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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): September 8, 1999
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MAGAININ PHARMACEUTICALS INC.
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(Exact Name of Registrant Specified in Charter)
Delaware 0-19651 13-3445668
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(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
5110 Campus Drive
Plymouth Meeting, PA 19462
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (610) 941-4020
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_____________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
Magainin Pharmaceuticals Inc. Announces the Renegotiation of its
Contract with Abbott Laboratories
Magainin's contract with Abbott Laboratories provided for the purchase of
approximately $10 million of bulk drug substance for LOCILEX(TM) Cream. As FDA
approval of LOCILEX(TM) Cream has not occurred, in September 1999 Magainin
renegotiated this agreement with Abbott. As a result, Magainin has agreed to pay
Abbott $4.2 million, of which $4.0 million has been paid to date, and will
receive partial delivery of material. An additional $3.4 million is due to
Abbott and will be paid in the event that Magainin successfully obtains
additional funds, and then only to the extent of 15% of amounts obtained in
excess of $10 million in any year. Magainin has no further purchase commitments
to Abbott, and Abbott has no further supply requirements to Magainin.
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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.
MAGAININ PHARMACEUTICALS INC.
(Registrant)
By /s/ Michael R. Dougherty
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Michael R. Dougherty
President, Chief Executive Officer and
Chief Financial Officer
Dated: September 27, 1999
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Settlement and Termination Agreement dated as of September 8,
1999 by and between Magainin Pharmaceuticals Inc. and Abbott
Laboratories Inc.
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EXHIBIT 99.1
SETTLEMENT AND TERMINATION AGREEMENT
THIS SETTLEMENT AND TERMINATION AGREEMENT (this "Settlement Agreement"),
dated as of September 8, 1999, is made by and between Magainin Pharmaceuticals
Inc. ("Magainin") and Abbott Laboratories Inc. ("Abbott").
W I T N E S S E T H:
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WHEREAS, Magainin is the owner of certain technology and patent rights to
pexiganan acetate;
WHEREAS, Magainin and Abbott have entered into a series of purchase order
agreements, including addendums thereto, and a stock issuance agreement,
pursuant to which Abbott has performed development activities leading to the
creation and maintenance of a Drug Master File (the "DMF") for Bulk Drug
Substance (the "Purchase Orders");
WHEREAS, Abbott possesses large scale facilities for the production of
commercial quantities of Bulk Drug Substance; and
WHEREAS, Magainin desired Abbott to produce for Magainin commercial
quantities of Bulk Drug Substance, and Magainin and Abbott entered into a Supply
Agreement (the "Supply Agreement"), made effective as of January 1, 1999 for
that purpose (the Purchase Orders and the Supply Agreement hereinafter being
collectively referred to as the "Agreements");
WHEREAS, the parties now wish to terminate the Agreements and resolve
various matters between them relating to such termination;
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NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Termination of the Agreements.
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(a) The Agreements are hereby terminated as of the date of this Settlement
Agreement and shall have no further force and effect, and no party thereto shall
have any further obligation to any other party thereto, except as otherwise
provided herein. However, nothing herein is intended to rescind or otherwise
affect the transfer and assignment of the payments, assets, contracts and rights
effected prior to the date hereof pursuant to the Agreements.
(b) Notwithstanding the termination of the Agreements, Magainin shall
purchase from Abbott and Abbott shall use its reasonable best efforts to supply
twenty (20) kilograms of Bulk Drug Substance at a price of TWO HUNDRED THOUSAND
DOLLARS ($200,000) payable as set forth below (the "New Liability"). On or
before September 14, 1999, Magainin shall provide Abbott with an irrevocable,
"direct pay" letter of credit, in form and substance acceptable to Abbott, from
a financial institution acceptable to Abbott in its sole and absolute
discretion, which letter of credit shall be in a face amount of TWO HUNDRED
THOUSAND DOLLARS ($200,000) and which letter of credit shall entitle Abbott to
direct and immediate payment thereunder upon Magainin's acceptance of the Bulk
Drug Substance. Consistent with the provisions of Section 1(a) hereof, and
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other than as solely set forth in the foregoing provisions of this Section 1(b),
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Abbott shall have absolutely no obligation to manufacture, sell, or deliver to
Magainin any other Bulk Drug Substance.
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(c) Consistent with the other provisions of this Section 1, the provisions
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of the Supply Agreement that survive the termination of the Agreements are
Sections 3.5 and 12.1, and Articles 6, (but not Section 6.10), 7, 8, 10, 11, 13,
and 15 thereof.
2. Settlement Amount. Without taking into account any New Liability to
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be incurred pursuant to Section 1(b) hereof, Magainin hereby acknowledges that
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in connection with the settlement set forth herein regarding the parties'
respective liabilities under the Agreements Magainin will pay to Abbott SEVEN
MILLION FOUR HUNDRED THOUSAND DOLLARS ($7,400,000.00), as provided for herein,
(the "Settlement Amount"), and that there is no amount presently owing by Abbott
to Magainin under the Agreements.
3. Payment of Additional Bulk Drug Substance and Settlement Amount.
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(a) Subject to the other terms and conditions of this Settlement
Agreement, Magainin will pay Abbott FOUR MILLION DOLLARS ($4,000,000) in
immediately available funds to be paid within two (2) business days of the
execution and delivery of this Settlement Agreement. Additionally, THREE MILLION
FOUR HUNDRED THOUSAND ($3,400,000) (the "Unpaid Amount") will be paid by
Magainin by paying to Abbott an amount equal to fifteen percent (15%) of the
amount by which Magainin's Cash Intake for each and every fiscal year exceeds
TEN MILLION DOLLARS ($10,000,000) for that fiscal year. (Example: in a year
where Magainin's Cash Intake was ELEVEN MILLION DOLLARS ($11,000,000), the
required payment under this Settlement Agreement with respect to that year would
be ONE HUNDRED AND FIFTY THOUSAND DOLLARS ($150,000) (ELEVEN MILLION DOLLARS
($11,000,000) minus TEN MILLION DOLLARS ($10,000,000) x
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FIFTEEN PERCENT (15%)). The term "Cash Intake" shall be defined to include cash
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or cash equivalents received by or for the benefit of Magainin (or any of its
subsidiaries, as limited liability companies, or joint ventures) in any fiscal
year from any source whatsoever and specifically includes, without limitation,
revenues from operations, the proceeds of any borrowings (whether under
conventional credit facilities or the issuance of publicly or privately placed
debt including senior, subordinated debt, or convertible debt), or the proceeds
of any type of equity offering. Any such required payment shall be made on or
before sixty (60) days following the end of the fiscal year, with the first
payment relating to Magainin's 2000 fiscal year. Also, on or before sixty (60)
days following the end of each fiscal year, any of Magainin's chief executive
officer, chief operating officer, or chief financial officer shall provide
Abbott with an officer's certificate (a "Compliance Certificate"), in form and
substance satisfactory to Abbott, that sets forth and certifies (by component)
Magainin's Cash Intake for that fiscal year, and Abbott shall further be
entitled to undertake any independent confirmation of such amount as it
determines appropriate in its reasonable discretion and Magainin shall
reasonably cooperate with any such confirmation efforts undertaken by Abbott or
by any agents or professionals retained by Abbott for such purpose.
(b) All payments due Abbott under this Settlement Agreement shall be paid
in U.S. dollars by wire transfer or by such other means agreed upon by the
parties, in each case at Magainin's expense, for value no later than the due
date thereof (with twenty four (24) hours advance notice of each wire transfer)
to the following bank account, or such other bank account as Abbott shall
designate in writing within a reasonable period of time prior to such due date:
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Account Name: Abbott Laboratories
Account Number: 0000-1329
Bank: Citibank N.A.
New York, New York
ABA Number: 021000089
(c) Magainin may prepay the Unpaid Amount, or any portion remaining
thereon, in whole or in part, without premium or penalty, at any time, by giving
Abbott at least five (5) business days' notice of its intention to prepay and
the amount and date of such prepayment.
(d) If any of the following conditions or events shall occur and be
continuing then: (1) in the case of a default in clause (iv) below, the entire
Unpaid Amount yet due and owing shall automatically mature and become due and
payable without demand, protest, or notice; (2) in the case of a default
described in clause (i), (ii), or (iii) below, Abbott may, at any time at its
sole option, declare the Unpaid Amount yet due and owing to be immediately due
and payable, whereupon the same shall forthwith mature and become due and
payable without presentment, demand, protest or notice; and (3) in the case of
any default hereunder, Abbott may proceed to protect and enforce the rights
available to it at law, in equity, by statute or otherwise, and every right or
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right or remedy hereunder or now or hereafter existing at law or in
equity or otherwise:
(i) Default by Magainin in any payment that is due and payable on
the Unpaid Amount, by acceleration or otherwise, unless such
default shall have been cured or waived within three (3) days;
or
(ii) Failure to properly and timely provide to Abbott any Compliance
Certificate, unless such default has been cured or waived
within three (3) days;
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(iii) Failure to comply with any other obligation of Magainin under
this Settlement Agreement, including, without limitation,
Magainin's obligations to reasonably cooperate with any efforts
undertaken by Abbott to confirm the amount of the Magainin's
Cash Intake for any fiscal year, unless any such default has
been cured or waived within three (3) days;
(iv) Magainin becomes insolvent or generally fails to pay, or admits
in writing (other than solely in its reports to shareholders or
reports filed with the Securities Exchange Commission) its
inability to pay, debts as they become due; or Magainin applies
for, consents to, or acquiesces in the appointment of, a
trustee, receiver or custodian for Magainin, or makes a general
assignment for the benefit of creditors; or in the absence of
such application, consent or acquiescence, a trustee, receiver
or other custodian is appointed for Magainin or for a
substantial part of the property of Magainin and is not
discharged within sixty (60) days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any event similar to
any of the foregoing under the laws of any jurisdiction, is
commenced in respect of Magainin, and if such case or
proceeding is not commenced by Magainin, it is consented to or
acquiesced in by Magainin or remains for sixty (60) days
undismissed; or Magainin takes any corporate action to
authorize, or in furtherance of, any of the foregoing.
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(e) In the event the payment of the Unpaid Amount is not accelerated due
to a default as set forth in subsection (d) immediately above, and the Unpaid
Amount, or some portion thereof remains unpaid as of December 31, 2012, the
amount of the Unpaid Amount that remains due shall be forgiven by Abbott.
(f) Should Abbott receive payment in full of the Settlement Amount but
then, for any reason, be required to return any portion of such payment, Abbott
shall be deemed for the purposes of the preceding sentence, and for all other
purposes, not to have received payment in full of the Settlement Amount.
Moreover, in the event that Magainin subsequently becomes a debtor in a
bankruptcy proceeding and Magainin, as a debtor-in-possession or any bankruptcy
trustee or other representation of its bankruptcy estate successfully seeks via
the entry of a final and nonappealable judgment the avoidance and recovery or
other return of any payment or other transfer made by Magainin to Abbott under
or pursuant to the Agreements or this Settlement Agreement, Abbott shall further
be entitled to assert in any such bankruptcy proceeding an additional claim in
the amount of any such rescinded or returned payment or transfer.
4. Release and Discharge of Claims.
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1. Magainin, for and on behalf of itself, and every person, corporation
or other entity controlling, controlled by or under common control with it, and
all officers, directors and employees of any of them, and the successors and
assigns of any of the foregoing (the "Magainin Group"), DOES HEREBY FULLY AND
FOREVER REMISE, RELEASE AND DISCHARGE Abbott, and every person, corporation or
other entity controlling, controlled by or under common control with it, and all
officers, directors and employees of any of them, and the successors and assigns
of any of the foregoing
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(the "Abbott Group"), from any and all claims, demands, liens, agreements,
contracts, covenants, actions, suits, expenses, accounts, damages, judgments,
losses and liabilities of whatever kind or nature, at law or in equity
(collectively, "Claims and Liabilities"), known or unknown, arising out of,
contained in, based on or in connection with (i) the Agreements or any document
or agreement entered into pursuant to, or as contemplated by, the Agreements,
(ii) the transactions contemplated by the Agreements, or (iii) any other
agreement or event or state of facts occurring or existing prior to the date
hereof that in any manner arises out of or otherwise relates to any aspect of
the business relationship between Magainin and Abbott, provided that the
Magainin Group does not hereby remise, release or discharge the Abbott Group
from any of the obligations of the Abbott Group hereunder or described herein as
remaining in effect.
2. Abbott, for and on behalf of the Abbott Group, DOES HEREBY FULLY AND
FOREVER REMISE, RELEASE AND DISCHARGE the Magainin Group from any and all Claims
and Liabilities, known or unknown, arising out of, contained in, based on or in
connection with (i) the Agreements or any document or agreement entered into
pursuant to, or as contemplated by, the Agreements, (ii) the transactions
contemplated by the Agreements, or (iii) any other agreement or event or state
of facts occurring or existing prior to the date hereof that in any manner
arises out of or otherwise relates to any aspect of the business relationship
between Abbott and Magainin; provided that the Abbott Group does not hereby
remise, release or discharge Magainin Group from any of the obligations of the
Magainin Group hereunder or described herein as remaining in effect.
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5. Representations and Warranties.
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(a) Abbott represents and warrants that (i) it has full power and
authority to enter into this Settlement Agreement, and this Settlement Agreement
is a valid and binding agreement enforceable against each member of the Abbott
Group; (ii) Bulk Drug Substance delivered to Magainin pursuant to this Agreement
shall conform with the Bulk Drug Specifications and shall be in compliance with
applicable laws and regulations, (iii) Bulk Drug Substance is and shall be
manufactured in accordance with cGMP and all applicable federal rules and
regulations, and (iv) Bulk Drug Substance shall be free from defects in
materials and workmanship and shall not be adulterated or misbranded within the
meaning of the U.S. Federal Food, Drug and Cosmetic Act, and is not an article
which may not, under the Act, be introduced into interstate commerce. ABBOTT
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO BULK DRUG
SUBSTANCE. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY ABBOTT.
(b) Magainin represents and warrants that (i) it has full power and
authority to enter into this Settlement Agreement, (ii) this Settlement
Agreement is a valid and binding agreement enforceable against each member of
the Magainin Group, except insofar as enforceability may be limited by
bankruptcy, insolvency or similar laws effecting the rights of creditor
generally, and (iii) it has not assigned, encumbered or in any manner
transferred all or any portion of the claims or rights covered by the Agreements
or this Settlement Agreement.
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6. Conditions Precedent to Effectiveness of this Settlement Agreement.
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This Settlement Agreement shall not become effective unless and until the last
of the following conditions occurs: (a) the execution and delivery of this
Settlement Agreement by both parties, and (b) Abbott's receipt of the FOUR
MILLION DOLLARS ($4,000,000) in immediately available funds to be paid by
Magainin pursuant to Section 3 hereof. In the event that all of these
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conditions have not been satisfied on or before September 14, 1999, this
Settlement Agreement shall, at Abbott's option, be of no force or effect.
7. No Admission of Liability. All parties hereby acknowledge and agree
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that this Settlement Agreement reflects certain compromises reached in
connection with terminating the on-going contractual and business relationship
between the parties, and consequently, the provisions of this Settlement
Agreement are not in any respect, nor for any purpose, to be deemed or construed
to be an admission or concession of any liability whatsoever on the part of any
person, firm, partnership or corporation whatsoever.
8. No Effect Upon Prior Performance. Nothing in this Settlement
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Agreement shall have the effect of rescinding any obligation of Abbott or
Magainin under the Agreements or otherwise to the extent heretofore performed by
the obligated party or create any right or cause of action on the part of any
party hereto to recover any money paid prior to the date hereof to any other
party or to otherwise challenge the ownership of any assets or other property
transferred to or created by any such party under the Agreements prior to the
date hereof.
9. Counterparts. This Agreement may be executed in any number of
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counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but
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one and the same Agreement. When counterparts have been executed by all the
parties hereto, this Agreement shall become effective as of the date first above
written.
10. Time of the Essence. Time is of the essence with respect to each and
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every term, condition, and other provision of this Settlement Agreement.
11. Governing Law. This Agreement shall be governed by the internal laws
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of the State of Illinois without taking into account any conflicts of law
principles otherwise applicable under such law.
12. Headings. The headings contained herein are for convenience only and
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do not limit, define or construe the contents of this Agreement.
13. Notices. All notices hereunder shall be in writing and shall be
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delivered personally, mailed by overnight delivery, registered or certified
mail, postage prepaid, mailed by express mail service or given by facsimile, to
the following addresses of the respective parties:
If to Abbott: Abbott Laboratories
President
Chemical and Agricultural Products Division
Department 390, Building A1
1401 Sheridan Road
North Chicago, IL 60064-4000
Fax Number: 847/938-2315
with copy to: Abbott Laboratories
Senior Vice President and General Counsel
Department 364, Building AP6D
100 Abbott Park Road
Abbott Park, IL 60064-3500
Fax Number: 847/938-6277
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If to Magainin: Magainin Pharmaceuticals, Inc.
5110 Campus Drive
Plymouth Meeting, Pennsylvania 19462
Attn: Chief Executive Officer
Fax Number: 610/941-5399
Notices shall be effective upon receipt if personally delivered, on the third
business day following the date of mailing if sent by certified or registered
mail, and on the second business day following the date of delivery to the
express mail service if sent by express mail, or the date of transmission if
sent by facsimile. A party may change its address listed above by notice to the
other party. The date of such notice shall be the date of mailing or
transmission, except that the date of a notice delivered by messenger shall be
the date of delivery. Failure or refusal to accept notice shall be deemed
conclusive evidence of receipt of such notice and knowledge of its contents.
14. Binding Effect. This Agreement shall be binding upon and shall inure
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to the benefit of the parties hereto and their respective assigns and successors
in interest.
15. Severability. If any clause, phrase, provision or portion of this
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Agreement shall be invalid or shall later be declared invalid, or unenforceable
under any applicable law or by decision of any court of competent jurisdiction,
such event shall not affect or impair this Agreement, nor shall such event be
considered so material as to render invalid or unenforceable the remainder of
this Agreement nor any other clause, phrase, provision or portion hereof, nor
shall it affect the application of any clause, phrase, provision or portion to
other persons or circumstances.
16. Construction of this Settlement Agreement. No provision of this
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Settlement Agreement shall be interpreted or construed against either Magainin
or Abbott because such party purportedly
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prepared or requested such provision, any other provision, or this Settlement
Agreement as a whole. Unless otherwise defined herein, capitalized terms used
herein shall have the same meanings as assigned thereto in the Supply Agreement;
17. Conflict between Agreements. To the extent that there is any conflict
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between the provisions of this Settlement Agreement, on the one hand, and any of
the Agreements, on the other hand, the provisions of this Settlement Agreement
shall govern and otherwise control.
18. JURY WAIVER. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
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WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THEY MAY
HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN ANY LEGAL
PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
19. ASSIGNMENT. Neither party shall assign this Settlement Agreement or
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any part thereof without the prior written consent of the other party; provided,
however, that this Settlement Agreement may be assigned by either party to a
third party purchaser in the event of an acquisition of at least fifty (50%)
percent of Magainin. Any permitted assignee shall assume all obligations of its
assignor under this Settlement Agreement. No assignment shall relieve any party
of responsibility for the performance of any accrued obligation that such party
then has hereunder.
20 WAIVER. No waiver or modification of any of the terms of this
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Settlement Agreement shall be valid unless in writing and signed by an
authorized representative of each party hereto. Failure
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by either party to enforce any rights under this Settlement Agreement shall not
be construed as a waiver of such rights nor shall a waiver by either party in
one or more instances be construed as constituting a continuing waiver or as a
waiver in other instances.
21. DISCLOSURE. Neither party shall use the name of the other party in
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any publicity or advertising without the other party's prior written consent,
except as may be required by law.
IN WITNESS WHEREOF, this Settlement Agreement has been executed on behalf
of each party by a duly authorized officer of such corporation, all as of the
date first above written.
ABBOTT LABORATORIES INC. MAGAININ PHARMACEUTICALS INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
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