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: July 20, 2000
(Date of earliest event reported)
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
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(Exact Name of Registrant as Specified in Charter)
New York 000-26749 11-2581812
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(State or Other Jurisdiction (Commission File No.) (IRS Employer Identification
of Incorporation) Number)
26 Harbor Park Drive, Port Washington, New York 11050
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 626-0007
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Item 2. Acquisition or Disposition of Assets.
Merger
On July 20, 2000 (the "Effective Date"), pursuant to the terms of an
Agreement and Plan of Merger, dated as of June 27, 2000 (the "Agreement"), by
and among National Medical Health Card Systems, Inc. ("Health Card"), PAI
Acquisition Corp., a wholly owned subsidiary of Health Card ("PAI"), Pharmacy
Associates, Inc. ("Pharmacy Associates") and the shareholders of Pharmacy
Associates (each a "Shareholder" and collectively the "Shareholders"), PAI,
merged with and into Pharmacy Associates.
Merger Consideration
Pursuant to the Agreement, the Shareholders as of the Effective Date
received an aggregate of $6,000,000 in cash and 400,000 shares of unregistered
common stock of Health Card. In addition, if Pharmacy Associates' pre-tax income
for the 12 months ending on June 30, 2001 or June 30, 2002 (each an "Earn-Out
Period" and collectively, the "Earn Out Periods") is greater than $1,000,000,
then promptly following the final determination of the pre-tax income
calculation by Health Card for the applicable Earn-Out Period, Health Card shall
pay a pro rata portion of the amount described below to the Shareholders:
(i) if Pharmacy Associates achieves a pre-tax income equal to
or greater than $2,500,000 in an Earn-Out Period, then the Contingent Payment
for such Earn-Out Period shall be $1,000,000;
(ii) if Pharmacy Associates achieves a pre-tax income of
greater than $1,000,000 but less than $2,500,000 in an Earn-Out Period, then the
Contingent Payment for such Earn-Out Period shall be equal to (x) the amount of
pre-tax income in excess of $1,000,000 achieved by Pharmacy Associates during
such Earn-Out Period (such excess amount not to exceed $1,500,000) divided by
$1,500,000, multiplied by (y) $1,000,000; and
(iii) if Pharmacy Associates does not achieve a pre-tax income
of at least $1,000,000 in an Earn-Out Period, then the Shareholders will not be
entitled to a Contingent Payment for such Earn-Out Period.
Neither the amount of pre-tax income achieved in an Earn-Out Period nor the
amount of a Contingent Payment paid in an Earn-Out Period shall affect the
calculation of pre-tax income achieved or the Contingent Payment payable, if
any, in the applicable Earn-Out Period. Seventy-five percent (75%) of the
Contingent Payment, if any, payable to the Shareholders shall be payable in
cash, with the remaining twenty-five percent (25%) payable in unregistered
shares of common stock of Health Card based on the Health Card Average Price
(hereinafter defined). The Health Card Average Price shall mean the average of
the last reported per share trading price of Health Card common stock over the
30 business day period immediately preceding the date of determination;
provided, that if such average is below $4.00, then the deemed Health Card
Average Price shall be $4.00, and if such average is above $6.00, the deemed
Health Card Average Price shall be $6.00.
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Additionally, if 35,000 additional covered lives from a specified account
are added to Pharmacy Associates' network under similar terms to such specified
account's existing network contract, Health Card will pay the Shareholders a
total of $16 per covered life; provided that such group must be contracted
within 90 days from the Effective Date and installation of such group must occur
within 180 days of the Effective Date.
Additionally, 200,000 shares of the Health Card common stock issued to the
Shareholders as part of the merger will be held in escrow as security for the
indemnification obligations of the Shareholders under the Agreement until July
20, 2002.
Pursuant to the Agreement, all of the Shareholders agreed not to become
involved, in any manner or capacity whatsoever, with any entity or individual
that engages or proposes to engage in prescription benefits management, except
Health Card or Pharmacy Associates, until June 27, 2003. Each of the
Shareholders further agreed not to (i) seek to transact any business with or
alter the relationship in any way between any of Pharmacy Associates' customers
or prospective customers and (ii) solicit for employment or in any way alter the
relationship between Pharmacy Associates and any person who was or is an
employee of Pharmacy Associates during the period of April 20, 2000 until July
20, 2003.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired. The Financial
Statements required by Item 7(a) will be filed by amendment to this
Current Report on Form 8-K pursuant to Item 7(a)(4).
(b) Pro Forma Financial Information. The Financial Statements required
by Item 7(b) will be filed by amendment to this Current Report on Form
8-K pursuant to Item 7(a)(4).
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated June 27, 2000, by
and among National Medical Health Card Systems, Inc.,
PAI Acquisition Corp., Pharmacy Associates, Inc. and
the Shareholders listed on Schedule I of the Agree-
ment and Plan of Merger.
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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.
NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC.
Dated: August 3, 2000 By: /s/ Bert E. Brodsky
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Bert E. Brodsky, Chairman of the Board
and Chief Executive Officer
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