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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) February 5, 1996
ZEGARELLI GROUP INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
CALIFORNIA 0-19227 95-4040591
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10318 Norris Ave., Pacoima, CA 91331
(Address of principal executive offices) (Zip code)
(818) 897-9474
Registrant's telephone number, including area code
Cosmetic Group U.S.A., Inc.
11312 Penrose St., Sun Valley, CA 91352
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On September 23, 1997 ("the Closing Date"), Cosmetic Group U.S.A., Inc. a
California corporation ("the Company"), sold to CGUSA, LLC., a privately-held
New Jersey limited liability company ("CGUSA"), substantially all of the assets
used in the operations of its contract packaging business ("the Sale"). The Sale
was effected pursuant to an asset purchase agreement, dated July 24, 1997 (the
"Asset Purchase Agreement"), between the Company and CGUSA. Prior to the
transaction, the Company and its affiliates did not have a pre-existing personal
or business relationship or prior interaction with the owners of CGUSA. The
aggregate purchase price ("the Purchase Price") for the assets was approximately
$6,700,000, of which $3,500,000 is payable to the Company pursuant to an
eight-year 10% subordinated promissory note ("the CGUSA Note"). Under the terms
of the CGUSA Note, $500,000 is payable to the Company on each anniversary of the
closing date commencing on the second anniversary of the closing date. Interest
accrues on the unpaid principal amount of the CGUSA Note at the rate of 10% per
annum and is payable quarterly. Interest and principal payable on the GGUSA Note
is subject to adjustment upward or downward based on adjustment to the Purchase
Price or offsets against liabilities for indemnification.
Furthermore, $500,000 was placed in escrow ("the Escrow Fund") to be released
pursuant to adjustment to the Purchase Price in accordance with the Asset
Purchase Agreement. Between 60 and 75 days following the Closing Date, CGUSA
will deliver its calculation of the purchase price adjustment, subject to the
Company's right to dispute any such adjustment as set forth in the Asset
Purchase Agreement. If CGUSA's calculation is the same as the Company's, then
the Escrow Fund will be released to the Company. If there is any increase of the
purchase price, then CGUSA will pay the Company first, the difference between
CGUSA's calculation and $4,000,000 up to a total of $500,000, and second, an
immediate increase in the principal amount of the CGUSA Note. Any decrease in
the Purchase Price due to CGUSA's purchase price adjustment will be paid to
CGUSA first, in cash from the Escrow fund and then, if necessary, through a
decrease in the aggregate principal amount of the CGUSA Note. Following the
settlement of the foregoing Purchase Price adjustments, all funds remaining in
the escrow fund, if any, will be released to the Company.
Item 5. Other Events.
On September 23, 1997, after approval from the Company's shareholders and
consummation of the Sale, the Company filed an amendment to its Articles of
Incorporation changing its name to "Zegarelli Group International, Inc."
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Exhibits
2.1 Asset Purchase Agreement, dated as of July 24, 1997 between Cosmetic
Group U.S.A., Inc. and CGUSA, LLC. (Incorporated herein by reference
to the Company's Proxy Statement for a Special Meeting of Shareholders
filed with the Securities and Exchange Commission on July 30, 1997.
2.2 Amendment to the Asset Purchase Agreement, dated as of September
23, 1997, between CGUSA, LLC and Cosmetic Group U.S.A., Inc.
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SIGNATURE
Pursuant to the requirements of the Security Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereto
duly authorized.
ZEGARELLI GROUP INTERNATIONAL, INC.
October __, 1997 --------------------------------------
Jennifer J. Eggers
Chief Financial Officer
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Cosmetic Group U.S.A., Inc.
10318 Norris Street
Pacoima, California 90212-3480
September 23, 1997
CGUSA, L.L.C.
11312 Penrose Street
Sun Valley, California 91352
Ladies and Gentlemen:
Reference is made to that certain Asset Purchase Agreement, dated July
24, 1997, between Cosmetic Group U.S.A., Inc. ("Seller") and CGUSA, L.L.C.
("Purchaser") (the "Agreement"). Seller and Purchaser hereby agree to amend the
Agreement as follows:
1. Section 1.04(b)(i) of the Agreement is amended by adding the following
language as the last sentence:
"Within two weeks of the Closing Date, Seller shall deliver to Purchaser
a revised Closing Adjustment Worksheet (the "Revised Closing Adjustment
Worksheet") which shall set forth the TNA based on Sellers' calculation
of the Assets and Assumed Liabilities as of the Closing Date using the
same accounting procedures and policies used by Seller in preparing
Seller's audited balance sheet included in its financial statements at
and for the year ended December 31, 1996 (included in Seller's Annual
Report on Form 10-KSB for the year ended December 31, 1996). For all
purposes under this Agreement (other than for determinations of the
Purchase Price or any adjustments thereto), Seller's Revised Closing
Adjustment Worksheet shall be deemed to be the Closing Adjustment
Worksheet."
2. Section 1.04(b)(ii) of the Agreement is amended in its entirety by
deleting it and replacing it with the following language:
"(ii)" Between 60 and 75 days following the Closing Date, Purchaser
shall prepare and deliver to Seller a Post-Closing Adjustment Worksheet
(the "Post-closing Adjustment Worksheet"), which shall set forth the TNA
based on the results of Purchaser's calculation of the Assets and
Assumed Liabilities as of the Closing Date (except that the amount of
Tangible Personal Property used by Purchaser in such calculation shall
be equal to $1,964,785). If the Post-Closing Adjustment Worksheet
indicates that the TNA (as defined below) is higher or lower than
$4,000,000, then the Purchase Price, as adjusted pursuant to Section
1.04(b)(i), shall be further adjusted upward or downward, respectively,
on a dollar-for-dollar basis. If the Post-Closing
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on a dollar-for-dollar basis. If the Post-Closing Adjustment Worksheet
indicates that the TNA is $4,000,000 or more, then there shall be a
prompt release of the Escrow Fund to Seller. Any other adjustment upward
shall be satisfied upon delivery of the Post-Closing Adjustment
Worksheet to Seller by (A) first, Purchaser's cash payment to Seller of
an amount equal to the difference between the amount of TNA set forth on
the Post-Closing Adjustment Worksheet and $4,000,000, up to a total
of $500,000 and (B) second, an immediate increase in the principal
amount of the Seller Note in an amount equal to the amount, if any, by
which the difference between the amount of TNA set forth on the
Post-Closing Adjustment Worksheet and $4,000,000 exceeds $500,000 with
such increase applied evenly to each annual principal repayment amount
set forth in the Seller Note. Any adjustment downward shall be equal to
the difference between $4,000,000 and the amount of TNA set forth on the
Post-Closing Adjustment Worksheet and such adjustment shall be satisfied
upon delivery of the Post-Closing Adjustment Worksheet to Seller (x)
first, by the prompt release and payment from the Escrow Fund to the
Purchaser of all adjustment amounts up to, but not exceeding the total
amount in, the Escrow Fund and (y) second, all adjustment amounts in
excess of the amount in the Escrow Fund shall be immediately deducted
from the principal amount of the Seller Note, with such reduction
applied evenly to each annual principal repayment amount set forth in
the Seller Note; provided that with respect to (y), if the amount of the
inventory set forth on the Post-Closing Adjustment Worksheet is less
than $1,165,043 (which is the result of $350,000 deducted from
$1,515,043), then the difference between $1,165,043 and the amount of
the inventory set forth on the Post-Closing Adjustment Worksheet shall
be paid in cash by Seller to Purchaser in lieu of adjusting the
principal amount of the Seller Note. Seller and Purchaser agree that all
cash amounts owed by Seller to Purchaser pursuant to the proviso in
subclause (y) of the preceding sentence shall be satisfied by offsetting
interest payments under the Seller Note."
3. The definition of "Operative Agreements" in the Agreement is amended in
its entirety by deleting it and replacing it with the following language:
""Operative Agreements" means, collectively, the General
Assignment and the other Assignment Instruments, the Assumption Agreement and
the other Assumption Instruments, and the Escrow Agreement."
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[Signature Page for Asset Purchase Agreement Amendment]
Please confirm your acceptance of these amendments by signing below.
COSMETIC GROUP U.S.A., INC.
By: /s/ ALFRED E. BOOTH, JR.
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Name: Alfred E. Booth, Jr.
Title: Chief Executive Officer
Agreed and Acknowledged as of the
date listed above:
CGUSA, L.L.C.
By: /s/ MARLA S. SMITH
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Name: Marla S. Smith
Title: Senior Vice President
