Prepared by MERRILL CORPORATION









Exhibit 10.76




 




RESTRUCTURING AND




OFFSET AGREEMENT




 




                This

RESTRUCTURING AND OFFSET AGREEMENT (the "Agreement") is

entered into by and among AP Pharma, Inc. (formerly Advanced Polymer Systems,

Inc.), a Delaware corporation ("AP"), Premier Consumer

Products, Inc., a Delaware Corporation ("Premier") and Lee

Pharmaceuticals, Inc., a California company ("Lee") as of this

__ day of July 23, 2001.




 




R

E C I T A L S




 




                A.            WHEREAS, AP, Premier and Lee entered

into that certain Asset Purchase and Sale Agreement, dated as of June 29, 1999

(the "Purchase Agreement"), pursuant to which Lee purchased

certain assets of Premier (the "Asset Sale"); and




 




                B.            WHEREAS, pursuant to the Purchase

Agreement, payment due upon the closing of the Asset Sale was evidenced by

promissory notes in an amount of $500,000 in favor of AP (the "AP Note")

and $300,000 in favor of Premier (the "Premier Note"), each

dated as of June 29, 1999, and with a specified maturity date of September 15,

2001 (collectively the "Old Notes"); and




 




                C.            WHEREAS, there remains an

outstanding principal balance on the AP Note of $320,000 and an outstanding

principal balance on the Premier Note of $192,000, the combined monthly

payments of principal of which equals $32,000; and




 




                D.            WHEREAS, pursuant to that certain

Letter Agreement, by and between AP and Premier, dated as of June 30, 1999 (the

"Letter Agreement") Premier is entitled to offset, against

minimum royalties payable to AP, any payments of principal under the Premier

Note which are not paid by Lee; and




 




                E.             WHEREAS, no payments have been made

by Lee under the Old Notes since May 25, 2000; and




 




                F.             WHEREAS, pursuant to that certain

Modification Agreement, by and between AP and Premier, dated as of January 1,

1999 (the " Modification Agreement") Premier has an outstanding

obligation which is due and payable to AP, in the amount of $174,312; and




 




                G.            WHEREAS, AP, Lee and Premier desire

to restructure the obligations of Lee to AP and Premier by restructuring those

payments due under the Old Notes and to offset the amount which is due and

payable by Lee to Premier with the amount which is due and payable by Premier

to AP, all upon the terms and conditions hereinafter set forth.







                NOW,

THEREFORE, in consideration of the premises and the mutual covenants,

representations and warranties herein contained, and other good and valuable

consideration, the receipt and sufficiency of which is hereby acknowledged, the

parties hereto intending to be bound hereby agree as follows:




 




SECTION I




OFFSET OF OBLIGATIONS




 




                1.1           Offset of Obligations. AP hereby

agrees that, as consideration for Premier's restructuring of the amount due and

payable by Lee to Premier under the Premier Note, to be an amount payable to AP

pursuant to Section 2.1, AP hereby agrees that the minimum royalties due and

payable by Premier to AP through July 25, 2000, pursuant to the Modification

Agreement, shall be deemed paid.




 




                1.2           Premier Release of Claims.

Premier hereby agrees that, as consideration for the offsetting of obligations

as described in Section 1.1 herein, Premier releases, discharges and

relinquishes any and all claims and actions, both known and unknown, that now

exist, that Premier may have against Lee under the Premier Note and all

liabilities, damages, losses, costs and expenses related thereto (the "Premier

Release").




 




                1.3           AP Release of Claims. AP

hereby agrees that, as consideration for the offsetting of obligations as

described in Section 1.1 herein, AP releases, discharges and relinquishes any

and all claims and actions, both known and unknown, that now exist that AP may

have against Premier under the Modification Agreement and all liabilities,

damages, losses, costs and expenses related thereto (the "AP Release").




 




                1.4           New Claims. Notwithstanding

anything herein to the contrary, neither the Premier Release nor the AP release

shall apply to any claims, actions, liabilities, damage, losses, costs and

expenses based on breaches of this Agreement that occur after the date hereof.




 




SECTION 2




RESTRUCTURING OF OBLIGATIONS




 




                2.1           Restructuring of Old Notes.

Lee hereby agrees that, in consideration for the restructuring of the

obligation as provided in Section 1.1 and for AP's agreement to extend the

repayment of the obligation due by Lee under the Old Notes, the indebtedness

represented by the Old Notes shall be amended and restated to be an amount

payable by Lee to AP and represented by a secured promissory note in the

principal amount of Five Hundred and Twelve Thousand dollars ($512,000) in

substantially the form of Exhibit A hereto (the "New Note").













 




                2.2           Cancellation of Old Notes.

Upon execution and delivery of this Agreement and the New Note by Lee, AP and

Premier agree that the indebtedness previously represented by the Old Notes

shall be replaced by the New Note and that they shall surrender the Old Notes

to Lee.




 




SECTION 3




REPRESENTATIONS AND WARRANTIES




 




                3.1           Representations and Warranties of

Lee. Lee hereby represents and warrants to AP and Premier that:




 




                All

corporate action on the part of Lee, its officers, directors and shareholders

necessary for the authorization, execution, delivery and performance of all

obligations under this Agreement, has been taken.




 




                3.2           Representations and Warranties of

Premier. Premier hereby represents and warrants to Lee and AP that:




 




                All

corporate action on the part of Premier and its officers, directors and

shareholders necessary for the authorization, execution, delivery and

performance of all obligations under this Agreement, has been taken.




 




                3.3           Representations and Warranties of

AP. AP hereby represents and warrants to Lee and Premier that:




 




                All

corporate action on the part of the AP, its officers, directors and

shareholders necessary for the authorization, execution, delivery and

performance of all obligations under this Agreement, has been taken.




 




SECTION 4




MISCELLANEOUS




 




                4.1           Modification. Neither this

Agreement nor any provisions hereof shall be modified, discharged or terminated

except by an instrument in writing signed by the party against whom any

modification, discharge or termination is sought.




 




                4.2.          Notices. Any notice, demand or

other communication that any party hereto may be required, or may elect, to

give to anyone interested hereunder shall be sufficiently given if deposited,

postage prepaid, in a United States mail letter box, registered or certified

mail, return receipt requested, addressed to the address set forth for notice

to the appropriate party in this Agreement.













 




                4.3           Binding Effect. Except as

otherwise provided herein, this Agreement shall be binding upon and inure to

the benefit of the parties and their heirs, executors, administrators,

successors, legal representatives and assigns.




 




                4.4           Entire Agreement; Successors and

Assigns. This Agreement, including Exhibit A hereto, which is incorporated

herein by reference, constitutes the entire agreement among and between the

parties with respect to the specific subject matter hereof, superseding in

their entirety all prior and contemporaneous agreements, discussions,

understandings or correspondences between or among the parties regarding the specific

subject matter hereof and there are no representations, covenants or other

agreements except as stated or referred to herein.




 




                4.5           Assignability. This Agreement

is not transferable or assignable except as may be provided herein.




 




                4.6           Governing Law. This Agreement

will be governed by, and construed in accordance with, the laws of the State of

California excluding those laws that direct the application of the laws of

another jurisdiction.




 




                4.7           Severability. If any provision

hereof is held to be invalid, illegal or unenforceable, such provision will be

enforced to the maximum extent legally possible, and the validity, legality and

enforceability of the remaining provisions will not in any way be affected or

impaired thereby.




 




                4.8           Counterparts. This Agreement

may be executed in two or more counterparts, each of which will be deemed an

original, but all of which together will constitute one and the same

instrument.




 




                4.9           Headings. The headings of the

Sections hereof are for convenience and will not by themselves determine the

interpretation of this Agreement.




 




                4.10.        Expenses. Each party to this

Agreement shall bear its own costs and expenses related to the preparation of

this Agreement.













 




                IN

WITNESS WHEREOF, the parties have executed this Loan Restructuring and Offset

Agreement as of the date and year first set forth above.




 




	

  AP PHARMA, INC.


  
	

   


  	

   


  
	

  By:


  	

  /s/ Gordon Sangster


  
	

  Name:


  	

  Gordon Sangster


  
	

  Title:


  	

  Chief Financial

  Officer


  
	

   


  	

   


  
	

  PREMIER CONSUMER

  PRODUCTS, INC.


  
	

   


  	

   


  
	

  By:


  	

  /s/ John P. Boylen


  
	

  Name:


  	

  John P. Boylen


  
	

  Title:


  	

  Treasurer


  
	

   


  	

   


  
	

  LEE PHARMACEUTICALS,

  INC


  
	

   


  	

   


  
	

  By:


  	

  /s/ Ronald G. Lee


  
	

  Name:


  	

  Ronald G. Lee


  
	

  Title:


  	

  Chairman


  





 






















EXHIBIT A




 




NEW NOTE