UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
13D
(Rule
13d-102)
INFORMATION
TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO
RULE 13d-l(a) AND AMENDMENTS THERETO FILED PURSUANT
TO
RULE 13d-2(a)
(Amendment
No. ___)*
|
A.P.
Pharma, Inc
|
||||
|
(Name
of Issuer)
|
||||
|
Common
Stock, par value $0.01 per share
|
||||
|
(Title
of Class of Securities)
|
||||
|
00202J203
|
||||
|
(CUSIP
Number)
|
||||
|
Leo
Kirby
667
Madison Avenue, 17th Floor
New
York, NY 10065
(212)
339-5633
|
||||
|
(Name,
Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
|
||||
|
October
19, 2009
|
||||
|
(Date
of Event which Requires Filing of this Statement)
|
||||
If the
filing person has previously filed a statement on Schedule 13G to report the
acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
..
The
information required on the remainder of this cover page shall not be deemed to
be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934
or otherwise subject to the liabilities of that section of the Act but shall be
subject to all other provisions of the Act.
(Continued
on the following pages)
SCHEDULE
13D
|
CUSIP
No. 00202J203
|
Page
2
of 12
Pages
|
|
1
|
NAMES
OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
Felix J. Baker
|
||||
|
2
|
CHECK
THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
Instructions)
|
(a) o
(b) o
|
|||
|
3
|
SEC
USE ONLY
|
||||
|
4
|
SOURCE
OF FUNDS (See Instructions)
WC
|
||||
|
5
|
CHECK
BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
OR 2(e)
|
o
|
|||
|
6
|
CITIZENSHIP
OR PLACE OF ORGANIZATION
United
States
|
||||
|
NUMBER
OF
SHARES
BENEFICIALLY
OWNED
BY
EACH
REPORTING
PERSON
WITH
|
7
|
SOLE
VOTING POWER
0
|
|||
|
8
|
SHARED
VOTING POWER
9,444,462(1)
|
||||
|
9
|
SOLE
DISPOSITIVE POWER
0
|
||||
|
10
|
SHARED
DISPOSITIVE POWER
9,444,462(1)
|
||||
|
11
|
AGGREGATE
AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,444,462(1)
|
||||
|
12
|
CHECK
BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions)
|
||||
|
13
|
PERCENT
OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.53%
|
||||
|
14
|
TYPE
OF REPORTING PERSON (See Instructions)
IN
|
||||
(1)
See Item 5(a) of this Amendment for a detailed explanation of the shares of
beneficial ownership and percentage ownership of the Reporting
Persons.
*SEE
INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE
13D
|
CUSIP
No. 00202J203
|
Page 3 of 12
Pages
|
|
1
|
NAMES
OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS
Julian
C. Baker
|
||||
|
2
|
CHECK
THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See
Instructions)
|
(a) o
(b) o
|
|||
|
3
|
SEC
USE ONLY
|
||||
|
4
|
SOURCE
OF FUNDS (See Instructions)
WC
|
||||
|
5
|
CHECK
BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
OR 2(e)
|
o
|
|||
|
6
|
CITIZENSHIP
OR PLACE OF ORGANIZATION
United
States
|
||||
|
NUMBER
OF
SHARES
BENEFICIALLY
OWNED
BY
EACH
REPORTING
PERSON
WITH
|
7
|
SOLE
VOTING POWER
0
|
|||
|
8
|
SHARED
VOTING POWER
9,444,462(1)
|
||||
|
9
|
SOLE
DISPOSITIVE POWER
0
|
||||
|
10
|
SHARED
DISPOSITIVE POWER
9,444,462(1)
|
||||
|
11
|
AGGREGATE
AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,444,462(1)
|
||||
|
12
|
CHECK
BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions)
|
||||
|
13
|
PERCENT
OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.53%
|
||||
|
14
|
TYPE
OF REPORTING PERSON (See Instructions)
IN
|
||||
(1)
See Item 5(a) of this Amendment for a detailed explanation of the shares of
beneficial ownership and percentage ownership of the Reporting
Persons.
*SEE
INSTRUCTIONS BEFORE FILLING OUT!
|
CUSIP
No. 00202J203
|
13D
|
Page 4 of 12
Pages
|
ITEM
1. Security
and Issuer.
The class
of equity security to which this statement on Schedule 13D relates is the common
stock, par value $0.01 per share (the “Common Stock”) of
A.P. Pharma, Inc., a corporation organized under the laws of the state of
Delaware (the “Issuer”). The address
of the principal executive offices of the Issuer is 123 Saginaw Drive, Redwood,
CA 94063. Information given in response to each item shall be deemed
incorporated by reference in all other items, as applicable.
ITEM
2. Identity
and Background.
(a) The
Reporting Persons are:
|
1.
|
Felix
J. Baker; and
|
|
2.
|
Julian
C. Baker
|
(b) The
business address of each of the Reporting Persons is:
c/o Baker
Bros. Advisors, LLC
667
Madison Avenue, 21st
Floor
New York,
NY 10065
(212)
339-5633
(c) The
principal business of each Reporting Person is to serve as a managing member of
Baker Bros.
Advisors,
LLC (an entity engaged in investment activities).
Certain
securities of the Issuer are owned by Baker/ Tisch Investments,
L.P., a limited partnership the sole general partner of which is Baker/
Tisch Capital, L.P., a limited partnership the sole general partner of which is
Baker/ Tisch Capital (GP), LLC. Julian C. Baker and Felix J. Baker are the
controlling members of Baker/ Tisch Capital (GP), LLC. As the sole general
partner of Baker/ Tisch Capital, L.P., Baker/ Tisch Capital (GP), LLC may be
deemed to be the indirect beneficial owner of such securities under Rule
16a-1(a)(2) promulgated under the Exchange Act. However, pursuant to Rule
16a-1(a)(4) promulgated under the Exchange Act, Baker/ Tisch Capital (GP), LLC
disclaims beneficial ownership of such securities, except to the extent of its
pecuniary interest therein. As the controlling members of Baker/ Tisch Capital
(GP), LLC, Julian C. Baker and Felix J. Baker may be deemed to be the indirect
beneficial owners of such securities under Rule 16a-1(a)(2) promulgated under
the Exchange Act. However, pursuant to Rule 16a-1(a)(4) promulgated under the
Exchange Act, each of Julian C. Baker and Felix J. Baker disclaims beneficial
ownership of such securities, except to the extent of his pecuniary interest
therein.
Certain
securities of the Issuer are owned directly by Baker Bros. Investments II, L.P.,
a limited partnership the sole general partner of which is Baker Bros. Capital,
L.P., a limited partnership the sole general partner of which is Baker Bros.
Capital (GP), LLC. Julian C. Baker and Felix J. Baker are the controlling
members of Baker Bros. Capital (GP), LLC. As the sole general partner of Baker
Bros. Capital, L.P., Baker Bros. Capital (GP), LLC may be deemed to be the
indirect beneficial owner of such securities under Rule 16a-1(a)(2) promulgated
under the Exchange Act. However, pursuant to Rule 16a-1(a)(4) promulgated under
the Exchange Act, Baker Bros. Capital (GP), LLC disclaims beneficial ownership
of such securities, except to the extent of its pecuniary interest therein. As
the controlling members of Baker Bros. Capital (GP), LLC, Julian C. Baker and
Felix J. Baker may be deemed to be the indirect beneficial owners of such
securities under Rule 16a-1(a)(2) promulgated under the Exchange Act. However,
pursuant to Rule 16a-1(a)(4) promulgated under the Exchange Act, each of Julian
C. Baker and Felix J. Baker disclaims beneficial ownership of such securities,
except to the extent of his pecuniary interest therein.
|
CUSIP
No. 00202J203
|
13D
|
Page 5 of 12
Pages
|
Certain securities of the Issuer are owned directly by 667, L.P., a
limited partnership the sole general partner of which is Baker Biotech Capital,
L.P., a limited partnership the sole general partner of which is Baker Biotech
Capital (GP), LLC. Julian C. Baker and Felix J. Baker are the controlling
members of Baker Biotech Capital (GP), LLC. As the sole general partner of Baker
Biotech Capital, L.P., Baker Biotech Capital (GP), LLC may be deemed to be the
indirect beneficial owner of such securities under Rule 16a-1(a)(2) promulgated
under the Exchange Act. However, pursuant to Rule 16a-1(a)(4) promulgated under
the Exchange Act, Baker Biotech Capital (GP), LLC disclaims beneficial ownership
of such securities, except to the extent of its pecuniary interest therein. As
the controlling members of Baker Biotech Capital (GP), LLC, Julian C. Baker and
Felix J. Baker may be deemed to be the indirect beneficial owners of such
securities under Rule 16a-1(a)(2) promulgated under the Exchange Act. However,
pursuant to Rule 16a-1(a)(4) promulgated under the Exchange Act, each of Julian
C. Baker and Felix J. Baker disclaims beneficial ownership of such securities,
except to the extent of his pecuniary interest therein.
Certain
securities of the Issuer are owned directly by Baker Brothers Life Sciences,
L.P., a limited partnership the sole general partner of which is Baker Brothers
Life Sciences Capital, L.P., a limited partnership the sole general partner of
which is Baker Brothers Life Sciences Capital (GP), LLC. Julian C. Baker and
Felix J. Baker are the controlling members of Baker Brothers Life Sciences
Capital (GP), LLC. As the sole general partner of Baker Brothers Life Sciences
Capital, L.P., Baker Brothers Life Sciences Capital (GP), LLC may be deemed to
be the indirect beneficial owner of such securities under Rule 16a-1(a)(2)
promulgated under the Exchange Act. However, pursuant to Rule 16a-1(a)(4)
promulgated under the Exchange Act, Baker Brothers Life Sciences Capital (GP),
LLC disclaims beneficial ownership of such securities, except to the extent of
its pecuniary interest therein. As the controlling members of Baker Brothers
Life Sciences Capital (GP), LLC, Julian C. Baker and Felix J. Baker may be
deemed to be the indirect beneficial owners of such securities under Rule
16a-1(a)(2) promulgated under the Exchange Act. However, pursuant to Rule
16a-1(a)(4) promulgated under the Exchange Act, each of Julian C. Baker and
Felix J. Baker disclaims beneficial ownership of such securities, except to the
extent of his pecuniary interest therein.
Certain
securities of the Issuer are owned directly by 14159, L.P., a limited
partnership the sole general partner of which is 14159 Capital, L.P., a limited
partnership the sole general partner of which is 14159 Capital (GP), LLC. Julian
C. Baker and Felix J. Baker are the controlling members of 14159 Capital (GP),
LLC. As the sole general partner of 14159 Capital, L.P., 14159 Capital (GP), LLC
may be deemed to be the indirect beneficial owner of such securities under Rule
16a-1(a)(2) promulgated under the Exchange Act. However, pursuant to Rule
16a-1(a)(4) promulgated under the Exchange Act, 14159 Capital (GP), LLC
disclaims beneficial ownership of such securities, except to the extent of its
pecuniary interest therein. As the controlling members of 14159 Capital (GP),
LLC, Julian C. Baker and Felix J. Baker may be deemed to be the indirect
beneficial owners of such securities under Rule 16a-1(a)(2) promulgated under
the Exchange Act. However, pursuant to Rule 16a-1(a)(4) promulgated under the
Exchange Act, each of Julian C. Baker and Felix J. Baker disclaims beneficial
ownership of such securities, except to the extent of his pecuniary interest
therein.
Each of
667, L.P., Baker Brothers Life Sciences, L.P. and 14159, L.P. is referred to
individually as a “Purchasing Fund” and
collectively as the “Purchasing
Funds”. Each of the Purchasing Funds, Baker/ Tisch
Investments, L.P. and Baker Bros. Investments II, L.P. is part of the Baker
Brothers Investments family of funds managed by the Reporting Persons (such
funds and their affiliates or associates, “Baker”).
(d) and
(e) During the past five years, none of the Reporting Persons nor any of the
persons listed in Item 2(b) and (c) above has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
|
CUSIP
No. 00202J203
|
13D
|
Page 6 of 12
Pages
|
ITEM
3. Source
and Amount of Funds or Other Consideration.
The
Reporting Persons acquired certain of the shares of Common Stock in connection
with a private placement by the Issuer (the “Offering”) which
closed on October 22, 2009 (the “Issuance
Date”). In the Offering, the Issuer sold a total of (i)
7,954,543 shares of the Common Stock (collectively, the “Shares”), (ii)
warrants to purchase an aggregate of 3,977,270 shares of the Common Stock (the
“Warrants”) at
an exercise price of $0.88 per share, for a purchase price of $0.125 per share
and (iii) rights to purchase an aggregate of up to 5,165,286 shares of the
Common Stock (the “Purchase Rights”) at
a second closing to occur on May 14, 2010 or such earlier date as the purchasers
having agreed to purchase a majority of the shares in such second closing
mutually agree upon (the “Second Closing”), at
a purchase price of $0.968 per share, for a purchase price of $0.125 per
share.
The
Warrants were exercisable on the Issuance Date and expire at 5:00 p.m. New York
City time on January 7, 2015, subject to the Limitation on Exercise described in
Item 5 below.
The
Purchasing Funds purchased an aggregate of 3,977,272 Shares, 1,988,636 Warrants and 2,582,644
Purchase Rights as follows:
|
Fund
|
Shares
|
Price Paid
|
Warrants
|
Price Paid
|
Purchase Rights
|
Price Paid
|
||||||||||||||||||
|
667,
L.P.
|
727,905 | $ | 640,556.40 | 363,952 | $ | 45,494.00 | 472,665 | $ | 59,083.13 | |||||||||||||||
|
Baker
Brothers Life Sciences, L.P.
|
3,160,131 | $ | 2,780,915.28 | 1,580,066 | $ | 197,508.25 | 2,052,033 | $ | 256,504.13 | |||||||||||||||
|
14159,
L.P.
|
89,236 | $ | 78,527.68 | 44,618 | $ | 5,577.25 | 57,946 | $ | 7,243.25 | |||||||||||||||
Prior to
participating in the Offering, the Reporting Persons expended an aggregate of
approximately $3,984,745.98 to purchase an aggregate of 2,884,546 shares of
Common Stock (the “Previous Holdings”).
Such transactions were effected in public offerings and open market purchases
and the common stock was acquired in the ordinary course of
business.
The funds
used to purchase the Previous Holdings and the Shares, Warrants and Purchase
Rights reported in Item 5 below were provided from the available working capital
of the entities there indicated.
ITEM
4. Purpose
of Transactions.
The
Purchasing Funds acquired the Previous Holdings, Shares, Warrants and Purchase
Rights solely for investment. The Reporting Persons expect to review from time
to time the investment positions of these entities and may, depending on market
and other conditions, increase or decrease their holdings.
Whether
the entities purchase any additional shares of Common Stock, including by
exercise of the Warrants or the Purchase Rights, or dispose of any shares of
Common Stock, and the amount and timing of any such transactions, will depend
upon the Reporting Persons’ continuing assessments of pertinent factors,
including the availability of shares of Common Stock for purchase at particular
price levels, the Issuer’s business and prospects, other business investment
opportunities, economic conditions, stock market conditions, money market
conditions, the attitudes and actions of the board of directors and management
of the Issuer, the availability and nature of opportunities to dispose of shares
in the Issuer and other plans and requirements of the particular entities.
Depending upon their assessments of these factors from time to time, the
Reporting Persons may change their present intentions as stated above, including
determining to acquire additional shares of Common Stock (by means of open
market purchases, privately negotiated purchases, exercise of some or all of the
Warrants or Purchase rights, or otherwise) or to dispose of some or all of the
shares of Common Stock under their control. At the present time the Reporting
Persons do not have any plans or proposals with respect to any extraordinary
corporate transaction involving the Issuer or any sale of its assets or any
change in its board of directors, management, capitalization, dividend strategy,
charter or by-laws, or any other change in its business or corporate structure
or with respect to the delisting or deregistration of any of its securities
including, without limitation, those matters described in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
|
CUSIP
No. 00202J203
|
13D
|
Page 7 of 12
Pages
|
Pursuant
to the terms of the Securities Purchase Agreement described in Item 6, Baker has
the right to designate a representative (the “Baker Director
Designee”) to the board of directors of the Issuer as soon as practicable
and no later than December 31, 2009. The Issuer shall cause the Baker
Director Designee to be promptly appointed or elected to the board of directors
of the Issuer including, if necessary, by amending its Bylaws to increase the
number of authorized directors to enable the Baker Director Designee to be
elected or appointed by the board of directors of the Issuer to the vacant seat
created thereby. The Baker Director Designee shall be acceptable to
the majority of board of directors of the Issuer, with such acceptance not to be
unreasonably withheld.
In
addition, in the event that the Purchasing Funds purchase no less than all of
the Common Stock for which they hold the Purchase Rights described above at the
Second Closing, Baker shall have the right to designate an additional
representative (the “Second Baker Director
Designee”) to the board of directors of the Issuer concurrently with the
Second Closing. The Issuer shall cause the Second Baker Director
Designee to be promptly appointed or elected to the board of directors of the
Issuer including, if necessary, by securing the resignation of an incumbent
director as necessary to enable the Second Baker Director Designee to be elected
or appointed by the board of directors of the Issuer to the vacant seat created
thereby. The Second Baker Director Designee shall be acceptable to
the majority of the board of directors of the Issuer, with such acceptance not
to be unreasonably withheld.
Also in
connection with the Securities Purchase Agreement, Baker was given certain
observer rights and related rights with respect to the board of directors of the
Issuer, as described in Item 6 below.
ITEM
5. Interest
in Securities of the Issuer.
(a) and
(b) Set forth below is the aggregate number of shares of the Common
Stock held by the Purchasing Funds, Baker/ Tisch Investments,
L.P. and Baker Bros. Investments II, L.P. and beneficially owned by the
Reporting Persons, including shares that may be acquired upon the exercise of
the Purchase Rights at a purchase price of $0.968 per share, as of the date
hereof by each of the following, together with the percentage of outstanding
shares of the Common Stock that such number represents based upon (i) 31,376,432
shares of the Common Stock outstanding as reported on the Issuer’s SEC Form 10-Q
filed on August 4, 2009 in addition to (ii) 7,954,543 shares of the Common Stock
issued on October 22, 2009, pursuant to the Securities Purchase Agreement
described in Item 6. Such percentage figures are calculated on the basis that
the Purchase Rights held by the Purchasing Funds are deemed exercised into
shares of Common Stock but other outstanding derivative securities for the
Common Stock are not deemed converted or exercised in shares of the Common
Stock.
|
CUSIP
No. 00202J203
|
13D
|
Page 8 of 12
Pages
|
|
Holder
|
Shares of Common Stock
|
Purchase Rights
|
Total
|
Percentage of Class
Outstanding
|
||||||||||||
|
Baker/
Tisch Investments, L.P.
|
5,967 | 0 | 5,967 | 0.01 | % | |||||||||||
|
Baker
Bros. Investments II, L.P.
|
1,786 | 0 | 1,786 | 0.00 | % | |||||||||||
|
667,
L.P.
|
1,432,692 | 472,665 |
1,905,357
|
4.55 | % | |||||||||||
|
Baker
Brothers Life Sciences, L.P.
|
5,264,782 | 2,052,033 |
7,316,815
|
17.46 | % | |||||||||||
|
14159,
L.P.
|
156,591 | 57,946 |
214,537
|
0.51 | % | |||||||||||
The
Reporting Persons may be deemed beneficial owners of a combined total of
9,444,462 shares of Common Stock, representing 22.53% of total outstanding
Common Stock (including Common Stock issuable upon exercise of Purchase Rights
held by the Purchasing Funds).
The Reporting Persons may also be deemed beneficial
owners of the Warrants in the amounts listed as follows:
|
Holder
|
Warrants
|
|||
|
667, L.P.
|
363,952 | |||
|
Baker Brothers Life Sciences,
L.P.
|
1,580,066 | |||
|
14159, L.P.
|
44,618 | |||
The
number of shares of Common Stock that may be acquired by the Purchasing Funds
upon any exercise of the Warrants is limited to the extent necessary to ensure
that, following such exercise, the total number of shares of Common Stock then
beneficially owned by the Reporting Persons does not exceed 9.999% of the total
number of then issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise) (the “Limitation on Exercise”). The Limitation on
Exercise remains in effect with respect to the Warrants held by the Purchasing
Funds and no shares are currently issuable upon exercise of the
Warrants held by the Purchasing Funds.
By virtue
of their ownership of entities that have the power to control the investment
decisions of the limited partnerships listed in the table above, Julian C. Baker
and Felix J. Baker may each be deemed to be beneficial owners of shares owned by
the entities listed above and may be deemed to have shared power to vote or
direct the vote of and shared power to dispose or direct the disposition of such
securities.
(c)
Except as described in this Schedule, including Item 3 hereof, none of the
Reporting Persons has effected any transaction in the securities of the Issuer
in the past 60 days.
(d) No
person other than the Reporting Persons has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of the
securities to which this Schedule relates.
(e) Not
applicable.
ITEM
6. Contracts,
Arrangements, Understandings or Relationships with Respect toSecurities of the
Issuer.
Securities
Purchase Agreement
As
disclosed in Item 3, above, the Purchasing Funds entered into a securities
purchase agreement with the Issuer, dated October 19, 2009 (the “Securities Purchase
Agreement”), pursuant to which such Reporting Persons purchased an
aggregate of 3,977,272 Shares, 1,988,636 Warrants and 2,582,644
Purchase Rights.
The
foregoing description of the Securities Purchase Agreement, including as
disclosed in Item 3, is only a summary and is qualified in its entirety by
reference to the Securities Purchase Agreement, a copy of which is filed as
Exhibit 2
hereto.
|
CUSIP
No. 00202J203
|
13D
|
Page 9 of 12
Pages
|
Pursuant
to the Securities Purchase Agreement, the Purchasing Funds purchased warrants to
purchase an aggregate of 1,988,636 shares of Common Stock at an exercise price
of $0.88 per share, for a purchase price of $0.125 per share.
The
foregoing description of the warrants is only a summary and is qualified in its
entirety by reference to the form of warrant, a copy of which is filed as Exhibit 3
hereto.
Registration
Rights Agreement
In
connection with the Securities Purchase Agreement, on October 22, 2009, the
Issuer entered into a Registration Rights Agreement (the “Registration Rights
Agreement”) with the Purchasing Funds and the other parties thereto.
Pursuant to the Registration Rights Agreement, the Issuer agreed to prepare and
file a registration statement with the Securities and Exchange Commission (the
“SEC”) within
30 days of the initial closing date of October 22, 2009 for purposes of
registering the resale of the Shares, the shares of common stock issuable
upon exercise of the Warrants and Purchase Rights and any shares of common stock
issued as a dividend or other distribution with respect to the Shares or shares
underlying the Warrants and Purchase Rights. The Issuer agreed to use its best
efforts to cause the registration statement to be declared effective by the SEC
within 90 days after the initial closing date of October 22, 2009 (or 120 days
in the event the registration statement is reviewed by the SEC). If the Issuer
fails to meet either of these deadlines, fails to meet filing or effectiveness
deadlines with respect to any additional registration statements required by the
Registration Rights Agreement or fails to keep any registration statements
continuously effective (with limited exceptions), the Issuer may be obligated to
pay to the holders of the Shares, Warrants and Purchase Rights liquidated
damages in the amount of 1% per month of the purchase price for the Shares,
Warrants and Purchase Rights, up to a maximum cap of 8%. The Issuer also agreed,
among other things, to indemnify the selling holders under the registration
statements from certain liabilities and to pay all fees and expenses (excluding
underwriting discounts and selling commissions and all legal fees of any selling
holder) incident to the Issuer’s obligations under the Registration Rights
Agreement.
The
foregoing description of the transaction is only a summary and is qualified in
its entirety by reference to the Registration Rights Agreement, a copy of which
is filed as Exhibit
4 hereto.
Except as
described in this Item 6, none of the Reporting Persons have any other existing
agreement with respect to the Common Stock or other securities of the
Issuer.
Board
Observation Rights Agreement
In
connection with the Securities Purchase Agreement, on October 22, 2009, the
Issuer entered into a letter agreement (the “Board Observation Rights
Agreement”) with Baker, pursuant to which Baker was granted the right to
designate one observer (the “Baker Observer”), who
shall have the right to attend all regular, special and telephonic meetings of
the board of directors of the Issuer, and to receive materials sent to the
members of the board of directors in their capacity as such, until May 14, 2010
(the “Observer
Period”), unless Baker notifies the Issuer in writing that it wishes to
suspend such observer rights. The Issuer agrees to give the Baker
Observer, during the Observer Period, notice of such meetings, by telecopy or by
such other means as such notices are delivered to the members of the Issuer’s
board of directors, at the same time notice is provided or delivered to the
board of directors
|
CUSIP
No. 00202J203
|
13D
|
Page 10 of 12
Pages
|
ITEM
7. Materials
to be Filed as Exhibits.
|
Exhibit
1:
|
Joint
Filing Agreement as required by Rule 13d-1(k)(1) under the Securities
Exchange Act of 1934, as amended, dated October 29, 2009, by and between
Julian C. Baker and Felix J. Baker
|
|
Exhibit
2:
|
Securities
Purchase Agreement dated October 19, 2009, by and among A.P. Pharma, Inc.
and the purchasers listed on Exhibit A thereto. (Incorporated by reference
to Exhibit 10.1 to the Issuer’s Current Report on Form 8-K (File No.
001-33221), filed with the SEC on October 22, 2009.)
|
|
Exhibit
3:
|
Form
of Warrant to Purchase Shares of Common Stock of A.P. Pharma, Inc.
(Incorporated by reference to Exhibit 10.3 to the Issuer’s Current Report
on Form 8-K (File No. 001-33221), filed with the SEC on October 22,
2009.)
|
|
Exhibit
4:
|
Registration
Rights Agreement made and entered into as of October 22, 2009 by and among
A.P. Pharma, Inc. and the purchasers’ signatory
thereto. (Incorporated by reference to Exhibit 10.2 to the
Issuer’s Current Report on Form 8-K (File No. 001-33221), filed with the
SEC on October 22, 2009.)
|
|
Exhibit
5:
|
Board
Observation Rights Agreement, between A.P. Pharma, Inc. and Baker, dated
October 22, 2009
|
|
CUSIP
No. 00202J203
|
13D
|
Page 11 of 12
Pages
|
SIGNATURES
After
reasonable inquiry and to the best of my knowledge and belief, each of the
undersigned hereby certifies that the information set forth in this statement is
true, complete and correct.
EXECUTED
as a sealed instrument this 29th day of
October, 2009.
|
By:
|
/s/ Julian C. Baker
|
|
|
Julian
C. Baker
|
||
|
By:
|
/s/ Felix J. Baker
|
|
|
Felix
J. Baker
|
|
CUSIP
No. 00202J203
|
13D
|
Page 12 of 12
Pages
|
Exhibit
1
JOINT
FILING AGREEMENT
Pursuant to Rule 13d-1(k)(1) under the
Securities Exchange Act of 1934, as amended, the undersigned hereby agree that
only one statement containing the information required by Schedule 13D need be
filed with respect to the ownership by each of the undersigned of the shares of
Common Stock of A.P. Pharma, Inc.
This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
EXECUTED
as of this 29th day of
October, 2009.
|
By:
|
/s/ Julian C. Baker
|
|
|
Julian
C. Baker
|
||
|
By:
|
/s/ Felix J. Baker
|
|
|
Felix
J. Baker
|
Exhibit
5
A.P.
PHARMA, INC.
October
22, 2009
VIA
EMAIL
Baker
Brothers Investments
667
Madison Avenue
21st
Floor
New York,
NY 10065
Attention:
Felix Baker
Re: Board
Observation Rights
Ladies
and Gentlemen:
Pursuant to Section 8.3 of that certain
Securities Purchase Agreement by and among A.P. Pharma, Inc. (the “Company”)
and the purchasers listed therein, dated October 19, 2009 (the “Purchase
Agreement”), the Company hereby agrees as follows:
1. Observation Rights; Board
Materials. The Company covenants and agrees
that Baker Brothers Investments (the “Investor”)
may designate a representative (the “Observer”)
to be present at all regular, special and telephonic meetings of the Company’s
Board of Directors (the “Board”),
and that the Company will give the Investor notice of such meetings, by telecopy
or by such other means as such notices are delivered to the members of the
Board, at the same time notice is provided or delivered to the
Board. Board materials that are sent to the members of the Board in
their capacity as such shall be sent to the Observer simultaneously by the
Company by means reasonably designed to insure timely receipt by the
Observer. Upon reasonable notice and at a scheduled meeting of the
Board or such other time, if any, as the Board may determine in its sole
discretion, the Observer may address the Board with respect to the Investor’s
concerns regarding significant business issues facing the
Company. The Investor hereby agrees that any non-public proprietary
information obtained by the Investor and/or Observer as a result of the
Observer’s attendance at Board meetings, or in connection with the Investor’s
and/or Observer’s receipt of Board materials, shall be held in confidence and
will not be disclosed by the Investor or any affiliates of the Investor or the
Observer, except to the extent otherwise required by law. In
addition, the Observer agrees and covenants to be bound by all applicable
restrictions placed on the Company’s board of directors, including trading
windows and black-out periods relating to the sale of the Company’s
securities.
Notwithstanding the provisions of the
first paragraph of this Section 1, the Company shall be entitled to recuse the
Observer from portions of any Board meeting and to redact portions of any Board
materials delivered to the Investor and/or the Observer where recusal or
redaction is reasonably necessary, in the opinion of counsel to the Company, (i)
to preserve attorney-client privilege, (ii) to protect highly confidential
information or trade secrets (in each case as determined in good faith by the
Board of Directors) or (iii) in the event the Board intends to discuss or vote
upon any matter in which the Investor and/or the Observer have a material
business or financial interest (other than by reason of the Investor’s and/or
the Observer’s interests as a stockholder of the Company). Further,
the members of the Board shall be entitled to hold Executive Sessions (as
hereinafter defined) which the Observer may not be invited to
attend. “Executive
Sessions” shall mean meetings of the members of the Board in which the
Company’s Chief Executive Officer is not present.
2. Termination or Suspension of
Rights. The rights under Section 1 of this letter agreement
shall terminate on May 14, 2010 and shall not apply at any time that the Second
Baker Director Designee (as defined in the Purchase Agreement) is serving on the
Board. The confidentiality provision hereof will survive any
termination of this letter agreement.
3. Counterparts. This letter agreement may
be executed in counterparts and signature pages may be delivered by facsimile,
each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
|
Sincerely,
A.P.
PHARMA, INC.
By: /s/ Ronald J.
Prentki
Name: Ronald
J. Prentki
Title: President
and Chief Executive Officer
|
|
ACKNOWLEDGED
AND AGREED:
BAKER
BROTHERS INVESTMENTS
By: /s/ Felix
Baker
Name:
Felix Baker
Title:
Managing Member