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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 25, 2004
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A.P. PHARMA, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 1-16109 94-2875566
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
123 SAGINAW DRIVE, REDWOOD CITY, CALIFORNIA 94063
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(650) 366-2626
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5.
On June 24, 2004, A.P. Pharma, Inc. ("A.P. Pharma") announced a
sale of 4,183,335 shares of its common stock at a price of $3.00
per share, for gross proceeds of $12,550,000, to various
institutional investors. The shares were offered under A.P.
Pharma's shelf registration statement on Form S-3 (File Nos. 333-
115156), as amended.
A.P. Pharma expects to receive net proceeds from the offering of
approximately $11.8 million after deducting placement agent fees
and estimated costs associated with the offering. Olympus
Securities LLC served as placement agent.
Copies of the engagement letter between A.P. Pharma and Olympus
Securities LLC, dated as of June 7, 2004, a form of the Common
Stock Purchase Agreement among A.P. Pharma and the purchasers,
and a press release related to the offering are attached as
Exhibits 99.1, 99.2 and 99.3 to this current report and are
incorporated herein by reference.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Engagement letter between A.P. Pharma and Olympus
Securities LLC, dated as of June 7, 2004.
99.2 Common Stock Purchase Agreement among A.P. Pharma and
the purchasers dated as of June 23, 2004.
99.3 Press release dated June 24, 2004.
SIGNATURE
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 hereunto duly authorized.
A.P. PHARMA, INC.
Date: June 25, 2004 By: /S/ Michael O'Connell
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Michael P. J. O'Connell,
President and Chief
Executive Officer
EXHIBIT INDEX
99.1 Engagement letter between A.P. Pharma and Olympus
Securities LLC, dated as of June 7, 2004.
99.2 Common Stock Purchase Agreement among A.P. Pharma and the
purchasers dated as of June 23, 2004.
99.3 Press release dated June 24, 2004.
(continued from previous page)
Exhibit 99.1
June 7, 2004
Olympus Securities, LLC
5 Magnolia Lane
Boonton, NJ 07005
Attn: James Carrazza, President
Dear Mr. Carrazza:
This letter will serve to document the fee arrangement between
A.P. Pharma, Inc. (the "Company") and Olympus Securities, LLC
("Olympus") regarding Olympus' involvement in the purchase of
common stock by Vertical Ventures, LLC (and affiliates) and other
institutional investors approved by the Company (the
"Transaction").
Upon closing of the Transaction, the Company will pay Olympus a
cash fee of 5% of the Transaction gross proceeds.
The Company and Olympus agree to indemnify each other as provided
in Appendix A.
Yours very truly,
/S/ Mike O'Connell
------------------
Mike O'Connell
President & CEO
Acknowledged and Agreed:
OLYMPUS SECURITIES, LLC
By /S/ James Carrazza
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James Carrazza, President
Appendix A
A. Indemnification
1. Indemnification of the Placement Agent. The Company
will indemnify and hold harmless Olympus and any of its
affiliates or any officer, director, partner,
controlling person, employee or agent of Olympus or any
of its affiliates (a "Related Person") for its
reasonable legal and other expenses (including the
costs of any investigation, preparation and travel) and
for any Losses incurred in connection with any action,
claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial
proceeding, such as a disposition), whether commenced
or threatened (each, a "Proceeding") , insofar as such
Losses arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the Registration Statement or the
Supplement, or any amendment or supplement thereto, and
all other documents filed as a part thereof, as amended
at the time of effectiveness of the Registration
Statement, including any information deemed to be a
part thereof as of the time of effectiveness pursuant
to paragraph (b) of Rule 430A, or pursuant to Rule 434,
under the Securities Act, or arise out of or are based
upon the omission or alleged omission to state in any
of them a material fact required to be stated therein
or necessary to make the statements in any of them, in
light of the circumstances under which they were made,
not misleading, as such expenses or Losses are
incurred; provided, however, that the foregoing
indemnity agreement shall not apply to any Losses to
the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in
reliance upon and in conformity with written
information furnished to the Company by Olympus
expressly for use in the Registration Statement or the
Supplement, or any amendment or supplement thereto. In
addition, the Company shall indemnify and hold harmless
Olympus and Related Person from and against any and all
Losses, as incurred, arising out of or relating to any
breach by the Company of any of the representations,
warranties or covenants made by the Company in this
Agreement, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of
any Proceeding for which indemnification is available
under this Appendix shall be governed by paragraph 3
below. The indemnification obligations of the Company
under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall
be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives
of Olympus and any such Related Persons. The Company
also agrees that neither Olympus nor any Related
Persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the
Company in connection with or as a result of the
Transaction contemplated by this letter agreement,
except as provided in paragraph 2 below or to the
extent that any Losses incurred by the Company result
from the gross negligence or willful misconduct of
Olympus or Related Person in connection with such
Transaction. If the Company breaches its obligations
under this letter agreement, then, in addition to any
other liabilities the Company may have under this
letter agreement or applicable law, the Company shall
pay or reimburse Olympus on demand for all costs of
collection and enforcement (including reasonable
attorneys fees and expenses). Without limiting the
generality of the foregoing, the Company specifically
agrees to reimburse Olympus on demand for all costs of
enforcing the indemnification obligations in this
paragraph. For the purposes of this Appendix, "Losses"
shall mean any and all losses, claims, damages,
liabilities, settlement costs and expenses, including
without limitation costs of preparation of legal action
and reasonable attorneys' fees.
2. Indemnification of the Company, its Directors and
Officers. Olympus agrees to indemnify and hold
harmless the Company, each of its directors, each of
its officers who signed the Registration Statement and
each person, if any, who controls the Company within
the meaning of the Act or the Exchange Act, for its
reasonable legal and other expenses (including the
costs of any investigation, preparation and travel) and
for any Losses incurred in connection with any
Proceeding, whether commenced or threatened, insofar as
such Losses arise out of or are based upon any untrue
statement of any material fact contained in the
Registration Statement or the Supplement, or any
amendment or supplement thereto, and all other
documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement,
including any information deemed to be a part thereof
as of the time of effectiveness pursuant to paragraph
(b) of Rule 430A, or pursuant to Rule 434, under the
Securities Act, or arise out of or are based upon the
omission to state in any of them a material fact
required to be stated therein or necessary to make the
statements in any of them, in light of the
circumstances under which they were made, not
misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made
in such Supplement, or any amendment or supplement
thereto, in reliance upon and in conformity with
written information furnished to the Company by Olympus
expressly for use therein as such expenses or Losses
are incurred. The conduct of any Proceeding for which
indemnification is available under this Appendix shall
be governed by paragraph 3 below.
3. Conduct of Indemnification Proceedings. If any
Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an "Indemnified
Party"), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying
Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment
of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which
determination is not subject to appeal or further
review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (i) the
Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall
have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist
if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not
be liable for any settlement of any such Proceeding
effected without its written consent, which consent
shall not be unreasonably withheld. No Indemnifying
Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is
a party, unless such settlement includes an
unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent
with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Business Days of written
notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder;
provided, that the Indemnifying Party may require such
Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
Exhibit 99.2
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (this "Agreement") is
made and effective as of June 23, 2004, by and among A.P. Pharma,
Inc., a Delaware corporation (the "Company"), and the purchasers
identified in the signature pages attached hereto (each, a
"Purchaser" and, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in
this Agreement, the Company desires to sell to the Purchasers and
each Purchaser, severally and not jointly desires to purchase
from the Company certain shares of the Company's common stock,
$0.01 par value per share (the "Common Stock"), as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
contained in this Agreement and for other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser, severally and not
jointly, agree as follows:
1. Closing.
(a) The closing of the sale of the
securities contemplated hereby (the "Closing") shall
take place at the offices of Proskauer Rose LLP
("Purchaser Counsel"), 1585 Broadway, New York, New
York 10036, on June 23, 2004 or on such other date or
at such other location as the parties shall otherwise
agree. The date of the Closing is hereinafter referred
to as the "Closing Date." At the Closing: (x) the
Company shall issue and deliver to each Purchaser (i) a
stock certificate, registered in the name of such
Purchaser and free of all restrictive legends,
representing the number of shares of Common Stock (the
shares of Common Stock issued and sold to the
Purchasers hereunder are collectively, the "Shares")
equal to the quotient obtained by dividing (a) the
purchase price set forth below such Purchaser's
signature to this Agreement by (b) $3.00, or, for
Purchasers who provide the necessary account
information to the Company, the Company shall issue and
deliver such Shares in a balance account with The
Depository Trust Company through its Deposit Withdrawal
Agent Commission System, (ii) a prospectus supplement
with respect to the Registration Statement (as defined
in Section 2(g)) reflecting the sale of the Shares (the
"Supplement"), and (iii) the legal opinion of the
Company's outside counsel in the form of Exhibit A; and
(y) each Purchaser shall deliver to the Company the
purchase price set forth below such Purchaser's
signature to this Agreement, in immediately available
funds by wire transfer to an account designated in
writing by the Company for such purpose.
(b) For the purposes of this Agreement, the
following definitions shall apply:
"Business Day" shall mean any day except Saturday, Sunday
and any day which shall be a federal legal holiday in the United
States or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental
action to close.
"Common Stock Equivalents" means, collectively, Options and
Convertible Shares.
"Convertible Shares" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Shares.
"Person" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal,
state, local or other governmental authority or other entity of
any kind.
(c) The obligation of the Purchasers to
purchase and acquire the Shares under this Agreement is
subject to the fulfillment (or waiver by such
Purchaser) of each of the following conditions:
(i) The Company shall have filed the Supplement with
the Securities and Exchange Commission (the "Commission").
(ii) The Registration Statement (as defined in Section
2(g) below) shall be effective on the Closing Date as to all
Shares, not subject to any threatened or actual stop order
and will not on the Closing Date contain any untrue
statement of material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) The Company shall have provided a certificate
from a duly authorized officer certifying on behalf of the
Company that each of the conditions set forth in Section
1(c) shall have been satisfied.
2. Representations and Warranties of the Company. The
Company hereby represents and warrants to each of the Purchasers
as follows:
(a) Subsidiaries. The Company does not have
any significant subsidiaries, as that term is defined
in Rule 1-02(w) of Regulation S-X (a "Subsidiary").
Except as disclosed in Schedule 2(a), the Company owns,
directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and
clear of any lien, charge, claim, security interest,
encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued
and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-
assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of
the Company and the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing
and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable),
with the requisite power and authority to own and use
its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of
its respective certificate or articles of
incorporation, bylaws or other organizational or
charter documents. Each of the Company and the
Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation or other entity
in each jurisdiction in which the nature of the
business conducted or property owned by it makes such
qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (i)
adversely affect the legality, validity or
enforceability of this Agreement, (ii) have or result
in a material adverse effect on the results of
operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) adversely impair the Company's
ability to perform fully on a timely basis its
obligations under this Agreement (any of (i), (ii) or
(iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company
has the requisite corporate power and authority to
enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry
out its obligations hereunder. The execution and
delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated
hereunder have been duly authorized by all necessary
action on the part of the Company and no further
consent or action is required by the Company, its Board
of Directors or its stockholders. This Agreement has
been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the
Company in accordance with its terms.
(d) No Conflicts. The execution, delivery
and performance of this Agreement by the Company and
the consummation by the Company of the transactions
contemplated hereby do not and will not (i) conflict
with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation,
bylaws or other organizational or charter documents,
(ii) subject to obtaining the Required Approvals (as
defined below), conflict with, or constitute a default
(or an event that with notice or lapse of time or both
would become a default) under, or give to others any
rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company
or any Subsidiary is a party or by which any property
or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental
authority to which the Company or a Subsidiary is
subject (including federal and state securities laws
and regulations) and the rules and regulations of any
self-regulatory organization to which the Company or
its securities are subject, or by which any property or
asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii)
and (iii), such as could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(e) Filings, Consents and Approvals.
Neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration
with, any court or other federal, state, local or other
governmental authority or other Person in connection
with the execution, delivery and performance by the
Company of this Agreement, other than (i) the required
filing of the Supplement, (ii) applicable Blue Sky
filings, and (iii) in all other cases where the failure
to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or
registration could not have or result in, individually
or in the aggregate, a Material Adverse Effect
(collectively, the "Required Approvals").
(f) Issuance of the Shares. The Shares are
duly authorized and, when issued and paid for in
accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable, free and
clear of all Liens and shall not be subject to any
preemptive rights or similar rights of stockholders.
The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common
Stock to issue all of the Shares. At the Closing, the
Shares shall have been listed for trading on the NASDAQ
National Market (the "Trading Market").
(g) Registration Statement. The Company's
Registration Statement on Form S-3 (No. 333-115163)
(the "Registration Statement") was declared effective
by the Commission on May 27, 2004. The Registration
Statement is effective on the date hereof and the
Company has not received notice that the Commission has
issued or intends to issue a stop order with respect to
the Registration Statement or that the Commission
otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to
do so. The Registration Statement (including the
information or documents incorporated by reference
therein), as of the time it was declared effective, and
any amendments or supplements thereto, each as of the
time of filing, did not contain any untrue statement of
material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading. The issuance of the
Shares to the Purchasers is registered by the
Registration Statement.
(h) Listing and Maintenance Requirements
The Company has not, in the two years preceding the
date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements
of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing
and maintenance requirements.
(i) Certain Fees. Except for listing fees
to be paid by the Company to the Trading Market and the
placement fee payable to Olympus Securities, LLC in
connection with the transactions contemplated by this
Agreement, no fees or commissions will be payable by
the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions
contemplated by this Agreement and the Company has not
taken any action that would cause any Purchaser to be
liable for any such fees or commissions. The
Purchasers shall have no obligation with respect to any
fees incurred by the Company or any other Person (other
than the Purchasers, if the Purchasers have agreed in
writing to pay such fees) or with respect to any claims
made by or on behalf of other Persons for fees of a
type contemplated in this Section 2(i) that may be due
in connection with the transactions contemplated by
this Agreement. The Company shall indemnify and hold
harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their affiliates,
from and against all claims, losses, damages, costs
(including the reasonable costs of preparation and
reasonable attorney's fees) and expenses suffered in
respect of any such claimed or existing fees incurred
by the Company or any other Person (other than the
Purchasers, if the Purchasers have agreed in writing to
pay such fees), as such fees and expenses are incurred.
(j) Disclosure. The Company confirms that
neither it nor any other Person acting on its behalf
has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might
constitute material, nonpublic information. The
Company understands and confirms that each of the
Purchasers will rely on the foregoing representations
in effecting transactions in securities of the Company.
All disclosure provided to the Purchasers regarding
the Company, its business and the transactions
contemplated hereby, including the Schedules to this
Agreement, the Registration Statement and the
Supplement, furnished by or on behalf of the Company
are true and correct and do not contain any untrue
statement of a material fact or omit to state any
material fact necessary in order to make the statements
made therein, in light of the circumstances under which
they were made, not misleading. No event or
circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects,
operations or financial conditions, which, under
applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has
not been so publicly announced or disclosed (assuming
for this purpose that the Company's reports filed under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act") are being incorporated into an
effective registration statement filed by the Company
under the Securities Act of 1933, as amended (the
"Securities Act")). The Company acknowledges and
agrees that no Purchaser makes or has made any
representations or warranties with respect to the
transactions contemplated hereby other than those
specifically set forth in Section 3 or (ii) any
statement, commitment or promise to the Company or, to
its knowledge, any of its representatives which is or
was an inducement to the Company to enter into this
Agreement or otherwise.
(k) No Violation. The issuance and sale of
the Shares hereunder does not conflict with or violate
any rules or regulations of the Trading Market.
(l) SEC Reports; Financial Statements. The
Company has filed all reports required to be filed by
it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as
the Company was required by law to file such material)
(the foregoing materials being collectively referred to
herein as the "SEC Reports" and, together with this
Agreement and the Schedules to this Agreement, the
"Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration
of any such extension. The Company has delivered to
the Purchasers a copy of all SEC Reports filed within
the 20 days preceding the date hereof. As of their
respective dates, the SEC Reports complied in all
material respects with the requirements of the
Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder,
and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state
a material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading. The financial statements of the
Company included in the SEC Reports comply in all
material respects with applicable accounting
requirements and the rules and regulations of the
Commission with respect thereto as in effect at the
time of filing. Such financial statements have been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the
notes thereto, and fairly present in all material
respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end
audit adjustments. All material agreements to which
the Company or any Subsidiary is a party or to which
the property or assets of the Company or any Subsidiary
are subject are included as part of or specifically
identified in the SEC Reports.
(m) Capitalization. The authorized, issued
and outstanding capital stock of the Company is as set
forth in the Registration Statement and in each
Supplement (other than for issuances after the dates
thereof, if any, pursuant to employee benefit plans
described in any Supplement or upon exercise of
outstanding options or warrants described in any
Supplement). The Shares conform in all material
respects to the description thereof contained in the
Base Prospectus and the Supplement. The outstanding
capital stock of the Company, and the outstanding
options, warrants, or convertible securities of the
Company, are as described in the Prospectus and
Supplement, as of the date such information is
presented therein. All the issued and outstanding
shares of the capital stock of the Company have been
duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance, in
all material respects, with federal and state
securities laws, as applicable. Except as disclosed in
Schedule 2(m), there are no outstanding options,
warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as
disclosed in Schedule 2(m), there are no anti-dilution
or price adjustment provisions contained in any
security issued by the Company (or in any agreement
providing rights to security holders) and the issue and
sale of the Shares will not obligate the Company to
issue shares of Common Stock or other securities to any
Person and will not result in a right of any holder of
Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the
knowledge of the Company, except as specifically
disclosed in Schedule 2(m), no Person or group of
related Persons beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act), or has
the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial
ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at
any single time.
(n) Material Changes. Since the date of the
latest audited financial statements included within the
SEC Reports, except as specifically disclosed in the
SEC Reports, (i) there has been no event, occurrence or
development that has had or that, individually or in
the aggregate, could result in a Material Adverse
Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the
ordinary course of business consistent with past
practice and (B) liabilities not required to be
reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its
capital stock, and (v) the Company has not issued any
equity securities to any officer, director or
affiliate, except pursuant to existing Company stock
option plans.
(o) Litigation. There is no action, suit,
claim, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company,
any Subsidiary or any of their respective properties
before or by any court, arbitrator, public board,
governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign)
(collectively, an "Action") which (i) adversely affects
or challenges the legality, validity or enforceability
of this Agreement or the Shares or (ii) could, if there
were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect.
Schedule 2(o) of the Disclosure Schedule contains a
complete list and summary description of any pending
or, to the knowledge of the Company, threatened in
writing proceeding against or affecting the Company or
any of its Subsidiaries, without regard to whether it
would, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or
has been the subject of any Action involving a claim of
violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.
The Company does not have pending before the Commission
any request for confidential treatment of information.
There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any
investigation by the Commission involving the Company
or any current or former director or officer of the
Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any
registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities
Act. No strike, work stoppage, slow down or other
material labor problem exists or, to the knowledge of
the Company, is threatened or imminent with respect to
any of the employees of the Company or the
Subsidiaries.
(p) Compliance. Neither the Company nor any
Subsidiary (i) is in default under or in violation of
(and no event has occurred that has not been waived
that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties
is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or
has been in violation of any statute, rule or
regulation of any governmental authority, including
without limitation all foreign, federal, state and
local laws relating to taxes, environmental protection,
occupational health and safety, product quality and
safety and employment and labor matters, except in each
case as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.
(q) Regulatory Permits. The Company and the
Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate federal, state,
local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such
permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material
Permits"), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(r) Title to Assets. The Company and the
Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is
material to the business of the Company and the
Subsidiaries and good and marketable title in all
personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each
case free and clear of all Liens, except for Liens as
do not materially affect the value of such property and
do not materially interfere with the use made and
proposed to be made of such property by the Company and
the Subsidiaries. Any real property and facilities held
under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in
compliance.
(s) Patents and Trademarks. The Company and
the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or
material for use in connection with their respective
businesses as described in the SEC Reports and which
the failure to so have could have a Material Adverse
Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To
the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no
existing infringement by another Person of any of the
Intellectual Property Rights.
(t) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries
are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its
business without a significant increase in cost.
(u) Transactions With Affiliates and
Employees. Except as set forth in SEC Reports filed at
least ten days prior to the date hereof, none of the
officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services
as employees, officers and directors), including any
contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for
rental of real or personal property to or from, or
otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an
officer, director, trustee or partner.
(v) Internal Accounting Controls. The
Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed
in accordance with management's general or specific
authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements
in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management's general or specific authorization, and
(iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(w) Solvency. Based on the financial
condition of the Company as of the Closing Date, (i)
the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in
respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not
constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted
and as proposed to be conducted including its capital
needs taking into account the particular capital
requirements of the business conducted by the Company,
and projected capital requirements and capital
availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to
be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to
be payable on or in respect of its debt).
(x) Acknowledgment Regarding Purchasers'
Purchase of Shares. The Company acknowledges and
agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect
to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with
respect to this Agreement and the transactions
contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or
agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental
to the Purchasers' purchase of the Shares. The Company
further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and
its representatives.
(y) Going Concern. The Company and the
Subsidiaries have no knowledge (upon receipt of the
proceeds of this transaction) that Ernst & Young LLP,
the Company's independent public accountants, will
issue an audit letter containing a "going concern"
opinion in connection with the Company's annual report
on Form 10-K pursuant to Section 13 or 15(d) under the
Exchange Act for the fiscal year ended December 31,
2003 or otherwise.
(z) Sarbanes-Oxley Act. The Company is in
compliance with applicable requirements of the
Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in
effect as of the date of this Agreement, except where
such noncompliance could not be reasonably expected to
have, individually or in the aggregate, a Material
Adverse Effect.
3. Representations and Warranties of the Purchasers. Each
Purchaser hereby for itself and for no other Purchaser,
represents and warrants to the Company as follows:
(a) Organization; Authorization. Each such
Purchaser is an entity is duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation. Such Purchaser has
full right, power, authority and capacity to enter into
this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action
to authorize the execution, delivery and performance of
this Agreement. Upon the execution and delivery of
this Agreement and assuming the valid execution hereof
by the Company, this Agreement shall constitute the
valid and binding obligation of such Purchaser
enforceable in accordance with its terms.
(b) Experience of Such Purchaser. Such
Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and
experience in business and financial matters so as to
be capable of evaluating the merits and risks of the
prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.
The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than
those specifically set forth in this Section 3.
4. Other Agreements of the Parties.
4.1 Subsequent Placements.
(a) Until 90 Business Days following the
Closing Date, the Company will not, directly or
indirectly, offer, sell, grant any option to purchase,
or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition
of) any of its or the Subsidiaries' equity or equity
equivalent securities, including, without limitation,
any debt, preferred stock or other instrument or
security that is, at any time during its life and under
any circumstances, convertible into or exercisable or
exchangeable for Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition
or announcement being referred to as a "Subsequent
Placement") unless the Company shall have first
complied with this Section 4.1(a).
(i) The Company shall deliver to each Purchaser a
written notice (the "Offer") of any proposed or intended
issuance or sale or exchange of the securities being offered
(the "Offered Securities") in a Subsequent Placement, which
Offer shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the
number or amount of the Offered Securities to be issued,
sold or exchanged, (y) identify the persons or entities to
which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (z) offer to issue
and sell to or exchange with each Purchaser (A) a pro rata
portion of the Offered Securities, based on such
Purchaser's pro rata portion of the aggregate purchase price
paid by the Purchasers for all of the Shares purchased
hereunder (the "Basic Amount"), and (B) with respect to each
Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to
the Basic Amounts of other Purchasers as such Purchaser
shall indicate it will purchase or acquire should the other
Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a
Purchaser must deliver a written notice to the Company prior
to the end of the ten (10) Business Day period of the Offer,
setting forth the portion of the Purchaser's Basic Amount
that such Purchaser elects to purchase and, if such
Purchaser shall elect to purchase all of its Basic Amount,
the Undersubscription Amount, if any, that such Purchaser
elects to purchase (in either case, the "Notice of
Acceptance"). If the Basic Amounts subscribed for by all
Purchasers are less than the total of all of the Basic
Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and
the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has
subscribed for any Undersubscription Amount shall be
entitled to purchase on that portion of the Available
Undersubscription Amount as the Basic Amount of such
Purchaser bears to the total Basic Amounts of all Purchasers
that have subscribed for Undersubscription Amounts, subject
to rounding by the Board of Directors to the extent its
deems reasonably necessary.
(iii) The Company shall have five (5) days
from the expiration of the period set forth in Section
4.1(a)(ii) above to issue, sell or exchange all or any part
of such Offered Securities as to which a Notice of
Acceptance has not been given by the Purchasers (the
"Refused Securities"), but only to the offerees described in
the Offer and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are
not more favorable to the acquiring person or persons or
less favorable to the Company than those set forth in the
Offer.
(iv) In the event the Company shall propose to
sell less than all the Refused Securities (any such sale to
be in the manner and on the terms specified in Section
4.1(a)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or
amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that the
Purchaser elected to purchase pursuant to Section 4.1(a)(ii)
above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange
(including Offered Securities to be issued or sold to
Purchasers pursuant to Section 4.1(a)(ii) above prior to
such reduction) and (ii) the denominator of which shall be
the original amount of the Offered Securities. In the event
that any Purchaser so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the
Purchasers in accordance with Section 4(a)(i) above.
(v) Upon the closing of the issuance, sale or
exchange of all or less than all of the Refused Securities,
the Purchasers shall acquire from the Company, and the
Company shall issue to the Purchasers, the number or amount
of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(a)(iv) above if
the Purchasers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the
Purchasers of any Offered Securities is subject in all cases
to the preparation, execution and delivery by the Company
and the Purchasers of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and
substance to the Purchasers and their respective counsel.
(vi) Any Offered Securities not acquired by the
Purchasers or other persons in accordance with Section
4.1(a)(iii) above may not be issued, sold or exchanged until
they are again offered to the Purchasers under the
procedures specified in this Agreement.
(b) The restrictions contained in paragraph
(a) of this Section shall not apply to (i) the granting
of options to employees, officers and directors of the
Company pursuant to any stock option plan duly adopted
by the Company or to the issuance of Common Stock upon
exercise of such options, or (ii) strategic
transactions not significantly for the purpose of
raising capital.
4.2 Disclosure of Material Non-Public
Information. The Company shall not and shall cause each
of its Affiliates (as defined in Rule 405 under the
Securities Act) and other Persons acting on behalf of the
Company or such Affiliate not to provide to any Purchaser
any information that it believes to be material non-
public information without the express written consent of
such Purchaser.
4.3 Reservation and Listing of Shares. The
Company shall maintain a reserve from its duly authorized
shares of Common Stock for the issuance pursuant to this
Agreement in such amount as may be required to fulfill
its obligations in full under this Agreement. In the
event that at any time the then authorized shares of
Common Stock are insufficient for the Company to satisfy
its obligations in full under this Agreement, the Company
shall promptly take such actions as may be required to
increase the number of authorized shares. The Company
shall take such steps as may be required to cause and
maintain the listing of the Shares on the Trading Market
and such other exchange, market or quotation facility on
which the Common Stock is traded.
4.4 Indemnification
(a) Indemnification by the Company. The
Company will indemnify and hold harmless each Purchaser
and any of its affiliates or any officer, director,
partner, controlling person, employee or agent of a
Purchaser or any of its affiliates (a "Related Person")
for its reasonable legal and other expenses (including
the costs of any investigation, preparation and travel)
and for any Losses incurred in connection with any
action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or
partial proceeding, such as a disposition), whether
commenced or threatened (each, a "Proceeding"), insofar
as such Losses arise out of or are based upon any
untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement
or the Supplement, or any amendment or supplement
thereto, and all other documents filed as a part
thereof, as amended at the time of effectiveness of the
Registration Statement, including any information
deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, under the Securities Act, or
arise out of or are based upon the omission or alleged
omission to state in any of them a material fact
required to be stated therein or necessary to make the
statements in any of them, in light of the
circumstances under which they were made, not
misleading, as such expenses or Losses are incurred. In
addition, the Company shall indemnify and hold harmless
each Purchaser and Related Person from and against any
and all Losses, as incurred, arising out of or relating
to any breach by the Company of any of the
representations, warranties or covenants made by the
Company in this Agreement, or any allegation by a third
party that, if true, would constitute such a breach.
The conduct of any Proceeding for which indemnification
is available under this paragraph shall be governed by
Section 4.4(c). The indemnification obligations of the
Company under this paragraph shall be in addition to
any liability that the Company may otherwise have and
shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives
of the Purchasers and any such Related Persons. The
Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the
transactions contemplated by this Agreement, except as
provided in Section 4.4(b) below and to the extent that
any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross
negligence or willful misconduct of the applicable
Purchaser or Related Person in connection with such
transactions. If the Company breaches its obligations
under this Agreement, then, in addition to any other
liabilities the Company may have under this Agreement
or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection
and enforcement (including reasonable attorneys fees
and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse
the Purchasers on demand for all costs of enforcing the
indemnification obligations in this paragraph. For the
purposes of this Section 4.4, "Losses" shall mean any
and all losses, claims, damages, liabilities,
settlement costs and expenses, including without
limitation costs of preparation of legal action and
reasonable attorneys' fees.
(b) Indemnification by Purchasers. Each
Purchaser shall, severally and not jointly, indemnify
and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising
solely out of any untrue statement of a material fact
contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out
of any omission of a material fact required to be
stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the
circumstances under which they were made) not
misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any
information so furnished in writing by such Purchaser
to the Company specifically for inclusion in the
Supplement or to the extent that such untrue statements
or omissions are based solely upon information
regarding such Purchaser furnished in writing to the
Company by such Purchaser expressly for use therein.
In no event shall the liability of any selling
Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such
Purchaser upon the sale of the Shares giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings.
If any Proceeding shall be brought or asserted against
any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom indemnity is
sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the
defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or
further review) that such failure shall have
proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (i) the
Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall
have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist
if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not
be liable for any settlement of any such Proceeding
effected without its written consent, which consent
shall not be unreasonably withheld. No Indemnifying
Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is
a party, unless such settlement includes an
unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Business
Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party
to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that
such Indemnified Party is not entitled to
indemnification hereunder).
5. Miscellaneous
(a) Fees and Expenses. At the Closing, the
Company shall pay to Iroquois Capital L.P. an
aggregate of $15,000 for their legal fees and
expenses incurred in connection with its diligence
and the preparation and negotiation of this
Agreement. In lieu of the foregoing payment,
Iroquois Capital L.P. may retain such amount at
the Closing or require the Company to pay such
amount directly to Purchaser Counsel. Except as
expressly set forth in this Agreement to the
contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses
incurred by such party incident to the
negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall
pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the
issuance of the Shares.
(b) Publicity. Neither the Company nor the
Purchasers shall issue any press release or make
any other public announcement relating to this
Agreement unless (i) the content thereof is
mutually agreed to by the Company and the
Purchasers, or (ii) such party is advised by its
counsel that such press release or public
announcement is required by law; except that no
press release issued to disclose the issuance and
sale of the Shares to the Purchasers will refer to
the Purchasers by name. The Company shall (i)
within one Business Day following the Closing
Date, issue a press release mutually agreed to by
the Company and the Purchasers, disclosing the
transactions contemplated hereby and (ii) make
such other filings and notices in the manner and
time required by the Commission.
(c) Entire Agreement; Amendments. This
Agreement together with the Exhibits and Schedules
hereto contain the entire understanding of the
parties with respect to the subject matter hereof
and supersedes all prior agreements and
understandings, oral or written, with respect to
such matters, which the parties acknowledge have
been merged into this Agreement and its Exhibits
and Schedules. This Agreement may not be modified
or amended except pursuant to an instrument in
writing signed by the Company and Purchasers then
holding a majority of the Shares purchased
hereunder. The waiver by either party hereto of
any right hereunder or the failure to perform or
of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any
other breach or failure by said other party
whether of a similar nature or otherwise.
(d) Construction. The headings herein are
for convenience only, do not constitute a part of
this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language
used in this Agreement will be deemed to be the
language chosen by the parties to express their
mutual intent, and no rules of strict construction
will be applied against any party.
(e) Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of
the parties and their successors and permitted
assigns. The Company may not assign this
Agreement or any rights or obligations hereunder
without the prior written consent of the
Purchasers. Any Purchaser may assign its rights
under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares,
provided such transferee agrees in writing to be
bound, with respect to the transferred Shares, by
the provisions hereof that apply to the
"Purchasers." Notwithstanding anything to the
contrary herein, Shares may be assigned to any
Person in connection with a bona fide margin
account or other loan or financing arrangement
secured by such Shares.
(f) Notices. Any and all notices or other
communications or deliveries required or permitted
to be provided hereunder shall be in writing and
shall be deemed given and effective on the
earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile
at the facsimile number specified in this Section
5(g) prior to 6:30 p.m. (New York City time) on a
Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication
is delivered via facsimile at the facsimile number
specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of
mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is
required to be given. The address for such
notices and communications shall be as follows:
If to the Company: A.P. Pharma, Inc.
123 Saginaw Drive,
Redwood City, CA 94063
Facsimile No.: 650-365-6490
Telephone No.: 650-366-2626
With a copy to: Heller Ehrman White & McAuliffe LLP
2775 Sand Hill Road,
Menlo Park, CA 94025
Facsimile No.: 650-324-0638
Telephone No.: 650-324-7025
Attn: Richard A. Peers
If to the Purchasers: To the address set forth under
such Purchaser's name on the
signature pages attached hereto.
or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
(g) Governing Law. All questions concerning
the construction, validity, enforcement and
interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the
internal laws of the State of New York, without regard
to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether
brought against a party hereto or its respective
affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New
York, Borough of Manhattan. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New
York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of
this Agreement), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action
or proceeding is improper. Each party hereto hereby
irrevocably waives personal service of process and
consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the
address in effect for notices to it under this
Agreement and agrees that such service shall constitute
good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any
manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in
any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If
either party shall commence an action or proceeding to
enforce any provisions of this Agreement, then the
prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable
attorneys fees and other reasonable costs and expenses
incurred with the investigation, preparation and
prosecution of such action or proceeding.
(h) Survival. The representations,
warranties, agreements and covenants contained herein
shall survive the Closing and the delivery and/or
exercise of the Shares, as applicable.
(i) Execution. This Agreement may be
executed in two or more counterparts, all of which when
taken together shall be considered one and the same
agreement and shall become effective when counterparts
have been signed by each party and delivered to the
other party, it being understood that both parties need
not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation
of the party executing (or on whose behalf such
signature is executed) the same with the same force and
effect as if such facsimile signature page were an
original thereof.
(j) Severability. If any provision of this
Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
(k) Remedies. In addition to being entitled
to exercise all rights provided herein or granted by
law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific
performance under this Agreement. The parties agree
that monetary damages may not be adequate compensation
for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific
performance of any such obligation the defense that a
remedy at law would be adequate.
(l) Independent Nature of Purchasers. The
obligations of each Purchaser under this Agreement are
several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other
Purchaser under this Agreement. The decision of each
Purchaser to purchase Shares pursuant to this Agreement
has been made by such Purchaser independently of any
other Purchaser and independently of any information,
materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities,
results of operations, condition (financial or
otherwise) or prospects of the Company or of the
Subsidiary which may have been made or given by any
other Purchaser or by any agent or employee of any
other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any other
Purchaser (or any other person) relating to or arising
from any such information, materials, statements or
opinions. Nothing contained herein, and no action
taken by any Purchaser pursuant hereto, shall be deemed
to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are
in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by
this Agreement. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser
in connection with making its investment hereunder and
that no other Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment
hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including
without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal
counsel in its review and negotiations of this
Agreement. For reasons of administrative convenience
only, the Purchasers acknowledge and agree that they
and their respective counsel have chosen to communicate
with the Company through Proskauer Rose LLP, but
Proskauer Rose LLP represents only Iroquois Capital
L.P.
(m) Replacement of Shares. If any
certificate or instrument evidencing any Shares is
mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances
shall also pay any reasonable third-party costs
associated with the issuance of such replacement
Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES
FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this
Common Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.
A.P. PHARMA, INC.
By: /S/ Michael P.J. O'Connell
---------------------------
Name: Michael P.J. O'Connell
Title: President and Chief Executive
Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE OF
PURCHASERS FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Common Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.
[ ]
By: /S/
-----------------------
Name:
Title:
Purchase Price: $[ ]
Address for Notice:
[ ]
641 Lexington Ave, 26th Floor
New York, NY 10022
Facsimile No.: (212) 207-3452
Telephone No.: (212) 974-3070
Attn: Joshua Silverman
With copies to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036-8299
Facsimile No.: (212) 969-2900
Attn: Adam J. Kansler, Esq.
[PURCHASER]
By: /S/
-------------------------
Name:
Title:
Purchase Price: $[ ]
Address for Notice:
[ ]
[ ]
[ ]
Telephone No.: [ ]
Facsimile No.: [ ]
Attn: [ ]
Exhibit 99.3
A.P. Pharma Logo
News Release
A.P. PHARMA COMPLETES COMMON STOCK SALE
REDWOOD CITY, Calif. (June 24, 2004) - A.P. Pharma, Inc. (NASDAQ
NM: APPA), a specialty pharmaceutical company, today completed
the sale of approximately 4.2 million shares of its common stock
at a price of $3.00 per share to various institutional investors,
for gross proceeds of approximately $12.5 million. The shares
were offered and sold pursuant to an effective "shelf"
registration statement, previously filed with the Securities and
Exchange Commission. Olympus Securities LLC served as placement
agent.
The Company estimates net proceeds from the financing to be
approximately $11.8 million after deducting placement agent fees
and the estimated costs associated with the offering. The
Company plans to use the net proceeds of this financing for
clinical trials, research and development expenses and general
and administrative expenses.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy, and there will not be any sales
of these securities in any jurisdiction in which an offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
This offering is being made by means of a prospectus supplement
to a prospectus that is part of a shelf registration statement,
which was previously filed with and declared effective by the
Securities and Exchange Commission.
Copies of the prospectus and the prospectus supplement can be
obtained from A.P. Pharma at 123 Saginaw Drive, Redwood City,
California 94063.
About A.P. Pharma
- -----------------
A.P. Pharma is a specialty pharmaceutical company focused on the
development of ethical (prescription) pharmaceuticals utilizing
its proprietary polymer-based drug delivery systems. The
Company's primary focus is the development and commercialization
of its bioerodible injectable and implantable systems under the
trade name Biochronomer(TM). Initial target areas of application
for the Company's drug delivery technology include pain
management, anti-nausea, inflammation, oncology and ophthalmology
applications. The Company's product development programs are
funded by royalties from topical products currently marketed by
pharmaceutical partners, by proceeds from the divestitures of its
cosmeceutical and analytical standards product lines and by fees
it receives from collaborative partners. For further information
visit the Company's Web site at www.appharma.com.
Forward-looking Statements
- --------------------------
Except for historical information, this news release contains
certain forward-looking statements that involve risks and
uncertainties including, among others, the amount of expected
proceeds from the public offering, our expected use of these
proceeds, uncertainty associated with timely development,
approval, launch and acceptance of new products, establishment of
new corporate alliances and progress in research and development
programs. Other risks and uncertainties associated with the
Company's business and prospects are identified in the Company's
filings with the Securities and Exchange Commission. The Company
does not undertake to revise these forward-looking statements to
reflect events or circumstances occurring in the future.
Investor Relations Contacts: Company Contact:
- ---------------------------- ----------------
Lippert/Heilshorn & Associates Gordon Sangster
Zachary Bryant (zbryant@lhai.com) Chief Financial Officer
Jody Cain (jcain@lhai.com) (650) 366-2626
Bruce Voss (bvoss@lhai.com)
(310) 691-7100