SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): August 13, 1999
CADAPULT GRAPHIC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21853 87-0475073
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
110 Commerce Drive, Allendale, New Jersey 07401
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 236-1100
Not applicable
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets.
(a) On September 8, 1999, Media Sciences, Inc. ("Media Sciences"), a
wholly-owned subsidiary of Cadapult Graphic Systems, Inc. (the "Company"),
entered into an asset purchase agreement (the "Asset Purchase Agreement"),
dated September 7, 1999, with UltraHue, Inc., a New Mexico corporation
("UltraHue"), and Donald Gunn and Randy Hooker, shareholders of UltraHue, for
the acquisition of certain assets and the assumption of certain liabilities
of UltraHue. The closing of the Asset Purchase Agreement is expected to
occur on or about ninety days from the date of execution.
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Upon the closing of the Asset Purchase Agreement, Media Sciences is
expected to acquire certain proprietary information and intellectual property
rights of UltraHue and other assets owned and used by UltraHue in the
operation of its business, including: any and all right, title and interest
in and to UltraHue's trade secrets; accounts receivable, less allowances;
inventory at lower of cost or fair market value; certain property and
equipment; all right, title and interest in and to the name UltraHue and any
other trademarks, service marks or any copyrights heretofore used and/or
owned by UltraHue; customer lists and all files relating thereto; sales,
service and vendor contracts and security deposits; existing telephone and
fax numbers; databases; and on-going business records.
Under the Asset Purchase Agreement, Media Sciences is expected to
assume the following liabilities of UltraHue: accounts payable as of the
date of closing; customer deposits as of the date of closing; warranties on
products sold prior to the date of closing; leases and contracts to the
extent they are to be performed after the date of closing.
The consideration to be given by Media Sciences under the Asset
Purchase Agreement are: payment of $2,340,000 at closing; delivery of a
promissory note, executed by Media Sciences and guaranteed by the Company, in
the principal sum of $1,160,000, with interest at the annual rate of 7%, with
the full principal and accrued interest due and payable in full on the first
anniversary of the closing; a sum equivalent to UltraHue's cost for
UltraHue's inventory that is delivered to Media Sciences at closing; based on
the closing date, the difference between all accounts receivable collected by
Media Sciences less accounts payable, as collected and paid, respectively; for
a period of one year from the date of closing, payment of a sum equivalent to
10% of the quarterly net profits derived by Media Sciences from the first
$1,500,000 dollars of gross profits plus thirty percent of the net profits
attributable to gross profits in excess of $1,500,000 dollars (in the event
there is a net loss in any quarter during this one year period, the amount of
such loss shall be set off against the net profits for any subsequent quarter,
provided that if there is no subsequent quarter in this one year period, then a
refund shall be due Media Sciences); and for a period of two years from the
first anniversary of the date of closing, after certain distributions shall
have terminated, payment of a sum equivalent to ten percent of the quarterly
net profits derived by Media Sciences from the first $1,000,000 of gross
profits, plus thirty percent of the net profits attributable to the gross
profits in excess of $1,000,000 dollars (in the event there is a net loss in
any quarter during this two year period, the amount of such loss shall be set
off against the net profits for any subsequent quarter, provided that if there
is no subsequent quarter in this two year period, then a refund shall be due
Media Sciences). Upon execution of the Asset Purchase Agreement, Media
Sciences deposited $50,000 in escrow pending the closing.
The consideration to be given was negotiated at "arms-length" between
the directors and executive officers of Media Sciences and the Company, and
the directors, executive officers and controlling shareholders of UltraHue.
The Board of Directors of Media Sciences and of Cadapult determined in good
faith that the consideration given under the Asset Purchase Agreement was
reasonable under the circumstances.
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The obligation of Media Sciences under the Asset Purchase Agreement is
conditioned upon Media Sciences obtaining financing to fund the purchase of
not less than $3,000,000. If Media Sciences does not obtain the financing by
the closing, either party shall then have the option to terminate the Asset
Purchase Agreement, and all of the rights and obligations of the parties
under the Asset Purchase Agreement shall be deemed null, void and of no
further effect, except that UltraHue shall have the right to retain the
$50,000 deposit being held in escrow as liquidated damages.
At closing, UltraHue is to deliver confidentiality agreements executed
by Donald Gunn and Randy Hooker agreeing not to disclose, and in all other
respects to maintain the secrecy of, UltraHue's trade secrets. In addition,
UltraHue is to assign to Media Sciences all of its right, title and interest
in and to certain Non-Disclosure/Non-Compete Agreements between UltraHue and
certain of its employees who have knowledge of UltraHue's trade secrets and
proprietary information.
No director, executive officer or person who may be deemed to be an
affiliate of the registrant had any direct or indirect interest in UltraHue
prior to entering into the Purchase Agreement. The Company has invited
Donald Gunn, a shareholder of UltraHue, to join the Company's Board of
Directors after the closing. Upon closing, Donald Gunn and Randy Hooker are
to become employees of Media Sciences pursuant to three year employment
agreements.
(b) Media Sciences has entered into an Asset Purchase Agreement to
acquire certain assets of UltraHue constituting equipment, physical property,
and intellectual property. UltraHue is engaged primarily in the business of
the manufacture of solid inks and remanufactures and refills color toner
cartridges for use in color printers and related equipment. UltraHue has
developed certain formulas and processes for manufacturing the aforesaid inks,
and related confidential information and know-how. UltraHue Inc. distributes
these products and transparency media, also for use in Tektronix color
printers, to dealers and distributors internationally. The Company intends
to continue the use the assets of UltraHue to be acquired under the Asset
Purchase Agreement in similar activities through the Company's subsidiary,
Media Sciences. Media Sciences is a recently formed subsidiary of the
Company with no present operations. After the closing of the Asset Purchase
Agreement, Media Sciences is expected to manufacture and distribute,
internationally, digital color printer supplies.
Item 5. Other Events
On August 13, 1999, the Company instituted an action against Tektronix,
Inc. before the United States District Court for the District of New Jersey,
seeking certain injunctive relief and an indeterminiate amount of damages,
alleging Tektronix, Inc. violated the New Jersey Franchise Practices Act,
the New Jersey Antitrust Act, federal acts prohibiting restraints of trade,
breach of contract and unfair competition, among other claims. In its
lawsuit, the Company alleges that, in August 1999, Tektronix, Inc.
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unilaterally, and without notice, illegally terminated the Company's Tektronix
Premier Plus Reseller franchise because the Company is selling a non-Tektronix
product, Cadapult solid ink supplied to the Company by UltraHue. The Company
is informed that Tektronix controls 97% of the U.S. solid ink market for
digital printers (which essentially are only Tektronix printers). The results
of the Company's pending lawsuit could have material positive or material
adverse consequences to the Company, or both adverse and positive consequences.
The Company derived 45% of its fiscal year 1999 revenues from sales and
services of Tektronix products. The lawsuit has only recently commenced and
may or may not be resolved in the near future. The loss of all or a part of
this lawsuit could have a material adverse affect on the Company.
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.
CADAPULT GRAPHIC SYSTEMS, INC.
Date: September 22, 1999 By: /s/ Michael W. Levin
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Michael W. Levin, President
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