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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): December 18, 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 December 17, 1996, Derma Sciences, Inc. (the "Registrant") announced the
implementation of a board-approved organizational restructuring plan. The
elements of the restructuring plan include the following: (1) consolidation of
marketing, sales and distribution functions under the Registrant's President,
John T. Borthwick, who will henceforth report to the Chairman of the Board of
Directors, Edward J. Quilty; (2) elimination of the positions of Vice President
for Sales and Marketing, Director of Purchasing and Director of International
Development, together with several support positions; and (3) evaluation of the
Registrant's selling and distribution network and implementation of changes to
improve market share.
The Registrant also announced that it expected to take a charge against
earnings in December, 1996 relative to severance expenses of the restructuring
in the amount of approximately $250,000. In related developments, the Registrant
announced that it would defer indefinitely plans to construct a new headquarters
facility and that it intended to write down certain inventories which are deemed
obsolete. Fourth quarter, 1996 charges relative to the foregoing events are
expected to aggregate $82,589 and $179,688, respectively.
Statements that are not historical facts, including statements about the
Registrant's confidence and strategies, expectations about new or existing
products, technologies and opportunities, and market demand or acceptance of new
or existing products are forward-looking statements that involve risks and
uncertainties. These uncertainties include, but are not limited to, product
demand and market acceptance risks, impact of competitive products and prices,
product development, commercialization or technological delay or difficulties,
and trade, legal, social and economic risks.
Item 7. Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
10.01 Agreement and Release dated December 23, 1996 between
Donald F. McHale and the Registrant.
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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: January 6, 1997 By: /s/ John T. Borthwick
----------------------
John T. Borthwick
President and Chief Executive Officer
AGREEMENT AND RELEASE
THIS AGREEMENT AND RELEASE, made this 23 day of December, 1996, by and
between Derma Sciences, Inc. ("DSI") and Donald F. McHale ("McHale").
WHEREAS, McHale has heretofore been employed as Vice President for Sales
and Marketing for DSI,
WHEREAS, DSI is in the process of consolidating and downsizing its
executive staff,
WHEREAS, by reason of the foregoing, McHale has tendered his resignation as
Vice President for Sales and Marketing of DSI, and DSI has accepted same with
regret,
NOW, THEREFORE, the parties hereto, in consideration of the promises and
covenants herein contained, and intending to be legally bound, hereby agree as
follows:
1. Severance Payment. DSI shall pay to McHale a cash severance payment in
the total amount of One Hundred Eighty-nine Thousand Dollars ($189,000), to be
tendered no later than Thirty (30) days from the date hereof, which payment
shall be applied as provided in paragraphs 2 and 3 hereinbelow.
2. Repayment of Promissory Notes. The remaining debt owed to DSI by McHale
in the amount of Thirty-one Thousand Nine Hundred Ninety-eight Dollars and
Thirty-nine Cents ($31,998.39) relative to that certain promissory note dated
May 12, 1995 by McHale, maker, and DSI, payee, and the remaining debt owed to
DSI by McHale in the amount of Seventy-eight Thousand Eight Hundred Forty-one
Dollars and Sixty-seven Cents ($78,841.67) relative to that certain promissory
note dated January 17, 1995 by McHale, maker, and DSI, payee, shall be deducted
from the severance payment provided in paragraph 1 and applied in satisfaction
of said promissory notes.
3. Character of Severance Payment. The severance payment provided in
paragraph 1 hereof shall constitute, in its entirety, taxable compensation to
McHale and DSI shall withhold Federal, state and local tax obligations of McHale
incident thereto as required by applicable law.
4. Health Benefits. Health benefits heretofore provided to McHale pursuant
to his Employment Agreement dated February 4, 1994, by DSI, shall continue until
the earlier of June 30, 1997, or the date McHale secures employment and becomes
eligible for health benefits.
5. Performance References. DSI agrees to provide positive references
relative to McHale's performance while employed by DSI to all inquiries made in
respect of same.
6. Maintenance of Confidentiality. McHale hereby undertakes and agrees to
maintain, in perpetuity, the strict confidentiality of all customer lists, trade
secrets, technology, formulas, research, product information, studies and all
other knowledge of DSI regardless of whether same is, or may be, proprietary.
7. Covenant Not-to-Compete. McHale hereby agrees that he shall not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, render advice with respect to, or be connected in any manner
with the ownership, management, operation or control of any business that
manufactures, develops or sells "wound care products" within the United States
for a period of One (1) year from the date of this Agreement. As used herein,
"wound care products" shall include, but shall not be limited to, those products
listed in Exhibit 1 attached hereto and made a part hereof. DSI shall be
entitled, in addition to such other remedies as it may have, to equitable relief
from any breach of this paragraph without proof of actual damages that it has
suffered or may suffer by such breach.
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8. Further Assurances. McHale hereby agrees, without additional
consideration, to cooperate with DSI relative to DSI's prosecution or defense of
any and all litigation, whether same is pending or instituted in the future, as
to which McHale has, or may have, material factual information. Such cooperation
shall include, but shall not necessarily be limited to, consultation with
personnel of DSI and its counsel, giving of depositions and rendering of
testimony.
9. Release by McHale. McHale hereby releases DSI, its officers, directors,
shareholders and agents from any and all causes of action, claims, rights or
obligations which he may have, of whatsoever nature, which have arisen from the
beginning of the world to the date of these presents.
10. Release by DSI. DSI hereby releases McHale from any and all causes of
action, claims, rights or obligations which it may have, of whatsoever nature,
which have arisen from the beginning of the world to the date of these presents.
11. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior agreements, representations and undertakings of the parties whether oral
or written. No supplement, modification or waiver of this Agreement shall be
binding unless contained in a writing executed by the party against whom such
supplement, modification or waiver is sought to be enforced.
12. Governing Law. This Agreement shall be construed under and governed by
the laws of the Commonwealth of Pennsylvania.
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WHEREFORE, the parties have hereunder set their set their hands and seals
as of the date first hereinabove written.
DERMA SCIENCES, INC.
By: /s/ John T. Borthwick
----------------------
John T. Borthwick
President and Chief Executive Officer
/s/ Donald F. McHale
----------------------
Donald F. McHale
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Wound Care Products
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CATEGORY PRODUCT MANUFACTURER
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1. Skin Sealants
Bard TM Protective Barrier Film Bard
Nu-Guard TM Nu-Hope
Skin Cote(R) Dynamed
Skin Gel Hollister
Skin Prep TM SNU
Skin Shield(R) Mentor
Sween Prep TM Sween
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2. Wound Cleansers
a. Saline Multiple Multiple
b. Hydrogen Peroxide Multiple Multiple
c. Wound Cleansers Biolex TM Wound Cleanser Catalina
Cara-Klenz TM Carrington Labs
PuriClens TM Sween
Shur Clens (R) Calgon-Vestal
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3. Gauze Dressings
a. Cotton Mesh Multiple Multiple
b. Synthetic (Non-Wovens) Multiple Multiple
c. Packing/Wrapping Cotton
Mesh Hermitex Fluff Sponge(R) Hermitage
Kerlix(R)/Kerlix(R) Lite Kendall
d. Wrapping Kling TM.Sof-Kling TM J & J
e. Hypertonic Absorbing Mesalt(R) Scott
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4. Nonadherent/
Impregnated Dressings
Adaptic TM J & J
ETE(R)Sterile Protective Dressing Scott
EXU-DRY(R) Frastec
Melolite TM SNU
Metalline(R) Selomas
Release(R) J & J
Scarlet Red(R) Sherwood
Telfa(R) Kendall
Vaseline(R) Gauze Sherwood
Xeroflo(R) Sherwood
Xeroform(R) Sherwood
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5. Antimicrobials/
Antiseptics/Antibiotics
a. Solutions Multiple Multiple
b. Creams Multiple Multiple
c. Ointments Multiple Multiple
d. Scrubs Multiple Multiple
e. Sprays Multiple Multiple
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6. Transparent Films
ACU-Derm(R) Acme United
Bioclusive TM J & J
BlisterFilm(R) Sherwood
Ensure-It TM Deseret
OpraFlex(R) Professional
Medical
OpSite(R) SNU
Polyderm TM Picture Frame
Film Dressing Laivan
Polyskin(R) II Kendall
Tegaderm(R) 3M
Tegaderm TM Pouch 3M
Transite Exudate
Transfer Film TM SNU
Uniflex TM United
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7. Composites
Airstrip TM SNU
PolyDerm WBC TM Laivan
Polymeric Membrane Dressing Ferris
Viasorb(R) Sherwood
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8. Hydrocolloids
a. Regular Biofilm(R)(UK) Clinimed
Comfeel(R) Kendall
Dermaflex (UK) J & J
DuoDERM(R)/Granuflex(R) (UK) ConvaTec
Hydrapad TM Baxter
Intact TM Bard
Intrasite TM SUN
J & J Ulcer Dressing TM J & J
Restore TM Hollister
Tegasorb TM 3M
ULTEC TM Sherwood
b. Pastes Comfeel(R) Kendall
DuoDERM(R) ConvaTec
c. Granules DuoDERM(R) ConvaTec
d. Powder Comfeel(R) Kendall
e. Special Actiderm(R) ConvaTec
Comfeel(R)Pressure Relief Dressing Kendall
DuoDERM(R)Extra-Thin TM ConvaTec
DuoDERM(R) CGF TM ConvaTec
Restore CX TM Hollister
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9. Gels/Hydrogels
Biolex TM Wound Gel Catalina
Carrington Dermal Wound Gel TM Carrington Labs
Elasto-Gel TM Southwest
Technolgies
Geliperm(R)Wet/Geliperm(R)Granulate Fougera
Hydron Wound Dressing(R) Bioderm Sciences
Intrasite Gel TM SNU
Second Skin(R) Spenco
Vigilon(R) Bard
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10. Wound Care Systems
Biolex TM Wound Cleanser
Biolex TM Wound Gel Catalina
Cara-Klenz TM
Carrington Dermal Wound Gel TM Carrington
Dermagran(R) Spray
Dermagran(R) Ointment Derma Sciences
Optipore Sponge(R)
Shur Clens(R) Calgon-Vestal
Chloresium(R) Ointment/ Solution
Panafil(R) Ointment
Panafil(R) White Ointment Rystan
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11. Calcium Alginates
Kaltocarb(R) (UK)
Kaltostat TM
Sorbsan TM
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12. Exudate Absorbers
Beads/Pastes
Bard(R) Absorption Dressing Bard
Debrisan(R) J & J
Envisan TM Marion Labs
Hydragran TM Pharmaseal
Iodosorb(R) Beads/Ointment (UK) Perstop
Mesalt(R) Scott
Span-Gel(R) Medi-Tech
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13. Foams
Allevyn TM SNU
Epi-Lock TM Calgon Vestal
LYOfoam(R) Acme United
LYOfoam(R) "C" Acme United
Mitraflex Calgon Vestal
Silastic Foam Dressing(R)(UK) Dow Corning
Silastic Gel Sheeting(R) (UK) Dow Corning
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14. Growth Factors
Thirty-two growth factors have been identified to date. Some
growth factors that now have different names, may be found
to be identical in the future. Growth factors are not
available at this time for routine clinical use.
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15. Wound Pouches
Wound Drainage Collector Hollister
Wound Manager TM ConvaTec
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16. Carbon-impregnated
Dressings
Carbonet TM SNU
LYOfoam(R) "C" Acme United
Odor-Absorbent Dressing Hollister
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17. Miscellaneous
a. Debriding Agents Biozyme-C(R) Armour
Elase(R) Parke-Davis
Panafil(R) Ointment Rystam
Panafil(R) White Ointment Rystam
Santy1(R) Knoll
Travase(R) Flint
b. Leg Ulcer Wraps Dome-Paste(R) Miles
(Unna Boot)
c. Lubricating Sprays Granules TM Dow B. Hickam
Proderm TM Dow B. Hickam
- --------------------------- ---------------------------------- -------------
