<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
---------- ----------
Commission File Number 0-16109
ADVANCED POLYMER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2875566
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
123 Saginaw Drive, Redwood City, California 94063
- ------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 366-2626
--------------
Securities registered pursuant to Section 12 (b) of the Act: None
----
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock ($.01 par value)
-----------------------------
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
---
The aggregate market value of the voting stock of the registrant held
by non-affiliates of the registrant as of April 22, 1999, was
$72,900,410. (1)
As of April 22, 1999, 20,068,113 shares of registrant's Common Stock,
$.01 par value, were outstanding.
- -----------------------------------------------------------------------
(1)Excludes 6,505,246 shares held by directors, officers and
shareholders whose ownership exceeds 5% of the outstanding shares at
April 22, 1999. Exclusion of such shares should not be construed as
indicating that the holders thereof possess the power, directly or
indirectly, to direct the management or policies of the registrant,
or that such person is controlled by or under common control with
the registrant.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Form
10-K
Document Part
- -------- ----
<PAGE>
TABLE OF CONTENTS
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management
ITEM 13. Certain Relationships and Related Transactions
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Signatures
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
<TABLE>
<CAPTION>
DIRECTORS
DIRECTOR
NAME AGE POSITION WITH COMPANY SINCE
- ----------------------- --- --------------------- --------
<S> <C> <C> <C>
John J. Meakem, Jr. 62 Chairman, President and CEO 1991
Carl Ehmann, M.D. (3) 56 Director 1994
Jorge Heller, Ph.D. (3) 71 Director 1991
Peter Riepenhausen (2) 62 Director 1991
Toby Rosenblatt (1)(2) 60 Director 1983
Gregory H. Turnbull (1) 60 Director 1986
C. Anthony Wainwright (2) 65 Director 1996
Dennis Winger (1) 51 Director 1993
<FN>
- ----------------
(1) Member of the Finance and Audit Committee of the Board.
(2) Member of the Compensation and Stock Option Committee of the
Board.
(3) Member of the Science Oversight Committee of the Board.
</FN>
</TABLE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
NAME AGE POSITION WITH COMPANY
- ----------------------- --- ---------------------
<S> <C> <C>
Michael O'Connell 49 Executive Vice President,
Chief Financial and
Administrative Officer of
Company, President of
Pharmaceutical Sciences
Les Riley 54 Senior Vice President;
President of Dermatology
and Skin Care
Subhash Saxena, Ph.D 52 Senior Vice President,
Research and Development/
Regulatory Affairs
</TABLE>
John J. Meakem, Jr. -- chief executive officer and president of APS since
June 1991, director since July 1991; chairman of APS board of directors since
March 1993; chairman of Premier, Inc., a privately held company, from 1986
until its acquisition by APS in 1993. From 1970 to 1986, Mr. Meakem was with
Combe, Inc. and served as corporate executive vice president and president of
Combe, North America. Prior to that Mr. Meakem was vice president of
Richardson-Vicks, Inc.
Carl Ehmann, M.D., F.A.C.P. -- director of APS since June 1994. Dr.
Ehmann currently serves as Group Director, Global Research and Development of
Reckitt & Colman plc. Formerly, he was executive vice president - research
and development of R.J. Reynolds Tobacco Company where he also served as a
member of the executive and operating committee from 1992 until 1996. From
1987 until 1992, he was executive vice president of research and development
at Johnson & Johnson Consumer Products, Inc.
Jorge Heller, Ph.D. -- director of APS since April 1991. Dr. Heller is a
full time consultant to the Company and its Chief Scientist. Prior to
joining the Company, Dr. Heller was director of the controlled release and
biomedical polymers program at SRI International until January 1994, where he
was a staff member since 1974. He is also adjunct professor of pharmacy at
the University of California, San Francisco, and at the University of Utah.
He is editor of the Journal of Controlled Release and past president of the
Controlled Release Society.
Peter Riepenhausen -- director of APS since April 1991. Mr. Riepenhausen
is currently a business consultant. He was president and chief executive
officer of ReSound Corporation from 1994 to 1998. He serves as a director of
Weru A.G. He also served as a director of Caradon (Europe) plc from April
1994 until September 1998. He served as vice chairman of the board of
directors of The Cooper Companies, Inc. from January, 1987 until September,
1989, and from January, 1984 until December, 1986 he was executive vice
president of The Cooper Companies, Inc. Mr. Riepenhausen has also held
executive positions with Blendax-Werke R. Schneider GmbH & Co. of West
Germany and Pepsico, Inc.
Toby Rosenblatt -- director of APS since September, 1983. Mr. Rosenblatt
is president of The Glen Ellen Company and vice president of Founders
Investments, Ltd. Both companies are involved in private investment
activities. Mr. Rosenblatt also serves as a director of State Street
Research Mutual Funds and is a trustee of numerous civic and educational
institutions.
Gregory H. Turnbull -- director of APS since February, 1986. Mr. Turnbull
is currently a business consultant and a director of Planar Systems, Inc.
Previously, he was a general partner of Cable & Howse Ventures, a venture
capital organization which he first joined in 1983, and of which he is
currently a special limited partner. Prior to his work as a venture
capitalist, Mr. Turnbull was an investment banker for 15 years with Morgan
Stanley & Co. and White Weld & Co.
Charles Anthony Wainwright -- director of APS since November 1996. Mr.
Wainwright is currently vice chairman of McKinney & Silver, a national
advertising agency and a director of the following companies: Gibson
Greetings, American Woodmark Corp., Del Webb Corp., Caribiner Corp., and
Marketing Services Group, Inc. He was the chairman of Harris Drury Cohen
from 1995 until early 1997 and from 1990 to 1995, he was the chairman of
Compton Partners, Saatchi & Saatchi. He was also the president and chief
operating officer of the Bloom Companies from 1980 until 1989.
Dennis Winger -- director of APS since February 1993. Mr. Winger is
senior vice president and chief financial officer of Perkin-Elmer
Corporation. From 1989 to 1997, Mr. Winger was senior vice president,
finance and administration and chief financial officer of Chiron
Corporation. He was also a member of Chiron's Strategy Committee.
Prior to joining Chiron, Mr. Winger held a series of financial
positions at The Cooper Companies, Inc., including chief financial
officer.
Michael O'Connell - chief financial officer of APS since July 1992; senior
vice president and chief administrative officer since 1993; executive vice
president and president of APS' Pharmaceutical Sciences since 1998. From
1980 to 1992, he held various positions with The Cooper Companies including
vice president, finance and corporate controller from 1989 to 1991, vice
president, finance and administration of Coopervision Surgical from 1987 to
1989 and vice president, finance and administration of Coopervision
International from 1986 to 1987.
Les Riley - senior vice president of APS and president of APS' Dermatology
and Skin Care since January 1996. From 1993 to 1995, he was the chief
executive officer and president of Tristrata Incorporated ("Tristrata"), a
member of the board of directors of Neostrata Company ("Neostrata") a
subsidiary of Tristrata, and chief executive officer of Neostrata. From 1976
to 1993, he held various positions with Ortho Pharmaceutical Corporation
where he was president of the Dermatology Division from 1991 to 1993 in
addition to being a member of the Board of Directors.
Subhash J. Saxena, Ph.D. - senior vice president of research and
development/regulatory affairs of APS since 1998; vice president of research
and development/regulatory affairs of APS since 1994; director of
pharmaceutical sciences of APS since 1988. From 1983 to 1988, he was a
director of research and development for VLI Corporation.
Item 11. Executive Compensation
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------ -------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL
SALARY BONUS AWARDS OPTIONS OTHER
NAME AND POSITION YEAR ($) ($) ($)(1) (#) COMPENSATION
- ----------------- ---- ------ ------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Meakem, Jr. 1998 373,654 0 359,400 198,000 4,800(2)
Chairman, President 1997 339,635 100,000 0 50,000 4,569(2)
and Chief Executive 1996 324,693 0 0 0 4,500(2)
Officer
Michael O'Connell 1998 235,616 0 119,800 110,000 4,800(2)
Executive Vice 1997 211,769 56,000 0 40,000 4,750(2)
President, Chief 1996 195,962 10,000 0 40,000 4,500(2)
Financial and
Administrative
Officer; President
of Pharmaceutical
Sciences
Les Riley 1998 235,616 0 119,800 75,000 4,800(2)
Senior Vice 1997 211,769 56,000 0 40,000 169,799(3)
President, President 1996 190,769 10,000 0 125,000 3,249(2)
of Dermatology and
Skin Care
Subhash Saxena, Ph.D. 1998 188,077 0 0 70,000 4,800(2)
Senior Vice 1997 166,731 37,500 0 20,000 4,560(2)
President, Research 1996 137,846 5,000 0 20,000 4,285(2)
and Development/
Regulatory Affairs
<FN>
- ---------------
(1) The dollar value of restricted stock awards net of consideration paid by
the named executive officer was calculated using the closing market price
of the Company's Common Stock on date the restricted stock award was
granted. Each restricted stock award provides that for a period of three
years after the award of restricted stock, the recipient may not sell,
assign, transfer, pledge or otherwise encumber the shares of restricted
stock. Any cash dividends with respect to shares of restricted stock are
automatically reinvested in additional shares of restricted stock. Each
restricted stock award provides that if the employee should leave the
employ of the Company prior to three years from the date of award, unless
waived by the administrator of the plan under certain circumstances, the
Company will have the right to repurchase the restricted stock at their
original purchase price of $.01 per share. As of December 31, 1998, the
Company had a total of 100,000 shares of restricted stock outstanding
with an aggregate value of $537,500 based on the value of the Company's
shares at December 31, 1998.
(2) The stated amounts are Company matching contributions to the Advanced
Polymer Systems Salary Reduction Profit Sharing Plan. In 1998, the
Company made matching contributions equal to 50% of each participant's
contribution during the plan year up to a maximum amount equal to the
lesser of 3% of each participant's annual compensation or $4,800.
(3) This amount consists of $165,349 in relocation costs that were taxable to
Mr. Riley in 1997 and $4,450 in Company matching contribution to the
Advanced Polymer Systems Salary Reduction Profit Sharing Plan. See note
(2) above.
</FN>
</TABLE>
<TABLE>
The following table sets forth certain information with respect to options
granted during 1998 to the executive officers named in the Summary
Compensation Table.
STOCK OPTION GRANTS IN 1998
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------- --------------------
%
OF
TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO
UNDERLYING EMPLOYEES
OPTIONS IN EXERCISE
GRANTED FISCAL PRICE EXPIRATION
NAME (#)(2) YEAR ($/SH) DATE 5%($) 10%($)
- -------------------- --------- ---- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
John J. Meakem, Jr. 60,000 8.5 $7.000 03/06/08 264,136 669,372
95,000 13.5 $4.188 10/20/08 250,212 634,086
43,000 6.1 $4.625 12/16/08 125,071 316,956
Michael P.J. O'Connell 20,000 2.8 $6.375 01/13/08 80,184 203,202
60,000 8.5 $4.188 10/20/08 158,029 400,476
30,000 4.2 $4.625 12/16/08 87,259 221,132
Les Riley 20,000 2.8 $6.375 01/13/08 80,184 203,202
25,000 3.6 $4.188 10/20/08 65,845 166,865
30,000 4.3 $4.625 12/16/08 87,259 221,132
Subhash Saxena, Ph.D. 20,000 2.8 $6.000 06/23/08 75,467 191,249
30,000 4.3 $4.188 10/20/08 79,014 200,238
20,000 2.8 $4.625 12/16/08 58,173 147,421
<FN>
- ---------------
(1) Potential realizable value is based on an assumption that the price
of the Common Stock appreciates at the annual rate shown
(compounded annually)
from the date of grant until the end of the ten year option term.
The numbers are calculated based on the requirements promulgated by
the Securities and Exchange Commission ("SEC") and do not reflect
the Company's estimate of future stock price growth.
(2) The options granted under the Company's 1992 Stock Plan typically vest
over 4 years at 25% annually. Payments on exercise, including any taxes
the Company is required to withhold, may be made in cash, by a full
recourse promissory note or by tender of shares. Options are granted at
fair market value on the date of grant.
</FN>
</TABLE>
<TABLE>
The following table sets forth certain information with respect to options exercised during 1998 and the value
of options held at fiscal year end by the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 1998 YEAR-END AT FISCAL YEAR END (2)
------------------------- --------------------------
SHARES
ACQUIRED
UPON
OPTION VALUE
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($)(1) (#) (#) ($) ($)
- --------------------- -------- -------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Meakem, Jr. 20,000 100,938 625,081 225,833 189,903 115,369
Michael P.J. O'Connell 0 0 330,833 119,167 74,216 71,689
Les Riley 0 0 151,146 88,854 22,500 29,675
Subhash Saxena, Ph.D 0 0 139,667 70,833 55,000 35,923
<FN>
- ---------------
(1) Market value of underlying securities at exercise less the exercise price.
(2) Market value of underlying securities at fiscal year-end minus the
exercise price of "in-the-money" options.
</FN>
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
<TABLE>
The following table sets forth beneficial Common Stock ownership as of April
22, 1999, by (i) each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) each director
and each executive officer named in the Summary Compensation Table above, and
(iii) all executive officers and directors as a group. Each person has sole
investment and voting power with respect to the shares indicated, subject to
community property laws where applicable and except as otherwise set forth in
the footnotes to the table.
<CAPTION>
NUMBER PERCENT
OF OF
NAME SHARES(1) CLASS(1)
- ------------------------------------------- --------- --------
<S> <C> <C>
Carl Ehmann, M.D., F.A.C.P.(2) 67,686 *
Jorge Heller, Ph.D.(3) 100,686 *
John J. Meakem, Jr.(4) 905,967 4.4
Michael O'Connell(5) 371,526 1.8
Peter Riepenhausen(6) 93,686 *
Les Riley(7) 194,098 1.0
Toby Rosenblatt(8) 266,212 1.3
Subhash Saxena, Ph.D.(9) 149,912 *
Gregory H. Turnbull(10) 75,686 *
C. Anthony Wainwright(11) 24,186 *
Dennis Winger(12) 75,686 *
Johnson & Johnson Development Corporation(13) 1,332,101 6.6
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Citigroup, Inc.(14) 4,657,561 23.2
388 Greenwich Street
New York, NY 10013
Officers and Directors as a group(11 persons) 2,325,331 10.6
(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)
<FN>
- --------------
* Less than one percent.
(1) Assumes the exercise of all outstanding options and warrants
to purchase Common Stock held by such person or group to the
extent exercisable on or before June 22, 1999, and that no
other person has exercised any outstanding stock options.
(2) Includes 65,000 shares underlying presently exercisable
stock options.
(3) Includes 90,000 shares underlying presently exercisable
stock options.
(4) Includes 654,247 shares underlying presently exercisable
stock options.
(5) Includes 346,249 shares underlying presently exercisable
stock options.
(6) Includes 8,000 shares held as joint tenant with Mr.
Riepenhausen's spouse and 85,000 shares underlying presently
exercisable stock options.
(7) Includes 172,917 shares underlying presently exercisable
stock options.
(8) Includes 75,000 shares underlying presently exercisable
stock options.
(9) Includes 148,834 shares underlying presently exercisable
stock options.
(10) Includes 75,000 shares underlying presently exercisable
stock options.
(11) Includes 22,500 shares underlying presently exercisable
stock options.
(12) Includes 75,000 shares underlying presently exercisable
stock options.
(13) Based solely on information contained in a Schedule 13G
dated July 6, 1998.
(14) Based solely on information contained in a Schedule 13G
dated January 8, 1999, and includes 1,659,500 shares held by
Mutual Management Corporation and 2,998,061 shares held by
Solomon Smith Barney, Inc.
</FN>
</TABLE>
Item 13. Certain Relationships and Related Transactions
The Company entered into a three-year employment agreement with Mr. Meakem in
May 1993. In 1995, the employment agreement was amended to extend the term
for an additional three years and provide for automatic yearly extensions
thereafter unless written notice of its intention not to automatically extend
the agreement is given by either party and was further amended in April 1999
to include in the definition of "change in control" a change in a majority of
the Board of Directors discussed below. The employment agreement provides
that Mr. Meakem may elect to terminate his employment within stated periods
of a change in control of the Company and receive an amount equal to his
prior twelve months' salary and bonus, payable over the subsequent twelve
month period. Mr. Meakem is entitled to receive an amount equal to twice his
prior twelve months' salary and bonus if the Company should terminate his
employment within stated periods of a change in control or if he elects to
terminate his employment following a change in control if his position with
the Company is reduced in terms of responsibility or indicia of status.
"Change in control" under the agreement is defined to include an acquisition
of more than fifty percent of the outstanding shares of the Company or a
change in the majority of the individuals who were members of the Board of
Directors in May 1993 (the "Initial Directors") plus any new directors who
were approved by a majority of the original Initial Directors and any new
directors who were so approved by them, but excluding any new director who
initially assumed office as a result of an actual or threatened contested
election of directors.
As of April 26, 1999, the Company had an outstanding secured loan receivable
of $235,000 from John J. Meakem, Jr. The loan is secured by the shares of
Company stock owned by Mr. Meakem. In 1998, the Company charged an interest
rate of 5% on this loan, which was intended to be equivalent to interest
earned by the Company on its short term investments. The rate of interest
was increased beginning March 1, 1999 to a rate equal to the Company's cost
of funds (approximately 13.87%) or, if lower, the highest rate permitted
under applicable law. The loan was approved by the Compensation and Stock
Option Committee of the Company's Board of Directors. Repayment of the loan
is due on or before December 31, 1999.
During 1998, the Company paid to Dr. Carl Ehmann, Dr. Jorge Heller (who
consults for the Company on a full time basis and is the Company's Chief
Scientist), Peter Riepenhausen and Mr. C. Anthony Wainwright, all who are
directors of the Company for consulting services in their fields of
expertise, the respective amounts of $3,000, $160,000, $7,500 and $4,500,
respectively. Payments for similar services in 1997 were $0, $144,999, $0
and $2,000, respectively, and in 1996 were $0, $127,000, $0 and $0,
respectively.
The Company has entered into agreements with Biosource Technologies, Inc.
("Biosource") of which Toby Rosenblatt is a stockholder and a former
director. All agreements between APS and Biosource have been, and will
continue to be, considered and approved by a vote of the disinterested
directors. The agreements provided APS worldwide rights to use and sell
Biosource's biologically-synthesized melanin in Microsponge(R) systems for
all sun protection, cosmetic, ethical dermatology and over-the-counter skin
care purposes. In return, APS was required to make annual minimum purchases
of melanin, pay royalties on sales of APS melanin-Microsponge products and
was required to prepay $500,000 of royalties. For estimated losses on
purchase commitments and related inventory, the Company accrued $1,400,000 in
1996. All minimum financial commitments under the current agreements have
been expensed by APS. In 1996, APS paid Biosource the 1995 minimum purchase
commitment by issuing Biosource 94,000 shares of APS common stock. In
November 1997 Biosource filed a complaint against the Company in the San
Mateo Superior Court alleging failure to make annual minimum purchases of
melanin and the Company cross complained. In December 1998, the Company
reached a settlement agreement with Biosource for a net amount of $1,300,000,
which consists of a $1,500,000 settlement of Biosource's claims and a
$200,000 settlement of the Company's cross claims.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) 3. Exhibits
3-A-Copy of Registrant's Certificate of Incorporation. (1)
3-B-Copy of Registrant's Bylaws. (1)
10-C-Registrant's 1992 Stock Plan dated August 11, 1992. (2)*
10-D-Registrant's 1997 Employee Stock Purchase Plan dated
March 5, 1997 (7)*
10-E-Lease Agreement between Registrant and Metropolitan Life
Insurance Company for lease of Registrant's executive
offices in Redwood City dated as of November 17, 1997. (9)
10-N-Agreement with Johnson & Johnson dated April 14, 1992.
(3)
10-P-Warrant to Purchase Common Stock. (4)
10-S-Lease Agreement between Registrant and Financing for
Science International dated September 1, 1995 (5)
10-V-Investment Agreement between Registrant and Lander
Company. (6)
10-W-License, Assignment and Supply Agreement between
Registrant and Lander Company. (8)
10-X-Employment Agreement between the Registrant and John J.
Meakem, Jr., as amended. *
10-Y-Master Loan and Security Agreement with Finova Capital
Corporation dated March 29, 1999 with exhibits.
- -----------------------------------------------------------------------
(1)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Registration Statement on Form S-1 (Registration No.
33-15429) and incorporated herein by reference.
(2)Filed as Exhibit No. 28.1 to Registrant's Registration Statement
on Form S-8 (Registration No. 33- 50640), and incorporated herein
by reference.
(3)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference.
(4)Filed as an Exhibit with corresponding Exhibits 4.1, 4.2, 4.3 and
4.4 to Registrant's Registration Statement on Form S-3
(Registration No.33-82562) and incorporated herein by reference.
(5)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1995.
(6)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1996, and incorporated herein by
referenced.
(7)Filed an Exhibit No. 99.1 to Registrant's Registration Statement
on Form S-8 (Registration No. 333-35151), and incorporated herein
by reference.
(8)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference.
(9)Filed as an Exhibit with corresponding Exhibit No. to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997, and incorporated herein by reference.
* Management Contract or Compensatory plans.
(b) Reports on Form 8-K
None.
(c) Exhibits
The Company hereby files as part of this Form 10-K the exhibits
listed in Item 14(a)3 as set forth above.
(d) Financial Statement Schedules
See Item 14(a)2 of this Form 10-K.
<PAGE>
For purposes of complying with the amendments to the rules governing
Registration Statements on Form S-8 (effective July 13, 1990) under the
Securities Act of 1933 ("the Act"), as amended, the undersigned
registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into Part II of the registrant's Registration
Statements on Form S-8 Nos. 33-18942, 33-21829, 33-29084, 33-50640,
333-06841, 333-35151 and 333-60585 filed on April 25, 1990, May 12,
1988, September 30, 1991, August 11, 1992, June 26, 1996, September 8,
1997 and August 4, 1998, respectively.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ADVANCED POLYMER SYSTEMS, INC.
By: /s/John J. Meakem, Jr.
----------------------------------------------
John J. Meakem, Jr.
Chairman, President, Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on
the dates indicated.
<CAPTION>
Signature Title Date
- --------------------------------------------------------------------------
<S> <C> <C>
/S/ John J. Meakem, Jr. Chairman, President,
- ------------------------- Chief Executive Officer April 29, 1999
John J. Meakem, Jr. --------------
/S/ Michael O'Connell Executive Vice President,
- ------------------------- Chief Administrative Officer
Michael O'Connell and Chief Financial Officer April 29, 1999
--------------
/S/ Carl Ehmann Director April 29, 1999
- ------------------------- --------------
Carl Ehmann
/S/ Jorge Heller Director April 29, 1999
- ------------------------- --------------
Jorge Heller
/S/ Peter Riepenhausen Director April 29, 1999
- ------------------------- --------------
Peter Riepenhausen
/S/ Toby Rosenblatt Director April 29, 1999
- ------------------------- --------------
Toby Rosenblatt
/S/ Gregory H. Turnbull Director April 29, 1999
- ------------------------- --------------
Gregory H. Turnbull
/S/ C. Anthony Wainwright Director April 29, 1999
- ------------------------- --------------
C. Anthony Wainwright
/S/ Dennis Winger Director April 29, 1999
- ------------------------- --------------
Dennis Winger
</TABLE>
<PAGE>
EXHIBIT INDEX
Form 10-K Annual Report
3-A-Copy of Registrant's Certificate of Incorporation. (1)
3-B-Copy of Registrant's Bylaws. (1)
10-C-Registrant's 1992 Stock Plan dated August 11, 1992. (2)*
10-D-Registrant's 1997 Employee Stock Purchase Plan dated March 5, 1997
(7)*
10-E-Lease Agreement between Registrant and Metropolitan Life Insurance
Company for lease of Registrant's executive offices in Redwood City
dated as of November 17, 1997. (9)
10-N-Agreement with Johnson & Johnson dated April 14, 1992. (3)
10-P-Warrant to Purchase Common Stock. (4)
10-S-Lease Agreement between Registrant and Financing for Science
International dated September 1, 1995 (5)
10-V-Investment Agreement between Registrant and Lander Company. (6)
10-W-License, Assignment and Supply Agreement between Registrant and
Lander Company. (8)
10-X-Employment Agreement between the Registrant and John J. Meakem,
Jr., as amended. *
10-Y-Master Loan and Security Agreement with Finova Capital Corporation
dated March 29, 1999 with exhibits.
- -----------------------------------------------------------------------
(1)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Registration Statement on Form S-1 (Registration No. 33-15429) and
incorporated herein by reference.
(2)Filed as Exhibit No. 28.1 to Registrant's Registration Statement on
Form S-8 (Registration No. 33- 50640), and incorporated herein by
reference.
(3)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992,
and incorporated herein by reference.
(4)Filed as an Exhibit with corresponding Exhibits 4.1, 4.2, 4.3 and
4.4 to Registrant's Registration Statement on Form S-3
(Registration No.33-82562) and incorporated herein by reference.
(5)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995.
(6)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1996, and incorporated herein by referenced.
(7)Filed an Exhibit No. 99.1 to Registrant's Registration Statement on
Form S-8 (Registration No. 333-35151), and incorporated herein by
reference.
(8)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Annual Report on form 10-K for the year ended December 31, 1996,
and incorporated herein by reference.
(9)Filed as an Exhibit with corresponding Exhibit No. to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997,
and incorporated herein by reference.
* Management Contract or Compensatory plans.
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective May 1, 1993 ("Effective Date") by and between ADVANCED POLYMER
SYSTEMS, INC., a Delaware corporation, ("Corporation") and JOHN J. MEAKEM
("Officer").
R E C I T A L
-------------
Corporation desires to employ officer as its President and Chief Executive
Officer, and Officer is willing to accept such employment by Corporation, on
the terms and subject to the conditions set forth in this Agreement.
A G R E E M E N T
-----------------
THE PARTIES AGREE AS FOLLOWS:
1. DUTIES.
------
1.1 POSITION. Officer agrees to be employed by and to serve Corporation
as its President and Chief Executive Officer during the term hereof, and
Corporation agrees to employ and retain Officer in such capacities during the
term hereof. Officer shall devote his best efforts to the performance of his
duties hereunder. Officer shall have powers and duties commensurate with his
positions as President and Chief Executive officer, and shall have
appropriate office and secretarial assistance as necessary to perform such
duties. Officer shall not undertake other business activities during the
term of his employment without the consent of the Board of Directors of
Corporation.
1.2 BOARD MEMBER. So long as Officer is serving as its President and
Chief Executive officer, Corporation shall cause Officer to be nominated for
election as a Director at each annual meeting of Corporation's stockholders.
2. EMPLOYMENT.
----------
2.1 DEFINITION. For purposes of this Agreement, "Termination for Cause"
shall mean termination by Corporation of Officer's employment by Corporation
by reason of Officer's dishonesty or fraud, or deliberate material injury or
attempted material injury to Corporation, or by reason of Officer's material
breach of this Agreement.
2.2 TERM OF EMPLOYMENT. Unless terminated earlier pursuant to this
Section 2, the term of employment of Officer by Corporation shall be for a
period of three years from the Effective Date.
2.3 TERMINATION FOR CAUSE. Termination for Cause may be effected by
Corporation at any time by notice to Officer. Upon a Termination for Cause,
Corporation shall immediately pay to Officer any accrued salary, any other
compensation to the extent earned, any benefits under any plans of
Corporation in which Officer is a participant to the full extent of Officer's
rights under such plans, any accrued vacation pay and any appropriate
business expenses incurred by Officer in connection with his duties
hereunder, all to the date of termination, but Officer shall not be paid any
other compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.4 DEATH; TERMINATION BY REASON OF DISABILITY. In the event of
Officer's death during the term of this Agreement, Officer's employment shall
be deemed to have terminated as of the last day of the month during which his
death occurs. If officer, in the reasonable judgment of the Board of
Directors of Corporation, has failed to perform his duties under this
Agreement on account of illness or physical or mental incapacity and such
illness or incapacity continues for a period of more than six consecutive
months, Corporation shall have the right to terminate Officer's employment
hereunder as of the last day of any month thereafter by notice to Officer.
In either such event, Corporation shall pay to Officer or his estate, as the
case may be, any accrued salary, any other compensation to the extent earned,
any benefits under any plans of corporation in which Officer is a participant
to the full extent of Officer's rights under such plans, any accrued vacation
pay and any appropriate business expenses incurred by officer in connection
with his duties hereunder, all to the date of termination, but no other
compensation or reimbursement of any kind, except for any disability payments
and benefits payable to Officer, under any disability plans then maintained
by Corporation, up to the balance of the original three year term hereof.
3. SALARY, OPTIONS AND BENEFITS.
3.1 SALARY. As payment for the services to be rendered by Officer as
provided in Section 1 and subject to the terms and conditions of Section 2,
Corporation agrees to pay to Officer a Salary at the rate of $285,000 per
annum payable in equal semi-monthly installments, which salary shall be
subject to annual review for consideration of any increase thereto.
3.2 ADDITIONAL BENEFITS. During his term of employment, officer shall
be entitled to the following benefits:
3.2.1 BENEFIT PLANS. Officer shall be eligible to participate in
all benefit plans generally available to the senior management of
Corporation, including such health and disability coverage and life insurance
as is available from time to time, and any incentive plans adopted by
Corporation.
3.2.2 STOCK OPTION. Corporation shall grant to officer incentive
and nonstatutory options in the Company's usual form to acquire 150,000
shares of Corporation's Common Stock, vesting in equal monthly installments
over a period of three years, and to represent his total option awards for
the period of the contract except as may be otherwise determined by the
directors and except for a special 25,000 option grant attributable to the
Premier, Inc. merger.
4. CHANGE IN CONTROL OR EMPLOYMENT POSITION.
4.1 TERMINATION BY EMPLOYEE ON CHANGE IN CONTROL. In the event of a
Change in Control (as defined herein) during the term of this Agreement,
Officer shall be entitled to terminate his employment and receive Termination
Benefits. Said termination shall occur immediately upon officer providing
notice to Corporation of such termination, which notice shall be given not
later than ninety days after officer receives from Corporation notice of
Change in Control.
4.2 TERMINATION BY CORPORATION ON CHANGE IN CONTROL. In the event of
such Change in Control, Corporation shall be entitled to terminate Officer's
employment. Upon such termination, officer shall receive Extended
Termination Benefits. Said termination shall occur immediately upon
Corporation providing notice to officer of such termination, which notice
shall be given not later than sixty days after a Change in Control.
4.3 CHANGE IN EMPLOYMENT POSITION. If, at any time subsequent to a
Change in Control and during the term of this Agreement, Officer is not re-
elected to or is removed from office as the chief executive officer of
Corporation, or Officer's position as chief executive office of Corporation
is reduced in terms of responsibility of indicia of status (collectively, a
"Change of Employment Position") then Officer shall have the option to
terminate this Agreement. Such termination, if elected by Officer, shall be
effective sixty days after officer has given written notice to Corporation of
Officer's intention to terminate. Upon such termination, Officer shall
receive Extended Termination Benefits, determined as of the Termination Date
rather than the date of Change of Control
4.4 NOTICE OF CHANGE IN CONTROL. Corporation shall give written notice
of a Change in Control to Officer within five days of such event.
4.5 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings assigned to them below:
4.5.1 "CHANGE IN CONTROL" shall mean each of the following events:
(i) The acquisition after the date hereof by any person as
defined in Section 13(d) or 14(d)(2) of the Securities Exchange Act of the
United States of America of more than fifty percent of the issued and
outstanding shares of stock of Corporation. A person shall not be deemed to
have acquired stock merely because such person has been designated as a
fiduciary or because such person has received upon distribution of any trust
or estate or otherwise, as a result of the death of a prior stockholder,
shares of stock; or
(ii) The merger of Corporation with or into another
corporation or consolidation into another corporation, and as a result
thereof the stockholders of Corporation receive equity securities having less
than fifty percent of the voting power of all securities issued by such
corporation; or
(iii) The sale by Corporation of substantially all of the
stock, business operations or assets of Corporation to an unrelated person
not directly or indirectly controlled by Corporation's stockholders
immediately prior to such transfer.
4.5.2 "TERMINATION DATE" shall mean the last day officer is
employed by Corporation or its successor.
4.5.3 "TERMINATION BENEFITS" shall mean the amount of salary and
bonuses paid to or for the benefit of Officer or otherwise earned by officer
in accordance with the provisions of Section 3 hereof during the twelve-month
period immediately preceding the Change in Control. In the event that the
Change in Control shall occur prior to one year from the date of this
Agreement, Termination Benefits shall be the amount which Officer would have
received during the initial twelve months of this Agreement. Corporation, or
its successor, shall pay the Termination Benefits to Officer for the twelve-
month period commencing on the Termination Date. Said amounts, and benefits,
shall be paid in the same manner as Officer received such amounts and
benefits during employment.
4.5.4 "EXTENDED TERMINATION BENEFITS" shall mean an amount equal to
twice the Termination Benefits and shall be payable by Corporation, or its
successor, one-half on the Termination Date and the remaining one-half on the
first anniversary of the Termination Date.
4.6 MITIGATION. Officer shall not be required to mitigate the amount of
any payment provided for in this Section by seeking other employment or
otherwise, and the amount payable hereunder shall be payable even after he
has taken other employment.
5. NONCOMPETITION.
During the time Officer is employed by corporation and for any additional
period during which Corporation continues to pay to Officer the full
compensation payable under the provisions of this Agreement (but not
including Extended Termination Benefits as defined in Section 4.5.4), officer
shall not, directly or indirectly, by way of ownership, management or
otherwise, whether or not for compensation, either as a consultant, employer,
employee, agent, principal, partner, stockholder (other than ownership of
less than five percent of the outstanding capital stock of a publicly traded
corporation), officer, director or in any other representative or individual
capacity, engage in any activity competitive with Corporation or, directly or
indirectly, solicit or hire to engage in any such business any person who is
then or was within one year prior thereto an employee of Corporation.
6. MISCELLANEOUS.
6.1 CONFIDENTIALITY. Officer recognizes that he now has knowledge of
and will hereafter gain further knowledge of confidential information, trade
secrets, confidential processes, and confidential "know-how" relating to, or
concerned with the past, present or future business, finances, products,
services and policies of Corporation (collectively, "Proprietary
Information"). Officer agrees that all Proprietary Information shall be kept
and treated by officer as confidential both during and after Officer's
employment by Corporation, and that Officer will not, directly or indirectly,
use, divulge, furnish or make accessible such information to any other person
or entity (other than as required in the performance of his services
hereunder), except as may be permitted in writing by Corporation's Board of
Directors or as to such information: (i) as is within the public domain or
comes within the public domain without any breach of this Agreement by
Officer; (ii) which is subsequently disclosed to Officer by a third party not
bound to keep such information confidential; or (iii) as is known to officer
prior to his employment by Corporation and which was not disclosed to officer
by Corporation or any affiliate or agent of Corporation.
6.2 WAIVER. The waiver of the breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of the
same or other provision hereof.
6.3 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided
herein, this Agreement represents the entire understanding among the parties
with respect to the subject matter hereof, and this Agreement supersedes any
and all prior understandings, agreements, plans and negotiations, whether
written or oral, with respect to the subject matter hereof, including without
limitation, any understandings, agreements or obligations respecting any past
or future compensation, bonuses, reimbursements or other payments to Officer
from Corporation. All modifications to the Agreement must be in writing and
signed by the party against whom enforcement of such modification is sought.
6.4 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given by a nationally recognized overnight
air courier service or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given three days
after mailing or one day after delivery to a nationally recognized overnight
air courier service to the respective persons named below:
If to Corporation: Advanced Polymer Systems, Inc.
3696 Haven Avenue
Redwood City, California 94063
Attn: Vice President - Finance
If to Officer: John J. Meakem, Jr.
Armonk, N.Y.
Either party may change such party's address for notices by notice duly given
pursuant to this Section 6.4.
6.5 GOVERNING LAW; ARBITRATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed within the State of
California by California residents. All disputes, controversies or claims
arising out of or related to: (i) the interpretation or enforcement of this
Agreement; or (ii) any breach, termination or claim or invalidity of this
Agreement shall be settled finally and without resort to any legal
proceedings (except for the enforcement of the arbitration award) by
arbitration conducted in accordance with the provisions of this Section 6.5.
Notwithstanding the foregoing, the remedy at law for any breach of the
provisions of this Section 6.5 is acknowledged by the parties to be
inadequate, and an aggrieved party seeking relief or remedies for such a
breach shall have the right and is hereby granted the privilege, in addition
to all other remedies at law or in equity, to temporary or permanent
injunctive relief without the necessity or providing actual damage.
Arbitrations under this Section 6.5 shall be conducted before a single
arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in San Francisco, California. All decisions
of the arbitrator resolving disputes, controversies, or claims shall he final
and binding upon the parties both as to law and to fact and shall be
enforceable at law or in equity by any court of competent jurisdiction. Once
an issue has been arbitrated pursuant hereto, the decision of the arbitrator
shall be RES JUDICATA with respect to such issue. The parties shall take
whatever steps may be necessary to have the decision of the arbitrator
carried out. The parties shall cooperate with each other in causing the
arbitration to be held in as efficient and expeditious a manner as
practicable and in this connection to furnish such documents and make
available themselves and such personnel as the arbitrator may request. All
fees and expenses attributable to the conduct of arbitration pursuant to this
Section 6.5 shall be shared equally by the parties to the arbitration;
PROVIDED, HOWEVER, that each party to the arbitration shall bear its own
expenses (including but not limited to legal expenses). Officer agrees that
service upon Officer in any such action may be made by first class mail,
certified or registered, in the manner provided for delivery of notices in
Section 6.4.
6.6 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and all other provisions of this Agreement shall be deemed
valid and enforceable to the extent possible.
6.7 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the executors, administrators, heirs, successors and assigns of
the parties; provided, however, that except as herein expressly provided,
this Agreement shall not be assignable either by Corporation (except to an
affiliate of Corporation) or by Officer. If this Agreement is assigned by
Corporation, then Corporation shall remain primarily liable to Officer for
the payment of all amounts due officer from Corporation under this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
6.9 WITHHOLDINGS. All compensation and benefits to Officer hereunder
shall be reduced by all federal, state, local and other withholdings and
similar taxes and payments required by applicable law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Corporation:
ADVANCED POLYMER SYSTEMS, INC.
By: /S/ Michael O'Connell
---------------------
Title: Chief Financial Officer
-----------------------
Officer:
/S/ John J. Meakem, Jr.
-----------------------
AMENDMENT
---------
This Amendment to the Employment Agreement originally effective May 1, 1993,
by and between Advanced Polymer Systems, Inc. ("Corporation") and John J.
Meakem ("officer") is entered into effective May 1, 1995.
W I T N E S S E T H:
-------------------
The parties agree as follows:
1. Section 2.2 of the Employment Agreement entitled "Term of Employment"
is
hereby amended to read in its entirety as follows:
"2.2 TERM OF EMPLOYMENT. Unless terminated earlier pursuant to this
Section 2, the term of employment of Officer by Corporation shall be
for
a period of three years from May 1, 1995. Thereafter, unless either
party shall give written notice to the other party not later than March
1st of each year of its intention not to automatically extend this
Agreement for an additional year, then the term of this Agreement shall
be automatically extended for an additional year. For example, if
notice is not given by March 1, 1996, then the term of this Agreement
shall be extended through April 30, 1999.
2. The parties confirm that, as of the date of this Amendment, Officer's
salary has been increased to $315,000 per year.
3. In all other respects the provisions of the Employment Agreement are
hereby confirmed.
In witness whereof, the parties have executed this Amendment.
/S/ John J. Meakem, Jr.
-----------------------
John J. Meakem
ADVANCED POLYMER SYSTEMS, INC.
By: /S/ Michael O'Connell
---------------------
AMENDMENT
---------
This Amendment to the Employment Agreement originally effective May 1, 1993,
by and between Advanced Polymer Systems, Inc. ("Corporation") and John J.
Meakem, Jr. ("officer") is entered into effective May 1, 1996.
W I T N E S E T H:
-----------------
The parties agree as follows:
1. Section 2.2. of the Employment Agreement entitled "Term of Employment"
is hereby amended to read in its entirety as follows:
"2.2 Term of Employment. Unless terminated earlier pursuant to this
Section 2, the term of employment of Officer by Corporation shall be
for
a period of three years from May 1, 1996. Thereafter, unless either
party shall give written notice to the other party not later than March
1st of each year of its intention not to automatically extend this
Agreement for an additional year, then the term of the Agreement shall
be automatically extended for an additional year. For example, if
notice is not given by March 1, 1997, then the term of this Agreement
shall be extended through April 30, 2000."
2. The parties confirm that, as of the date of this Amendment, Officer's
salary has been increased to $330,000 per year.
3. In all other respects the provisions of the Employment Agreement are
hereby confirmed.
In witness whereof, the parties have executed this Amendment.
/S/ John J. Meakem, Jr.
-----------------------
John J. Meakem, Jr.
ADVANCED POLYMER SYSTEMS, INC.
By: /S/ Michael O'Connell
---------------------
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This Amendment to Employment Agreement (this "Amendment") is made and entered
into effective April 26, 1999 by and between ADVANCED POLYMER SYSTEMS, INC.,
a Delaware corporation ("Corporation"), and JOHN J. MEAKEM ("Officer").
R E C I T A L S
---------------
A. Corporation and Meakem are parties to an Employment Agreement dated May
1, 1993 providing for the Company's employment of Meakem as its President and
Chief Executive Officer (as heretofore amended, the "Agreement"); and
B. The Board of Directors of Corporation has approved the following
amendment to the Agreement and Meakem agrees to such amendment.
AGREEMENT
---------
THE PARTIES AGREE that Section 4.5.1 of the Agreement ("Section 4.5.1") is
hereby amended as follows and in all other respects the Agreement shall
remain in full force and effect in accordance with its terms, as hereby
amended.
(1) The period at the end of clause (iii) of Section 4.5.1 shall be replaced
with a semi-colon followed by the addition of the word "or"; and
(2) a new clause (iv) shall be added to Section 4.5.1, which clause (iv)
shall read in its entirely as follows:
"(iv) The individuals (the Initial Directors") who, as of the date of this
Agreement, are members of the Board of Directors of the Corporation (the
"Board") cease for any reason to constitute at least a majority of the
members of the Board; PROVIDED, HOWEVER, that if the election, or nomination
for election by the Corporation's stockholders, of any new director was
approved by a vote of at least a majority of either (x) the Initial Directors
or (y) the aggregate of the Initial Directors and any director referred to in
this proviso, such new director shall be considered an Initial Director for
purposes of this Agreement; PROVIDED, FURTHER, HOVEVER, that no individual
shall be considered an Initial Director if such individual initially assumed
office as a director as a result of either an actual or threatened election
contest (an "Election Contest") regulated by Rule 14a-11 promulgated under
the Securities Exchange Act of 1934 (or any successor rule or regulation) or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than a majority of the Initial Directors (a "Proxy
Contest") including (without limitation) by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
CORPORATION
ADVANCED POLYMER SYSTEMS, INC.
By: /S/ John J. Meakem, Jr.
-----------------------
Title: Chairman, President, CEO
------------------------
OFFICER
/S/ Michael O'Connell
---------------------
[FINOVA LOGO]
FINOVA Capital Corporation
10 Waterside Drive
Farmington, CT 06032-3065
(860)676-1818
MASTER LOAN AND SECURITY AGREEMENT
----------------------------------
Master Loan and Security Agreement No. S4330 Dated March 29, 1999
FINOVA Capital Corporation ("we," "us" or "FINOVA"), having its principal
place of business at 1850 North Central Avenue, Phoenix, Arizona 85004, is
willing to make a loan (the "Loan") to Advanced Polymer Systems, Inc., a
Delaware corporation, APS Analytical Standards, Inc., a California
corporation, Premier, Inc., a Connecticut corporation, and APS Joint Venture
Corp., a Delaware corporation (jointly and severally, "you" or "Borrower"),
each having its principal place of business at 123 Saginaw Drive, Redwood
City, California 94063, under the terms and conditions contained in this
Master Loan and Security Agreement (this "Master Agreement"). The Loan will
be secured by the collateral (the "Collateral") described in the Schedule to
the Note hereinafter defined ("Schedule"). The Collateral also includes any
replacement parts, additions and accessories that you may add to the
Collateral, as well as any proceeds of sale, lease or rental of the
Collateral. We may treat any Schedule as a separate loan and security
agreement containing all of the provisions of this Loan and Security
Agreement.
1. THE CREDIT
----------
We will make the Loan in one advance (the "Advance"), which shall be
evidenced by the Schedule. We will only make the Loan to you if all the
conditions in this Master Agreement have been met to our satisfaction. We
will rely on your representations and warranties, contained in this Master
Agreement, in making the Loan. The terms of this Agreement will each apply
to the Loan.
- USE OF PROCEEDS. You will use the proceeds of the Loan solely to
refinance your purchases of the Equipment (as defined in the Schedule) (which
Equipment shall be satisfactory to us in our sole discretion) and for general
corporate purposes. You will properly install the Collateral at your expense
at your premises at 301 Laser Lane, Lafayette, Louisiana (the "Premises"), as
indicated in the Schedule. Because you have already paid for the Collateral,
we will pay the Loan proceeds to you or to another person that you may
designate in writing.
- NOTE. Your obligation to repay the Loan and to pay interest on the Loan
will be evidenced by a promissory note (the "Note"). The Note will be dated
the date of the Schedule.
- TERM. The Term of the Schedule (and the Loan) begins upon the date that
we make the Loan to you (the "Closing Date"). The Term continues until you
fully perform all of your obligations under this Agreement, the Schedule and
the related Note.
- LOAN ACCOUNT. We will keep a loan account on our books and records (which
are computerized) for the Loan. We will record all payments of principal and
interest in the loan account. Unless the entries in the loan account are
clearly in error, the loan account will definitively indicate the outstanding
principal balance and accrued interest on the Loan. We may send you loan
account statements from time to time or upon your request.
- PAYMENTS. The scheduled loan payments (the "Payments") are indicated on
the Schedule. The Payments are payable periodically as specified on the
Schedule from time to time (for example, monthly). The Schedule also
indicates that the Payments are payable "in advance". You agree that you owe
us the total of all of these Payments over the Term of the Schedule.
- FIRST PAYMENT. The first Payment is due at the beginning of the Term or
at a later date that we agree to in writing. Subsequent Payments are due on
the thirtieth day of each successive period until you pay us in full all of
the Payments and any other charges or expenses you owe us.
- INTEREST. Prior to maturity of the Schedule, you will pay us interest on
the Schedule at the Interest Rate indicated in the Schedule. "Maturity" means
the scheduled maturity or any earlier date on which we accelerate the Loan.
The Payment amount indicated in the Schedule includes interest at this
Interest Rate. Interest is calculated in advance using a year of 360 days
with twelve months of 30 days.
- DEFAULT INTEREST RATE. After Maturity of the Loan you will pay us interest
at a rate of four (4%) percent per year above the Interest Rate. This is
referred to as the "Default Rate."
- INTERIM PAYMENT. If the Loan is made on a day other than the thirtieth or
thirty-first day of a period, you will also pay us an interim payment of
interest, only, at the interest rate set forth on the Schedule, payable on
the first Payment date. The interim payment will be for the period from the
beginning of the Term until the twenty-ninth day of the period in which the
Loan is made, unless the Loan is made on the thirty-first day of a period.
If the Loan is made on the thirty-first day of a period, the interim payment
will be for the period from the beginning of the Term through and including
the twenty-ninth day of the next following period. The interim payment of
interest will be calculated the same way as the regular installments of
interest are calculated, but pro rata on a daily basis for the number of days
for which the interim payment is due.
- USURY. You and we intend to obey the law. If the Interest Rate charged
would exceed the maximum legal rate, you will only have to pay the maximum
legal rate. You do not have to pay any excess interest over and above the
maximum legal rate of interest. However, if it later becomes legal for you
to pay all or part of any excess interest, you will then pay it to us upon
our request.
- PAYMENT DETAILS. You will make all payments due under this Master
Agreement by 12:00 P.M., Connecticut time, on the day they are due. You will
make all payments in US Dollars (US$) in immediately available funds. We do
not have to make or give "presentment, demand, protest or notice" to get
paid. You waive "presentment, demand, protest and notice."
- APPLICATION OF PAYMENTS. Each payment under this Master Agreement is to
be applied in the following order: first, to any fees, costs, expenses and
charges you may owe us; second, to any interest due; and third to the
principal balance.
- PREPAYMENT. You may prepay the Loan, in whole and not in part, but only
as specifically permitted by Exhibit A to this Agreement. You will give us
at least 30 days advance written notice of prepayment. You will pay us the
prepayment premium indicated in the Schedule(s). You will also pay us all
accrued and unpaid interest through the date of prepayment, as well as all
outstanding fees, costs, expenses and charges then due. Of course, you will
also pay the entire outstanding principal balance of the Loan. Once you give
us a notice of prepayment, that notice is final and irrevocable. If we
accelerate the Loan following an Event of Default, you will also owe us a
prepayment premium calculated as if the Loan were prepaid on the date of
acceleration. If no prepayment is permitted, the premium due upon
acceleration will be five (5%) percent of the outstanding principal balance.
- YOUR OBLIGATION TO PAY US ALL PAYMENTS IS ABSOLUTE AND UNCONDITIONAL. YOU
ARE NOT EXCUSED FROM MAKING THE PAYMENTS, IN FULL, FOR ANY REASON. YOU AGREE
THAT YOU HAVE NO DEFENSE FOR FAILURE TO MAKE THE PAYMENTS AND YOU WILL NOT
MAKE ANY COUNTERCLAIMS OR SETOFFS TO AVOID MAKING THE PAYMENTS.
2. SECURITY INTEREST
-----------------
- You grant us a first and only lien on and security interest in the
Collateral. The Collateral secures the full and timely payment and
performance of all of your now existing or hereafter arising indebtedness,
liabilities and obligations to us, whether under this Master Agreement, the
Schedule, the Note and any other agreement, loan or lease that you may from
time to time have with us, or otherwise (collectively, the "Obligations").
You also grant us a security interest in any additional collateral identified
in any Schedule. Any additional collateral is considered to be "Collateral"
and it secures all of the Obligations.
- If we request, you will put labels supplied by us stating "PROPERTY
SUBJECT TO A SECURITY INTEREST HELD BY FINOVA CAPITAL CORPORATION" on the
Collateral where they are clearly visible.
- You give us permission to add to this Master Agreement or any Schedule the
serial numbers and other information about the Collateral.
- You give us permission to file this Master Agreement or a Uniform
Commercial Code financing statement, at your expense, in order to perfect our
security interest in the Collateral. You also give us permission to sign
your name on the Uniform Commercial Code financing statements where this is
permitted by law.
- You will pay our cost to do searches for other filings or judgments
against you or your affiliates. You will also pay any filing, recording or
stamp fees or taxes resulting from filing this Agreement or a Uniform
Commercial Code financing statement. You will also pay our fees in effect
from time to time for documentation, administration and termination of this
Master Agreement.
- At your expense, you will defend our first priority security interest in
the Collateral against, and keep the Collateral free of, any legal process,
liens, other security interests, attachments, levies and executions. You
will give us immediate written notice of any legal process, liens,
attachments, levies or executions, and you will indemnify us against any loss
that results to us from these causes.
- You will notify us at least 30 days before you change the address of your
principal executive office, principal place of business, place where you keep
your books and records or place where your Receivables (as defined in the
Schedule) are generated. Your principal executive office, principal place of
business, place where you keep your books and records and the place where all
of your Receivables are generated is 123 Saginaw Drive, Redwood City,
California 94063.
- You will promptly sign and return additional documents that we may
reasonably request in order to protect our first priority security interest
in the Collateral.
- The Collateral (other than the Premises) is personal property and will
remain personal property. You will not incorporate it into real estate and
will not do anything that will cause the Collateral to become part of real
estate or a fixture.
3. CONDITIONS OF LENDING
---------------------
- See our Commitment Letter to you dated February 26, 1999 (the "Commitment
Letter"), which you and we consider to be a part of this Master Agreement.
The terms and conditions of the Commitment Letter continue following the
making of the Loan. However, if there is a conflict between the terms and
conditions of this Master Agreement, the Schedule or the Note and the terms
and conditions of the Commitment Letter, then you and we agree that the terms
and conditions of this Agreement, the Schedule and the Note control over the
Commitment Letter terms and conditions.
- Before we disburse any proceeds of the Advance, we also require the
following:
* That no payment is past due to us under any other agreement, loan or lease
that you or any guarantor have with us.
* That you are complying with all terms of this Agreement, the Schedule and
the Note.
* That we have received all the documents we requested, including the signed
Schedule, Note, Delivery and Acceptance Certificate, and a mortgage in form
and substance satisfactory to us (the "Mortgage") covering the Premises.
* That there has been no material adverse change in your financial
condition, business, operations or prospects, from the financial condition
that you disclosed to us in your application for credit.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
You represent and warrant to us as follows:
- All financial information and other information that you have given us is
true and complete. You have not failed to tell us anything that would make
the financial information misleading. There has been no material adverse
change in your financial condition, business, operations or prospects, from
the financial condition that you disclosed to us in your application for
credit.
- You have supplied us with information about the Collateral.
- You have complied with all "environmental laws" and will continue to
comply with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored or disposed of by you or at your properties except
in compliance with all environmental laws. "Environmental laws" mean all
federal, state or local environmental laws and regulations, including the
following laws: CERCLA, RCRA, Hazardous Materials Transport Act and The
Federal Water Pollution Control Act. "Hazardous substances" means all
hazardous or toxic wastes, materials or substances, as defined in the
environmental laws, as well as oil, flammable substances, asbestos that is or
could become friable, urea formaldehyde insulation, polychlorinated biphenyls
and radon gas.
- You have taken all action necessary including but not limited to due
inquiry and due diligence to assure that there will be no material adverse
change to your business by reason of the advent of the year 2000, including
without limitation that all computer-based systems, embedded microchips and
other processing capabilities effectively recognize and process dates after
April 1, 1999.
5. COVENANTS
---------
You agree to do the following things (or not to do the following things if so
stated) until full payment of all amounts due to us under this Agreement, the
Schedule and the Note:
CARE, USE, LOCATION, TRANSFER AND ALTERATION OF THE COLLATERAL
- --------------------------------------------------------------
- You will make sure that the Collateral is maintained in good operating
condition, and that it is serviced, repaired and overhauled when this is
necessary to keep the Collateral in good operating condition. All
maintenance must be done according to the Supplier's or Manufacturer's
requirements or recommendations. All maintenance must also comply with any
legal or regulatory requirements.
- You will maintain service logs for the Collateral and permit us to inspect
the Collateral, the service logs and service reports. You give us permission
to make copies of the service logs and service reports.
- We will give you prior notice if we, or our agent, want to inspect the
Collateral or the service logs or service reports. We may inspect it during
regular business hours. You will pay our travel, meals and lodging costs to
inspect the Collateral, but only for one inspection per year. If we find
during an inspection that you are not complying with this Master Agreement,
you will pay our travel, meals and lodging costs, our salary costs, and the
costs and fees of our agents for reinspection. You will promptly cure any
problems with the Collateral that are discovered during our inspection.
- You will use the Collateral only for business purposes. You will obey all
legal and regulatory requirements in your material use of the Collateral.
- You will make all additions, modifications and improvements to the
Collateral that are required by law or government regulation. Otherwise, you
will not alter the Collateral without our written permission. You will
replace all worn, lost, stolen or destroyed parts of the Collateral with
replacement parts that are as good or better than the original parts. The
new parts will become subject to our security interest upon replacement.
- You will not remove the Collateral from the Premises indicated in the
Schedule without our written permission.
- You have and will have good and merchantable title to all of the
Collateral.
- You will not convey, assign, sell, mortgage, transfer, encumber, pledge,
hypothecate, grant a security interest in, grant options with respect to,
lease or otherwise dispose of all or any part of any interest whatsoever in
or to any or all of the Collateral, including, without limitation, the
Premises, or any interest therein, whether to a third party or to another
Borrower.
YEAR 2000 COMPLIANT
- -------------------
- You shall take all action necessary including but not limited to due
inquiry and due diligence with critical business partners to assure that
there will be no material adverse change to your business by reason of the
advent of the year 2000, including without limitation that all computer-based
systems, embedded microchips and other processing capabilities effectively
recognize and process dates after April 1, 1999. At our request, you shall
provide to us assurance reasonably acceptable to us that your computer-based
systems, embedded microchips and other processing capabilities are year 2000
compatible.
RISK OF LOSS
- ------------
- You have the complete risk of loss or damage to the Collateral. Loss or
damage to the Collateral will not relieve you of your obligation to make the
Payments.
- If any Collateral is lost or damaged, you have two choices (although if
you are in default under this Master Agreement, we and not you will have the
two choices). The choices are:
(1) Repair or replace the damaged or lost Collateral so that, once again, the
Collateral is in good operating condition and we have a perfected first
priority security interest in it.
(2) Pay us the present value (as of the date of payment) of the remaining
Payments. We will calculate the present value using a discount rate of five
(5%) percent per year. Once you have paid us this amount and any other
amount that you may owe us, we will release our security interest in the
damaged or lost Collateral and you (or your insurer) may keep the Collateral
for salvage purposes, on an "AS IS, WHERE IS" basis.
INSURANCE
- ---------
- Until you have made all Payments to us under this Master Agreement, the
Schedule and the Note, you will keep the Collateral insured. The amount of
insurance, the coverage, and the insurance company must be acceptable to us.
- If you do not provide us with written evidence of insurance that is
acceptable to us, we may buy the insurance ourselves, at your expense. You
will promptly pay us the cost of this insurance. We have no obligation to
purchase any insurance. Any insurance that we purchase will be our
insurance, and not yours.
- Insurance proceeds may be used to repair or replace damaged or lost
Collateral or to pay us the present value of the Payments, as provided above.
- You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and to
endorse your name on all documents, checks or drafts relating to insurance
claims for Collateral.
TAXES
- -----
- You will pay all sales, use, excise, stamp, documentary and ad valorum
taxes, license, recording and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession, use,
lease or rental of the equipment or on the Loan.
- You will pay all taxes (other than our federal or state net income taxes)
imposed on you or on us regarding the Payments.
- You will reimburse us for any of these taxes that we pay or advance.
- You will file and pay for any personal property taxes on the Collateral.
FINANCIAL INFORMATION
- ---------------------
- During the Term you will promptly provide us with copies of all current,
quarterly and annual reports and all proxy (or information) statements you
file with the Securities and Exchange Commission (SEC).
- You will also provide us with the following financial statements:
* Quarterly balance sheet and statements of earnings and cash flow - within
45 days after the end of your first three fiscal quarters in each fiscal
year. These will be certified by the chief financial officer.
* Annual balance sheet and statements of earnings and cash flow - within 90
days after the end of each fiscal year. These will be audited by independent
auditors acceptable to FINOVA. Their audit report must be unqualified.
* All financial statements will be prepared according to generally accepted
accounting principles, consistently applied. All financial statements and
SEC filings that you provide us will be true and complete. They will not fail
to tell us anything that would make them misleading.
* At the same time you deliver the annual and quarterly financial statements
described above, you will also provide us with a certificate of your chief
financial officer stating that no default exists, or, if he cannot certify
this because a default does exist, he must specify in reasonable detail the
nature of the default.
* So long as we have a security interest in the Receivables (as defined in
the Schedule), you shall deliver to us, monthly, not later than the 10th day
of each month, an accounts receivable aging by invoice, which shall be in
form satisfactory to us.
6. DEFAULTS
--------
You are in default if any of the following happens:
- You do not pay us, within ten (10) days of its due date, any Payment or
other payment that you owe us under this Master Agreement, the Schedule or
the Note or that you owe under any other agreement, loan or lease that you
have with us.
- Any of the financial information that you give us is not true and
complete, or you fail to tell us anything that would make the financial
information not misleading.
- You do something you are not permitted to do, or you fail to do anything
that is required of you or you otherwise breach any term of or default under
this Master Agreement, the Schedule, the Note, the Mortgage or any other
lease, loan or other financial arrangement that you have with us, and the
same is not cured within thirty (30) days after your receipt of written
notice from us of such default.
- An event of default occurs under any other lease, loan or obligation of
yours that exceeds $25,000.
- You file bankruptcy, or involuntary bankruptcy is filed against you.
- You are subject to any other insolvency proceeding other than bankruptcy
(for example, a receivership action or an assignment for the benefit of
creditors).
- Without our permission, you sell all or a substantial part of your assets,
merge or consolidate, or a majority of your voting stock or interests is
transferred or encumbered.
- There is a material adverse change in your financial condition, business,
operations or prospects, from the condition that you disclosed to us.
REMEDIES, DEFAULT INTEREST, LATE FEES
- -------------------------------------
If you are in default we may exercise one or more of our "remedies." Each of
our remedies is independent. We may exercise any of our remedies, all of our
remedies or none of our remedies. We may exercise them in any order we
choose. Our exercise of any remedy will not prevent us from exercising any
other remedy or be an "election of remedies." If we do not exercise a
remedy, or if we delay in exercising a remedy, this does not mean that we are
forgiving your default or that we are giving up our right to exercise the
remedy. Our remedies allow us to do one or more of the following:
- "Accelerate" the Loan balance under the Note. This means that we may
require you to immediately pay us all Payments for the entire Term for the
Schedule.
- Require you to immediately pay us all amounts that you are required to pay
us for the entire Term of any other agreements, loans or leases that you have
with us.
- Sue you for all Payments and other amounts you owe us plus the Prepayment
Premium (see Section 1 above).
- We will have all of our rights and remedies under this Master Agreement,
the Note, the Schedule, the Mortgage and all agreements, instruments and
documents executed in connection herewith and therewith and all of our rights
under applicable law, whether as a secured party or otherwise.
- Require you at your expense to assemble the Collateral at a location we
request in the United States of America.
- Remove and repossess the Collateral from where it is located, without
demand or notice, or make the Collateral inoperable. We have your permission
to remove any physical obstructions to removal of the Collateral. We may
also disconnect and separate all Collateral from other property. No court
order, court hearing or "legal process" will be required for us to repossess
the Collateral. You will not be entitled to any damages resulting from
removal or repossession of the Collateral. We may use, ship, store, repair
or lease any Collateral that we repossess. We may sell any repossessed
Collateral at private or public sale. You give us permission to show the
Collateral to buyers at your location free of charge during normal business
hours. If we do this, we do not have to remove the Collateral from your
location. If we repossess the Collateral and sell it, we will give you
credit for the net sale price, after subtracting our costs of repossessing
and selling the Collateral. If we rent the Collateral to somebody else, we
will give you credit for the net rent received, after subtracting our costs
of repossessing and renting the Collateral, but the credit will be discounted
to present value using a discount rate equal to the Default Rate. The credit
will be applied against what you owe us under this Master Agreement, the
Schedule, the Note and any other agreements, loans or leases that you have
with us. If the credit exceeds the amount you owe under this Master
Agreement, the Schedule, the Note and any other agreements, loans or leases
that you have with us, we will refund the amount of the excess to you.
- So long as we have a lien on and security interest in the Receivables (as
defined in the Schedule), we may deliver written notices to all of your
account debtors (including, without limitation, Ortho Pharmaceutical
Corporation) instructing them to pay all Receivables directly to us. In
furtherance of this right, you appoint us and our designees as your attorney,
with the power to endorse your name on any checks, notes, acceptances, money
orders or other forms of payment or security that come into our possession;
to sign your name on any invoice or bill of lading relating to any
Receivable, on drafts against customers, on assignments of Receivables, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to customers or account debtors; to
send requests for verification of Receivables to customers or account
debtors, to notify the post office authorities to change the address for
delivery of your mail to an address designated by us and to open and dispose
of all mail addressed to you; and to do all other things we deem necessary or
desirable to carry out the terms of this Master Agreement. You hereby ratify
and approve all acts of such attorney. Neither we nor our designees shall be
liable for any acts or omissions nor for any error of judgment or mistake of
fact or law while acting as your attorney. This power, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied.
- Return conditions: Following an Event of Default, at our request you will
return the Collateral, freight and insurance prepaid by you, to us at a
location we request in the United States of America. It will be returned in
good operating condition, as required by Section 5 above. The Collateral
will not be subject to any liens when it is returned. All advertising
insignia will be removed and the finish will be painted or blended so that
nobody can see that advertising insignia used to be there.
* You will pack or crate the Collateral for shipping in the original
containers, or comparable ones. You will do this carefully and follow all
recommendations of the Supplier and the Manufacturer as to packing or
crating.
* You will also return to us the plans, specifications, operating manuals,
software documentation, discs, warranties and other documents furnished by
the Manufacturer or Supplier. You will also return to us all service logs
and service reports, as well as all written materials that you may have
concerning the maintenance and operation of the Collateral.
* At our request, you will provide us with up to 60 days free storage of the
Collateral at your location, and will let us (or our agent) have access to
the Collateral in order to inspect it and sell it.
* You will pay us what it costs us to repair the Collateral if you do not
return it in the required condition.
You will also pay us for the following:
- All our expenses of enforcing our remedies. This includes all our
expenses to repossess, store, ship, repair and sell the Collateral.
- Our reasonable attorney's fees and expenses.
- Default interest on everything you owe us from the date of your default to
the date on which we are paid in full at the Default Rate.
You realize that the damages we could suffer as a result of your default are
very uncertain. This is why we have agreed with you in advance on the
Default Rate to be used in calculating the payments you will owe us if you
default. You agree that, for these reasons, the payments you will owe us if
you default are "agreed" or "liquidated" damages. You understand that these
payments are not "penalties" or "forfeitures."
LATE FEES
- ---------
You will pay us a late fee whenever you pay any amount that you owe us more
than ten (10) days after it is due. You will pay the late fee within one
month after the late Payment was originally due. The late fee will be ten
(10%) percent of the late Payment. If this exceeds the highest legal amount
we can charge you, you will only be required to pay the highest legal amount.
The late fee is intended to reimburse us for our collection costs that are
caused by late Payment. It is charged in addition to all other amounts you
are required to pay us, including Default Interest.
7. EXPENSES AND INDEMNITIES
------------------------
PERFORMING YOUR OBLIGATIONS IF YOU DO NOT
- -----------------------------------------
If you do not perform one or more of your obligations under this Master
Agreement or Schedule or Note, we may perform it for you. We will notify you
in writing at least ten (10) days before we do this. We do not have to
perform any of your obligations for you. If we do choose to perform them,
you will pay us all of our expenses to perform the obligations. You will
also reimburse us for any money that we advance to perform your obligations,
together with interest at the Default Rate on that amount. These will be
additional "Payments" that you will owe us and you will pay them at the same
time that your next Payment is due.
- You will indemnify us, defend us and hold us harmless for any and all
claims, expenses and attorney's fees concerning or arising from the
Collateral, this Agreement, or any Schedule or Note, or your breach of any
representation or warranty. It includes any claims concerning the
manufacture, selection, delivery, possession, use, operation or return of the
Collateral.
- This obligation of yours to indemnify us continues even after the Term is
over.
8. MISCELLANEOUS
-------------
WE MAY ASSIGN OR GRANT A SECURITY INTEREST IN THIS AGREEMENT, SCHEDULE, NOTE
OR ANY PAYMENTS WITHOUT YOUR PERMISSION. THE PERSON TO WHOM WE ASSIGN IS
CALLED THE "ASSIGNEE." THE ASSIGNEE WILL NOT HAVE ANY OF OUR OBLIGATIONS
UNDER THIS MASTER AGREEMENT. YOU WILL NOT BE ABLE TO RAISE ANY DEFENSE,
COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE.
UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER
YOUR RIGHTS UNDER THIS MASTER AGREEMENT OR ANY SCHEDULE. YOU ALSO ARE NOT
ALLOWED TO LEASE OR RENT THE COLLATERAL OR LET ANYBODY ELSE USE IT UNLESS WE
GIVE YOU OUR WRITTEN PERMISSION.
WE DID NOT MANUFACTURE OR SUPPLY THE COLLATERAL. WE ARE NOT A DEALER IN THE
COLLATERAL. INSTEAD, YOU CHOSE THE COLLATERAL.
WE DO NOT MAKE ANY WARRANTY AS TO THE COLLATERAL. WE DO NOT MAKE ANY
WARRANTY AS TO "MERCHANTABILITY" OR "SUITABILITY" OR "FITNESS FOR A
PARTICULAR PURPOSE" OR "NONINFRINGEMENT" OF ANY PATENT, COPYRIGHT OR OTHER
INTELLECTUAL PROPERTY RIGHT.
WE WILL NOT BE RESPONSIBLE FOR ANY LOSS, DAMAGE, OR INJURY TO YOU OR ANYBODY
ELSE AS A RESULT OF ANY DEFECTS, HIDDEN OR OTHERWISE, IN THE COLLATERAL UNDER
"STRICT LIABILITY" LAWS OR ANY OTHER LAWS.
WE WILL NOT BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, LOSS OF PROFITS OR GOODWILL.
If the Collateral is unsatisfactory, you will continue to pay us all Payments
and other amounts you are required to pay us. You must seek repair or
replacement of the equipment solely from the Manufacturer or Supplier and not
from us. Neither the Manufacturer nor the Supplier is our "agent," so they
cannot speak for us and they are not allowed to make any changes in this
Master Agreement or any Schedule or Note, or give up any of our rights.
ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE
- -----------------------------------------------------------------
OF PROCESS, WAIVER OF JURY TRIAL.
- ---------------------------------
THIS MASTER AGREEMENT WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN
WRITING.
THIS MASTER AGREEMENT IS GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF
ARIZONA (NOT INCLUDING THE "CHOICE OF LAW" DOCTRINE), THE STATE IN WHICH OUR
OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS OR CONDITIONS OF THIS
MASTER AGREEMENT OCCURRED AND FROM WHICH DISBURSEMENT OF THE LOAN PROCEEDS
WILL BE ORDERED. HOWEVER, IF THIS MASTER AGREEMENT IS UNENFORCEABLE UNDER
ARIZONA LAW, IT WILL INSTEAD BE GOVERNED BY THE LAWS OF THE STATE IN WHICH
THE COLLATERAL IS LOCATED.
YOU MAY ONLY SUE US IN A FEDERAL OR STATE COURT THAT IS LOCATED IN MARICOPA
COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES,
INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL
JURISDICTION OF THESE ARIZONA COURTS. YOU WILL NOT CLAIM THAT MARICOPA
COUNTY, ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A PROPER
"VENUE."
WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH
PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO YOUR
ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.
YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.
NOTICES.
- --------
Your address for notices is your address set forth below your name on the
signature page of this Master Agreement. We may give you written notice in
person, by mail, by overnight delivery service, or by fax. Notice will be
sent to your address below your signature. Mail notice will be effective
three (3) days after we mail it with prepaid postage to the right address.
Overnight delivery notice requires a receipt and tracking number. Fax notice
requires a receipt from the sending machine showing that it has been sent to
your fax number and received.
Our address for notices is our address set forth below our name on the
signature page of this Master Agreement, with attention to Linda Moschitto,
Director, Contract Administration. You will also give copies of all notices
to us to our principal place of business at the address set forth in the
opening paragraph of this Master Agreement, with attention to Vice President,
Law Department. You may give us notice the same way that we may give you
notice.
GENERAL.
- --------
This Master Agreement benefits our successors and assigns. This Master
Agreement benefits only those successors and assigns of yours that we have
approved in writing.
This Master Agreement binds your successors and assigns. This Master
Agreement binds only those successors and assigns of ours that clearly assume
our obligations in writing.
TIME IS OF THE ESSENCE OF THIS MASTER AGREEMENT
- -----------------------------------------------
This Master Agreement, all of the Schedules and the Note and the Commitment
Letter are together the entire agreement between you and us concerning the
Collateral.
Only an employee of FINOVA who is authorized by corporate resolution or
policy may modify or amend this Loan or any Schedule or Note on our behalf,
and this must be in writing. Only he or she may give up any of our rights,
and this must be in writing. If more than one person is the Borrower under
this Agreement, then each of you is jointly and severally liable for your
obligations under this Master Agreement.
This Master Agreement is only for your benefit and for our benefit, as well
as our successors and assigns. It is not intended to benefit any other
person.
If any provision in this Master Agreement is unenforceable, then that
provision must be deleted. Only unenforceable provisions are to be deleted.
The rest of this Master Loan Agreement will remain as written.
PUBLICITY.
- ----------
We may make press releases and publish a tombstone announcing this
transaction and its total amount. You may not publicize this transaction in
any way without our prior written consent.
JOINT AND SEVERAL LIABILITY.
- ----------------------------
All references to "Borrower" shall mean each of Advanced Polymer Systems,
Inc., APS Analytical Standards, Inc., Premier, Inc, and APS Joint Venture
Corp., jointly and severally, individually and collectively, and the
successors and assigns of each.
Advanced Polymer Systems, Inc., APS Analytical Standards, Inc., Premier,
Inc., and APS Joint Venture Corp. acknowledge and confirm that the
indebtedness, liabilities and obligations of each of them under this Master
Agreement, the Note, the Mortgage and the other agreements, instruments and
documents executed in connection herewith, or otherwise, are and shall be
joint and several.
LENDER: BORROWER:
FINOVA CAPITAL CORPORATION ADVANCED POLYMER SYSTEMS, INC.
10 Waterside Drive 123 Saginaw Drive
Farmington, CT 06032-3065 Redwood City, California 94063
Fax Number: (860) 676-1814 Fax Number: (650) 365-6490
By: /S/ Linda A. Moschitto By: /S/ Michael O'Connell
Printed Name: Linda A. Moschitto Printed Name: Michael O'Connell
Title: Director-Contract Admin. Title: Chief Financial Officer
Fax Number: (860) 676-1814 Taxpayer ID# 94-2875566
Date Accepted: April 1, 1999 Fax Number: (650) 365-6490
Dated: March 19, 1999
APS ANALYTICAL STANDARDS, INC.
123 Saginaw Drive
Redwood City, California 94063
Fax Number: (650) 365-6490
By: /S/ Michael O'Connell
Printed Name: Michael O'Connell
Title: Chief Financial Officer
Taxpayer ID# 94-3231278
Dated: March 19, 1999
PREMIER, INC.
123 Saginaw Drive
Redwood City, California 94063
Fax Number: (650) 365-6490
By: /S/ Michael O'Connell
Printed Name: Michael O'Connell
Title: Chief Financial Officer
Taxpayer ID# 06-1259435
Dated: March 19, 1999
APS JOINT VENTURE CORP.
123 Saginaw Drive
Redwood City, California 94063
Fax Number: (650) 365-6490
By: /S/ Michael O'Connell
Printed Name: Michael O'Connell
Title: Chief Financial Officer
Taxpayer ID# 94-3231278
Dated: March 19, 1999
STATE OF California
COUNTY OF San Mateo
I acknowledge that Michael O'Connell, who stated that he/she is Chief
Financial Officer of Advanced Polymer Systems, Inc., signed this Master Loan
and Security Agreement in my presence today: March 19, 1999. He/She
acknowledged to me that his/her signature on this Master Loan and Security
Agreement was authorized by a valid resolution or other valid authorization
from Borrower's board of directors or other governing body.
/S/ Diane Anderson
------------------
Notary Public
[SEAL]
STATE OF California
COUNTY OF San Mateo
I acknowledge that Michael O'Connell, who stated that he/she is Chief
Financial Officer of Advanced Polymer Systems, Inc., signed this Master Loan
and Security Agreement in my presence today: March 19, 1999. He/She
acknowledged to me that his/her signature on this Master Loan and Security
Agreement was authorized by a valid resolution or other valid authorization
from Borrower's board of directors or other governing body.
/S/ Diane Anderson
------------------
Notary Public
[SEAL]
STATE OF California
COUNTY OF San Mateo
I acknowledge that Michael O'Connell, who stated that he/she is Chief
Financial Officer of Advanced Polymer Systems, Inc., signed this Master Loan
and Security Agreement in my presence today: March 19, 1999. He/She
acknowledged to me that his/her signature on this Master Loan and Security
Agreement was authorized by a valid resolution or other valid authorization
from Borrower's board of directors or other governing body.
/S/ Diane Anderson
------------------
Notary Public
[SEAL]
STATE OF California
COUNTY OF San Mateo
I acknowledge that Michael O'Connell, who stated that he/she is Chief
Financial Officer of Advanced Polymer Systems, Inc., signed this Master Loan
and Security Agreement in my presence today: March 19, 1999. He/She
acknowledged to me that his/her signature on this Master Loan and Security
Agreement was authorized by a valid resolution or other valid authorization
from Borrower's board of directors or other governing body.
/S/ Diane Anderson
------------------
Notary Public
[SEAL]
Exhibit A
PREPAYMENT PREMIUM
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You may not prepay the Loan, in whole or in part, prior to the date that you
make the twenty-fourth (24th) timely consecutive monthly Payment. You shall
have the right, upon not less than thirty (30) days prior written notice to
Lender, on any regularly scheduled Payment date occurring after the twenty-
fourth (24th) regularly scheduled Payment date, to prepay the outstanding
principal balance of the Loan in whole, but not in part, provided that you
shall pay to us, together with the principal balance of the Loan, (i) all
accrued and unpaid interest on the amount prepaid through the date of
prepayment, (ii) all outstanding fees, charges and other amounts then due
under the Master Agreement, Schedule, Note and all of the other agreements,
instruments and documents executed in connection herewith, and (iii) a
prepayment fee ("Prepayment Fee") in an amount equal to the product of (A)
the outstanding principal balance of the Loan at the time of prepayment,
times (B) the applicable percentage set forth opposite the month of the Term
in which the prepayment occurs, as set forth below:
Number of
Month of the Term Percentage
----------------- ----------
1 through and including 24 No Prepayment Permitted
25 through and including 36 2.75%
37 through and including 48 1.50%
MORTGAGE AND SECURITY AGREEMENT
-------------------------------
THIS IS A MULTIPLE INDEBTEDNESS MORTGAGE FOR
PURPOSES OF LOUISIANA REVISED STATUTE ss.9:5217.
BE IT KNOWN, that on the dates set forth hereinbelow, before the Notaries
Public, duly commissioned and qualified, in and for the jurisdictions set
forth below and in the presence of the witnesses hereinafter named and
undersigned,
PERSONALLY CAME AND APPEARED:
ADVANCED POLYMER SYSTEMS, INC., a corporation having its principal place of
business at 123 Saginaw Drive, Redwood City, California 94063, organized
under the laws of the State of Delaware (TIN#94-2875566) and authorized to do
and doing business in the State of Louisiana, represented herein by Michael
O'Connell, its duly authorized Vice President, pursuant to authority
contained in its Corporate Resolutions, with a mailing address of 123 Saginaw
Drive, Redwood City, California 94063 (hereinafter referred to as
"Borrower"), who declared and acknowledged that Borrower is justly and truly
indebted unto FINOVA CAPITAL CORPORATION, a corporation, having a principal
place of business at 1850 North Central Avenue, Phoenix, Arizona 85004,
organized under the laws of the State of Delaware, being represented herein
by Linda A. Moschitto, its duly authorized Director, Contract Administration,
with a mailing address of 1850 North Central Avenue, Phoenix, Arizona 85004
(hereinafter referred to as "Lender").
1. DEFINITION OF TERMS. As used in this Mortgage and Security Agreement, the
following terms shall have the following meanings:
1.1 Land: The land described in Exhibit A attached hereto, together
with all right, title and interest of Borrower thereto.
1.2 Improvements: (a) All buildings, structures and other improvements
now or hereafter existing or erected on the Land, (b) all of Borrower's
interest in personal property of any kind or nature whatsoever, which is or
will be used on or in connection with, the Land or any of the foregoing,
including, without limitation, all equipment, machinery, and furniture,
together with all present and future attachments, accessions, replacements
and additions located on the Land (the "Personalty"), and (c) all fixtures of
every kind and nature now or hereafter owned by Borrower and used in
connection with such improvements.
1.3 Property: The Land, Improvements, Easements or any portion thereof
or interest therein.
1.4 Lease(s): All leases and other occupancy or use agreements, now or
hereafter existing, which cover or relate to all or any portion of the
Property.
1.5 Secured Debt: All principal, interest, late charges, other charges,
prepayment and other premiums, indemnification amounts due or to become due
by Borrower to Lender and all other liabilities of Borrower to Lender,
howsoever created, whether now existing or hereafter arising including,
without limitation, obligations under any guarantee and amounts due or to
become due under the Loan Documents.
1.6 Notes: One or more promissory notes made by Borrower (which may
contain co-borrowers) in favor of Lender, including, without limitation, a
certain Promissory Note No. 1 of even date herewith made by Borrower (and APS
Analytical Standards, Inc., Premier, Inc. and APS Joint Venture Corp.) to
Lender in the principal amount of $4,000,000.
1.7 Master Loan and Security Agreement: A certain Master Loan and
Security Agreement of even date herewith made by Borrower, APS Analytical
Standards, Inc., Premier, Inc., and APS Joint Venture Corp. in favor of
Lender.
1.8 Indenture: This Mortgage and Security Agreement and all
modifications or amendments thereto or extensions thereof.
1.9 Loan Documents: The Indenture, the Notes, the Master Loan and
Security Agreement, personal property leases, guarantees, Uniform Commercial
Code financing statements and amendments and any and all other documents or
instruments related to or evidencing any portion of the Secured Debt, whether
now or hereafter given or made by or on behalf of Borrower to Lender.
1.10 Easements: All easements, rights of way, gores of land, streets,
ways, alleys, passages, sewer rights, water courses, water rights and powers,
and all appurtenances whatsoever, in any way, now or in the future,
belonging, or relating to the Land, whether now owned or hereafter acquired
by Borrower.
1.11 Maximum Amount: For purposes of recording this Indenture only, the
maximum amount of the Secured Debt secured by this Indenture shall be
$4,000,000.
2. GRANTING CLAUSES. Borrower hereby irrevocably and absolutely grants,
assigns, mortgages, bargains, sells and conveys to Lender, with all POWERS OF
SALE AND STATUTORY RIGHTS AND COVENANTS, and grants to Lender a security
interest in all of Borrower's estate, right, title and interest in the
Property, together with all proceeds thereof (including but not limited to
Insurance Proceeds and Taking Proceeds as hereinafter defined) FOR THE
PURPOSE OF SECURING payment of the Secured Debt and the due, prompt and
complete observance, performance and fulfillment of each and every
obligation, covenant, condition, warranty, agreement and representation of
Borrower contained in the Loan Documents. This Indenture is also intended to
be a security agreement under the Uniform Commercial Code as in force, from
time to time, in the State where the Improvements are located (the "State").
3. ASSIGNMENT OF LEASES AND RENTS. As additional collateral for the
payment of the Secured Debt, Borrower hereby assigns to Lender the Leases,
including the rents, income and profits of the Property, and grants the
Lender the right to enter upon and take possession of the Property for the
purpose of collecting the same and to let the Property or any part thereof,
and to apply the rents, income and profits (after payment of all necessary
charges and expenses) on account of the Secured Debt. Until an Event of
Default as hereinafter defined shall occur, Borrower shall be entitled to
collect and receive said rents, income and profits. Borrower warrants that:
(a) Borrower is or will be the sole owner of the entire lessor's interest in
the Leases; (b) the Leases are or will be valid and enforceable and have not
been and will not be altered, modified, or amended in any manner whatsoever
except as herein set forth; (c) no rents reserved in the Leases have been or
will be assigned or anticipated; (d) no rents for any period subsequent to
the date of this assignment have been or will be collected in advance of the
time when the same shall become due under the terms of the Leases. Borrower
will not (i) execute any other assignment of its interest in the Leases or
assignment of rents arising or accruing from the Lease or from the Property;
(ii) alter, modify or change the terms of any Lease or give any consent to
exercise any option required or permitted by such terms without the prior
written consent of Lender; (iii) consent to any assignment or subletting
under any Lease not in accordance with its terms, without the prior written
consent of Lender. If an Event of Default shall occur Borrower will, upon
Lender's demand, pay monthly in advance to Lender or to any receiver
appointed to collect said rents, income and profits, the fair and reasonable
rental value for the use and occupation of the Property. The exercise by
Borrower of any right or remedy available under applicable law with respect
to the Lease including without limitation, the collection of the rents,
income and profits and the application thereof as herein provided shall not
be considered a waiver of any default by Lender under this Indenture or the
Lease or this assignment. Lender shall not be liable for any loss sustained
by Borrower resulting from Lender's failure to let the Property after default
or from any other act or omission of Lender in managing the Property after
default unless such loss is caused by the willful misconduct and bad faith of
Lender. Lender shall not be obligated to perform or discharge any
obligation, duty, or liability under any Lease or under or by reason of this
assignment. Should Lender incur any such liability under any Lease or under
or by reason of this assignment, or in defense of any such claims or demands,
the amount thereof, including costs, expenses and reasonable attorneys' fees,
shall be Secured Debt.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants
to Lender that the following are true, correct and complete as of date of the
Indenture:
4.1 Due Organization; Authority. If Borrower is a corporation,
partnership or a limited liability company, it is duly organized, validly
existing and in good standing under the laws of the State of its organization
and is duly qualified to conduct business and is in good standing in the
State and has power to carry on its business as presently conducted, to own
the Property, to make and enter into the Loan Documents and to carry out the
transaction contemplated therein.
4.2 Execution, Delivery and Effect of Loan Documents. The Loan
Documents have each been duly authorized, executed and delivered by Borrower,
and each of the Loan Documents is a legal, valid and binding obligation of
Borrower, enforceable in accordance with its terms.
4.3 No Violation; Required Approvals. Borrower is not in material
violation of any term or provision of any document governing its organization
or existence or in default under any material instruments or obligations
relating to Borrower's business, assets or the Property and no claim or
default relating to such instruments, assets, business, or the Property has
been asserted against Borrower. The execution and performance by Borrower of
the Loan Documents and the consummation of the transactions contemplated
thereby will not result in any material breach of, or constitute a material
default under, any contract, agreement, document or other instrument to which
Borrower is a party or by which Borrower may be bound or affected. No
approval by, authorization of, or filing with any federal, state or municipal
or other governmental commission, board or agency or other governmental
authority is required in connection with the authorization, execution and
delivery of the Loan Documents.
4.4 Construction and Completion of Improvements. The Improvements have
been completed and installed in a good and workmanlike manner, in compliance
with the Laws as such term is hereinafter defined. There are no contracts or
agreements of any kind, either oral or in writing, now in existence covering
labor or materials heretofore furnished or to be furnished in connection with
the Property which are incomplete nor is any indebtedness outstanding for
labor and materials in connection with the Property.
4.5 Litigation. There are no pending or threatened suits, judgments,
executions, condemnation, proceedings, zoning changes or any other
proceedings pending or of record in any court of any nature or before or by
any governmental or administrative agency which could in any manner now or
hereafter affect the Borrower's title to, possession of or use of the
Property, or which could now be or hereafter constitute a lien thereon or
materially or adversely affect the Property or Borrower or change the
Property. No petitions or cases have been filed by or against Borrower under
any federal or state insolvency law. No portion of the Property is subject
to any right of redemption in favor of any third party under the foreclosure
laws of the State.
4.6 Financial Statements. All statements, financial or otherwise,
submitted to Lender in connection with the extension of credit evidenced by
the Loan Documents are true, correct and complete in all material respects,
and do not omit the statement of any fact or circumstance necessary to
prevent the statement contained therein from being misleading or false and
all such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied, and fairly present the
financial condition of Borrower or entities covered by such statements as of
the date thereof. Since the date thereof, neither Borrower nor any such
entity has experienced any material adverse change in its finances, business,
operations, affairs or prospects.
4.7 Title to Property. Borrower has good and clear, record and
marketable title to the Property, free of all liens, encumbrances or
restrictions.
4.8 Hazardous Waste. To the knowledge of the Borrower, after due
inquiry, the Land and Improvements have never been used as a land fill to
receive solid waste, whether or not hazardous, and has not been used for
disposal, storage or treatment of any waste, trash, garbage, industrial by--
product, chemical or hazardous substance of any nature, including without
limitation radioactive containers, polychlorinated biphenyls, asbestos,
pesticides, herbicides, pesticide or herbicide containers, untreated sewage,
industrial process sludge or any "hazardous substance" as such term is
defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. The Property does not now and will not
contain asbestos insulation or electrical transformers cooled by
phenylchlorobenzene. To the knowledge of Borrower, after due inquiry, no
release (a "Release") of oil or petroleum or chemical liquids or solids,
liquid or gaseous products or hazardous substance has occurred on the Land or
other real property in the State, now or previously owned by Borrower or any
of the partners of Borrower (if Borrower is a partnership), or any of the
stockholders or other persons having a legal or beneficial interest in
Borrower (if Borrower is a corporation, trust or other legal entity).
Borrower has not received any notice from any governmental agency or from any
tenant under a Lease with respect to any such Release.
4.9 Compliance with the Law. The Improvements and the use to which the
Borrower makes thereof, comply with all applicable restrictive covenants,
zoning ordinances, building codes and flood disaster laws; that Borrower has
obtained all requisite zoning, utility and building permits from all
governmental entities or authorities having jurisdiction over the Property;
and that no permits or licenses are required for the operation of the
Property.
4.10 Flood Plain. The Property is not located in an area designated as a
Flood Plain or if so located Borrower has obtained Federal Flood Plain
insurance coverage and delivered a certificate of such coverage to Lender.
4.11 Taxes; Liens. There are no unpaid taxes, assessments or liens
against the Property for any present or past due taxes or for paving,
sidewalk, curbing, sewer or any other street improvements of any kind, with
the exception of real estate taxes which are not yet due and payable.
4.12 Purpose of Loan; Homestead; Knowledge of Real Estate. The proceeds
of the Loan shall be used solely for commercial or business purposes. The
obligations evidenced by the Loan Documents are made on Borrower's own behalf
and for its own account. No portion of the Property is or will be used as
the residential homestead of Borrower. Borrower is knowledgeable and
experienced in real estate transactions and real estate financing, is
represented by counsel or persons who have such knowledge and experience or
has been made aware that Borrower should be represented by counsel and has
declined to be so represented.
4.13 Year 2000. Borrower shall take all action necessary to assure that
there will be no material adverse change to Borrower's business by reason of
the advent of the year 2000, including without limitation, that all computer-
based systems, embedded microchips and other processing capabilities
effectively recognize and process dates after April 1, 1999.
5. COVENANTS OF BORROWER.
5.1 Payments.
(a) Secured Debt. Borrower shall pay promptly to Lender, when due,
the Secured Debt at the times and in the manner provided in the Loan
Documents. Time is of the essence with respect to payment of the Secured
Debt.
(b) Property Taxes and Charges. Borrower shall pay, prior to
delinquency, all real estate taxes and personal property taxes, assessments,
levies, utility and sewer charges, and any and all taxes and other charges,
imposed upon or assessed against Borrower or the Property or upon the rents,
income and profits of use or possession thereof, and any stamp or other taxes
which may be required to be paid with respect to any of the Loan Documents
("Property Taxes and Charges"). Upon Lender's request Borrower shall furnish
Lender with receipts showing payment of the Property Taxes and Charges prior
to such Property Taxes and Charges becoming delinquent.
(c) Taxes on Lender. If the Laws impose upon Lender the obligation
to pay the whole or any part of the Property Taxes and Charges or changes in
any way the Laws relating to taxation so as to adversely affect the Loan
Documents, then Borrower shall pay such Property Taxes and Charges or
reimburse Lender for such adverse affect immediately therefor, unless in the
opinion of counsel to Lender, it might be unlawful to require Borrower to pay
the same or such payment might result in the imposition of interest
prohibited by the Laws.
(d) Liabilities. Borrower shall pay, prior to delinquency, all
debts and liabilities incurred in the construction, operation, development,
use, enjoyment, repair, maintenance, replacement, restoration and management
of the Property including, without limitation, utility charges, sums due
mechanics and materialmen and other sums secured or which might if unpaid
become liens on the Property.
(e) Expenses. Borrower shall, to the extent allowed by the Laws,
pay, on demand and without counterclaim, setoff, deduction, defense, or
reduction, all fees (including, without limitation, reasonable attorneys'
fees and disbursements), taxes, recording fees, commissions and other
liabilities, costs and expenses incurred in connection with (i) the making or
enforcement of the Loan Documents; (ii) Lender's exercise and enforcement of
its rights and remedies hereunder; and (iii) Lender's protection of the
Property and its interest therein, including but not limited to Lender's
right to have performed an environmental site assessment of the Property and
to require any and all work be completed based upon such environmental site
assessment. Borrower shall not be entitled to any credit against or in
reduction of the Secured Debt by reason of the payment of any sums required
to be paid under Paragraph 5.1 (b) through (e) hereof.
5.2 Operation of the Property.
(a) Maintenance; Alterations. Borrower shall maintain and preserve
the Property in good repair and condition and shall not commit, permit or
suffer any demolition or waste of the Property or any use or occupancy which
constitutes a nuisance or violation under the Laws.
(b) Liens. Borrower shall promptly discharge any mechanics',
laborers', materialmen's or similar or other lien, charge, attachment, or lis
pendens filed or recorded which relates to Borrower, the Property or any
Release.
(c) Compliance with Laws and Private Covenants. Borrower shall
keep, observe, and satisfy, and not suffer violations of any, Federal,
regional, State and local laws (including, without limitation, all
environmental laws), ordinances, rules, regulations, statutes, decisions,
order, judgments, directives or any governmental or regulatory authority,
court or arbitrator (collectively "Laws") and private covenants materially
affecting the Property. Should Borrower receive notice from any governmental
agency, any tenant under a Lease or have actual knowledge of a Release at the
Property, Borrower shall promptly comply with all applicable laws requiring
notice, removal, treatment or disposal of such Release and provide Lender
with satisfactory evidence of such compliance. Borrower shall provide Lender
within thirty (30) days after demand by Lender, with a bond, letter of credit
or similar financial assurance evidencing to Lender's satisfaction that
sufficient funds are available to pay the cost of removing, treatment and
disposing of such Release and discharging any assessment that may be
established on the Property as a result thereof.
(d) Inspection. Borrower shall permit Lender to enter upon and
inspect the Property at reasonable times without delay, hindrance or
restriction.
5.3 Insurance. Borrower shall obtain and keep in force, with one or
more insurers acceptable to Lender, such insurance as Lender may from time to
time require by notice to Borrower, including, as a minimum, insurance
providing (i) comprehensive general liability (including bodily injury and
property damage coverage) with a broad form coverage endorsement and a
combined single limit of at least $2,000,000.00, and (ii) protection against
fire, "extended coverage" and other "All Risk" perils, including, if
specifically required by Lender, earthquake and flood, to the full
replacement value of the Property, with a waiver of subrogation endorsement.
All property insurance policies shall include the standard mortgagee clause
in use in the State naming Lender as the first mortgagee with loss payable to
Lender as such mortgagee and all other policies shall name Lender as an
additional insured. All insurance policies shall not be cancelable or
modifiable without 30 days' prior written notice to Lender (except in the
case of cancellation due to non-payment, in which case, the number of days
shall be 10) and shall provide for a deductible of not more than $5,000.00
for any single "Casualty" as hereinafter defined. Borrower shall provide
Lender with evidence of compliance with this Paragraph in such forms as
required from time to time by Lender, or at least 15 days prior to the
expiration date of any policy required hereunder, each bearing notations
evidencing the prior payment of premiums.
5.4 Sales; Leases and Encumbrances. Borrower shall not, without the
prior written consent of Lender, (a) convey, assign, sell, mortgage,
encumber, pledge, hypothecate, grant a security interest in, grant options
with respect to, lease or otherwise dispose of all or any part of any legal
or beneficial interest in any part or all of the Property, or any interest
therein; or (b) convey, assign, transfer or otherwise dispose of a material
portion of the assets of Borrower (other than the Property), other than in
the ordinary course of business of Borrower.
5.5 Change of Control of Borrower. Borrower shall not, without the prior
written consent of Lender, directly or indirectly permit the legal or
beneficial ownership of Borrower to change from that reflected on the
documents submitted to Lender to induce it to enter into the Loan Documents.
5.6 Financial Records and Statements. Borrower shall keep accurate
books and records in accordance with generally accepted accounting principles
consistently applied (or other basis of accounting practice prescribed or
permitted by Lender), in which full, true and correct entries shall be
promptly made as to all operations of the Property and shall permit all such
books and records to be inspected and copies made by Lender, its designees or
its representatives during customary business hours. Borrower shall deliver
or cause to be delivered to Lender within 90 days after the close of its
fiscal year a statement of condition or balance sheet of Borrower and if
requested by Lender a further statement relating solely to the Property, as
at the end of such year and an annual operating statement showing in
reasonable detail all income and expenses of Borrower certified as to
accuracy by either an independent certified public accountant acceptable to
Lender (if requested by Lender) or the senior financial officer or managing
partner of Borrower.
5.7 Further Assurances. Borrower shall promptly upon request of Lender
(a) correct any defect, error or omission which may be discovered in the
contents of any Loan Document or in the execution or acknowledgment thereof;
(b) execute, acknowledge, deliver and record or file such further instruments
(including, without limitation, mortgages, deeds of trust, security
agreements, financing statements and specific assignments of rents or leases)
and do such further acts, in either case as may be necessary, desirable or
proper in Lender's opinion to (i) protect and preserve the first and valid
lien and security interest of this Indenture on the Property or to subject
thereto any property intended by the terms thereof to be covered thereby; or
(ii) protect the interest and security interest of Lender in the Property
against the rights or interests of third parties, and (iii) carry out more
effectively the purposes of the Loan Documents. Borrower hereby appoints
Lender as its attorney-in-fact, coupled with an interest, to take the above
actions and to perform such obligations on behalf of the Borrower, at
Borrower's sole expense, if Borrower fails to comply fully with this
Paragraph.
5.8 Indemnity. Borrower shall indemnify, defend and hold harmless
Lender from and against, and, upon demand, reimburse Lender for, all claims,
demands, liabilities, losses, damages, judgments, penalties, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, which may be imposed upon, asserted against or incurred or
paid by Lender by reason of, on account of or in connection with any bodily
injury or death or property damage occurring in, upon or in the vicinity of
the Property through any cause whatsoever, or asserted against Lender on
account of any act performed or omitted to be performed under the Loan
Documents or on account of any transaction arising out of or in any way
connected with the Property or the Loan Documents, except as a result of the
willful misconduct or gross negligence of Lender. This provision shall
survive payment in full of the Secured Debt.
5.9 Notices. Borrower shall deliver to Lender at Lender's address set
forth herein promptly upon receipt of the same, copies of all notices,
certificates, documents and instruments received by Borrower which materially
and adversely affect Borrower, the Property or the Leases, including, without
limitation, those given in connection with a Release.
5.10 Estoppel Certificates. Borrower shall promptly furnish to Lender
from time to time, on the request of Lender, written statements signed and,
if so requested, acknowledged, setting forth the then unpaid principal and
interest on the Note and specifying any claims, offsets or defenses which
Borrower asserts against the Secured Debt or any obligations to be paid or
performed by Borrower under the Loan Documents, together with any other
information reasonably requested by Lender.
5.11 Defense. Borrower shall, without liability, cost or expense to
Lender, protect, preserve and defend title to the Property and the security
interest of Lender, against all adverse claimants to title or any possessory
or non-possessory interests therein.
5.12 Year 2000. Borrower shall take all action necessary to assure that
there will be no material adverse change to Borrower's business by reason of
the advent of the year 2000, including without limitation, that all computer-
based systems, embedded microchips and other processing capabilities
effectively recognize and process dates after April 1, 1999. At Lender's
request, Borrower shall provide to Lender assurance reasonably acceptable to
Lender that Borrower's computer-based systems, embedded microchips and other
processing capabilities are year 2000 compatible.
6. CASUALTIES AND TAKINGS.
6.1 Notice to Lender. In the case of any act or occurrence of any kind
or nature which results in damage, loss or destruction to the Property (a
"Casualty"), or commencement of any proceedings or actions which might result
in a condemnation or other taking for public or private use of the Property
or which related to injury, or damage thereto (a "Taking"), Borrower shall
immediately notify Lender describing the nature and the extent of the Taking
or the Casualty, as the case may be. Borrower shall promptly furnish to
Lender copies of all notice, pleadings, determinations and other papers in
any such proceedings or negotiations.
6.2 Repair and Replacement. In case of a Casualty or Taking, Borrower
shall promptly (at Borrower's sole cost and expense and regardless of whether
the insurance or other proceeds, if any, shall be sufficient or made
available by Lender for the purpose) restore, repair, replace and rebuild the
Property as nearly as possible to its quality, utility, value, condition and
character immediately prior to the Casualty or the Taking, as the case may
be.
6.3 Proceeds.
(a) Collection. Borrower shall use its best efforts to collect the
maximum amount of insurance proceeds payable on account of any Casualty
("Insurance Proceeds"), and the maximum award or payment or compensation
payable on account of any Taking ("Taking Proceeds"). In the case of a
Casualty, Lender may, at its sole option, make proof of loss to the insurer
if not made promptly by Borrower. Borrower shall not settle or otherwise
compromise any claim for Insurance Proceeds or Taking Proceeds without
Lender's prior written consent.
(b) Assignment to Lender. Borrower hereby assigns, sets over and
transfers to Lender all Insurance Proceeds and Taking Proceeds and authorizes
payment of such Proceeds to be made directly to Lender. Lender may, in its
sole discretion, apply such Proceeds to either of the following, or any
combination thereof:
(i) payment of the Secured Debt, in any order that Lender
determines and with respect to the Notes as provided therein; or
(ii) repair or replacement of any part of the Property so
destroyed, damaged or taken, in which case Lender may impose such terms,
conditions and requirements for the disbursement of proceeds for such
purposes as it, in its sole discretion, deems advisable.
If any portion of the Secured Debt shall thereafter be unpaid, Borrower shall
not be excused from the payment thereof in accordance with the terms of the
Loan Documents. Lender shall not, in any event or circumstance, be liable or
responsible for failure to collect or exercise diligence in the collection of
any Insurance Proceeds or Taking Proceeds.
7. DEFAULTS; REMEDIES OF LENDER
7.1 Events of Default. Any of the following shall constitute an "Event
of Default" hereunder or under the Note:
(a) Breach of Payment. The failure by Borrower to pay any portion
of the Secured Debt within ten (10) days of the date when due including,
without limitation, the Note or any installment thereof when due; or
(b) Misrepresentations. Any representation or warranty made by
Borrower in the Loan Documents or any certificate or agreement delivered in
connection with the Loan Documents proves to be untrue, misleading or is,
without limitation, not fulfilled in any material respect; or
(c) Breach of Covenants. Any breach by Borrower of any covenants in
the Loan Documents or failure to observe or perform any other covenants,
agreement, condition, term or provision of any of the Loan Documents or any
certificate or agreement delivered in connection with the Loan Documents,
which breach or failure continues for 30 days after written notice thereof by
Lender to Borrower; or
(c) Change of Control. The occurrence of prohibited Change of
Control as provided in Section 5.5 hereof; or
(e) Bankruptcy. If (i) any one or more of the then legal or
beneficial owners of the Property, or any individual or entity then
personally liable on the Secured Debt (including, without limitation, any
guarantor) or, if Borrower is a partnership or a limited liability company,
any general partner, joint venturer or member (collectively the "Parties in
Interest" and individually a "Party in Interest") become insolvent, makes a
transfer in fraud of, or an assignment for the benefit of creditors, or
admits in writing its inability, or is unable to pay debts as they become
due; or (ii) a receiver, custodian, liquidator or trustee is appointed for
all or substantially all of the assets of a Party in Interest or for the
Property in any proceeding brought by a Party in Interest, or any such
receiver or trustee is appointed in any proceeding brought against a Party in
Interest or the Property and such appointment is not promptly contested or is
not dismissed or discharged within 120 days after such appointment, or a
Party in Interest consents or acquiesces in such appointment; or (iii) a
Party in Interest files a petition under the Bankruptcy Code, as amended, or
under any similar law or statute of the United States or any state thereof;
or (iv) a petition against a Party in Interest is filed commencing an
involuntary case under any federal or state insolvency law including the
Bankruptcy Code and such petition is not dismissed or discharged within 120
days after the filing thereof; or (v) any composition, rearrangement,
liquidation, extension, reorganization or other relief of debtors now or
hereafter existing is requested by a Party in Interest; or
(f) Adverse Court Action. A court of competent jurisdiction enters
an order staying the enforcement of this Indenture with respect to, assumes
custody of or sequesters all or a substantial part of, the Property, or the
Property is taken on execution or by process of law.
(g) Default by APS Analytical Standards, Inc. APS Analytical
Standards, Inc. breaches or defaults on any of the terms or provisions of any
agreement, instrument or document, whether now or hereafter executed, with or
for the benefit of Lender, including without limitation, promissory notes,
guaranties, equipment leases and security documents (including, but not
limited to security agreements, mortgages and deed of trust); or
(h) Default by Premier, Inc. Premier, Inc. breaches or defaults on
any of the terms or provisions of any agreement, instrument or document,
whether now or hereafter executed, with or for the benefit of Lender,
including without limitation, promissory notes, guaranties, equipment leases
and security documents (including, but not limited to security agreements,
mortgages and deeds of trust); or
(i) Default by APS Joint Venture Corp. APS Joint Venture Corp.
breaches or defaults on any of the terms or provisions of any agreement,
instrument or document, whether now or hereafter executed, with or for the
benefit of Lender, including without limitation, promissory notes,
guaranties, equipment leases and security documents (including, but not
limited to security agreements, mortgages and deeds of trust).
7.2 Remedies. In case of an Event of Default, Lender may, at any time
thereafter, at its option and without notice, exercise any or all of the
following remedies:
(a) Acceleration. Declare the entire Secured Debt immediately due
and payable, without notice, and it shall thereupon be immediately due and
payable; or
(b) Judicial Foreclosure and Other Action. Commence and maintain an
action or actions in any court of competent jurisdiction to foreclose this
Indenture pursuant to the Laws of the State or to obtain specific enforcement
of the covenants of Borrower hereunder. Borrower agrees that such covenants
shall be specifically enforceable by injunction or any other appropriate
equitable remedy; or
(c) Confession of Judgment. To cause the Property to be seized and
sold under executory process without appraisement, appraisement being
expressly waived, as an entirety or in parcels, as Lender may determine, to
the highest bidder for cash. Borrower hereby confesses judgment in favor of
the Lender, or any future holder or holders of the Note up to the full amount
of principal, interest and attorney's fees and for any sums that the Lender
may advance during the life of this mortgage for the payment of premiums of
insurance, taxes and assessments or for the protection and preservation of
its mortgage as authorized elsewhere in this act. Borrower does herein and
hereby waive, in favor of the lender, and in favor of any future holder of
the Note secured hereby, any and all homestead exemption to which Borrower is
or may be entitled under the Constitution and laws of the State of Louisiana,
insofar as the Property hereby mortgaged is concerned.
Borrower hereby expressly waives: (i) the benefit of appraisement as
provided in Articles 2332, 2336, 2723 and 2724, Louisiana Code of Civil
Procedure, and all other laws conferring the same; (ii) the demand and three
(3) days delay accorded by Articles 2639 and 2721, Louisiana Code of Civil
Procedure; (iii) the Notice of Seizure required by Articles 2293 and 2721,
Louisiana Code of Civil Procedure; (iv) the three (3) days delay provided by
Articles 2331 and 2722, Louisiana Code of Civil Procedure; and (v) the
benefit of the other provisions of Articles 2331, 2722 and 2723, Louisiana
Code of Civil Procedure, and any other Articles not specifically mentioned
above; and Borrower expressly agrees to the immediate seizure of the Property
subject to this mortgage in the event of suit thereof.
(d) Offset Rights. Apply in satisfaction of the Secured Debt or any
amount at any time to become due or payable in connection with the ownership,
occupancy, use, restoration or repair of the Property, any deposits or other
sums credited by or due from Lender to Borrower, including, without
limitation, Insurance Proceeds and the Taking Proceeds; or
(e) Cure a Default. Without releasing Borrower from any obligation
hereunder or under the Loan Documents, cure any default by Borrower. In
connection therewith, Lender may enter upon the Property and do such acts and
things as Lender deems necessary or desirable to protect the Property or the
Leases; or
(f) Possession of Property. Take physical possession of the Property
and of all books, records, documents and accounts relating thereto and
exercise, without interference from Borrower, any and all rights which
Borrower has with respect to the Property, including, without limitation, the
right at Borrower's expense, to rent and lease the same and to hire a
professional property manager for the Property. If necessary to obtain
possession as provided for above, Lender may, without liability to Borrower
or other persons, invoke any and all legal remedies to dispossess Borrower,
including, without limitation, one or more actions for forcible entry and
detainer, trespass and restitution. In connection with any action taken by
Lender pursuant to this Paragraph Lender shall not be liable for any loss
sustained by Borrower resulting from any failure to let the Property or from
any other act or omission of Lender in managing the Property unless caused by
the willful misconduct or gross negligence of Lender, nor shall Lender be
obligated to perform or discharge any obligation, duty or liability under any
Lease or by reason of any Loan Document. Should Lender incur any such
liability, the amount thereof shall be secured hereby and Borrower shall
reimburse Lender therefor immediately upon demand. Lender shall have full
power to make, from time to time, all alterations, renovations, repairs and
replacements to the Property as may seem proper to Lender; or
(g) Receiver. Secure the appointment of a receiver for the Property
whether such receivership be incident to a proposed sale of such Property or
otherwise, and without regard to the value of the Property or the solvency of
Borrower. Borrower hereby consents to the appointment of such receiver or
receivers, waives any and all defenses to such appointment and agrees not to
oppose any application therefor by Lender. The appointment of such receiver,
trustee or other appointee by virtue of any court order, or laws shall not
impair or in any manner prejudice the rights of Lender to receive payment of
rents and income; or
(h) Uniform Commercial Code Remedies. Exercise any and all rights
of a secured party with respect to that portion of the Indenture which
constitutes personal property under the Uniform Commercial Code of the State.
Written notice mailed to Borrower, as provided herein, 10 days prior to the
date of public sale of the Personalty or prior to the date, after which
private sale of such Personalty will be made, shall constitute reasonable
notice. Any sale made pursuant to the provisions of this Paragraph shall be
deemed to have been a public sale conducted in a commercially reasonable
manner, if held contemporaneously with the sale of the remainder of the
Property. In the event of a foreclosure sale, whether made by Lender under
the terms hereof, or under judgment of a court, such Personalty and the other
parts of the Property may, at the option of Lender, be sold in parts or as a
whole; or
(i) Subrogation. Have and exercise all rights and remedies of any
person, entity or body politic to whom Lender renders payment or performance
in connection with the exercise of its rights and remedies under the Loan
Documents; or
(j) Keeper. In the event of foreclosure, Lender may elect to serve
as keeper ("Keeper") or to designate a Keeper and in such case, if Lender so
elects, Borrower hereby expressly authorizes and appoints Lender or its
designee as the Keeper of the Property pursuant to La.R.S. ss. 9:5136, et
seq. The reasonable compensation of the Keeper shall be secured by the lien
of this Indenture; or
(k) Louisiana Provisions. This Indenture has been executed by
Borrower pursuant to Louisiana Civil Code articles 3278 et seq., La. R.S. ss.
9:4401, La. R.S. ss.9:5386-5388, Ln. R.S., ss. 10:1-101 et seq. (the "Uniform
Commercial Code" or "UCC") and other applicable laws, for the purpose of
securing the Secured Debt that may now be existing and/or that may arise in
the future as provided herein, with the preferences and priorities provided
under applicable Louisiana law . In accordance with the requirements of
applicable law, including Louisiana Civil Code art. 3288 and La. R.S. ss.
9:4401, Borrower acknowledges, notwithstanding any other provision of this
Indenture or any other Loan Document to the contrary, the maximum amount of
Secured Debt secured hereby shall be U.S. $50,000,000.00. Borrower
authorizes Lender to file multiple originals, or photocopies, carbon copies,
or facsimile copies of this Indenture or of such financing statements with
the appropriate filing officer in the State of Louisiana pursuant to the
provisions of the Uniform Commercial Code. Borrower's employer
identification number is accurately set out on the first page of this
Indenture. Borrower will not change its employer identification number or
its name, identity or corporate structure so that any financing statement
filed in connection herewith may become seriously misleading unless and until
it notifies Lender in writing and executes all new appropriate financing
statements or other such documents as Lender may require, with Borrower being
required to pay the cost of such documentation and the filing thereof as
provided above.
(1) Other. Take such other actions or commence such other
proceedings under the Laws as Lender deems necessary or advisable to protect
its interest in the Property and/or collect the Secured Debt.
Any sums advanced by Lender under this Paragraph or Paragraph 5.1 hereof
shall bear interest at the interest rate specified in the Note plus 5%, (but
in no event more than the maximum rate permitted by law); and shall be
payable by Borrower on demand and such sums together with such interest
thereon shall constitute a part of the Secured Debt.
7.3 Holding Over. Should Borrower, after an Event of Default, continue
in possession of any part of the Property unlawfully, Borrower shall be a
tenant from day to day, terminable at the will of either Borrower or Lender,
at a reasonable rental per diem, such rental to be due and payable daily to
Lender.
7.4 General Provisions Relating to Remedies.
(a) Cumulative Remedies. All of the rights, remedies and options
set forth herein or otherwise available at law or in equity are cumulative
and concurrent and may be exercised without regard to the adequacy of or
exclusion of, any other right, remedy, option or security held by Lender.
(b) Right to Purchase. At any sales of the Property pursuant
hereto, Lender shall have the right to purchase the Property being sold, and
in such cases the right to credit against the amount of the bid made therefor
(to the extent necessary) all or any of the Secured Debt then due. If Lender
acquires the Property Borrower shall not be entitled to any proceeds of the
further sale of the Property by Lender.
(c) No Waiver or Release by Lender. Lender may resort to any
remedies and the security given by the Loan Documents in whole or in part,
and in such portions and in such order as may seem best to Lender in its sole
discretion, and any such action shall not in any way be considered as a
waiver of any of the rights, benefits or remedies evidenced by the Loan
Documents. The failure of Lender to exercise any right, remedy or option
provided for in the Loan Documents shall not be deemed to be a waiver of any
of the covenants or obligations secured by the Loan Documents. No sale of
all or any of the Property, no forbearance on the part of Lender and no
extension of the time for the payment of the whole or any part of the Secured
Debt or any other indulgence given by Lender to Borrower or any other person
or entity including, without limitation, any surrender, compromise, release,
renewal, extension, exchange or substitution which Lender may grant in
respect of the Property or any interest therein or any release or indulgence
granted to any maker, endorser, guarantor or surety of any of the Secured
Debt, shall operate to release or in any manner affect Lender's interest in
the Property or the liability of Borrower to pay the Secured Debt, except to
the extent that such liability shall be reduced by proceeds of sale of all or
any of the Property received by Lender.
(d) Waiver by Borrower. Borrower hereby waives the benefit of any
laws providing for appraisal or redemption, waives any right to bring or
utilize any defense, counterclaim or setoff, other than one in good faith
which denies the existence or sufficiency of the facts upon which the
foreclosure action is grounded or which is based on Lender's wrongful
actions. If any defense, counterclaim or setoff (other than one permitted by
the preceding sentence) is timely raised in such foreclosure action, such
defense, counterclaim or setoff shall be dismissed. If such defense,
counterclaim or setoff is based on a claim which could be tried in an action
for money damages, the foregoing waiver shall not bar a separate action for
such damages (unless such claim is required by Laws or applicable rules of
procedure to be pleaded in or consolidated with the action initiated by
Lender) but such separate action shall not thereafter be consolidated with
Lender's foreclosure action. The bringing of such separate action for money
damages shall not be deemed to afford any grounds for staying Lender's
foreclosure action. Borrower waives any and all right to a trial by jury in
any action or proceeding based hereon.
8. GENERAL.
(a) Amendments. The Loan Documents may not be waived, changed or
discharged orally, but only by an agreement in writing and signed by Lender.
Such permitted waiver, change or discharge shall be effective only in the
specific instances and for the purposes for which given and to the extent
therein specified. Reference to any of the Loan Documents in this Indenture
shall include all amendments, modifications, extensions and renewals thereof.
(b) Notices. Any notice request, demand or other communication required
or permitted under the Loan Documents (unless otherwise expressly provided
therein) shall be given in writing by delivering the same in person to the
intended addressee, by overnight courier service addressed as provided herein
or as either Borrower or Lender shall have designated by written notice to
the other. Such notices shall be deemed given when received or, in the case
of delivery by courier service with guaranteed next day delivery, the next
day or the day designated for delivery, or in the case of delivery by
certified United States Mail, two days after deposit therein. No notice to
or demand on Borrower in any case shall of itself entitle Borrower to any
other or further notice or demand in similar or other circumstances.
(c) Successors and Assigns. The terms, provisions, and conditions
hereof shall be binding upon Borrower, and any permitted successors and
assigns of Borrower, and shall inure to the Land. All references in this
Indenture to Borrower or Lender shall be deemed to include all such
successors and assigns.
(d) Severability. A determination that any provision of the Loan
Documents is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application
of any provision of the Loan Documents to any person or circumstances is
illegal or unenforceable shall not affect the enforceability or validity of
such provision as it may apply to any other persons or circumstances.
(e) Joint and Several Liability. If there is more than one Borrower,
the obligations and covenants of each Borrower shall be joint and several.
(f) Governing Laws. This Indenture shall be construed according to and
governed by the Laws of the State.
(g) Publicity. Lender is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the consummation
of this transaction and the aggregate amount thereof.
(h) Captions. All paragraph and subparagraph captions are for
convenience of reference only and shall not affect the construction of any
provision herein.
LENDER: BORROWER:
FINOVA CAPITAL CORPORATION ADVANCED POLYMER SYSTEMS, INC.
BY: /S/ Linda A. Moschitto BY: /S/ Michael O'Connell
-------------------------------- ----------------------------
1850 North Central Avenue 123 Saginaw Drive
Phoenix, Arizona 85004 Redwood City, California 94063
DATED AS OF: DATED AS OF:
March 29, 1999 March 19, 1999
- -------------- --------------
<PAGE>
THUS DONE AND SIGNED by the Borrower on the 19th day of March, 1999 in the
County of San Mateo, before me, Diane C. Anderson, the undersigned Notary
Public, duly commissioned and qualified in and for said County and State, and
in the presence of the undersigned competent witnesses, who have signed with
the undersigned Borrower after a due reading of the whole.
WITNESSES: ADVANCED POLYMER SYSTEMS, INC.
/S/ Mercedes Reshke /S/ Michael O'Connell
- ---------------------------- BY: ----------------------------
/S/ Alice Gray
- ----------------------------
/S/ Diane C. Anderson
---------------------
NOTARY PUBLIC
My Commission Expires: July 30, 1999
--------------
<PAGE>
THUS DONE AND SIGNED by the Borrower on the 24th day of March, 1999 in the
County of Hartford, before me, Connecticut, the undersigned Notary Public,
duly commissioned and qualified in and for said County and State, and in the
presence of the undersigned competent witnesses, who have signed with the
undersigned Borrower after a due reading of the whole.
WITNESSES: FINOVA CAPITAL CORPORATION
/S/ Barbara A. Sullivan /S/ Linda A. Moschitto
- ----------------------- BY: ----------------------
/S/ Gina Kluza
- --------------
/S/ Linda M. Parady
-------------------
NOTARY PUBLIC
My Commission Expires: 6/30/2001
---------
PROMISSORY NOTE
NO. 1
$4,000,000 March 29, 1999
ADVANCED POLYMER SYSTEMS, INC., a Delaware corporation, APS ANALYTICAL
STANDARDS, INC., a California corporation, PREMIER, INC., Connecticut
corporation, and APS JOINT VENTURE CORP., a Delaware corporation
(individually and collectively, "you"), jointly and severally, promise to pay
to the order of FINOVA CAPITAL CORPORATION ("we," "us" or "FINOVA") the
principal amount of Four Million Dollars ($4,000,000), together with interest
on the unpaid principal balance at the interest rate per annum and on the
dates and as otherwise provided in the "Master Agreement" and "Schedule"
referred to below.
If the interest rate charged would exceed the maximum legal rate, you will
only have to pay the maximum legal rate. You do not have to pay any excess
interest over and above the maximum legal rate of interest. However, if it
later becomes legal for you to pay all or part of any excess interest, you
will then pay it to us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside
Drive, Farmington, Connecticut 06032-3065, or to another address that we
request in writing. All payments will be made in immediately available
funds.
This Note is secured by a Master Loan and Security Agreement dated March 29,
1999 (the "Master Agreement"), between you and FINOVA, the Mortgage dated
March 29, 1999 executed by you, and by the Collateral and other collateral
set forth on Exhibit A to the attached Schedule (the "Schedule"), dated the
same date as this Note and made a part hereof. All of the terms contained in
the Schedule are incorporated in full herein as if set forth in its entirety.
This Note may be accelerated by us upon a payment default or upon another
default under the Master Agreement or Mortgage.
TIME IS OF THE ESSENCE.
- -----------------------
If you do not make a payment within ten (10) days after the date it is due,
you will also pay us a late charge of ten percent (10%) of the amount past
due. Your interest rate will be increased by four percent (4%) per annum,
over and above your regular interest rate if payment is not made at the
scheduled or accelerated maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses.
If we accelerate this Note, you will also owe a prepayment premium, as set
forth in Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED
IN WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND
FROM WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE
JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA.
YOU WAIVE TRIAL BY JURY.
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral
described in the Schedule, and that the Collateral will only be used for
business purposes.
The obligations of each of you under this Note shall be joint and several.
ADVANCED POLYMER SYSTEMS, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
----------------------
Name: /S/ Michael O'Connell
----------------------
Title: Chief Financial Officer
------------------------
Date: March 29, 1999 /S/Julian Stern
---------------
[Assistant] Secretary
APS ANALYTICAL STANDARDS, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
---------------------
Name: /S/ Michael O`Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
----------------
[Assistant] Secretary
PREMIER, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
---------------------
Name: /S/ Michael O'Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
----------------
[Assistant] Secretary
APS JOINT VENTURE CORP. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
---------------------
Name: /S/ Michael O'Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
[Assistant] Secretary
SCHEDULE NO. 1 TO
MASTER LOAN AND SECURITY AGREEMENT
Schedule No. 1s dated March 29, 1999, (this "Schedule") to PROMISSORY NOTE
NO. 1 and MASTER LOAN AND SECURITY AGREEMENT dated as of March 29, 1999 (the
"Master Agreement") between ADVANCED POLYMER SYSTEMS, INC., a Delaware
corporation, APS ANALYTICAL STANDARDS, INC., a California corporation,
PREMIER, INC., a Connecticut corporation and APS JOINT VENTURE CORP., a
Delaware corporation, each with its executive office and principal place of
business at123 Saginaw Drive, Redwood City, California 94063 (collectively,
"you"); and FINOVA CAPITAL CORPORATION, a Delaware corporation with its
executive office and principal place of business at 1850 North Central
Avenue, Phoenix, Arizona 85004 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Four Million Dollars
($4,000,000) from us. This borrowing is evidenced by your promissory note
dated the same date as this Schedule in the amount of Four Million Dollars
($4,000,000) (the "Note") to which this Schedule is attached and made a part
thereof.
2. PAYMENTS (SUBJET TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-eight (48) consecutive
monthly payments of principal and interest each in the amount of $107,120
(the 48th consecutive monthly payment is referred to as the "Final Payment").
These payments will be adjusted on the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the date
that we make the Loan to you. The second monthly payment of principal and
interest will be due on the thirtieth (30th) day of the month succeeding the
month that we make the Loan to you and the remaining payments will continue
on the same day in each and every month thereafter through and including the
date upon which the Final Payment is scheduled to be due (the "Maturity
Date"). Any remaining amount that you owe us is due on the "Maturity Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th)
day of the month in which we make the Loan to you (in the case of making the
Loan the 30th), interest only, at the interest rate, from the date we make
the Loan to you to the twenty-ninth (29th) day of the same month. If the
date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
The first monthly payment of principal and interest and the interim payment
referred to above shall be payable on the date upon which we make the Loan to
you and shall be withheld from the proceeds of the Loan.
3. INTEREST; INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 8.70% per annum plus an "Index Rate" of
4.81%. The Index Rate means the highest yield, as published in THE WALL
STREET JOURNAL of four-year United States Treasury Notes. Two-business days
prior to the date we make the Loan to you, we will read THE WALL STREET
JOURNAL to determine the final Index Rate. If the Index Rate is not
published in THE WALL STREET JOURNAL, we will determine it from another
reliable source. We will increase the payments set forth above in Paragraph
2 to reflect any increase in the Index Rate. We will give you notice of any
increase as soon as we can. You will pay the increased payments unless we
have made an obvious mistake in our calculations. Interest is calculated in
advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN; SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the Equipment described in the
attached Exhibit A to this Schedule. The Equipment, together with all other
property described on the attached Exhibit A (including, without limitation,
the Receivables and the Premises) is hereinafter referred to as the
"Collateral." In order to secure all of the Obligations (as defined in the
Master Agreement), you grant us a first lien on and security interest in the
Collateral, as well as any additions, omissions, substitutions and proceeds
of the Collateral. You also grant us a security interest in any leases and
rentals of the Collateral. This security interest secures the Note. It also
secures the full and timely payment and performance of all of your other
Obligations to us, whether under the Master Agreement, any other agreement,
loan or lease that you may have with us, or otherwise.
5. COLLATERAL ACCEPTANCE DATE. The Equipment has been delivered, installed
and accepted prior to the date hereof. The Equipment is and at all times
shall be located at 301 Laser Lane, Lafayette, Louisiana. All Receivables
shall be deemed to be located at 123 Saginaw Drive, Redwood City, California.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in its entirety in this Schedule. Any
declaration of default under the Master Agreement is a default under this
Schedule and permits us to exercise all remedies provided by the Master
Agreement.
7. JOINT AND SEVERAL LIABILITY. The indebtedness, liabilities and
obligations of each Borrower under this Schedule shall be joint and several.
ADVANCED POLYMER SYSTEMS, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
----------------------
Name: /S/ Michael O'Connell
----------------------
Title: Chief Financial Officer
------------------------
Date: March 29, 1999 /S/Julian Stern
---------------
[Assistant] Secretary
APS ANALYTICAL STANDARDS, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
---------------------
Name: /S/ Michael O`Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
----------------
[Assistant] Secretary
PREMIER, INC. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
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Name: /S/ Michael O'Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
----------------
[Assistant] Secretary
APS JOINT VENTURE CORP. ATTEST:
[SEAL]
By: /S/ Michael O'Connell
---------------------
Name: /S/ Michael O'Connell
---------------------
Title: Chief Financial Officer
-----------------------
Date: March 29, 1999 /S/ Julian Stern
[Assistant] Secretary
EXHIBIT A TO SCHEDULE NO. 1
Collateral
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All of the following property, in each case, whether now existing or
hereafter arising, now owned or hereafter acquired, wherever located:
(a) all of your whether now owned or hereafter acquired machinery,
equipment, furniture and fixtures (collectively, the "Equipment") located at
your premises at 301 Laser Lane, Lafayette, Louisiana, more particularly
described on the legal description attached hereto (the "Premises");
(b) all of your whether now owned or hereafter acquired or created
accounts, accounts receivables, contract rights, trademarks, copyrights,
licenses, license agreements, general intangibles, chattel paper,
instruments, documents and all other forms of obligations at any time owing
to you, including without limitation, all payments due and to become due to
you and all of your right to receive such payments under the Development and
License Agreement effective April 14, 1992 between Advanced Polymer Systems,
Inc. and Ortho Pharmaceutical Corporation (collectively, the "Receivables");
(c) the Premises and all improvements now or hereafter located therein and
thereon (this Collateral and our rights with respect thereto will be more
particularly set forth in a Mortgage to be executed by you in connection with
the Master Agreement;
(d) all substitutions, replacements, attachments and accessions to all of
the foregoing; and
(e) all products and proceeds of all of the foregoing, including insurance
proceeds.
Contemporaneously herewith, we will order written appraisals of the Equipment
and the Premises and all such improvements located thereon, said appraisals
to be performed by outside appraisers, selected by us. We will perform and
complete all environmental due diligence as set forth in the Commitment. All
costs and expenses incurred in connection with each such appraisals and all
such environmental due diligence shall be borne by you. If, upon completion
of said appraisals and environmental due diligence (a) we determine, in our
sole and absolute discretion, that the results of said appraisals and
environment due diligence are satisfactory to us, and (b) we receive a title
insurance policy covering the Premises, in amount and otherwise in form and
substance satisfactory to us, including, without limitation, showing the
absences of any an all liens and other encumbrances covering the Premises,
and (c) you are not then in default under the Master Agreement, the Note, the
Schedule or any other agreement, instrument, lease or other documents with us
all of the foregoing being hereinafter referred to as "Release Conditions"),
we may, in our sole and absolute discretion, release any or all of our liens
on and security interest in and to the Receivables. Notwithstanding the
foregoing, upon satisfaction of all of the Release Conditions, if the
appraisals referred to above provide that the orderly liquidation value of
the Collateral exceeds $4,000,000, we will release our lien on and security
interest n certain Collateral selected by us in our sole and absolute
discretion so that the orderly liquidation value of the remaining Collateral
does not exceed $4,000,000.
