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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 16, 1999
GHS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-15586 52-1373960
(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
65 BROADWAY, 7TH FLOOR, NEW YORK, NEW YORK 10006
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 430-6430
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
THE SPIN-OFF OF U.S. NEUROSURGICAL, INC.
GHS, Inc. ("GHS") has changed the focus of its business from that of
its former wholly owned subsidiary, U.S. NeuroSurgical, Inc. ("USN"), which
provides access to stereotactic radiosurgery centers using the Gamma Knife
technology, to an Internet initiative including a plan for an online learning
network to focus on personal and professional improvement.
On September 16, 1999, GHS distributed to holders of common stock of
GHS, par value $0.01 per share (the "Common Stock"), GHS's entire interest in
USN. The disposition was effected by distributing one share of USN common stock
for each share of Common Stock owned by stockholders of GHS on September 8, 1999
(the "Spin-off"). On September 9, 1999, GHS distributed to its stockholders an
Information Statement dated September 8, 1999 regarding the Spin-off. Such
Information Statement is included as an exhibit to this Form 8-K. USN is now a
separate company no longer owned in any way by GHS.
USN owns and operates two stereotactic radiosurgery centers using Gamma
Knife technology. One of USN's centers is on the premises of Research Medical
Center in Kansas City, Missouri. The other center is on the premises of New York
University Medical Center (NYU) in New York, New York. USN's business strategy
is to provide a mechanism whereby hospitals, physicians and patients can have
access to Gamma Knife treatment capability, a high capital cost item. USN
provides the Gamma Knife to medical facilities on a "cost per treatment" basis.
USN owns the Gamma Knife units, and is reimbursed by the facilities where they
are housed, based on utilization.
AGREEMENT AND PLAN OF DISTRIBUTION: RELATIONSHIP BETWEEN GHS AND USN AFTER THE
SPIN-OFF
On May 27, 1999, USN and GHS entered into an Agreement and Plan of
Distribution (the "Distribution Agreement") which, in general, outlines the
relationship between the two companies after the Spin-off. The following sets
forth a summary of the material terms and provisions of the Distribution
Agreement.
ADMINISTRATIVE SERVICES
GHS and USN have agreed to provide their own respective administrative
services after the Spin-off. However, the Distribution Agreement provides that
for a period of up to two years after the Spin-off, GHS and USN will generally
make their employees available to each other as necessary to support the
activities of each party in areas including, without limitation, accounting, tax
and legal advice and services and human resources. GHS and USN each have agreed
in the Distribution Agreement to provide to the other, upon the other's request,
at all reasonable times, full and complete access to any and all books, records,
contracts, instruments, data and other information as the other may reasonably
request and require in the conduct of its business. GHS and USN have also agreed
to use their best efforts to make available to the other, upon the other's
request, their respective officers, directors, employees and agents as witnesses
to
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the extent that such persons may reasonably be required in connection with any
legal, administrative or other proceedings in which USN or GHS, may from time to
time be involved. The party rendering these services will be entitled to receive
from the other payment for its reasonable costs and expenses incurred in
providing such services.
INDEMNIFICATION
Pursuant to the Distribution Agreement, other than liabilities and
obligations in respect of taxes, which shall be governed by the terms of the Tax
Matters Agreement (described below) (a) USN shall be liable for all claims,
liabilities and obligations attributable to the USN Gamma Knife business or any
of the other assets assigned by GHS to USN pursuant to the Assignment and
Assumption Agreement described below (collectively, the "USN Liabilities"); (b)
GHS shall be liable for all claims, liabilities and obligations retained or
assumed by GHS pursuant to the Assignment and Assumption Agreement
(collectively, the "GHS Liabilities"); and (c) USN shall be responsible for
"Distribution Liabilities" (defined as expenses, costs, or liabilities directly
related to the Spin-off) which are incurred or accrued prior to or following May
27, 1999. USN will indemnify GHS and its officers, directors, employees, agents
and affiliates from and against any and all losses, liabilities, claims,
damages, costs and expenses arising out of or related in any manner to the USN
Liabilities. GHS will indemnify USN similarly, with respect to the GHS
Liabilities.
OTHER PROVISIONS
The Distribution Agreement also includes provisions relating to: (i)
allocating liability with respect to pending litigation and other potentially
significant obligations; and (ii) continued cooperation between GHS and USN with
respect to post-Spin-off matters. With respect to all significant outstanding
contracts, licenses, guarantees and other obligations relating to the Gamma
Knife business to which GHS had been a party and the liability for which will be
assumed by USN pursuant to the Assignment and Assumption Agreement discussed
below, GHS and USN have agreed, to the extent not already provided for, to have
USN substituted in the place of and for GHS (and to have GHS removed) as a party
as promptly as is reasonably practicable. GHS and USN also agreed to deliver
such other instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of the Distribution
Agreement and to consummate the transactions contemplated thereby.
ASSIGNMENT AND ASSUMPTION AGREEMENT
Pursuant to the Assignment and Assumption Agreement, USN has accepted
the assignment from GHS to USN of the following assets (collectively, the
"Assigned Assets"):
(i) all assets of GHS related exclusively or primarily to the USN
Gamma Knife business;
(ii) all accounts receivable of GHS and each of its subsidiaries
arising through May 27, 1999;
(iii) all intercompany accounts due from USN to GHS at May 27, 1999,
which contribution shall be deemed a capital contribution from
GHS to USN;
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(iv) all prepaid expenses and deposits made by GHS prior to May 27,
1999;
(v) all refunds payable to GHS for business conducted by GHS prior
to May 27, 1999;
(vi) the capital stock of U.S. Neurosurgical Physics, Inc., a
wholly owned subsidiary of GHS ("USNP");
(vii) cash in the amount of $374,144.71; and
(viii) the Lease dated March 5, 1998 between GHS and Research Grove
Associates, relating to the lease of the premises located at
2400 Research Boulevard, Suite 325, Rockville, Maryland 20850
(the "Maryland Lease").
The following assets of GHS were specifically excluded from the
assignment from GHS to USN (collectively, the "Excluded Assets"):
(i) cash and cash equivalents (a) held by GHS as of May 27, 1999,
other than the cash included in the Assigned Assets above, (b)
raised in GHS's May 1999 private placement of its Series B
Preferred Stock and (c) which come into GHS's possession
following May 27, 1999;
(ii) the capital stock of GHS's subsidiaries owned by GHS, other
than USNP; and
(iii) all assets of GHS acquired in connection with GHS's
acquisition of Change Your Life.com, LLC ("CYL") and Concept
Development, Inc. ("CDI") or acquired by GHS following May 27,
1999.
In addition, USN has assumed, has agreed to be liable for and indemnify
GHS with respect to all claims, liabilities and obligations which are
attributable to the following (collectively, the "Assumed Liabilities"):
(i) any of the Assigned Assets;
(ii) any event, occurrence, action or omission relating to GHS and
its subsidiaries taken or occurring prior to May 27, 1999,
except to the extent they are specifically included in the
Excluded Liabilities;
(iii) the obligations of GHS under the employment agreement dated
November 14, 1984, as amended, with Alan Gold;
(iv) the obligations of GHS under the Maryland Lease; and
(v) the obligations of GHS to Allen & Company Incorporated for the
payment of fees in respect of financial advisory services
rendered to GHS in connection with the acquisitions of CYL and
CDI.
GHS has agreed to retain, be liable for and indemnify USN with respect
to all claims, liabilities and obligations set forth below (collectively, the
"Excluded Liabilities"):
(i) all claims, liabilities and obligations which are attributable
to any of the Excluded Assets;
(ii) the obligations of GHS to issue GHS Common Stock pursuant to
options, warrants and commitments to issue capital stock
outstanding at May 27, 1999, as well as GHS's obligations
under its 1997 Stock Option Plan;
(iii) the obligations of GHS to pay the consideration, fees,
expenses and other costs
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arising in connection with the acquisitions of CYL and CDI;
(iv) all claims, liabilities or litigation arising out of any
event, occurrence, action or omission relating to GHS and its
subsidiaries taken or occurring following May 27, 1999;
(v) GHS's obligations under the Warrant Certificate, dated
November 30, 1993, as amended, issued to Allen & Company
Incorporated; and
(vi) GHS's obligations under that certain Settlement Agreement
dated as of March 22, 1999 by and among GHS, USN and the other
parties thereto.
TAX MATTERS AGREEMENT
GHS and USN have entered into a tax matters agreement (the "Tax Matters
Agreement") that defines the parties' rights and obligations with respect to
federal, state, foreign and other income or franchise taxes relating to GHS's
and USN's businesses for tax periods prior to, including and following the
Spin-off and with respect to certain other tax matters. Pursuant to the Tax
Matters Agreement, USN has agreed to be liable for, and indemnify and hold
harmless GHS from and against any liability for, taxes which are allocated to
USN under the Tax Matters Agreement as follows: (1) all taxes resulting from the
Spin-off, (2) all taxes resulting from the operations of USN and GHS prior to
May 27, 1999 (the date of the closings of the acquisitions of CYL and CDI), and
(3) all taxes resulting from the operations of USN following May 27, 1999. GHS
has agreed to be liable for, and indemnify and hold harmless USN from and
against any liability for, taxes which are allocated to GHS under the Tax
Matters Agreement as follows: (1) all taxes resulting from the acquisitions of
CYL or CDI and (2) all taxes resulting from the operations of GHS (other than
USN and its subsidiaries) following May 27, 1999. GHS's Board of Directors
determined that the allocation of responsibilities for taxes provided by the Tax
Matters Agreement was fair to the stockholders of GHS and USN. The allocation of
responsibility in the Tax Matters Agreement is based on the fact that prior to
May 27, 1999, the closing date of both the CYL and CDI acquisitions, USN's
Gamma Knife operations represented all of GHS's operations. Therefore, the Board
determined that allocating to USN the responsibility for taxes for periods
through May 27, 1999 was appropriate. The Board recognized that for periods
following May 27, 1999, the Tax Matters Agreement allocated to USN the
responsibility for its Gamma Knife operations and to GHS the responsibility for
its new online personal and professional improvement business. The Board also
determined that the allocation to USN of all taxes resulting from the Spin-off
was reasonable. The allocation to USN of all taxes resulting from the Spin-off
was required as a condition to the closing of the CYL acquisition by the sellers
of CYL. Because the Board believed that consummating the CYL acquisition was in
the best interests of GHS's stockholders and because the tax liabilities, if
any, resulting from the Spin-off were determined not to be material, the Board
determined that allocating such responsibility to USN was reasonable. It is
possible that a court or the IRS could disregard this contractual allocation of
responsibility for taxes and require GHS or USN or their respective subsidiaries
to assume responsibility for obligations allocated to the other party,
particularly if such other party were to refuse or was unable to pay or perform
any of its allocated obligations. Such events could have a material adverse
effect on the financial condition and operations of USN or GHS, as the case may
be.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA Consolidated Financial Information of GHS, Inc. and
subsidiaries
PRO FORMA Unaudited Consolidated Statement of Operations for
the six months ended June 30, 1999 (1)
Notes to PRO FORMA Unaudited Consolidated Statement of
Operations for the six months ended June 30, 1999 (1)
PRO FORMA Unaudited Consolidated Statement of Operations for
the year ended December 31, 1998 (1)
Notes to PRO FORMA Unaudited Consolidated Statement of
Operations for the year ended December 31, 1998 (1)
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(1) Previously filed as part of, and incorporated by reference
from, GHS's Information Statement on Form 14C as filed with
the Securities and Exchange Commission on September 29, 1999.
(c) Exhibits Description
10.1 Distribution Agreement dated May 27, 1999 between GHS
and USN (1)
10.2 Tax Matters Agreement dated May 27, 1999 between GHS
and USN (1)
10.3 Assignment and Assumption Agreement dated May 27,
1999 between GHS and USN (1)
99.1 Schedule 14C Information Statement of GHS dated
September 8, 1999 (2)
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(1) Previously filed as, and incorporated by reference
from, the identically numbered exhibit to USN's Form
10 as filed with the Securities and Exchange
Commission on July 1, 1999.
(2) Incorporated by reference from the definitive
Information Statement on Schedule 14C of GHS as filed
with the Securities and Exchange Commission on August
25, 1999.
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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 thereunto duly authorized.
GHS, INC.
Dated as of: September 30, 1999
By: /s/ Beth Polish
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Beth Polish
President
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EXHIBIT INDEX
Exhibit No. Description
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10.1 Distribution Agreement dated May 27, 1999 between GHS
and USN (1)
10.2 Tax Matters Agreement dated May 27, 1999 between GHS
and USN (1)
10.3 Assignment and Assumption Agreement dated May 27,
1999 between GHS and USN (1)
99.1 Schedule 14C Information Statement of GHS dated
September 8, 1999 (2)
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(1) Previously filed as, and incorporated by reference
from, the identically numbered exhibits to USN's Form
10 as filed with the Securities and Exchange
Commission on July 1, 1999.
(2) Incorporated by reference from the definitive
Information Statement on Schedule 14C of GHS as filed
with the Securities and Exchange Commission on August
25, 1999.
