALIFORNIA
By: /s/ David Kronen
------------------------------------
David Kronen, Authorized Officer
Address:
Santa Barbara Main Office
1036 State Street
Santa Barbara, CA 93101
GRANTOR:
MIRAVANT MEDICAL TECHNOLOGIES
By: /s/ Gary S. Kledzik
--------------------------------------------
Gary S. Kledzik, Chief Executive Officer
Address:
7408 Hollister Avenue
Goleta, CA 93117
<PAGE>
Exhibit 10.5
CONTINUING GUARANTY
For value received and in consideration of the extension of credit by SANWA BANK
CALIFORNIA (the "Bank") to MICHAEL D. FARNEY (the "Debtor") or the benefits to
the undersigned derived therefrom, the undersigned (the "Guarantor"), guarantees
and promises to pay to the Bank any and all Indebtedness (as defined below) and
agrees as follows:
1. Indebtedness. The term "Indebtedness" is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations,
guaranties and liabilities of the Debtor heretofore, now, or hereafter
made,incurred or created, whether voluntary or involuntary and however
arising, whether direct or acquired by the Bank by assignment or
succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether the Debtor may be
liable individually or jointly with others, or whether recovery upon any
Indebtedness may be or hereafter becomes barred by any statute of
limitations or whether any Indebtedness may be or hereafter becomes
otherwise unenforceable.
2. Guaranty. The Guarantor unconditionally agrees to pay to the Bank or its
order, on demand, an amount equal to the amount of the Indebtedness or
otherwise perform any obligation of the Debtor undertaken pursuant to any
Indebtedness. In addition to any maximum principal liability hereunder, the
Guarantor agrees to (i) bear the expenses enumerated hereunder in the
paragraph herein entitled "Attorneys' Fees" and (ii) pay interest on the
Indebtedness at the rate(s) applicable thereto. Notwithstanding the
foregoing, the Bank may allow the Indebtedness to exceed the Guarantor's
liability hereunder. Any payment by the Guarantor shall not reduce the
maximum principal obligation of the Guarantor hereunder unless written
notice to that effect is actually received by the Bank at or prior to the
time of such payment. Any payment by the Debtor or any other person shall
not reduce the Guarantor's maximum principal liability hereunder.
3. Right to Amend or Modify Indebtedness. The Guarantor authorizes the Bank,
at its sole discretion, with or without notice and without affecting the
Guarantor's liability hereunder, from time to time to: (i) change the
time or manner of payment of any Indebtedness by renewal, extension,
modification, acceleration or otherwise; (ii) alter or change any provision
of any Indebtedness including, but not limited to, the rate of interest
thereon, and any document, instrument or agreement (other than this
Guaranty) evidencing, guaranteeing, securing or related to any
Indebtedness; (iii) release, discharge, exonerate, substitute or add one or
more parties liable on any Indebtedness or one or more endorsers, cosigners
or guarantors for any Indebtedness; (iv) obtain collateral for the payment
of any Indebtedness or any guaranty thereof; (v) release existing or
after-acquired collateral on such terms as the Bank, in its sole
discretion, shall determine; (vi) apply any sums received from the Debtor,
any endorser, cosigner, other guarantor or other person liable on any
Indebtedness or from the sale or collection of collateral or its proceeds
to any indebtedness whatsoever owed or to be owed to the Bank by the Debtor
in any order or amount and regardless of whether or not such indebtedness
is guaranteed hereby, is secured by collateral or is due and payable; and
(vii) apply to any Indebtedness, in any order or amount, regardless of
whether such Indebtedness is secured by collateral or is due and payable,
any sums received from the Guarantor or from the sale of collateral in
which the Guarantor has granted the Bank a security interest.
4. Waivers. The Guarantor hereby unconditionally and irrevocably acknowledges
and agrees to the matters set forth below.
A. Deficiency. In the event that any Indebtedness is now or hereafter
secured by a deed of trust, the Guarantor waives any defense and all
rights and benefits of those laws purporting to state that no
deficiency judgment may be recovered on certain real property purchase
money obligations (as presently contained in Section 580b of the
California Code of Civil Procedure and as it may be amended or
superseded in the future) and those laws purporting to state that no
deficiency judgment may be recovered after a trustee's sale under a
deed of trust (as presently contained in Section 580d of the
California Code of Civil Procedure and as it may be amended or
superseded in the future). THE GUARANTOR ACKNOWLEDGES THAT A
FORECLOSURE BY A TRUSTEE'S SALE UNDER A DEED OF TRUST MAY RESULT IN
THE DESTRUCTION OF THE GUARANTOR'S SUBROGATION RIGHTS THAT MAY
OTHERWISE EXIST AND THAT A DESTRUCTION OF THOSE RIGHTS MAY CREATE A
DEFENSE TO A DEFICIENCY JUDGEMENT. THE GUARANTOR HEREBY SPECIFICALLY
WAIVES ANY SUCH DEFENSE.
B. Election of Remedies. The Guarantor waives any defense based upon the
Guarantor's loss of a right against the Debtor arising from the Bank's
election of a remedy on any Indebtedness under bankruptcy or other
debtor relief laws or under any other laws, including, but not limited
to, those purporting to reduce the Bank's right against the Guarantor
in proportion to the principal obligation of any Indebtedness (as
presently contained in Section 2809 of the California Civil Code and
as it may be amended or superseded in the future).
Without limiting the generality of the foregoing, the Guarantor waives
all rights and defenses arising out of an election of remedies by the
Bank, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has
destroyed the Guarantor's rights of subrogation and reimbursement
against the Debtor by operation of Section 580d of the California Code
of Civil Procedure or otherwise.
C. Statute of Limitations. The Guarantor waives the benefit of the
statute of limitations affecting Guarantor's liability hereunder or
the enforcement hereof.
D. Action Against the Debtor and Collateral (and Other Remedies). The
Guarantor waives all right to require the Bank to: (i) proceed against
the Debtor, any endorser, cosigner, other guarantor or other person
liable on any Indebtedness; (ii) join the Debtor or any endorser,
cosigner, other guarantor or other person liable on any Indebtedness
in any action or actions that may be brought and prosecuted by the
Bank solely and separately against the Guarantor on any Indebtedness;
(iii) proceed against any item or items of collateral securing any
Indebtedness or any guaranty thereof; or (iv) pursue or refrain from
pursuing any other remedy whatsoever in the Bank's power.
E. Debtor's Defenses. The Guarantor waives any defense arising by reason
of any disability or other defense of the Debtor, the Debtor's
successor or any endorser, cosigner, other guarantor or other person
liable on any Indebtedness. Until all Indebtedness has been paid in
full, even though it may be in excess of the liability incurred
hereby, the Guarantor shall not have any right of subrogation and the
Guarantor waives any benefit of and right to participate in any
collateral now or hereafter held by the Bank. The Guarantor waives all
presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, notices of sale of
any collateral securing any Indebtedness or any guaranty thereof, and
notice of the existence, creation or incurring of new or additional
Indebtedness.
F. Debtor's Financial Condition. The Guarantor hereby recognizes,
acknowledges and agrees that advances may be made in the future from
time to time with respect to any Indebtedness without authorization
from or notice to the Guarantor even though the financial condition of
the Debtor, any endorser, cosigner, other guarantor or other person
liable on any Indebtedness may have deteriorated since the date of
this Guaranty. The Guarantor waives all right to require the Bank to
disclose any information with respect to: (i) any Indebtedness now
existing or hereafter incurred; (ii) the present or future financial
condition, credit or character of the Debtor, any endorser, cosigner,
other guarantor or other person liable on any Indebtedness; (iii) any
present or future collateral securing any Indebtedness or any guaranty
thereof; or (iv) any present or future action or inaction on the part
of the Bank, the Debtor or any endorser, cosigner, other guarantor or
other person liable on any Indebtedness. The Guarantor hereby assumes
the responsibility for being informed of the financial condition,
credit and character of the Debtor and of all circumstances bearing
upon the risk of non-payment of any Indebtedness which diligent
inquiry would reveal.
5. Right of Set-off; Grant of Security Interest. In addition to all liens
upon and rights of set-off against any monies, securities or other
property of the Guarantor given to the Bank by law, the Bank shall have a
security interest in and a right to set off against all monies, securities
and other property of the Guarantor now or hereafter in the possession of
or on deposit with the Bank, the Bank's agents or any one or more of them,
whether held in general or special account or deposit or for safekeeping
or otherwise; and each such security interest and right of set-off may be
exercised without demand upon or notice to the Guarantor. No action or
inaction by the Bank with respect to any security interest or right of
set-off shall be deemed a waiver thereof and every right of set-off and
security interest shall continue in full force and effect until
specifically released by the Bank in writing. The security interest
created hereby shall secure all of the Guarantor's obligations under this
Guaranty.
6. Right of Foreclosure. The Bank may foreclose, either by judicial
foreclosure or by exercise of power of sale, any deed of trust securing
any Indebtedness even though such foreclosure may destroy or diminish the
Guarantor's rights against the Debtor. The Guarantor shall be liable to
the Bank for any part of any Indebtedness remaining unpaid after any such
foreclosure whether or not such foreclosure was for fair market value.
7. Subordination. Any indebtedness of the Debtor or any endorser, cosigner,
other guarantor or other person liable on any Indebtedness now or
hereafter owed to the Guarantor is hereby subordinated to the
Indebtedness. Such indebtedness owed to the Guarantor shall, if the Bank
so requests, be collected, enforced and received by the Guarantor as
trustee for the Bank and be paid over to the Bank on account of the
Indebtedness but without reducing or affecting in any manner the liability
of the Guarantor set forth herein. Should the Guarantor fail to collect
the proceeds of any such indebtedness owed to it and pay the proceeds to
the Bank, the Bank, as the Guarantor's attorney-in-fact, may do such acts
and sign such documents in the Guarantor's name as the Bank considers
necessary to effect such collection.
8. Invalid, Fraudulent or Preferential Payments. The Guarantor agrees that, to
the extent the Debtor or any endorser, cosigner, other guarantor or other
person liable on any Indebtedness makes a payment or payments to, or is
credited for any payment or payments made for or on behalf of the Debtor to
the Bank, which payment or payments, or any part thereof, is subsequently
invalidated, determined to be fraudulent or preferential, set aside or
required to be repaid to any trustee, receiver, assignee or any other party
whether under any bankruptcy, state or federal law or under any common law
or equitable cause or otherwise, then, to the extent thereof, the
obligation or part thereof intended to be satisfied thereby shall be
revived, reinstated and continued in full force and effect as if such
payment or payments had not originally been made or credited.
9. Joint and Several Obligations; Independent Obligations. If more than one
Guarantor signs this Guaranty, the obligations hereunder are joint and
several. The Guarantor's obligations hereunder are independent of the
obligations of the Debtor or any endorser, cosigner, other guarantor or
other person liable on any Indebtedness and a separate action or actions
may be brought and prosecuted against the Guarantor on any Indebtedness.
10. Acknowledgement of Receipt. Receipt of a true copy of this Guaranty is
hereby acknowledged by the Guarantor. The Guarantor understands and agrees
that this Guaranty shall not constitute a commitment of any nature
whatsoever by the Bank to renew or hereafter extend credit to the Debtor.
The Guarantor agrees that this Guaranty shall be effective with or without
notice from the Bank of the Bank's acceptance hereof.
11. Continuing Guaranty. This Guaranty is a continuing guaranty. Revocation
shall be effective only upon written notice personally received by an
officer of the Bank at the originating office indicated below or actually
received at the originating office by United States mail postage prepaid.
Notice shall be effective at any office of the Bank should the originating
office no longer be in existence. Revocation shall be effective at the
close of the Bank's business day when such notice is actually received.
Any revocation shall be effective only as to the revoking party and shall
not affect that party's obligation with respect to any Indebtedness
existing before such revocation is effective.
12. Non-Reliance. In executing this Guaranty, the undersigned is not relying,
and has not relied, upon any statement or representation made by the Bank,
or any employee, agent or representative of the Bank, with respect to the
status, financial condition or other matters related to the Debtor or the
relationship between the Debtor and the Bank.
13. Multiple Guaranties. If the Guarantor has executed or does execute more
than one guaranty of any indebtedness of the Debtor to the Bank, the
limits of liability thereunder and hereunder shall be cumulative.
14. Severability. Should any one or more provisions of this Guaranty be
determined to be illegal or unenforceable, all other provisions shall
remain effective.
15. Corporate or Partnership Authority. If the Debtor is a corporation or
partnership, the Bank need not inquire into the power of the Debtor or the
authority of its officers, directors, partners or agents acting or
purporting to act in its behalf and any credit granted in reliance upon
the purported exercise of such power or authority is guarantied hereunder.
16. Separate Property. Any married person who signs this Guaranty expressly
agrees that recourse may be had against such person's separate property
for all obligations hereunder.
17. Collateral. This Continuing Guaranty is secured by a Security Agreement
dated as of February 17, 1998 executed by the Guarantor on behalf of the
Debtor.
18. Assignment. The Bank may, with or without notice, assign this Guaranty in
whole or in part. This Guaranty shall inure to the benefit of the Bank,
its successors and assigns, and shall bind the Guarantor and the
Guarantor's heirs, executors, administrators, successors and assigns.
19. Waiver of Jury. The Guarantor and the Bank hereby expressly and
voluntarily waive any and all rights, whether arising under the California
constitution, any rules of the California Code of Civil Procedure, common
law or otherwise, to demand a trial by jury in any action, matter, claim
or cause of action whatsoever arising out of or in any way related to this
Guaranty or any other agreement, document or transaction contemplated
hereby.
20. Dispute Resolution.
A. Disputes. It is understood and agreed that, upon the request of any
party to this Guaranty, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in
any way arising out of, pertaining to or in connection with: (i) this
Guaranty, or any related agreements, documents or instruments, (ii)
all past and present loans, credits, accounts, deposit accounts
(whether demand deposits or time deposits), safe deposit boxes,
safekeeping agreements, guarantees, letters of credit, goods or
services, or other transactions, contracts or agreements of any kind,
(iii) any incidents, omissions, acts, practices, or occurrences
causing injury to any party whereby another party or its agents,
employees or representatives may be liable, in whole or in part, or
(iv) any aspect of the past or present relationships of the parties,
shall be resolved through a two-step dispute resolution process
administered by the Judicial Arbitration & Mediation Services, Inc.
("JAMS") as follows:
B. Step I - Mediation. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of
JAMS for mediation, which is an informal, non-binding conference or
conferences between the parties in which a retired judge or justice
from the JAMS panel will seek to guide the parties to a resolution of
the case.
C. Step II - Arbitration (Contracts Not Secured By Real Property). Should
any dispute, claim or controversy remain unresolved at the conclusion
of the Step I Mediation Phase, then (subject to the restriction at the
end of this subparagraph) all such remaining matters shall be resolved
by final and binding arbitration before a different judicial panelist,
unless the parties shall agree to have the mediator panelist act as
arbitrator. The hearing shall be conducted at a location determined by
the arbitrator in Los Angeles, California (or such other city as may
be agreed upon by the parties) and shall be administered by and in
accordance with the then existing Rules of Practice and Procedure of
JAMS and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys' fees and
costs. This subparagraph shall apply only if, at the time of the
submission of the matter to JAMS, the dispute or issues involved do
not arise out of any transaction which is secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator, or the arbitrator's designated representative, shall
determine a reasonable estimate of anticipated fees and costs of the
arbitrator, and render a statement to each party setting forth that
party's pro-rata share of said fees and costs. Thereafter, each party
shall, within 10 days of receipt of said statement, deposit said sum
with the arbitrator. Failure of any party to make such a deposit shall
result in a forfeiture by the non-depositing party of the right to
prosecute or defend the claim which is the subject of the arbitration,
but shall not otherwise serve to abate, stay or suspend the
arbitration proceedings.
D. Step II - Trial By Court Reference(Contracts Secured By Real
Property). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil
Procedure, or any amendment, addition or successor section thereto, to
hear the case and report a statement of decision thereon. The parties
intend this general reference agreement to be specifically enforceable
in accordance with said section. If the parties are unable to agree
upon a member of the JAMS panel to act as referee, then one shall be
appointed by the Presiding Judge of the county wherein the hearing is
to be held. The parties shall pay in advance, to the referee, the
estimated reasonable fees and costs of the reference, as may be
specified in advance by the referee. The parties shall initially share
equally, by paying their proportionate amount of the estimated fees
and costs of the reference. Failure of any party to make such a fee
deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend any cause of action which is the
subject of the reference, but shall not otherwise serve to abate, stay
or suspend the reference proceeding.
E. Provisional Remedies, Self Help and Foreclosure. No provision of,
or the exercise of any rights under any portion of this Dispute
Resolution provision, shall limit the right of any party to exercise
self help remedies such as set off, foreclosure against any real or
personal property collateral, or the obtaining of provisional or
ancillary remedies, such as injunctive relief or the appointment of a
receiver, from any court having jurisdiction before, during or after
the pendency of any arbitration. At the Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trust or mortgage, or by
judicial foreclosure. The institution and maintenance of an action for
provisional remedies, pursuit of provisional or ancillary remedies or
exercise of self help remedies shall not constitute a waiver of the
right of any party to submit the controversy or claim to arbitration.
21. Attorneys' Fees. Whether or not any suit, action, arbitration or other
dispute resolution proceeding is instituted, the Guarantor agrees to pay
reasonable attorneys' fees and all other costs and expenses which may be
incurred in the collection of any Indebtedness, in the protection or
preservation of, or realization on, any collateral securing any
Indebtedness and in the enforcement by the Bank of this Guaranty.
22. Governing Law. This Guaranty shall be governed by and construed according
to the laws of the State of California and the Guarantor hereby submits to
the jurisdiction of the courts of the State of California.
23. Entire Agreement. This Guaranty and all documents, instruments and
agreements mentioned herein constitute the entire and complete
understanding of the parties with respect to the transactions contemplated
hereunder. All previous conversations, memoranda and writings between the
parties pertaining to the transactions contemplated hereunder not
incorporated or referenced in this Guaranty or in such documents,
instruments and agreements are superseded hereby.
24. Headings. The headings used herein are solely for the purpose of
identification and have no legal significance.
25. Address of the Bank. The Bank's originating office under this Guaranty
is: Santa Barbara Main Office, 1036 State Street, Santa Barbara, CA 93101.
26. Maximum Principal Liability. THE MAXIMUM PRINCIPAL LIABILITY UNDER THIS
GUARANTY IS the amount of $7,600,000.00, plus interest at the rate(s)
applicable to any Indebtedness as set forth in the paragraph herein
entitled "Guaranty" and the expenses enumerated in the paragraph herein
entitled "Attorneys' Fees".
This Guaranty is made as of February 17, 1998, which shall be the date of this
Guaranty. Executed by the undersigned Guarantor as of the date set forth above.
GUARANTOR:
MIRAVANT MEDICAL TECHNOLOGIES
By: /s/ Gary S. Kledzik
--------------------------------------------
Gary S. Kledzik, Chief Executive Officer
Address:
7408 Hollister Avenue
Goleta, CA 93117
<PAGE>
Exhibit 10.6
ADDENDUM TO CONTINUING GUARANTY
THIS ADDENDUM TO CONTINUING GUARANTY (the "Addendum") is made
and dated as of the 17th day of February, 1998, by and between MIRAVANT MEDICAL
TECHNOLOGIES ("Guarantor"), and SANWA BANK CALIFORNIA ("Bank").
RECITALS
A. Pursuant to that certain Term Loan Agreement dated
concurrently herewith, Bank agreed to extend credit to MICHAEL D. FARNEY, an
individual (the "Debtor") in the form of a $7,600,000.00 term loan (the "Term
Loan") on the terms and subject to the conditions set forth more particularly
therein (as amended, extended and replaced from time to time, the "Loan
Agreement," and with capitalized terms not otherwise defined herein used with
the meanings given such terms in the Loan Agreement). The obligations of the
Debtor with respect to the Term Loan, including, without limitation, to pay
principal and interest on amounts outstanding under the Loan Agreement, are
secured by certain collateral consisting generally of outstanding capital stock
of Guarantor owned by the Debtor (the "Pledged Stock") pursuant to the terms of
the Loan Agreement.
B. As a condition precedent to the agreement of Bank to fund
the Term Loan to the Debtor, Bank has required Guarantor to execute and deliver
a credit guaranty of the obligations of the Debtor with respect to the Term Loan
in the form of the Continuing Guaranty dated concurrently herewith to which this
Addendum is attached (as amended, extended and replaced from time to time, the
"Guaranty").
C. In addition to providing the Guaranty, Bank has required
that Guarantor agree under certain circumstances to purchase from Bank upon
demand the Term Loan and all right, title and interest of Bank therein,
including, without limitation, under the Loan Agreement, (the "Loan Package").
D. Guarantor and Bank desire to set forth in this Addendum,
which is attached to and hereby made a part of the Guaranty, the terms and
conditions under which Bank may require Guarantor to purchase the Loan Package.
NOW, THEREFORE, in consideration of the above Recitals and for
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Purchase Commitment. Guarantor hereby agrees that upon the
delivery to Guarantor of written notice from Bank that a Put Event (as defined
below) has occurred, Guarantor absolutely and unconditionally agrees that no
later than one (1) Business Day thereafter Guarantor will purchase and take from
Bank all of Bank's right, title and interest in the Loan Package. For purposes
of this Paragraph l, the term "Put Event" shall mean: (a) the occurrence of an
Event of Default under the Loan Agreement, or (b) receipt by Bank of any
instruction from, or request by or on behalf of, the Debtor which Bank, in its
reasonable business judgment, concludes constitutes a request or demand to sell
or otherwise dispose of the Pledged Stock due to a decline or anticipated
decline in the value thereof .
2. Purchase Price. The purchase price to be paid by the
Guarantor for Bank's right, title and interest in the Loan Package shall be an
amount equal to the sum of: (a) the outstanding principal balance under the Loan
Agreement, (b) interest accrued and unpaid thereon to and including the purchase
date, plus (c) all other Obligations outstanding. The purchase price shall be
paid to Bank in lawful money of the United States and in immediately available
funds on the purchase date.
3. Delivery of Loan Package; Transfer Expenses. Upon payment
in full by the Purchaser to Bank of the purchase price pursuant to Paragraph 2
above, Bank shall deliver to Guarantor an assignment of the right, title and
interest of Bank in the Loan Agreement and such other documents, instruments and
agreements relating to the Term Loan as Guarantor may reasonably request which
are in Guarantor's judgment necessary to transfer Bank's rights in the Loan
Package to it; provided, however, that Guarantor acknowledges that the Special
Power of Attorney granted by Borrower to Bank is personal to Bank and not
transferrable. Any and all endorsements, assignments and other documents,
instruments and agreements executed by Bank hereunder shall be without recourse
to and, except as expressly set forth in Paragraph 4 below, without
representation or warranty, express or implied, by Bank. Guarantor shall be
responsible for all costs and expenses incurred or assessed against Bank in
connection with such transfer all of which shall be payable by Guarantor to Bank
upon demand with interest thereon at the Reference Rate minus 1.000% per annum
(computed on the basis of a 360-day year) from the date demand is made by Bank
until paid in full.
4. Representation and Warranty. On and as of the purchase date
for the Loan Package sold and transferred as contemplated hereby, Bank hereby
represents and warrants that immediately prior to the consummation of the
purchase and sale transaction Bank had good title to and was the sole owner of
the Loan Package and upon payment by Guarantor of the purchase price therefor
Guarantor will have good title to the Loan Package free and clear of any lien,
claim or other interest of any person or entity claiming by or through Bank.
5. Extent of Obligations. Guarantors' obligation to purchase
the right, title and interest of Bank in the Loan Package as provided herein is
absolute and unconditional and subject to all waivers and other terms and
provisions set forth in the Guaranty, including, without limitation, Paragraph 4
thereof. Without limiting the generality of the foregoing, Guarantor hereby
independently and irrevocably waives: (a) any defense to such obligation that
may arise by reason of the disability or other defense or cessation of liability
of the Debtor for any reason other than full payment; (b) deferral of such
obligation arising by reason of the institution of bankruptcy, insolvency,
reorganization, moratorium or other similar proceedings by or against the Debtor
or any other person or entity; (c) any defense arising as a result of Bank's
failure to preserve or protect the Loan Package, including, without limitation,
the Pledged Stock or to perfect or maintain the perfection or priority of any
lien thereon or Bank's exercise or failure to exercise any right, power or
remedy, including, without limitation, the failure to proceed first against the
Debtor, any security it holds under the Loan Agreement, including, without
limitation, the Pledged Stock, even when such election or failure impairs alters
or negates the rights of Guarantor against the Debtor, whether arising by way of
subrogation or otherwise. Guarantor agree that Bank may, without notice and
without releasing the Guarantor from its obligations under the Guaranty or under
this Addendum, extend the time for making any payment or extend the performance
of any agreement and may proceed against Guarantor directly and independently of
the Debtor or any other person or entity.
6. No Reliance. Guarantor confirms that it has reviewed and
approved the Loan Agreement and each of the other documents, instruments and
agreements included in the Loan Package. Guarantor expressly acknowledges that
neither Bank nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates (the "Bank-Related Parties") has made any
representations or warranties to it with respect to the Debtor or the Loan
Package and that no act by Bank or any Bank-Related Party hereinafter taken,
including any review of the affairs of the Debtor shall be deemed to constitute
any representation or warranty by Bank or any Bank-Related Party with respect
thereto. Guarantor represents and warrants to Bank that in agreeing to enter
into the Guaranty and this Addendum, it has, independently and without reliance
upon Bank or any Bank-Related Party, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Debtor and made its own decision to enter into the
Guaranty and this Addendum. Guarantor also represents that it will,
independently and without reliance upon Bank or any Bank-Related Party, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Guaranty and/or this Addendum and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Debtor. Bank shall have no any duty or responsibility to provide Guarantor with
any credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Debtor which may come
into the possession of Bank or any Bank-Related Party.
7. Relationship to Guaranty. All obligations of Guarantor
under this Addendum are in addition to and not in substitution for all
obligations of Guarantor under the Guaranty. Subject to the foregoing, this
Addendum is hereby incorporated into and shall form a pat of the Guaranty for
all purposes thereof.
IN WITNESS WHEREOF, the undersigned hereby execute and deliver this
Addendum on and as of the day first above written.
GUARANTOR: MIRAVANT MEDICAL TECHNOLOGIES
By: /s/ Gary S. Kledzik
-------------------------------------
Gary S. Kledzik, Chairman and CEO
BANK: SANWA BANK CALIFORNIA
By: /s/ David G. Kronen
-----------------------------------
David G. Kronen, Vice President
ACKNOWLEDGED AND AGREED TO: /s/ Michael D. Farney
------------------------------------
Michael D. Farney, an individual
<PAGE>
Exhibit 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered
into on the date hereinafter set forth by and between MIRAVANT MEDICAL
TECHNOLOGIES, a Delaware corporation ("MRVT") and MICHAEL D. FARNEY ("Farney").
WHEREAS:
A. Farney is a Director and Shareholder of MRVT and owns Four Hundred
and Thirty Five Thousand (435,000) shares of MRVT stock, together with options
to acquire Forty Five Thousand (45,000) shares of MRVT stock (collectively, the
"Farney Shares");
B. Farney has pledged the Farney Shares to Coutts Bank as collateral
for a SEVEN MILLION FIVE HUNDRED SIXTY EIGHT THOUSAND FOUR HUNDRED AND EIGHTEEN
DOLLAR ($7,568,418) loan, with interest accruing after February 2, 1998 at TWO
THOUSAND ONE HUNDRED FOURTEEN DOLLARS ($2,114) per day (the "Coutts Loan") and
Coutts Bank demands payment and requests that MRVT release any applicable
legends on stock certificates representing the Farney Shares;
C. MRVT feels that it is in MRVT's best interest to assist Farney to
resolve the Coutts Bank demand;
D. Farney wishes to secure the assistance of MRVT with respect to
guaranteeing a loan by Sanwa Bank, MRVT's principal banker, to pay the Coutts
Loan in full; and
E. MRVT has secured the approval of a majority of its Directors with
respect to this transaction, and Farney has abstained from voting with respect
to this matter.
NOW, THEREFORE, in consideration of the premises and promises,
warranties and representations herein contained, it is agreed as follows:
1. Corporate Guaranty. MRVT will provide a corporate guaranty to Sanwa
Bank (the "Guaranty") of a loan, for not more than eighteen (18) months, not to
exceed SEVEN MILLION SIX HUNDRED THOUSAND DOLLARS ($7,600,000), plus interest
payable quarterly from the date of the loan (the "Sanwa Loan"), which will be
used to pay the Coutts Loan. The Guaranty will be provided to Sanwa Bank by
MRVT.
2. Credit Enhancement Fee. Farney will pay to MRVT, at the execution of
the Guaranty and this Agreement, a credit enhancement fee equal to two percent
(2%) of the borrowed amount, not to exceed SEVEN MILLION SIX HUNDRED THOUSAND
DOLLARS ($7,600,000), payable in MRVT stock (the "Fee Shares") at the closing
price on the date of this Agreement.
3. Pledge of Assets. Farney represents that he will pledge to Sanwa
Bank all the Farney Shares, less the Fee Shares, as well as any other collateral
required by Sanwa Bank, to secure the payment of the Sanwa Loan.
4. Personal Financial Statement. Farney has delivered to the Chairman
of the Board of MRVT, on a confidential basis, his personal financial statement
as delivered to Sanwa Bank, and Farney warrants and represents that it is true
and correct.
5. Director Status. Farney has noticed MRVT that he will not stand for
re-election as a Director of MRVT at the 1998 MRVT Annual Shareholders meeting.
6. Indemnification. Farney does hereby unconditionally and irrevocably
indemnify and hold harmless MRVT from and against any and all losses,
liabilities, claims, demands, and causes of action of any kind or nature related
to this Agreement, the Sanwa Loan, the Guaranty or the Coutts Loan. Included in
this indemnification is the payment of reasonable legal fees in the event of any
litigation involving the Sanwa Loan or Farney's MRVT stock as it relates
directly to a uncured default by Farney of the Sanwa Loan.
7. Lock-Up Agreement. Farney agrees not to sell any of the Farney
Shares until January 1, 1999 and, thereafter, not to sell the Farney Shares in
an amount not to exceed up to five percent (5%) of the ten (10) day average
trading volume (as reported by Bloomberg, L.P.) on the date prior to the date of
disposition. Nothing in this Section 7 is intended to limit Farney's ability to
repay the Sanwa Loan by selling the Farney Shares in off-market transactions in
an orderly manner to repay the Sanwa Loan or refinancing with one or more
sources, so long as the purchaser or refinancier agrees to the foregoing terms;
provided, however, that MRVT, in its sole and absolute discretion, may agree to
other arrangements on a mutually agreeable basis, but this provision shall not
be construed to require MRVT to make any such other arrangements if it chooses
not to do so.
8. Default. In the event of (i) a default by Farney in the payment of
the Sanwa Loan, which is not cured by Farney within the cure period of the Sanwa
Loan agreements, and result in Sanwa's demand of full repayment of the Sanwa
Loan (the "Loan Default Date"), (ii) a default by Farney in any of the terms of
this Agreement (the "Agreement Default Date"), or (iii) if Sanwa Bank calls upon
MRVT to honor its Guaranty of the Sanwa Loan or puts the Sanwa Loan to MRVT (the
"Guaranty Performance Date"), MRVT may then elect to purchase the Sanwa Loan
from the Sanwa Bank for the amount due to it and have all of Sanwa Bank's rights
under the Sanwa Loan agreements, and Farney will not assert against MRVT any
claims he may have against Sanwa Bank. Provided that MRVT elects to purchase the
Sanwa Loan at its unpaid balance, Farney hereby irrevocably and unconditionally
grants MRVT an assignable option ("Option") to acquire the Farney Shares at a
price equal to fifty percent (50%) of the 20-day average closing price of the
MRVT stock on the exercise date of the Option, net of the Sanwa Loan repayment .
The Option may be exercised by MRVT or its assignee within sixty (60) days of
the applicable Loan Default Date, Agreement Default Date or the Guaranty
Performance Date. If MRVT does not exercise the Option, it may pursue all
remedies available to Sanwa Bank.
9. Severability. Nothing in this Agreement is intended to require or
shall be construed as requiring Farney to do or fail to do any act in violation
of applicable law. In the event any provision of this Agreement is finally
determined by the courts to require Farney to do or fail to do such an act, such
provision shall be limited or modified in its application to the minimum extent
necessary to avoid a violation of law, and as so limited or modified such
provision and the balance of this Agreement shall be enforceable in accordance
with their terms.
10. Choice of Law; Arbitration. This Agreement is made and entered into
in Santa Barbara, California, and California law shall apply. Any dispute
between the parties shall be resolved by arbitration, before one arbitrator, in
Santa Barbara, California, in accordance with the Rules of the American
Arbitration Association.
11. Successors and Assigns. This Agreement shall be binding upon
Farney, and his successors and assigns, and shall inure to the benefit of MRVT
and MRVT's officers, directors, shareholders, agents and representatives.
12. Confidentiality. Farney and MRVT will keep all of the terms of this
Agreement confidential and will not disclose any of those terms without the
prior written consent of the other party, except for any obligations of MRVT or
Farney to make a disclosure as required under applicable federal securities
laws.
13. Release. In consideration of this Agreement, Farney does hereby
irrevocably and unconditionally release Miravant, its officers, directors,
employees, agents and insureds (collectively, the "Released Parties") from any
and all liabilities, losses, claims and damages related to the Sanwa Loan or
this Agreement, including MRVT's Option set forth in Section 8 hereof. Farney
represents that he has not made an assignment of his claims and he is fully
authorized to execute this Agreement. Farney waives the rights of Section 1542
of the California Civil Code, which provides:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor."
14. Counsel Waiver. Farney hereby acknowledges that he has been advised
to seek independent counsel with respect to this Agreement, and has sought such
counsel, and Farney also hereby consents to Nida & Maloney, P.C. representing
MRVT with respect to the preparation of this Agreement. Both MRVT and Farney
hereby acknowledge that Nida & Maloney, P.C. has provided services to each of
the parties hereto.
(Signatures on next page)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this 27th day of February, 1998.
MRVT:
MIRAVANT MEDICAL TECHNOLOGIES,
a Delaware corporation
By: /S/ Gary S. Kledzik
---------------------------
Gary S. Kledzik
Chief Executive Officer
FARNEY:
/S/ Michael D. Farney
---------------------
Michael D. Farney
<PAGE>
SPOUSAL CONSENT
The undersigned, the spouse of MICHAEL D. FARNEY, hereby consents to
her spouse's execution of the foregoing Agreement, agrees to be bound by the
terms of this Agreement and hereby irrevocably appoints her spouse as the agent
of the undersigned for purposes of executing and performing any actions directly
or indirectly relating to MRVT and the foregoing Agreement, including, without
limitation, any amendments and supplements thereto and any waivers, consents or
approvals thereunder, without further signature, consent or notice to the
undersigned whatsoever.
Date: February 27, 1998 /s/ Sally Farney
----------------
Sally Farney
<PAGE>
Exhibit 11.1
MIRAVANT MEDICAL TECHNOLOGIES
STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
----------------- -------------------
<S> <C> <C>
Basic
Net loss.............................................. $ (7,917,000) $ (5,437,000)
================= ===================
Weighted average common shares outstanding............ 14,103,532 12,371,238
================= ===================
Net loss per share.................................... $ (0.56) $ (0.44)
================= ===================
Diluted
Net loss.............................................. $ (7,917,000) $ (5,437,000)
================= ===================
Weighted average common shares outstanding............ 14,103,532 12,371,238
================= ===================
Net loss per share.................................... $ (0.56) $ (0.44)
================= ===================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Mar-31-1998
<CASH> 37,389
<SECURITIES> 29,883
<RECEIVABLES> 1,929
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 69,415
<PP&E> 9,266
<DEPRECIATION> (3,467)
<TOTAL-ASSETS> 76,624
<CURRENT-LIABILITIES> 3,656
<BONDS> 0
0
0
<COMMON> 164,715
<OTHER-SE> (91,747)
<TOTAL-LIABILITY-AND-EQUITY> 76,624
<SALES> 0
<TOTAL-REVENUES> 635
<CGS> 0
<TOTAL-COSTS> 9,819
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (7,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,917)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
