1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
/ / 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 (IRS Employer
incorporation or organization) Identification No.)
3696 Haven Avenue, Redwood City, CA 94063
(Address of principal executive offices)
(415) 366-2626
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
At April 30, 1996 the number of outstanding shares of the Company's common
stock, par value $.01, was 17,839,922.
2
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheets 3
March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of Operations 4
for the three months ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows 5
for the three months ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis 9
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
3
ADVANCED POLYMER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 1996 December 31, 1995
-------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,547,418 $ 5,172,809
Trade accounts receivable, net 4,137,488 2,436,815
Inventory 6,575,638 7,858,584
Prepaid expenses and other 898,022 1,001,672
------------ ------------
Total current assets 17,158,566 16,469,880
Property and equipment, net 4,839,533 5,027,034
Deferred loan costs, net 815,362 832,324
Prepaid license fees 269,167 303,638
Intangible assets, including goodwill, net 1,475,618 345,557
Other assets 62,460 103,809
------------ ------------
$ 24,620,706 $ 23,082,242
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,357,761 $ 3,240,807
Accrued expenses 2,373,169 1,819,541
Accrued melanin purchase commitments -- 600,000
Accounts payable, Johnson & Johnson 3,731,445 4,229,637
Deferred revenues 750,000 750,000
Notes payable 500,000 --
Current portion - long-term debt 950,984 853,987
------------ ------------
Total current liabilities 9,663,359 11,493,972
Long-term debt 6,215,583 6,354,969
------------ ------------
Total liabilities 15,878,942 17,848,941
------------ ------------
Shareholders' equity:
Common stock and common stock warrants 72,957,736 67,423,859
Unrealized gain on securities 6,231 12,348
Accumulated deficit (64,222,203) (62,202,906)
------------ ------------
Total shareholders' equity 8,741,764 5,233,301
------------ ------------
$ 24,620,706 $ 23,082,242
============ ============
See accompanying notes.
3
4
ADVANCED POLYMER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
3 Months Ended 3 Months Ended
March 31, 1996 March 31, 1995
-------------- --------------
Product revenues $ 5,103,472 $ 4,286,219
Licensing revenues 50,000 855,000
------------ ------------
Total revenues 5,153,472 5,141,219
Cost of sales 3,304,806 3,023,046
Research & development 889,956 931,229
Selling & marketing 1,440,681 1,104,241
Advertising & promotion 596,887 273,163
General & administration 670,021 746,606
------------ ------------
Total expenses 6,902,351 6,078,285
------------ ------------
Operating loss (1,748,879) (937,066)
Interest income 38,956 97,984
Interest expense (299,078) (66,180)
Other expense (10,296) (4,343)
------------ ------------
Net loss ($ 2,019,297) ($ 909,605)
============ ============
Loss per common share ($ 0.12) ($ 0.06)
============ ============
Weighted average common
shares outstanding 17,354,858 16,179,214
============ ============
See accompanying notes.
4
5
ADVANCED POLYMER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
March 31, 1996 March 31, 1995
-------------- --------------
Cash flows from operating activities:
Net loss ($2,019,297) ($ 909,605)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 418,627 288,022
Change in allowance for doubtful accounts (1,308) 2,205
Accretion of marketable securities -- (41,159)
Changes in operating assets and liabilities:
Trade accounts receivable (1,699,365) (1,446,008)
Inventory 1,282,946 (1,977,778)
Prepaid expenses and other 103,650 34,467
Other assets 20,344 16,898
Current liabilities (1,827,610) 3,669,417
----------- -----------
Net cash used in operating activities (3,722,013) (363,541)
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (61,225) (192,429)
Purchase of marketable securities (512,513) (979,058)
Maturities and sales of marketable securities 506,396 1,476,845
----------- -----------
Net cash provided from (used in) investing activities (67,342) 305,358
----------- -----------
Cash flows from financing activities:
Proceeds from the exercise of common stock options 730,309 211,644
Proceeds from long-term debt and warrants 150,000 --
Proceeds from notes payable 500,000 --
Repayment of long-term debt (192,389) (31,300)
Proceeds from sale of common stock, net of costs 2,976,044 1,375,261
----------- -----------
Net cash provided from financing activities 4,163,964 1,555,605
----------- -----------
Net increase in cash and cash equivalents 374,609 1,497,422
Cash and cash equivalents, beginning of the
period 5,172,809 2,741,994
----------- -----------
Cash and cash equivalents, end of the period $ 5,547,418 $ 4,239,416
=========== ===========
Supplemental disclosure of non-cash financing transactions:
During the first quarter of 1996, the Company acquired all rights to the
Polytrap technology from Dow Corning Corporation in exchange for shares of
Common Stock valued at $1,200,000.
During the first quarter of 1996, the Company paid Biosource for the 1995
purchase commitment totalling $600,000 by issuing 94,000 shares of Common
Stock.
See accompanying notes.
5
6
ADVANCED POLYMER SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the financial
position of Advanced Polymer Systems, Inc. and subsidiaries ("the
Company") as of March 31, 1996 and the results of their operations
and their cash flows for the three months ended March 31, 1996 and 1995.
These condensed consolidated statements should be read in conjunction
with the Company's audited consolidated financial statements for the
years ended December 31, 1995, 1994 and 1993.
The condensed consolidated financial statements include the financial
statements of the Company and its subsidiaries, Premier, Inc.
("Premier"), Advanced Consumer Products, Inc., APS Analytical Standards,
Inc., and APS Joint Venture Corporation. All significant intercompany
balances and transactions have been eliminated in consolidation.
The business of Premier, the Company's marketing and distribution
subsidiary, is highly seasonal in that it markets and distributes
sunscreen products under an exclusive distribution agreement with Johnson
& Johnson. In addition, effective September 1995, the Company licensed
from Reckitt & Colman the exclusive U.S. rights to the Neet(R) line of
depilatory products. Sales of the two sunscreen products and the
depilatory product line are heavily weighted to the first two quarters of
the calendar year, so the results of operations for the interim periods
are not necessarily indicative of the results for the full year.
The Company considers all short-term investments which have original
maturities of less than three months to be cash equivalents. Investments
which have original maturities longer than three months are classified as
marketable securities in the accompanying balance sheets.
Certain reclassifications have been made to the prior year financial
statements to conform with the presentation in 1996.
6
7
(2) COMMON SHARES OUTSTANDING AND PER SHARE INFORMATION
Common stock outstanding as of March 31, 1996 is as follows:
Number of Shares
----------------
Common stock outstanding as of December 31, 1995 17,026,666
Options exercised after December 31, 1995 139,439
Shares issued to Lander Company 356,761
Shares issued in debt financing arrangements 10,675
Shares issued for acquisition of all rights to the Polytrap
technology from Dow Corning 200,000
Shares issued to pay Biosource for the 1995 Melanin
commitment 94,000
----------
TOTAL SHARES 17,827,541
==========
Per share information is based on the weighted average number of shares
of common stock outstanding, as adjusted during each of the periods.
Stock options and warrants (common stock equivalents) are not included in
the calculations as their inclusion would be anti-dilutive.
(3) SALE OF COMMON STOCK
In the first quarter of 1996, the Company formed a collaborative
agreement with the Lander Company under which the Company received
$2,976,000 in net proceeds from the sale of 356,761 shares of common
stock. In addition, the Company will receive licensing fees, royalties
on product sales and research and development funding in the future.
(4) ACQUISITION OF ALL RIGHTS TO POLYTRAP TECHNOLOGY
In the first quarter of 1996, APS acquired all rights to the Polytrap
technology from Dow Corning in exchange for 200,000 shares of APS Common
Stock. APS recorded intangible assets totalling $1,200,000 relating to
this transaction. The intangible assets are being amortized on a straight
line basis over a period of approximately 10 years, which is the
remaining life of the main patent acquired.
7
8
(5) NOTES PAYABLE
During the first quarter of 1996, the Company received advances from a
supplier totalling $500,000, with an interest rate equal to the Prime
Rate. Interest and principal are due in October 1996.
(6) SUBSEQUENT EVENT
In the second quarter of 1996, the Company entered into an agreement for
the sale of up to $5,000,000 of common stock and warrants, which can be
initiated at the Company's sole discretion. In May 1996, the Company
executed the sale of common stock and warrants totalling $2,000,000.
8
9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(ALL DOLLAR AMOUNTS ROUNDED TO THE NEAREST THOUSAND)
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
To the extent that this report discusses financial projections, information or
expectations about our products or markets, or otherwise makes statements about
future events, such statements are forward-looking and are subject to a number
of risks and uncertainties that could cause actual results to differ materially
from the statements made. These include, among others, uncertainty associated
with timely approval and acceptance of new products, the costs associated with
new product introductions, establishment of new corporate alliances, progress in
research and development programs and other risks listed from time to time in
the Company's Securities and Exchange Commission filings.
Revenues for the three month period ended March 31, 1996 totalled $5,153,000
compared to $5,141,000 in the corresponding period of the prior year. Product
revenues increased by 19% to $5,103,000 from $4,286,000 while licensing revenues
totalled $50,000 compared to $855,000 in the year-ago quarter.
The increase in product revenues was primarily attributable to sales of the
Neet(R) depilatory which was licensed from Reckitt & Colman in the third quarter
of 1995, and increased shipments of the Exact line of OTC acne medication
products. Additionally, sales of the Everystep foot powder also increased due to
a sampling program. These increases were partially offset by a decrease in
orders from Scott Paper Co. due to that company's merger with Kimberly-Clark,
and a reduction in sales of Take-Off makeup remover because the first quarter of
1995 included pipeline fill on the launch of the new Microsponge(R)-entrapped
version.
Licensing fees decreased by $805,000 because the first quarter of 1995 included
a milestone payment of $750,000 from Johnson & Johnson on the filing of the New
Drug Application (NDA) on Microsponge-entrapped tretinoin.
Gross profit on product revenues for the first quarter of 35% increased by 6
percentage points due mainly to the increased percentage of higher margin
consumer products, primarily Neet.
Research and development expense decreased by $41,000 or 4% due to reduced
spending on now-completed clinical studies, partially offset by increased
expenses associated with patent applications. Selling and marketing expense
increased by
9
10
$336,000 or 30% due to higher variable costs associated with rising product
sales volume and expanded activities in the ethical pharmaceutical and personal
care markets. Advertising and promotion costs increased by $324,000 or 119% due
primarily to a sampling program for consumer products. General and
administrative expense decreased by $77,000 or 10% due primarily to general
cost-containment measures.
Interest income decreased by $59,000 or 60% due to lower interest rates on lower
average cash balances. Interest expense increased by $233,000 or 352% as a
result of debt financings arranged in the second half of 1995 whereby
the Company raised $7.4 million.
The net loss for the quarter ended March 31, 1996 of $2,019,000 represented an
increase of $1,110,000 over the quarter ended March 31, 1995.
CAPITAL RESOURCES AND LIQUIDITY
Total assets as of March 31, 1996 were $24,621,000 compared with $23,082,000 at
December 31, 1995, and working capital increased to $7,495,000 from $4,976,000.
In the same period, cash and cash equivalents increased to $5,547,000 from
$5,173,000. During the first quarter, Company operations used $3,722,000 of
cash. The Company invested approximately $900,000 in product research and
development and $2,000,000 in selling, marketing and promoting new products.
The Company has financed its operations, including product research and
development, from amounts raised in debt and equity financings, the sale of
consumer products, Microsponge delivery systems and analytical standard
products; payments received under licensing agreements; and interest earned on
short-term investments.
In the first quarter of 1996, the Company formed a collaborative agreement with
the Lander Company under which the Company received $2,976,000 in net proceeds
from the sale of stock, and will receive licensing fees, royalties on product
sales and research and development funding in the future. In addition, the
Company received $730,000 in proceeds from the exercise of common stock options
during the quarter.
In prior years, cash was expended with regard to Phase III clinical tests of
tretinoin entrapped in a Microsponge delivery system for the treatment of acne,
and of APS' melanin-Microsponge sun protectant product, together with related
research and development costs, all of which decreased substantially in 1995
following the filing of the respective NDAs. Additionally, the Company is
contractually obligated to purchase minimum annual quantities of melanin.
Failure to purchase the minimum quantities results in a mandatory annual payment
of $600,000 to its melanin supplier under "take or pay" provisions. The minimum
financial commitments not yet expensed by the Company under the current
agreements are $600,000 per annum for each of the years in the two year period
ending December 31, 1998, in aggregate $1,200,000.
10
11
In the second quarter of 1996, the Company entered into an agreement for the
sale of up to $5,000,000 of common stock and warrants, which can be initiated at
the Company's sole discretion. This, together with the Company's existing cash
and cash equivalents, collections of trade accounts receivable, interest
income and other revenue producing activities including milestone payments,
are expected to be sufficient to meet the Company's near-term cash
requirements assuming no changes to existing business plans.
11
12
PART II.
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 10-V - Investment Agreement between Registrant
and the Lander Company
27 Financial Data Schedules
(b) Reports on Form 8-K: None
12
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED POLYMER SYSTEMS, INC.
Date: May 14, 1996 By: /s/ John J. Meakem, Jr.
------------- ------------------------
John J. Meakem, Jr.
Chairman, President and
Chief Executive Officer
Date: May 14, 1996 By: /s/ Michael O'Connell
------------- ----------------------
Michael O'Connell
Chief Financial Officer
13
SIGNATURES
14
EXHIBIT INDEX
Form 10-Q
ADVANCED POLYMER SYSTEMS, INC.
10-V -Investment Agreement between Registrant and the Lander Company
27 -Financial Data Schedules.
1
Exhibit 10V
INVESTMENT AGREEMENT
AGREEMENT effective the 26th day of March, 1996, by and between
ADVANCED POLYMER SYSTEMS, INC. ("APS") and LHC CORPORATION ("PURCHASER").
R E C I T A L S
A. APS and PURCHASER are entering into a License and Supply Agreement
(the "License Agreement") with respect to certain of the proprietary
technologies of APS.
B. In connection with the License Agreement, APS desires to sell to
PURCHASER, and PURCHASER desires to buy from APS, shares of APS Common Stock
(the "Shares").
IT IS THEREFORE, AGREED as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 Definitions.
(a) "Common Stock" means the Common Stock, $.01 par value, of
APS.
(b) "Share" means one of the shares of Common Stock being
purchased hereunder.
(c) "Act" means the Securities Act of 1933, as amended.
(d) "Material Adverse Event" shall mean an occurrence having a
consequence that is materially adverse as to the business, properties,
prospects or financial condition of APS.
(e) "Subsidiary" constitutes any corporation more than 50% (by
virtue of voting rights) of whose stock in the aggregate is owned directly or
indirectly by APS and any partnership in which APS, directly or indirectly,
owns more than 50% in interest or participation.
1.2 Sale and Issuance of Shares. Subject to the terms and
conditions hereof, APS shall sell to PURCHASER and PURCHASER shall buy from APS
at the Closing (as defined below) for a total consideration of $3,000,000, that
number of Shares which is equal to $3,000,000 divided by the average closing
price of APS Common Stock on the Nasdaq National Market for the 20 trading days
ending on the day immediately preceding the Closing (as hereinafter defined).
2
1.3 Closing.
(a) Closing Date. The closing of the purchase and sale
of the Shares (the "Closing") shall take place on March 25, 1996, or such other
date as APS and PURCHASER may agree.
(b) Time and Place. The Closing shall take place at the
offices of Heller, Ehrman, White & McAuliffe, 525 University Avenue, Suite
1100, Palo Alto, California, on the designated date at 10:00 a.m., or at such
other place and time as APS and PURCHASER may agree.
1.4 Deliveries at the Closing. At the Closing, APS shall
deliver to PURCHASER certificates for the Shares, in such denominations and
registered in such name or names as PURCHASER may designate by notice to APS
against delivery to APS of the purchase price for such Shares in immediately
available funds.
2. REPRESENTATIONS AND WARRANTIES OF APS. APS hereby represents and
warrants to the PURCHASER that:
2.1 Corporate Organization and Authority. APS:
(a) is a corporation duly incorporated and in good
standing in the State of Delaware, and is authorized to exercise its corporate
powers in that state;
(b) has full corporate power and authority to own and
operate its properties and assets and to carry on its business as conducted; and
(c) has been duly qualified and is in good standing to
do business as a foreign corporation in the states of California and Louisiana,
which are the only jurisdictions in which the conduct of its business requires
such qualification.
2.2 Capitalization. The authorized capital of APS consists
of:
(a) Preferred Stock. 2,500,000 shares of Preferred
Stock, $.01 par value, none of which are issued or outstanding.
(b) Common Stock. 50,000,000 shares of Common Stock,
of which 17,096,708 shares are validly issued (including, without limitation,
issued in compliance with applicable federal and state securities laws) and
outstanding, fully-paid and non-assessable as of January 31, 1996.
(c) Other Securities. As of January 31, 1996, APS has
available for issuance 3,024,850 shares of Common Stock under APS's Stock
Option Plans and outstanding warrants to purchase up to 1,628,211 shares of
Common Stock. There are no other rights, warrants, options, conversion
privileges,
-2-
3
subscriptions or other rights or agreements, either directly or indirectly, to
purchase or otherwise acquire or issue any equity securities of APS.
2.3 Corporate Power. APS has and will have at Closing all requisite
legal and corporate power to execute and deliver this Agreement and to sell and
issue the Shares.
2.4 Subsidiaries. Except for Premier Inc. and APS Analytical
Standards, Inc., each of which is wholly owned by APS, APS has no Subsidiaries.
2.5 Authorization. All corporate action on the part of APS necessary
for the authorization, execution and delivery of this Agreement, the
performance of APS's obligations hereunder, and for the authorization, sale,
issuance and delivery of the Shares has been taken or will be taken prior to
Closing. This Agreement, when executed and delivered, shall constitute a
legally binding valid obligation of APS enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies and subject to
limitations of public policy as they may effect the enforceability of the
indemnification and contribution provisions of Section 6.6.
2.6 Validity of Shares. The Shares, when issued, sold and delivered
in accordance with the terms and for the consideration expressed in this
Agreement, shall be duly and validly issued (including, without limitation, in
compliance with applicable federal and state securities laws), fully-paid and
non-assessable.
2.7 Financial Statements. The audited financial statements of APS and
the related notes (the "Audited Financial Statements") included in APS's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994
10-K") and the unaudited financial statements and the related notes (the
"Unaudited Financial Statements") included in APS's Quarterly Reports on Form
10-Q for the fiscal quarters ended March 31, June 30 and September 30, 1995
(the "1995 10-Q's") are complete and correct in all material respects, present
fairly the financial position and results of operations of APS at the dates and
for the periods to which they relate, are in accordance with the books and
records of APS, and have been prepared in accordance with generally accepted
accounting principles consistently applied (to the extent required for interim
reports with respect to the Unaudited Financial Statements).
2.8 Changes in Condition. Except as disclosed in the 1995 10-Q's,
there has not been since December 31, 1994, any change in the business,
properties, prospects or financial condition of APS which would constitute a
Material Adverse Event.
-3-
4
2.9 Patents and Other Proprietary Rights.
(a) To the best knowledge of APS: (i) APS has sufficient rights to
use all patents, patent applications, inventions, trademarks, service marks,
trade names and copyrights, all licenses with respect to the foregoing, and all
trade secrets, information, proprietary rights and processes necessary to the
proper conduct of its business; and (ii) such business does not conflict with
or constitute an infringement of the rights of others;
(b) APS has not received any communications alleging that APS has
violated or, by conducting its business as proposed, would violate any of the
patents, patent applications, inventions, trademarks, service marks, trade
names, copyrights or trade secrets, information, proprietary rights or
processes of any other person or entity; and
(c) APS has obtained from all key employees and consultants to
APS agreements with respect to the confidentiality and non-disclosure of
proprietary information of APS.
2.10 Compliance With Other Agreements. APS is not in violation of any
term or provision of its Certificate of Incorporation or By-laws, or any
material term or provision of any indebtedness, mortgage, indenture, contract,
agreement, judgment or, to APS's knowledge, any decree, order, statute, rule or
regulation applicable to APS, in each case, or in the aggregate, the violation
of which would constitute a Material Adverse Event. The execution, delivery and
performance of this Agreement and the issuances of the Shares by APS will not
result in any violation of, be in conflict with, or constitute a default under,
with or without the passage of time or the giving of notice, any provision of
APS's Certificate of Incorporation or By-laws, any material contract,
obligation or commitment to which APS is a party or by which it is bound, or
any provision of any judgment, decree or order to which APS is a party or by
which it is bound.
2.11 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of APS is required in connection with the consummation of the
transactions contemplated by this Agreement, except for possible filings
pursuant to Section 25102 (f) of the California Corporate Securities Law of
1968, as amended, and the rules thereunder, other applicable blue sky filings
and Regulation D promulgated under the Act, which filings will be effected if
necessary within 15 days of the Closing.
2.12 Private Offering. Assuming the accuracy of the representations
and warranties of PURCHASER contained in Section 3 hereof, the offer, issue and
sale of the Shares are and will be
-4-
5
exempt from the registration and prospectus delivery requirements of the Act,
and have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirement of
all applicable state securities laws.
2.13 Full Disclosure. The representations and warranties of APS
contained in this Agreement and the information included in the 1994 10-K and
the 1995 10-Q's, when read together, do not contain any untrue statements of a
material fact or omit any material fact necessary to make the statements
contained therein or herein in view of the circumstances under which they were
made not misleading; provided, however, that no representation or warranty is
made by APS that any financial or market projections, product development
schedules or forecasts will, in fact, be achieved; provided, further, that with
respect to such projections, schedules and forecasts, APS represents that such
projections, schedules and forecasts were prepared in good faith.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. PURCHASER represents
and warrants to APS as follows:
3.1 Investment Intent. This Agreement is made with PURCHASER in
reliance upon PURCHASER's representation to APS that the Shares to be received
by PURCHASER will be acquired for investment for PURCHASER's own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that PURCHASER has no present intention of selling, granting
any participation in, or otherwise distributing the same. PURCHASER further
represents that PURCHASER has no contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Shares.
3.2 Shares Not Registered. PURCHASER understands and acknowledges
that the Shares will not be registered under the Act on the grounds that the
offering and sale of securities contemplated by this Agreement are exempt from
registration under the Act, and that APS's reliance upon such exemption is
predicated upon PURCHASER's representations set forth in this Agreement.
3.3 Rule 144. PURCHASER covenants that in no event will PURCHASER
dispose of any of the Shares (other than pursuant to Rule 144 promulgated by
the Securities and Exchange Commission ("Commission") under the Act ("Rule
144") or pursuant to a registration statement filed with the Commission
pursuant to the Act) unless and until:
(a) PURCHASER shall have notified APS of the proposed disposition
and shall have furnished APS with a statement of the circumstances surrounding
the proposed disposition; and
-5-
6
(b) if requested by APS, PURCHASER shall have furnished APS
with an opinion of PURCHASER's counsel reasonably satisfactory in form and
substance to APS and APS's counsel to the effect that: (i) such disposition
will not require registration under the Act; and (ii) appropriate action
necessary for compliance with the Act and any applicable state, local or
foreign law has been taken. The restrictions on transfer imposed by this
Section 3 shall cease and terminate as to the Shares when: (1) such securities
shall have been effectively registered under the Act and sold by the holder
thereof in accordance with such registration; or (2) an opinion of the kind
described in the preceding sentence states that all future transfers of such
securities by the holder thereof would be exempt from registration under the
Act. Each certificate evidencing the Shares shall bear an appropriate
restrictive legend as set forth in Section 3.6 below, except that such
certificate shall not bear such legend if the transfer was made in compliance
with Rule 144 or pursuant to a registration statement or, if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the Act.
3.4 No Short Sales. PURCHASER further covenants that, until the
Registration Statement referred to in Section 6.2 hereof is declared effective,
PURCHASER will not:
(a) sell any equity security of APS if PURCHASER does not own
the security sold (or, if PURCHASER owns such security, PURCHASER shall deliver
it against such sale within 20 days thereafter); or
(b) engage in any other transaction which involves the
"selling short", as that term is generally understood in the securities
industry, of any equity security of APS.
3.5 Accredited Investor. PURCHASER is an "Accredited Investor" as
that term is defined in Regulation D promulgated under the Act, and has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of PURCHASER's prospective investment in the
Shares: (a) PURCHASER has received all the information it has requested from
APS and considers necessary or appropriate for deciding whether to purchase the
Shares; (b) PURCHASER has the ability to bear the economic risks of PURCHASER's
prospective investment; and (c) PURCHASER is able, without materially impairing
its financial condition, to hold the Shares for an indefinite period of time
and to suffer complete loss on its investment.
3.6 Legends.
(a) All certificates for the Shares shall bear the following
legend:
-6-
7
"The securities represented hereby have not been
registered under the Securities Act of 1933, as amended ("Act").
Such securities may not be transferred unless a Registration
Statement under the Act is in effect as to such transfer or in
the opinion of counsel for the issuer, an exemption from
registration is then available."
(b) The certificates evidencing the Shares shall also
bear any legend required by the Commissioner of Corporations of the State of
California or required pursuant to any state, local or foreign law governing
such securities.
3.7 Reports under Securities Exchange Act of 1934. With a view
to making available to the PURCHASER the benefits of Rule 144 and any other
rule or regulation of the Commission that may at any time permit the
PURCHASER to sell securities of APS to the public without registration, APS
agrees to:
(a) make and keep public information available, as those
terms are defined in Rule 144;
(b) file with the Commission in a timely manner all
reports and other documents required of APS under the Act and the Securities
Exchange Act of 1934 (the "1934 Act"); and
(c) furnish to the PURCHASER, so long as the PURCHASER
owns any Shares forthwith upon request: (i) a written statement by APS that it
has complied with the reporting requirements of Rule 144, the Act and the 1934
Act; (ii) a copy of the most recent annual or quarterly report of APS and such
other reports and document so filed by APS; and (iii) such other information as
may be reasonably requested in availing the PURCHASER of any rule or regulation
of the Commission which permits the selling of any such securities without
registration.
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations of
PURCHASER under Section 1 of this Agreement are subject to the fulfillment at
or before the Closing of each of the following conditions, any of which may be
waived in writing by PURCHASER:
4.1 Representations and Warranties. The representations and
warranties of APS contained in Section 2 shall be true in all material respects
on and as of the Closing with the same effect as if made on and as of the
Closing.
4.2 Covenants. APS shall have performed or fulfilled all
agreements, obligations and conditions contained herein required to be
performed or fulfilled by APS before the Closing.
4.3 Proceedings Satisfactory. All corporate and legal
proceedings taken by APS in connection with the transactions contemplated by
this Agreement and all documents and papers
-7-
8
relating to such transactions shall be satisfactory to PURCHASER, in the
reasonable exercise of its judgment.
4.4 Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body that are required in
connection with the lawful sale and issuance of the Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of the
Closing.
4.5 Nasdaq Listing. APS shall have filed an application to
list the Shares for quotation on the Nasdaq National Market System.
4.6 Compliance Certificate. APS shall have delivered to
PURCHASER a certificate dated as of the Closing, signed by APS' President,
certifying that the conditions set forth in Sections 4.1, 4.2, 4.4 and 4.5 have
been satisfied.
5. CONDITIONS OF APS'S OBLIGATIONS AT CLOSING. The obligations of APS
under Section 1 of this Agreement are subject to the fulfillment at or before
the Closing of each of the following conditions, any of which may be waived in
writing by APS:
5.1 Representations and Warranties. The representations and
warranties of PURCHASER contained in Section 3 shall be true on and as of the
Closing with the same effect as though said representations and warranties had
been made on and as of each the Closing.
5.2 Performance of Obligations. PURCHASER shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before the Closing.
5.3 Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body that are required in
connection with the lawful sale and issuance of the Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of the
Closing.
6. REGISTRATION RIGHTS; LISTING.
6.1 Certain Definitions. As used in this Section 6, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
(b) "Convertible Securities" shall mean securities of
APS convertible into or exchangeable for Registrable Securities.
-8-
9
(c) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is
PURCHASER or an assignee or transferee of Registration rights as permitted by
Section 6.7.
(d) The terms "Register", "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares purchased
by or issued to PURCHASER at the Closing, including any Common Stock issued
with respect to the Shares pursuant to stock splits, stock dividends and
similar distributions, so long as such Shares have not been sold to the public
in a public distribution or a public securities transaction or sold in a single
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act such that all transfer restrictions and restrictive
legends with respect to such Shares shall have been removed in connection with
such sale.
(f) "Registration Expenses" shall mean all expenses incurred
by APS in complying with this Section 6, including, without limitation, all
federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for APS, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such Registration.
(g) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(h) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
6.2 Registration.
6.2.1 Registration. Subject to the terms of this Agreement,
APS shall use its best efforts to effect Registration of the Registrable
Securities by filing a Registration Statement with the Commission within 30
days after the Closing. APS shall use its best efforts to effect such
Registrations on Form S-3 (or any successor to Form S-3) so long as APS is
eligible to register securities on Form S-3 for an offering of Registrable
Securities by the PURCHASER or any Holder; if APS is not so eligible, it shall
use its best efforts to effect such Registrations on Form S-1. As of the date
hereof, APS is eligible to register securities on Form S-3.
-9-
10
6.2.2 Registration of Other Securities. The Registration Statement
filed under this Section 6 may include securities of APS other than Registrable
Securities; provided, however, that neither PURCHASER or any Holder shall be
required to utilize an underwriter in connection with the sale of their
Registrable Securities.
6.2.3 Blue Sky. In connection with the Registration pursuant to
Section 6, APS will exercise its best efforts to Register and qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions (not to exceed twenty) as shall be
reasonably appropriate for the distribution of such securities; provided,
however, that:
(a) APS shall not be required to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless APS is already subject to service in such jurisdiction;
and
(b) notwithstanding anything in this Agreement to the contrary,
in the event any jurisdiction in which the securities shall be qualified imposes
a non-waivable requirement that expenses incurred in connection with the
qualification of the securities be borne by selling shareholders, such expenses
shall be payable pro rata by selling shareholders.
6.3 Expenses of Registration. All Registration Expenses (but not
Selling Expenses) incurred in connection with the Registration pursuant to
Section 6 shall be borne by APS.
6.4 Registration Procedures. Subject to the other provisions of this
Agreement, APS shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a Registration
Statement with respect to such securities within 30 days from the date of the
Closing and use its diligent best efforts to cause such Registration Statement
to become effective as promptly as possible thereafter and to remain effective
for a period equal to the shorter of: (i) two years from the date of the
Closing; or (ii) until the distribution described in the Registration Statement
has been completed.
(b) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement.
(c) Furnish to the Holders participating in such Registration and
the underwriters, if any, of the securities being Registered, such reasonable
number of copies of the
-10-
11
Registration Statement, preliminary prospectus and final prospectus as they may
request in order to facilitate the public offering of such securities.
6.5 Information Furnished by Holder. It shall be a condition
precedent of APS's obligations under this Agreement that each Holder of
Registrable Securities included in any Registration furnish to APS such
information regarding such Holder and the distribution proposed by such Holder
as APS may reasonably request.
6.6 Indemnification.
6.6.1 Company's Indemnification of Holder. To the extent
permitted by law, APS will indemnify each Holder, each of the officers,
directors, employees and constituent partners, and each person controlling such
Holder, with respect to which Registration, qualification or compliance of
Registrable Securities has been effected pursuant to this Agreement, from and
against all claims, losses, damages or liabilities (or actions in respect
thereof) to the extent such claims, losses, damages or liabilities arise out of
or are based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document (including any
related Registration Statement) incident to any such Registration, qualification
or compliance, or are based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by APS of any rule or
regulation promulgated under the Securities Act applicable to APS and relating
to action or inaction required of APS in connection with any such Registration,
qualification or compliance; and APS will reimburse each such Holder, each such
underwriter and each person who controls any such Holder or underwriter, for any
legal and any other expenses reasonably incurred in connection with defending
any such claim, loss, damage, liability or action; provided, however, that the
indemnity contained in this Section 6.6.1 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of APS (which consent shall not unreasonably be
withheld) and; provided, further, that APS will not be liable in any such case
to the extent that any such claim, loss, damage, liability or expense arises out
of or is based upon any untrue statement or omission based upon written
information furnished to APS by such Holder or controlling person and stated
expressly to be for use in connection with the offering of securities of APS.
6.6.2 Holder's Indemnification of Company. To the extent
permitted by law, each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such Registration,
qualification or compliance is being effected pursuant to this Agreement,
indemnify APS, each of its directors, officers and employees, each person who
controls APS within the meaning of the Securities Act, each other such Holder,
-11-
12
and each of its officers, directors, employees and constituent partners, and
each person controlling such other Holder, from and against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
upon any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by such Holder of any rule or
regulation promulgated under the Securities Act applicable to such Holder and
relating to action or inaction required of such Holder in connection with any
such Registration, qualification or compliance; and will reimburse APS, such
Holder, such directors, officers, employees, partners, persons or control
persons for any legal and any other expenses reasonably incurred in connection
with defending any such claim, loss, damage, liability or action, in each case
to the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to APS by such Holder and
specifically approved in writing by such Holder for use in connection with the
offering of securities of APS; provided, however, that the indemnity contained
in this Section 6.6.2 shall not apply with respect to a Holder to amounts paid
in settlement of any claim, loss, damage, liability or action if settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably delayed or withheld).
6.6.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 6.6 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6.6, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and to
assume the defense of such claim; provided, however, that the indemnifying party
shall be entitled to select counsel for the defense of such claim with the
approval of any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided, further, that if either party reasonably
determines that there may be a conflict between the position of APS and a Holder
in conducting the defense of such action, suit or proceeding by reason of
recognized claims for indemnity under this Section 6.6, then counsel for such
party shall be entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the interest of such
party. The failure to notify an indemnifying party promptly of the commencement
of any such action, if prejudicial to the ability of the indemnifying party to
defend such action, shall relieve such indemnifying party, to the extent so
prejudiced, of any liability to the indemnified party under this Section 6.6,
but the omission so to
-12-
13
notify the indemnifying party will not relieve such party of any liability that
such party may have to any indemnified party otherwise other than under this
Section 6.6.
6.7 Transfer of Rights. The right to cause APS to Register securities
granted by APS to PURCHASER under this Agreement may be assigned by any Holder
to a transferee or assignee of any Registrable Securities not sold to the
public acquiring at least 50,000 shares of such Holder's Registrable Securities
(equitably adjusted for any stock splits, subdivisions, stock dividends,
changes, combinations or the like); provided, however, that:
(a) APS must receive written notice prior to the time of said
transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such information and
Registration rights are being assigned; and
(b) the transferee or assignee of such rights must not be a
person deemed by the Board of Directors of APS, in its best judgment, to be a
competitor or potential competitor of APS. Notwithstanding the limitations set
forth in the foregoing sentence respecting the minimum number of shares which
must be transferred and permitted transferees and assignees: (i) any Holder
which is a partnership may transfer such Holder's Registration rights to such
Holder's constituent partners without restriction as to the number or
percentage of shares acquired by any such constituent partner; and (ii) Section
6.7(b) shall not prohibit the transfer or assignment of such rights to an
affiliate of the PURCHASER.
6.8 Nasdaq Listing. Prior to Closing, APS shall file an application
to list the Shares for quotation on the Nasdaq National Market System.
6.9 Limits on Resale. Notwithstanding the foregoing, in consideration
of the Registration and listing, PURCHASER on its own behalf and that of its
successors and assigns, agrees not to sell any of the Shares until the
Registration Statement is declared effective, and after the Registration
Statement has been declared effective with respect to the Shares, PURCHASER and
its successors and assigns may sell in the public market in any calendar
quarter no more than 25% of the Shares.
7. MISCELLANEOUS.
7.1 Governing Law. 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.
7.2 Successors and Assigns. Subject to the exceptions specifically
set forth in this Agreement, the terms and
-13-
14
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and assigns of the
parties.
7.3 Entire Agreement. This Agreement and any Exhibits and Schedule
hereto constitute the entire contract between APS and the PURCHASER relative to
the subject matter hereof. Any previous agreement between APS and the PURCHASER
with respect to the subject matter hereof is superseded by this Agreement.
7.4 Severability. Any invalidity, illegality or limitation of the
enforceability with respect to PURCHASER of any one or more of the provisions of
this Agreement, or any part thereof, whether arising by reason of the law of
PURCHASER's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of this Agreement with respect to other
investors. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal and enforceable and to retain as nearly as practicable the intent
of the parties, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
7.5 Amendment of Agreement. Any provision of this Agreement may be
amended only by a written instrument signed by APS and by PURCHASER.
7.6 Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by registered
or certified mail, postage prepaid, addressed:
(a) if to APS, Advanced Polymer Systems, Inc., 3696 Haven Avenue,
Redwood City, California 94063, ATTENTION: President; and
(b) if to PURCHASER, LHC Corporation, ATTENTION: President.
7.7 Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
-14-
15
7.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement.
ADVANCED POLYMER SYSTEMS, INC.
By: John J. Meakem, Jr.
--------------------------
Title: Chairman, CEO and President
--------------------
LEC CORPORATION
By: Francis Ziegler
--------------------------
Title: Chairman
--------------------
16
TABLE OF CONTENTS
PAGE
----
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Issuance of Shares . . . . . . . . . . . . 1
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Deliveries at the Closing . . . . . . . . . . . . . 2
2. REPRESENTATIONS AND WARRANTIES OF APS . . . . . . . . . . . 2
2.1 Corporate Organization and Authority . . . . . . . 2
2.2 Capitalization . . . . . . . . . . . . . . . . . . 2
2.3 Corporate Power . . . . . . . . . . . . . . . . . . 3
2.4 Subsidiaries . . . . . . . . . . . . . . . . . . . 3
2.5 Authorization . . . . . . . . . . . . . . . . . . . 3
2.6 Validity of Shares . . . . . . . . . . . . . . . . 3
2.7 Financial Statements . . . . . . . . . . . . . . . 3
2.8 Changes in Condition . . . . . . . . . . . . . . . 3
2.9 Patents and Other Proprietary Rights . . . . . . . 4
2.10 Compliance With Other Agreements . . . . . . . . . 4
2.11 Governmental Consents . . . . . . . . . . . . . . . 4
2.12 Private Offering . . . . . . . . . . . . . . . . . 4
2.13 Full Disclosure . . . . . . . . . . . . . . . . . . 5
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . 5
3.1 Investment Intent . . . . . . . . . . . . . . . . . 5
3.2 Shares Not Registered . . . . . . . . . . . . . . . 5
3.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . 5
3.4 No Short Sales . . . . . . . . . . . . . . . . . . 6
3.5 Accredited Investor . . . . . . . . . . . . . . . . 6
3.6 Legends . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Reports Under Securities Exchange Act of 1934 . . . 7
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING . . . . . 7
4.1 Representations and Warranties . . . . . . . . . . 7
4.2 Covenants . . . . . . . . . . . . . . . . . . . . . 7
4.3 Proceedings Satisfactory . . . . . . . . . . . . . 7
4.4 Qualifications . . . . . . . . . . . . . . . . . . 8
4.5 Nasdaq Listing . . . . . . . . . . . . . . . . . . 8
4.6 Compliance Certificate . . . . . . . . . . . . . . 8
5. CONDITIONS OF APS'S OBLIGATIONS AT CLOSING . . . . . . . . 8
5.1 Representations and Warranties . . . . . . . . . . 8
5.2 Performance of Obligations . . . . . . . . . . . . 8
5.3 Qualifications . . . . . . . . . . . . . . . . . . 8
6. REGISTRATION RIGHTS; LISTING . . . . . . . . . . . . . . . 8
6.1 Certain Definitions . . . . . . . . . . . . . . . . 8
6.2 Registration . . . . . . . . . . . . . . . . . . . 9
6.3 Expenses of Registration . . . . . . . . . . . . . 10
6.4 Registration Procedures . . . . . . . . . . . . . . 10
6.5 Information Furnished by Holder . . . . . . . . . . 10
6.6 Indemnification . . . . . . . . . . . . . . . . . . 11
-16-
17
TABLE OF CONTENTS
(continued)
PAGE
----
6.7 Transfer of Rights . . . . . . . . . . . . . . . . 12
6.8 Nasdaq Listing . . . . . . . . . . . . . . . . . . 13
6.9 Limits on Resale . . . . . . . . . . . . . . . . . 13
7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Governing Law . . . . . . . . . . . . . . . . . . 13
7.2 Successors and Assigns . . . . . . . . . . . . . . 13
7.3 Entire Agreement . . . . . . . . . . . . . . . . . 14
7.4 Severability . . . . . . . . . . . . . . . . . . . 14
7.5 Amendment of Agreement . . . . . . . . . . . . . . 14
7.6 Notices . . . . . . . . . . . . . . . . . . . . . 14
7.7 Headings . . . . . . . . . . . . . . . . . . . . . 14
7.8 Counterparts . . . . . . . . . . . . . . . . . . . 15
-17-
5
1
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
5,547,418
0
4,137,488
92,775
6,575,638
17,158,566
13,029,508
8,189,975
24,620,706
9,663,359
6,215,583
0
0
178,275
8,563,489
24,620,706
4,963,658
5,153,472
3,304,806
3,304,806
3,597,545
24,126
299,078
(2,019,297)
0
(2,019,297)
0
0
0
(2,019,297)
($0.12)
($0.12)
