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
------------------
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).