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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CHANTAL PHARMACEUTICAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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SETTLEMENT AGREEMENT
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AGREEMENT made this 3rd day of July, 1997, by and among Chantal
Pharmaceutical Corporation ("Company") and the following named individuals and
corporations (said individuals and corporations being hereinafter collectively
referred to as the "Settling Defendants"):
Paul LoCigno
Donald Wright
Francis Phalen
Douglas Friedenberg
Rollins International, Limited
The parties mutually acknowledge that:
(A) Some of the Settling Defendants and others have filed a Schedule 13D
with the Securities and Exchange Commission stating their intention to oppose
management of the Company and have otherwise indicated their intention to oppose
management at an annual meeting of stockholders presently scheduled for July 17,
1997 in Los Angeles, California;
(B) The Company has brought an action against the Settling Defendants and
other signers of the Schedule 13D in the U.S. District Court for the Southern
District of New York, entitled Chantal Pharmaceutical Corporation v. Ting, et
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al., 97 Civ. 4497 (the "Federal Court Action") alleging fraud, misrepresentation
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and nondisclosure of material facts, violation of Sections 13 and 14 of the
Securities Exchange Act of 1934, including violation of the proxy rules, and
seeking damages and injunctive and other relief;
(C) The Court in the Federal Court Action has granted the
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Company's motion for expedited discovery and an expedited hearing to be held on
July 11, 1997;
(D) The Settling Defendants have concluded that it is in the best interests
of the Company and its stockholders as well as in their own interest to resolve
their differences with the Company and to fully support and vote their stock in
favor of the Company's existing management and its nominees for the Board of
Directors.
(E) ManAssist International Co., Limited ("ManAssist") which is also a
defendant in the Federal Court Action has separately agreed with the Company to
cancel an agreement for Asian royalties that is a subject of the Company's
Federal Court action and agreeing to other provisions set forth in said separate
agreement (the "ManAssist Amending Agreement").
(F) The Company and the Settling Defendants have agreed to resolve their
differences on the terms stated herein.
THEREFORE, it is hereby agreed:
1. The Settling Defendants and each of them will promptly file with the
Securities and Exchange Commission, on or before July 8, 1997, an amendment to
the Schedule 13D Statement acceptable to the Company and its counsel
disassociating themselves from and withdrawing from the Schedule 13D and stating
that they intend to fully support and vote in favor of the current management of
the Company and its nominees for the Board of Directors at the July 17 meeting.
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2. The Settling Defendants agree that they will publicly and privately
support and that they will vote all stock of the Company owned by them in favor
of the Company's existing management and its nominees for the Board of Directors
at the July 17 meeting, including Chantal Burnison as Chairman of the Board of
Directors and Chief Executive Officer, Polly Bergen as Chief Operating Officer
and Joseph DeKama as Executive Vice President. In connection therewith, each of
the Settling Defendants will execute and deliver to the Company an irrevocable
proxy in the form attached hereto, to be voted in favor of management and its
nominees at the Annual Meeting on July 17, 1997 or, in the event such meeting or
any part thereof shall be adjourned or re-scheduled, then on such adjourned or
re-scheduled date or dates. Each such proxy shall remain irrevocable until the
completion of the aforesaid Annual Meeting and any adjourned or re-scheduled
portions thereof, but not more than three months from the date of execution
thereof or such longer period as the meeting may be extended by Court order.
The Company agrees that it will proceed in good faith to hold and complete said
meeting promptly.
3. The Settling Defendants and each of them agree that, for a period which
shall include the upcoming Annual Meeting currently scheduled for July 17, 1997
and the two succeeding Annual Meetings of the Stockholders of the Company to be
held in 1998 and 1999, or for a period of three (3) years from the date hereof,
whichever is less, that:
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(a) Such Settling Defendant shall be present in person or by proxy, at all
meetings of stockholders of the Company so that all common stock of the Company
beneficially owned by them may be counted for the purpose of determining the
presence of a quorum at such meetings;
(b) No Settling Defendant shall deposit any stock of the Company in a
voting trust or subject any stock of the Company to any arrangement or agreement
with respect to the voting of such stock;
(c) No Settling Defendant shall solicit proxies or become a "participant"
in a "solicitation" (as such terms are defined in Regulation 14A under the
Securities Exchange Act of 1934 (the "Exchange Act")) or solicit written
consents of stockholders in opposition to a management slate of directors or any
candidate included in that slate proposed for election or re-election to the
Board of Directors of the Company or in opposition to the recommendation of the
majority of the directors of the Company with respect to any other matter;
(d) No Settling Defendant will directly or indirectly initiate, induce,
attempt to induce or encourage another person or entity to initiate any proposal
or tender or exchange offer for stock of the company or for a change of control
of the Company. No Settling Defendant shall directly or indirectly join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any other person or
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entity, for the purpose of acquiring, holding, voting or disposing of stock of
the Company or otherwise take any action under which such Settling Defendant and
another person would become a "person" or "group" within the meaning of Section
13(d)(3) of the Exchange Act.
(e) No Settling Defendant shall participate in or sell stock of the Company
to any person participating in or making a tender or exchange offer for
outstanding common stock or securities convertible into, or exercisable for,
common stock of the Company except in connection with a tender offer or exchange
offer that the Board of Directors of the Company does not oppose;
(f) No Settling Defendant shall disparage the Company or its management or
any member of its management, or its products, performance or business, nor
shall any Settling Defendant disclose to any third party any confidential
information of the Company.
(g) Notwithstanding the foregoing, the Settling Defendants shall be free to
sell any common stock of the Company owned by them in ordinary market
transactions that they do not know and have no reasonable grounds to believe to
be intended to change the control of the Company or to effect objectives opposed
by the Company's management.
4. The Settling Defendants agree to join in the issuance on behalf of each
and all of them and the Company of the press release annexed hereto as Exhibit
A.
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5. Paul LoCigno ("LoCigno") and Rollins International, Ltd. ("Rollins"),
acknowledge and agree:
(a) ManAssist International Co., Limited ("ManAssist") is a corporation
organized in Taiwan; Jeffrey Wang ("Wang") is an officer of ManAssist and Wang
is a stockholder thereof; neither LoCigno nor Rollins own any stock of
ManAssist; to the best of their knowledge, Wang has the authority to sign and to
authorize the signing of agreements on behalf of ManAssist;
(b) ManAssist is a party to the following three agreements (hereinafter
collectively called the "Three ManAssist Sub-Distribution Agreements"):
. Agreement captioned "Distribution Agreement Sub-license" dated September
30, 1996 between ROGER CHANG and ManAssist, which is signed by Roger Chang
and Jeffrey Wang and Chantal Burnison on behalf of the Company
. Agreement captioned "Distribution Agreement Sub-Agent" between MICHILAN
INTERNATIONAL TRADE CO., LTD. ("Michilan") and ManAssist, dated October 29,
1996 signed by Jeffrey Wang on behalf of ManAssist and by JULIA P.L. CHAO
on behalf of Michilan (this agreement being hereinafter referred to as
"Michilan Agreement No. 1")
. Agreement captioned "Distribution Sub-Agreement Sales Agent for Royalty
Payments", dated October 29, 1996 between Michilan and ManAssist (therein
described as "A Rollins International Ltd. Company) signed by Paul R.
LoCigno for Rollins International, Ltd., Jeffrey Wang for ManAssist and
Julia Chao and Elia Chang for Michilan International Holding Group (this
agreement being hereinafter referred to as "Michilan
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Agreement No. 2")
(c) The Company is simultaneously entering into an Agreement with
ManAssist, Rollins, Roger Chang, Michilan and Michilan Holding Group (the
ManAssist Amending Agreement") terminating Michilan Agreement No. 2 ab initio
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and eliminating ManAssist as a sub-distributor of Chang to Michilan. Rollins and
LoCigno will cooperate with the Company in concluding the foregoing agreement
and Rollins, as a party to Michilan Agreement No. 2, has executed or will
execute the same.
(d) LoCigno and Rollins agree not to make any further contacts with
Roger Chang or Michilan with respect to the Company and its products and not to
oppose, object to or interfere with the Company's contacts with Roger Chang or
Michilan.
(e) LoCigno and Rollins shall not accept from and will not make any
claim or demand against Michilan or anyone else for any commission, royalty or
payment on any sale of the Company's products to or by Michilan.
6. Francis Phalen agrees, with respect to his options to purchase
50,000 shares of the Company's common stock, which options were issued to him in
August, 1996, that he will not exercise such options in whole or in part until
after June 30, 1998.
7. On condition that the Settling Defendants have fully complied
with the terms of this Agreement, and except for the enforcement of this
Agreement, and except as set forth in
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paragraphs 9-10, the Company hereby releases all claims against the Settling
Defendants and the officers, directors agents and attorneys of any corporate
Settling Defendant, arising out of any matter or event to the date of this
Agreement.
8. Except for the enforcement of this Agreement and except as set
forth in paragraphs 9-10, each of the Settling Defendants hereby releases all
claims against the Company, its officers, directors employees, agents and
attorneys, arising out of any matter or event to the date of this Agreement.
The Settling Defendants do not and shall not contest the validity or legality of
the Company's "Notice of Annual Meeting of Stockholders to be held July 17,
1997," dated June 27, 1997, or the Proxy Statement accompanying said Notice.
9. Francis Phalen reserves the right to make a claim against the
Company relating to payments and benefits of approximately $8-12,000 he claims
to be due and owing to him, provided such claim is made solely in a court of
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general jurisdiction in which the Company may fully assert any offset or
counterclaim it may have as against such claim. The Company reserves the right,
in the event that any such claim is made by Phalen, to assert any and all
defenses thereto and to assert any and all claims which it may now have or which
it ever has had or will have against Phalen, as an offset and/or counterclaim
against such claim by Phalen, to the extent of such claim by Phalen, free of any
release given by the Company to Phalen hereunder. The
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Company's discontinuance of the Federal Court Action shall be and is without
prejudice to the right of the Company to assert such an offset and counterclaim
against Phalen.
10. Donald Wright reserves the right to make a claim against the
Company for approximately $17,000 he claims to be due and owing to him, provided
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such claim is made solely in a court of general jurisdiction in which the
Company may fully assert any offset or counterclaim it may have to such claim.
The Company reserves the right, in the event that any such claim is made by
Wright, to assert any and all defenses thereto and to assert any and all claims
which it may now have or which it ever has had or will have against Wright, as
an offset and/or counterclaim against such claim by Wright, to the extent of
such claim by Wright, free of any release given by the Company to Wright
hereunder. The Company's discontinuance of the Federal Court Action shall be and
is without prejudice to the right of the Company to assert such an offset or
counterclaim against Wright.
11. The Company hereby agrees upon the completion of the Annual
Meeting and any adjourned or re-scheduled portions thereof, and upon condition
that all Settling Defendants have fully complied with their obligations
hereunder in connection with said Annual Meeting and that the ManAssist Amending
Agreement has been fully executed and exchanged, to promptly execute and file
such documents as may be necessary to dismiss the Federal Court Action with
prejudice (except that such dismissal shall be without
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prejudice to the extent provided in paragraphs 9 and 10) as against the Settling
Defendants. In the meantime, the parties agree to join in requesting that the
Court defer the current expedited discovery schedule and defer the July 11
hearing date until after the July 17 stockholders' meeting, and the parties
agree that, subject to the consent of the Court, neither the Settling Defendants
nor the Company shall be deemed in default of any discovery obligations or
obligation to file an answer or responding papers in the Federal Court action
and that the otherwise applicable times to respond or answer shall be duly
extended, provided, as to the Settling Defendants, that they are in compliance
with their obligations pursuant to this Agreement.
12. The Settling Defendants acknowledge and agree that the Company
would be irreparably damaged in the event of a breach of the obligations of the
Settling Defendants under this Agreement. It is accordingly agreed by the
Settling Defendants that the Company shall be entitled to an injunction or
injunctions to redress such breaches of this Agreement and to specifically
enforce the terms and provisions hereof, in addition to any other remedy to
which such party may be entitled, at law or in equity.
13. The parties consent and agree to the jurisdiction of the federal
and state courts located in the State of New York, County of New York, for the
purpose of enforcing or construing the provisions of this Agreement, including,
without limitation, any proceeding for injunctive relief.
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14. This Agreement shall be construed and enforced in accordance with
the laws of New York, excluding its provisions regarding conflicts of laws.
15. This Agreement constitutes the complete agreement between the
parties, superseding all prior agreements or understandings relating to the
subject matter hereof. This Agreement cannot be changed, amended, supplemented
or terminated except in writing, expressly signed by the party to be charged.
16. This Agreement may be signed in counterparts and may be exchanged
by facsimile transmission and shall thereupon be binding upon the parties who
have signed and exchanged signed counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date stated above.
CHANTAL PHARMACEUTICAL
CORPORATION
By: /s/ Chantal Burnison
___________________________
Authorized Officer
/s/ Paul LoCigno
___________________________
Paul LoCigno
/s/ Donald Wright
___________________________
Donald Wright
/s/ Francis Phalen
___________________________
Francis Phalen
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/s/ Douglas Friedenberg
___________________________
Douglas Friedenberg
Rollins International Limited
By /s/ Paul LoCigno
___________________________
Paul LoCigno
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EXHIBIT A
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PRESS
RELEASE
FOR IMMEDIATE RELEASE
FORMER DISSIDENTS ANNOUNCE
DISSOLUTION OF DISSIDENT GROUP
AND FULL SUPPORT FOR
MANAGEMENT OF
CHANTAL PHARMACEUTICAL CORPORATION
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More of the stockholders who filed a 13D statement with the Securities and
Exchange Commission on June 10 opposing the management of Chantal Pharmaceutical
Corp. have now announced that they have agreed to support management and that
the dissident group has been dissolved. The announcement comes after Chantal
sued the dissident group in Federal Court in New York.
Twelve of nineteen original dissident stockholders previously announced on
June 30 that they had reached an agreement to support the management of the
Company. Two more (E.C. Morgan and Doran Capital Management LL.P.)
subsequently, joined that group. Another three, Donald Wright, Francis Phalen
and Douglas Friedenberg, have now also agreed to support the Company's
management and to refrain from activity hostile to management for three years.
At the same time, ManAssist International Co. Ltd., a company that Chantal's New
York lawsuit charged with making a secret Asian royalty agreement with respect
to Chantal products, agreed to cancel that agreement.
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The following statement was issued by former dissidents Donald Wright and
Francis Phalen.
"Based on positive talks with the Company's current management,
including Chantal Burnison, we have complete confidence in the current
management group, including Ms. Burnison as Chairman and Chief
Executive Officer and the Board of Directors as proposed to be
constituted by management. We have, therefore, concluded that it is
in the best interest of the stockholders to resolve our differences
with the Company, dissolve the dissident group and support the
existing management team. We will vote for management and its
nominees at the July 17 annual meeting and urge all stockholders to do
the same."
