UNITED STATES
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):
December 15, 2006
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A.P. Pharma, Inc.
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(Exact name of registrant as specified in its charter)
000-16109
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(Commission File Number)
Delaware 94-2875566
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
123 Saginaw Drive
Redwood City, CA 94063
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(Address of principal executive offices, with zip code)
(650) 366-2626
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Effective as of December 15, 2006, the Board of Directors of
A.P. Pharma, Inc. (the "Company") declared a dividend of one
preferred share purchase right (a "Right") for each outstanding
share of Common Stock, $0.01 par value (the "Common Shares"), of
the Company. The dividend is payable on January 2, 2007 (the
"Record Date") to stockholders of record as of the close of
business on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of
Series A Participating Preferred Stock, $0.01 par value, of the
Company (the "Preferred Shares"), subject to adjustment, at a
price of $11.00 per one-thousandth of a preferred share, subject
to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Preferred Shares Rights
Agreement (the "Rights Agreement") dated as of December 18, 2006
between the Company and Computershare Trust Company, N.A., as
Rights Agent (the "Rights Agent").
The following is a general description only and is subject
to the detailed terms and conditions of the Rights Agreement. A
copy of the Rights Agreement, including the exhibits thereto, the
Amended and Restated Certificate of Designation, Preferences and
Rights of Series A Preferred Stock, and the Form of Rights
Certificate, are attached as Exhibits to this Form 8-K and are
incorporated herein by reference.
Rights Evidenced by Common Share Certificates
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The Rights will not be exercisable until the Distribution
Date (defined below). Accordingly, Common Share certificates
outstanding on the Record Date will evidence the Rights related
thereto, and Common Share certificates issued after the Record
Date will contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), the surrender
or transfer of any certificates for Common Shares, even without
notation or a copy of the Summary of Rights being attached
thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such
certificate.
Distribution Date
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The Rights will separate from the Common Shares,
certificates for the rights ("Rights Certificates") will be
issued and the Rights will become exercisable upon the earlier
of: (i) the close of business on the tenth day (or such later
date as may be determined by a majority of the Board of
Directors) following a public announcement that a person or group
of affiliated or associated persons has acquired, or obtained the
right to acquire, beneficial ownership of 20% or more of the
outstanding Common Shares (an "Acquiring Person") or (ii) the
close of business on the tenth day (or such later date as may be
determined by a majority of the Board of Directors) following the
commencement of a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by
a person or group of 20% or more of the outstanding Common
Shares. The earlier of such dates is referred to as the
"Distribution Date".
Issuance of Rights Certificates, Expiration of Rights
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As soon as practicable following the Distribution Date,
separate Rights Certificates will be mailed to holders of record
of the Common Shares as of the close of business on the
Distribution Date and such separate Rights Certificates alone
will evidence the Rights from and after the Distribution Date.
Unless otherwise determined by the Board of Directors, all Common
Shares issued prior to the Distribution Date will be issued with
Rights. Common Shares issued after the Distribution Date may be
issued with Rights if such shares are issued (i) upon the
exercise, conversion or exchange of securities issued after
adoption of the Rights Agreement or (ii) pursuant to the exercise
of stock options or under any employee benefit plan or
arrangement. Except as otherwise determined by the Board of
Directors, no other Common Shares issued after the Distribution
Date will be issued with Rights. In addition, no Common Shares
issued after the Distribution Date will be issued with Rights if
such issuance would result in (or create a significant risk) (i)
of material adverse tax consequences to the Company or the person
to whom such Rights Certificate would be issued or (ii) that such
options or plans would not qualify for otherwise available
special tax treatment. The Rights will expire on December 31,
2016 (the "Final Expiration Date"), unless the Final Expiration
Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company or expire upon consummation of certain
mergers, consolidations or sales of assets, as described below.
Initial Exercise of the Rights
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Following the Distribution Date, and until the occurrence of
one of the subsequent events described below, holders of the
Rights will be entitled to receive, upon exercise and the payment
of $11.00 (the "Purchase Price") per Right, one one-thousandth of
a Preferred Share.
Exchange Provision
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At any time after an Acquiring Person has become such and
prior to the Acquiring Person beneficially owning 50% or more of
the outstanding Common Shares, the Board of Directors may
exchange the Rights (other than Rights owned by the Acquiring
Person or its affiliates), in whole or in part, at an exchange
ratio of one Common Share per Right (subject to adjustment).
Right to Buy Common Shares at Half Price
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Unless the Rights are earlier redeemed or exchanged, in the
event that an Acquiring Person becomes such, other than pursuant
to a tender offer which is made for all of the outstanding Common
Shares and approved by a majority of the Board of Directors after
determining that the offer is both adequate and otherwise in the
best interests of the Company and its stockholders (a "Permitted
Offer"), then proper provision will be made so that each holder
of a Right which has not theretofore been exercised (other than
Rights beneficially owned by the Acquiring Person, which will
thereafter be void) will thereafter have the right to receive,
upon exercise of a Right, a number of Common Shares having a then
current value equal to two times the Purchase Price. In the
event that the Company does not have a sufficient number of
Common Shares available, or the Board of Directors decides that
such action is necessary or appropriate and not contrary to the
interests of Rights holders, the Company may, among other things,
instead substitute cash, assets or other securities for the
Common Shares into which the Rights would have otherwise been
exercisable.
Right to Buy Acquiring Company Stock at Half Price
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Similarly, unless the Rights are earlier redeemed or
exchanged, in the event that, after the Shares Acquisition Date
(as defined below), (i) the Company consolidates with or merges
into another entity, (ii) another entity consolidates with or
merges into the Company or (iii) the Company sells or otherwise
transfers 50% or more of its consolidated assets or earning
power, proper provision must be made so that each holder of a
Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person, which will thereafter
be void) will thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring
company having a then current value equal to two times the
Purchase Price (unless the transaction satisfies certain
conditions and is consummated with a person who acquired shares
pursuant to a Permitted Offer, in which case the Rights will
expire).
Adjustments to Prevent Dilution
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The Purchase Price payable, the number of Rights and the
number of Preferred Shares, Common Shares or other securities or
property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution as set forth in
the Rights Agreement. With certain exceptions, no adjustment in
the Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% in such Purchase Price.
Rights and Preferences of the Preferred Shares
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Preferred Shares purchasable upon exercise of the Rights
will not be redeemable. Each Preferred Share will be entitled to
an aggregate dividend of 1,000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a preferential liquidation
payment equal to accrued but unpaid dividends plus the greater of
$1,000 per share or 1,000 times the aggregate per share amount to
be distributed to the holders of Common Shares. Each Preferred
Share will have 1,000 votes, voting together with the holders of
Common Shares, except as required by law or the Amended and
Restated Certificate of Designation, Preferences and Rights of
Series A Preferred Stock. In the event of any merger,
consolidation or other transaction in which Common Shares are
changed or exchanged, each Preferred Share will be entitled to
receive 1,000 times the amount received per Common Share. These
rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting
rights of the Preferred Shares, the value of the one one-
thousandth interest in a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common
Share.
Redemption
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At any time prior to the close of business on the earlier of
(i) the tenth day following the date (the "Shares Acquisition
Date") of public announcement that an Acquiring Person has become
such or such later date as may be determined by a majority of the
Board of Directors and publicly announced by the Company or (ii)
the Final Expiration Date of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $0.01 per
Right ("Redemption Price").
No Stockholders' Rights Prior to Exercise
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Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company (other than
any rights resulting from such holder's ownership of Common
Shares), including, without limitation, the right to vote or to
receive dividends.
Amendment of Rights Agreement
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The provisions of the Rights Agreement may be supplemented
or amended by the Board of Directors in any manner prior to the
Distribution Date without the approval of Rights holders. After
the Distribution Date, the provisions of the Rights Agreement may
be supplemented or amended by the Board of Directors in order to
(i) cure any ambiguity, defect or inconsistency, (ii) to make
changes which are deemed necessary or advisable and do not
adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or (iii) to shorten or
lengthen any time period under the Rights Agreement; provided,
however, that no amendment to lengthen (A) the time period
governing redemption shall be made at such time as the Rights are
not redeemable, or (B) any other period unless for the purpose of
protecting, enhancing or clarifying the rights of, and/or
benefits to, the holders of Rights.
Certain Anti-takeover Effects
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The Rights approved by the Board of Directors are designed
to protect and maximize the value of the outstanding equity
interests in the Company in the event of an unsolicited attempt
by an acquiror to take over the Company, in a manner or on terms
not approved by the Board of Directors. Takeover attempts
frequently include coercive tactics to deprive a corporation's
Board of Directors and its stockholders of any real opportunity
to determine the destiny of the corporation. The Rights have
been declared by the Board of Directors in order to deter such
tactics, including a gradual accumulation of shares in the open
market of a 20% or greater position to be followed by a merger or
a partial or two-tier tender offer that does not treat all
stockholders equally. These tactics unfairly pressure
stockholders, squeeze them out of their investment without giving
them any real choice and deprive them of the full value of their
shares.
The Rights are not intended to prevent a takeover of the
Company and will not do so. The Rights are not exercisable in
the event of a Permitted Offer, as described above. The Rights
may be redeemed by the Company at $0.01 per Right within ten days
(or such later date as may be determined by a majority of the
Board of Directors) after the accumulation of 20% or more of the
Company's outstanding Common Shares by a single acquiror or
group. Accordingly, the Rights should not preclude any merger or
business combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The
issuance of the Rights has no immediate dilutive effect, will not
affect reported earnings per share, should not be taxable to the
Company or to its stockholders and will not change the way in
which the Company's shares are presently traded. The Board of
Directors believes that the Rights represent a sound and
reasonable means of addressing the complex issues of corporate
policy created by the current takeover environment. However, the
Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. The Rights may cause substantial
dilution to a person or group that attempts to acquire the
Company on terms or in a manner not approved by the Board of
Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
Item 3.03 Material Modifications to Rights of Security Holders
The information set forth in Item 1.01 and in Item 5.03 is
incorporated by reference.
Item 5.03 Amendment to Articles of Incorporation or Bylaws;
Change in Fiscal Year
In connection with the adoption of the Rights Agreement
referenced in Item 1.01 above, the Board of Directors approved a
Amended and Restated Certificate of Designation, Preferences and
Rights of Series A Preferred Stock (the "Certificate of
Designation") classifying and designating the Series A
Participating Preferred Stock. The Certificate of Designation
was filed with the Secretary of State of the State of Delaware,
and became effective, on December 19, 2006. The Certificate of
Designation is attached as Exhibit 3.C to this Current Report on
Form 8-K and is incorporated herein by reference. The
information set forth in Item 1.01 is incorporated by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
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3.C Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock filed with the Secretary of State of the
State of Delaware on December 19, 2006.
4.A Preferred Shares Rights Agreement, dated as of
December 18, 2006, between A.P. Pharma, Inc. and
Computershare Trust Company, N.A., including the
Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock, the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits
A, B and C, respectively.
4.B Form of Rights Certificate.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
A.P. PHARMA, INC.
Date: December 19, 2006 By: /s/ Gregory Turnbull
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Name: Gregory Turnbull
Title: President and
Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
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3.C Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock filed with the Secretary of State of the
State of Delaware on December 19, 2006.
4. A Preferred Shares Rights Agreement, dated as of
December 18, 2006, between A.P. Pharma, Inc. and
Computershare Trust Company, N.A., including the
Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock, the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits
A, B and C, respectively.
4.B Form of Rights Certificate.