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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): June 21, 1996
Derma Sciences, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-31070 23-2328753
(State or other jurisdiction (Commission (IRS employer
of incorporation) File Number) identification number)
121 West Grace Street
Old Forge, PA 18518
(717) 457-1232
(Address including zip code and telephone
number, of principal executive offices)
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Item 5. Other Events
On June 21, 1996, Derma Sciences, Inc. (the "Registrant") executed an Asset
Purchase Agreement (attached as Exhibit 10.01 hereto), effective May 1, 1996,
providing for the acquisition of certain assets of Morgan Paris, Inc., a former
master distributor of the Registrant, for total consideration of $350,000
payable over two years. The acquired assets include customer lists, goodwill,
territory sales records, business records and contract rights under Morgan
Paris' master distributorship agreement with the Registrant. The latter
agreement granted Morgan Paris exclusive sales and distribution rights with
respect to the Registrant's wound care products in the states of Illinois,
Indiana, Michigan, Minnesota, North Dakota, South Dakota and Wisconsin.
In conjunction with the execution of the Asset Purchase Agreement, Morgan
Paris and the Registrant executed a Settlement Agreement and Mutual Release
dated June 21, 1996 (attached as Exhibit 10.02 hereto) wherein the parties
agreed to fully settle and determine all differences between them which in any
way relate to or arise out of the claims and counterclaims asserted in Morgan
Paris, Inc. v. Derma Sciences, Inc., filed by Morgan Paris on or about September
7, 1994 in the United States District Court for the Southern District of Ohio
(the "Court"). A stipulated entry of dismissal relative to the suit has been
executed by the parties and filed with the Court. Upon approval of the foregoing
stipulation by the Court, the suit will be dismissed with prejudice.
Item 7. Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
10.01 Asset Purchase Agreement dated June 21, 1996
10.02 Settlement Agreement and Mutual Release dated June 21, 1996
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DERMA SCIENCES, INC.
Date: June 27, 1996 By: /s/ John T. Borthwick
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John T. Borthwick
President and Chief Executive Officer
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of the 21st day
of June, 1996, by and among Morgan Paris, Inc. ("MPI"), an Ohio corporation
("Seller"), Derma Sciences, Inc. ("DSI"), a Pennsylvania corporation ("Buyer"),
and Kathryn H. Dumas ("Dumas"), an individual residing in the State of Ohio and
the sole shareholder of Seller. This Agreement shall be effective as of the 1st
day of May, 1996.
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of Seller's assets used in connection with
Seller's business;
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
I. ASSETS
1.1 Asset Purchase. Subject to the terms and conditions of this Agreement,
and in reliance on the representations and warranties contained in this
Agreement, Seller shall sell to Buyer, and Buyer shall purchase from Seller,
free and clear of all liabilities, liens and encumbrances, the following assets
and property of Seller used in connection with the operation of Seller's
business (the "Purchased Assets"):
a) The names "Derma Marketing" and "Morgan Paris" and any other
registered trade name or d.b.a. and trademarks, logos,
Internetaddresses or domain names.
b) MPI's rights under the Master Distributorship Agreement (dated
November 19, 1993), Supplemental Agreement (dated November 19,
1993), and Territory Licensing Agreement (dated July 1, 1993).
c) Goodwill.
d) Customer list.
e) Territory sales records.
f) Business records.
1.2 Excluded Assets. Notwithstanding the above, the following of Seller's
assets relating to or used in connection with Seller's business shall not be
sold to Buyer hereunder (the "Excluded Assets"):
a) MPI's receivables which Seller has represented consist solely of
several claims currently in litigation in Chicago, Illinois.
b) Inventory.
c) Physical assets.
1.3 Liabilities. Buyer does not assume or agree to assume, pay, discharge
or perform any obligations, liabilities or commitments of Seller, including, but
not limited to, any equipment or real estate leases, obligations of any kind to
present or former employees, sales representatives and independent contractors.
All liabilities and obligations of any kind shall remain the responsibility of
the Seller.
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II. PRICE AND PAYMENT
2.1 Purchase Price. The purchase price for the Purchased Assets, excluding
the cash on hand, is Three Hundred Fifty Thousand Dollars ($350,000). One
Hundred Sixty Thousand Dollars ($160,000) of the purchase price shall be paid by
Buyer to Seller at the Closing. The remaining One Hundred Ninety Thousand
Dollars ($190,000) shall be paid by Buyer to Seller in two equal installments of
Ninety-Five Thousand Dollars ($95,000) each, the first to be paid on or before
December 31, 1997; the second to be paid on or before December 31, 1998. Buyer
shall not be obligated to pay interest on the amount of the purchase price as a
whole or on any installment payment thereof. In the event that for any reason a
closing does not occur, Buyer shall not be obligated to make any payments to
Seller.
2.2 Allocation of Purchase Price. The purchase price may be allocated among
the Purchased Assets by Buyer in its sole discretion.
2.3 Manner of Payment: All payments under this Agreement shall be made by
cashier's check payable to "Greenwood & Associates IOLTA Account" for the
benefit of Morgan Paris, Inc.
III. CLOSING
3.1 Closing. The closing shall be held at the offices of Dinsmore & Shohl
at 10:00 a.m. on June 21st , 1996, or at such other time or place as the parties
may agree upon in writing (the "Closing" or the "Closing Date").
3.2 Deliveries.
a) At the Closing the Seller will deliver: bills of sale,
assignments and other instruments of transfer as shall be
appropriate to carry out the intent of this Agreement, and as
shall be sufficient to transfer to Buyer all rights title and
interest of Seller in and to the Purchased Assets in accordance
with Seller's representations and warranties set forth herein. In
the event the transfer or delivery of any instrument, interest or
asset to be assigned, transferred or delivered to Buyer hereunder
requires the consent of any party, Seller shall obtain such
consent in writing and deliver a copy of same to Buyer.
b) Each party agrees that at any time and from time to time after
Closing, it shall, upon the request and at the expense of the
other, do, execute, acknowledge and deliver or will cause to be
done, executed, acknowledged or delivered all such further acts,
assignments, transfers, powers of attorney, documents or
assurances as may be required for final and complete
implementation of the transactions contemplated herein.
IV. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Dumas hereby make the following representations and warranties,
all of which shall be made as of, and shall be true on, the Closing Date and all
of which shall survive the Closing Date:
4.1 Corporate. Seller is a corporation duly organized and existing under
the laws of the State of Ohio, and has the power and authority to own its
properties and carry on its business in the manner in which such business is
conducted.
4.2 Authorization for Agreement. The execution, delivery and performance of
this Agreement by Seller in accordance with the terms and provisions of this
Agreement have been duly authorized by appropriate corporate action of Seller.
4.3 Power to Perform. Seller and Dumas have full power, right and authority
to enter into this Agreement and to perform its obligations under this
Agreement, and this Agreement is legal, valid and binding on Seller and Dumas
and is enforceable against Seller and Dumas in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or similar debtor relief legislation affecting the rights of
creditors generally.
4.4 Title to Purchased Assets. The Purchased Assets shall be owned by
Seller and transferred and sold to Buyer on the Closing Date, free and clear of
any liens, claims or encumbrances.
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V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties, all of
which shall be made as of, and be true on, the Closing Date, and all of which
shall survive the Closing Date:
5.1 Corporate. Buyer is a corporation duly organized and existing under the
laws of the Commonwealth of Pennsylvania, and has the power and authority to own
its properties and carry on its business in the manner in which such business is
to be conducted.
5.2 Authorization for Agreement. The execution, delivery and performance of
this Agreement by Buyer in accordance with the terms and provisions of this
Agreement have been duly authorized by appropriate corporate action of Buyer.
5.3 Power to Perform. Buyer has full power, right and authority to enter
into this Agreement and to perform their obligations under this Agreement, and
this Agreement is legal, valid and binding on Buyer and is enforceable against
Buyer in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or similar debtor relief
legislation affecting the rights of creditors generally.
5.4 Performance. Buyer shall perform all of their obligations, including
payments, provided for herein, when due.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligations of Buyer under this
Agreement are subject to the occurrence at or before the Closing Date of the
following conditions:
a) Seller's representations and warranties shall be true and correct
in all material respects as of the Closing Date, and Seller shall
have performed and complied with all agreements and conditions of
this Agreement to be performed or complied with by Seller before
or at the Closing.
b) It is expressly understood and agreed that Buyer's obligation to
consummate the Closing is conditioned upon the occurrence of each
of the events described below ("Conditions of Closing") at or
prior to closing (any one or more of which may be waived by
Buyer):
i) Execution of a mutual settlement and release of all claims
in the case captioned Morgan Paris, Inc. v. Derma
Sciences, Inc. (S.D. Ohio, filed September 7, 1994) , Case
No. C-1-94-614, on or before the Closing date and in the
form shown in Attachment~B, hereto.
ii) A stipulated entry of dismissal of all claims must be filed
in the case captioned Morgan Paris, Inc. v. Derma Sciences,
Inc. (S.D. Ohio, filed September 7, 1994), Case No.
C-1-94-614 on or before the closing date.
6.2 Conditions to Seller's Obligations. The obligations of Seller under
this Agreement are subject to the occurrence at or before the Closing Date of
the following conditions:
a) Buyer's representations and warranties shall be true and correct in
all material respects as of the Closing, and Buyer shall have
performed and complied with all agreements and conditions of this
Agreement to be performed or complied with by Buyer before or at the
Closing.
b) Buyer shall have delivered a certified check in the full amount of One
Hundred Sixty Thousand Dollars ($160,000), as set forth above in
Section 2.1.
VII. TERMINATION
7.1 Buyer's obligations under this Agreement shall terminate immediately in
the event that any of the following occur:
a) Infringement of any patent held by DSI by Dumas or Kenneth Heyl
("Heyl"), or by any agent of Dumas and/or Heyl, or by any business,
whether incorporated or unincorporated, in which Dumas and/or Heyl own
a majority interest either individually or collectively.
b) Representation, marketing or sale of any product which infringes upon
any patent held by DSI by Dumas or Heyl, or by any agent of Dumas
and/or Heyl, or by any business, whether incorporated or
unincorporated, in which Dumas and/or Heyl own a majority interest
either individually or collectively.
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c) Filing of a lawsuit by Dumas or Heyl or any business, whether
incorporated or unincorporated, in which Dumas and/or Heyl own a
majority interest either individually or collectively against Buyer,
Seller's former sales persons, Omnicare, Inc., or any of Buyer's
Master Distributors involving issues raised in or related to the case
captioned Morgan Paris, Inc. v. Derma Sciences, Inc., Case No.
C-1-94-614.
VIII. WAIVER OF BULK SALES COMPLIANCE
8.1 Waiver of Bulk Sales. Buyer hereby waives Seller's obligation to comply
with the applicable requirements of the bulk transfer laws of the State of Ohio.
Seller shall indemnify, defend and hold Buyer harmless from and against any and
all suits, actions, losses, liabilities, damages, demands, costs and expenses,
including reasonable attorneys' fees, incurred or suffered by Buyer arising out
of or relating to Seller's noncompliance with such bulk transfer laws.
IX. OTHER AGREEMENTS
9.1 Publicity. Neither Seller nor Dumas nor Heyl nor any officer or employee
of Seller shall make or authorize any third party to make any public
announcement or institute any advertisement or otherwise publicize or disclose
the terms of this agreement or any of the matters referred to herein.
X. MISCELLANEOUS
10.1 Sales and Related Taxes. Any sale, purchase, documentary recording,
transfer or use tax under the law of any state, county, city or subdivision
thereof, which may be due as a result of the transfer of the Purchased Assets
under this Agreement, shall be paid by Seller.
10.2 Governing Law. This Agreement shall be governed by, interpreted under
and construed in accordance with the laws of the State of Ohio. All disputes
involving this Agreement must be resolved or litigated in the United States
District Court for the Southern District of Ohio.
10.3 Effect. All of the terms of this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the respective parties, together with
their agents, officers, directors, employees, successors, legal representatives
and assigns.
10.4 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to its subject matter.
10.5 Amendments. No modification, amendment, discharge or change of this
Agreement, except as otherwise provided herein, shall be valid unless the same
is in writing and signed by the party against which the enforcement of such
modification, amendment, discharge or change is sought.
10.6 Notices. All notices, demands, requests and other communications under
this Agreement shall be in writing and shall be deemed properly served when
received if delivered by hand or messenger service with proof of receipt of the
party to whose attention it is directed, or when received if sent, postage
prepaid, by United States mail, return receipt requested:
If to Buyer, to:
Derma Sciences, Inc.
121 West Grace Street
Old Forge, Pennsylvania 18518
If to Seller or Dumas,
to:
c/o Scott T. Greenwood, Esq.
Greenwood & Associates
2301 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
or such other address as may be designated in writing to the other parties
from time to time.
10.7 Assignment. Neither Seller nor Dumas may assign this Agreement or any
of their rights, duties or obligations hereunder without the prior written
consent of Buyer.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER:
MORGAN PARIS, INC.
By: /s/ Kathryn H. Dumas
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Kathryn H. Dumas
President
BUYER:
DERMA SCIENCES, INC.
By: /s/ John T. Borthwick
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John T. Borthwick
President and Chief Executive Officer
DUMAS:
/s/ Kathryn H. Dumas
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Kathryn H. Dumas
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is entered into
between Morgan Paris, Inc. ("Morgan Paris"), an Ohio corporation with its
principal place of business in Cincinnati, Ohio, Derma Sciences, Inc. ("DSI"), a
Pennsylvania corporation with its principal place of business in Old Forge,
Pennsylvania, and Kathryn H. Dumas ("Dumas"), an individual residing in the
State of Ohio, who is the President and the sole shareholder of Morgan Paris.
WHEREAS, a suit was filed on or about September 7, 1994, by Morgan Paris in
the United States District Court for the Southern District of Ohio, being Civil
Action No.C-1-94-614, against DSI, in which Morgan Paris alleged that it was
entitled to recover damages from DSI for, inter alia, breach of contract and
violation of various federal and state antitrust laws ("Suit"); and
WHEREAS, DSI has denied and continues to deny all of the substantive
allegations made in Morgan Paris' Suit and, in addition, has itself asserted
counterclaims in said Suit for recovery of damages against Morgan Paris
alleging, inter alia, breach of contract by Morgan Paris, and for non-payment of
certain amounts which DSI claims are due and owing by Morgan Paris to DSI; and
WHEREAS, Morgan Paris has denied and continues to deny all substantive
allegations of DSI's counterclaims; and
WHEREAS, Morgan Paris has made certain claims in the aforesaid Suit for
recovery of commissions and compensation allegedly owed to Dumas; and
WHEREAS, the parties hereto now wish to fully settle and compromise all
differences between themselves which are in any way related to or arise out of
the claims and counterclaims asserted in the aforesaid Suit;
NOW, THEREFORE, in consideration of the mutual promises and undertakings of
the parties hereto, and the mutual releases granted herein, and for other good
and valuable consideration, the sufficiency and adequacy of which is
acknowledged by the parties hereto, it is now hereby agreed as follows:
1. The aforementioned Suit, together with all claims and counterclaims
therein, shall be promptly dismissed, with prejudice, and each party hereto
agrees to execute any papers, including a stipulated entry of dismissal, and do
whatever other things may be necessary to promptly effect such dismissal. Each
party shall bear its own costs in such Suit.
2. Morgan Paris and Dumas do hereby forever release and discharge DSI from
any and all liability or responsibility for any and all claims, debts, damages,
losses, injuries, rights of action or obligations of any kind, matured or
unmatured and of whatever nature, and whether or not presently known, which may
have been sustained or suffered by Morgan Paris or Dumas, which arise out of or
are related to any of the events, transactions and occurrences referred to in
the aforesaid Suit, or which may in the future result from or arise out of such
events, transactions and occurrences, and both Morgan Paris and Dumas do hereby
accept the aforesaid consideration in full discharge, compromise and settlement
of any and all such claims, debts, etc.
3. DSI does hereby forever release and discharge Morgan Paris and Dumas
from any and all liability or responsibility for any and all claims, debts,
damages, losses, injuries, rights of action or obligations of any kind, matured
or unmatured and of whatever nature, and whether or not presently known which
may have been sustained or suffered by DSI, which arise out of or are related to
any of the events, transactions and occurrences referred to in the aforesaid
Suit, or which may in the future result from or arise out of such events,
transactions and occurrences referred to in the aforesaid Suit, and DSI does
hereby accept the aforesaid consideration in full discharge, compromise and
settlement of all such claims, debts, etc.
4. It is the intent and expectation of the parties hereto, and a condition
of the parties entering into this Agreement that there will be executed
contemporaneously herewith a separate agreement pursuant to which DSI will
purchase certain assets of Morgan Paris. If, for any reason, such Asset Purchase
Agreement is not executed contemporaneously herewith, this Agreement shall
become null and void and unenforceable.
5. Morgan Paris and Dumas do further covenant and agree that neither of
such parties will file any action or make any claim against any of DSI's Master
Distributors, or against any of Morgan Paris' present or former sales
representatives, or against Omnicare, with respect to any of the matters alleged
in or referred to in the aforesaid Suit, or which may relate to or arise out of
the contractual relationships and the disputes as between Morgan Paris and DSI.
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6. Upon execution of this Agreement, all of the parties hereto shall
promptly return all documents produced through discovery during the course of
the Suit, including all copies thereof and copies in the possession of any of
the parties' attorneys, to the party from whom such documents were obtained.
7. This Agreement is not intended to be and shall not be interpreted as
being any admission of liability or responsibility whatsoever on the part of DSI
or Morgan Paris or Dumas with respect to any of the claims or allegations made
in the aforesaid Suit.
8. Morgan Paris and Dumas agree to maintain the confidentiality of this
Agreement and any of its terms unless they are compelled to make any disclosure
by virtue of an order of a court or governmental agency.
9. This Agreement has been entered into in Cincinnati, Ohio, and shall be
governed by the laws of the State of Ohio. The parties agree that in the event
any dispute should arise in the future as to the interpretation or
implementation of the terms of this Agreement, such dispute will be submitted to
the United States District Court for the Southern District of Ohio to enforce
the Agreement.
10. Dumas represents that she is the President and sole shareholder of
Morgan Paris, that she has authority to enter into this Agreement on behalf of
Morgan Paris, and that her execution of this Agreement shall be binding upon
Morgan Paris. In like manner, John Borthwick, President of DSI, represents that
he has the authority to enter into this Agreement on behalf of DSI, and that his
execution of this Agreement shall be binding upon DSI.
11. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, together with their heirs, administrators, executors,
successors, agents and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement and Mutual Release on this 21st day of June, 1996.
DERMA SCIENCES, INC.
By:
/s/ John T. Borthwick
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John T. Borthwick
President and Chief Executive Officer
MORGAN PARIS, INC.
By:
/s/ Kathryn H. Dumas
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Kathryn H. Dumas
President
/s/ Kathryn H. Dumas
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KATHRYN H. DUMAS
