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): July 8, 1998
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)
214 Carnegie Center, Suite 100
Princeton, NJ 08540
(609) 514-4744
(Address including zip code and telephone
number, of principal executive offices)
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ITEM 5. OTHER EVENTS
On July 13, 1998, the Registrant announced the execution of a nonbinding
letter of intent to purchase all of the issued and outstanding capital stock of
Sunshine Products, Inc. ("Sunshine") for $1.2 million in cash. In addition, the
Registrant would grant to Sunshine stockholders options to purchase a total of
75,000 shares of the Registrant's common stock at the market value thereof on
the grant date and would satisfy Sunshine's indebtedness to its stockholders in
the aggregate amount of approximately $25,000. Among other items, closing of the
purchase is conditioned upon: (1) release of Sunshine stockholders from personal
guarantees of Sunshine corporate loans, (2) execution of mutually satisfactory
executive employment agreements between Sunshine stockholders and the
Registrant, (3) execution of a definitive purchase agreement, (4) successful
completion of due diligence examinations by the Registrant, (5) successful
completion of audits of the financial statements of Sunshine, and (6) approval
of the purchase by the board of directors of the Registrant. The letter of
intent, attached hereto as Exhibit 10, is incorporated herein by reference.
Sunshine is a manufacturer and marketer of general purpose and
specialized skincare products for hospitals, nursing homes and other
institutional facilities. Sunshine also manufactures private label cosmetic,
skincare and specialty products in accordance with customer specifications. The
Sunshine product line includes body washes, shampoos, an incontinent wash, a
moisture barrier ointment, skin moisturizers and lotions, over-the-counter hand
washes and sanitizers and a hard surface disinfectant. Unaudited Sunshine
revenues for calendar years 1993 through 1997 were $1,894,676, $2,120,262,
$2,325,338, $2,435,212 and $2,839,794, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits:
10.01 - Letter of Intent between Registrant and Sunshine Products, Inc.
2
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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: July 13, 1998 By:/s/ Stephen T. Wills
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Stephen T. Wills, CPA, MST
Vice President and Chief Financial Officer
3
D E R M A S C I E N C E S
214 CARNEGIE CENTER
SUITE 100
PRINCETON, NJ 08540
TELEPHONE 609 514 4744
TOLL FREE 800 825 4325
FACSIMILE 609 514 0562
June 29, 1998
Mr. John G. Vogel
Ms. Martha A. Crimmins
Mr. Gordon E. Cory
Sunshine Products, Inc.
1149 Reco Drive
St. Louis, MO 63126
Re: Derma Sciences, Inc. - Sunshine Products, Inc. - Purchase Letter of Intent
Dear John, Martha and Gordon:
This letter sets forth the intent of Derma Sciences, Inc., a Pennsylvania
corporation ("Derma Sciences"), to purchase all of the outstanding equity
securities of Sunshine Products, Inc., a Missouri corporation ("Sunshine"), in
accordance with the terms described hereinbelow (the "Transaction").
This is a non-binding letter of intent save for the obligations of
confidentiality described on page 2. With the exception of the foregoing, this
letter of intent imposes no contractual or other legal obligations on either
party hereto and does not constitute an offer which may be accepted by execution
hereof. A binding contract will be created only upon the execution of a purchase
agreement together with such other formal documents as may be necessary to
consummate the Transaction.
We contemplate the principal terms of the Transaction to be as follows:
Structure
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Derma Sciences will purchase all of the issued and outstanding equity securities
of Sunshine for a total purchase price of $1.2 million payable at closing of the
Transaction.
Each stockholder will receive 25,000 options to acquire Derma Sciences, Inc.
stock (75,000 in the aggregate) exercisable at the market value of the stock on
the grant date.
Outstanding shareholder loans owed to the shareholders by the Company of
approximately $25,000 to be paid at closing.
At closing shareholders would be released from the personal guarantees on all
existing loans outstanding.
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Transactions Outside the Ordinary Course of Business
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Pending consummation of the Transaction, Sunshine shall not issue additional
shares of its securities, declare stock or cash dividends relative to its stock,
pay bonuses or extraordinary compensation, purchase or sell assets or incur
indebtedness other than in the ordinary course of its business.
Sunshine Executive Contracts
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Prior to consummation of the Transaction, Derma Sciences shall negotiate and
execute mutually satisfactory executive employment agreements with John G.
Vogel, Martha A. Crimmins and Gordon E. Cory. The employment agreements will
include current salary, performance bonus provision, minimum two year term and
an anti-relocation clause.
Transaction Expenses
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Prior to the consummation of the Transaction, each party shall be responsible
for its own expenses, of whatsoever nature, relative to the Transaction and the
negotiation and examination thereof.
Conditions
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Consummation of the Transaction shall be subject to the following conditions,
together with such other terms and conditions as are necessarily incident
thereto: (1) execution of a definitive purchase agreement governing the
Transaction; (2) successful completion of due diligence by Derma Sciences; (3)
approval of the purchase agreement by the board of directors of Derma Sciences;
(4) successful completion of audits of the financial statements of Sunshine, by
independent auditors selected by Derma Sciences, for the twelve month periods
ending December 31, 1996 and 1997; and (5) the occurrence of no material adverse
change in the business operations or financial condition of Sunshine.
Due Diligence
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Immediately following the execution hereof, Sunshine will allow Derma Sciences,
its accountants, attorneys and other authorized representatives to review
Sunshine's books, records, financial statements, tax returns, inventory,
tangible and intangible assets, material contracts, evidence of liabilities and
any and all other material necessary in order for Derma Sciences to satisfy
itself as to Sunshine's financial condition and business operations.
Confidentiality
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The parties agree to keep confidential all information regarding the
Transaction, and any information obtained in the process of due diligence
relative thereto, except to the extent otherwise permitted hereby or required by
securities laws or other laws or regulations, and except to the extent otherwise
required by legal process or in response to inquiries by governmental officials
or agencies.
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Public Announcement - Securities Filings
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Immediately upon execution hereof, Derma Sciences may: (a) prepare and issue
press releases announcing the Transaction, and (b) prepare and file with the
Securities and Exchange Commission current reports on Form 8-K disclosing the
contemplated Transaction and the principal terms thereof.
Very truly yours,
DERMA SCIENCES, INC.
By:
Stephen T. Wills, CPA, MST
Vice President and Chief Financial Officer
Accepted in accordance with the terms hereof.
SUNSHINE PRODUCTS, INC. SHAREHOLDERS
John G. Vogel
Martha A. Crimmins
Gordon E. Cory
RCH:JMH
