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): October 29, 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 2. Acquisition or Disposition of Assets
On October 29, 1998 (the "Closing Date"), pursuant to a Stock Purchase
Agreement dated as of August 28, 1998 (the "Agreement") by and among Derma
Sciences, Inc., a Pennsylvania corporation (the "Company"), the John G. Vogel,
Jr. Revocable Trust U/A dated August 23, 1995, Martha A. Crimmins, the Gordon E.
Cory Revocable Trust U/A dated August 24, 1995, John G. Vogel, Jr., Gordon E.
Cory and Sunshine Products, Inc. ("Sunshine"), a Missouri corporation, the
Company purchased all of the issued and outstanding common stock of Sunshine and
Sunshine became a wholly-owned subsidiary of the Company.
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.
Pursuant to the Agreement, the common stock of Sunshine ("Sunshine
Common Stock") was purchased by the Company for $1.5 million. Stock options to
acquire shares of the Company's Common Stock were issued in blocks of 25,000
each to John G. Vogel, Martha A. Crimmins and Gordon E. Cory (the "Sunshine
Shareholders") at a per share exercise price of $0.75.
Also pursuant to the Agreement, outstanding loans to Sunshine by the
Sunshine Shareholders of $29,533.56 were repaid by the Company to the Sunshine
Shareholders and the Company entered into Employment Agreements with each of the
Sunshine Shareholders which agreements are attached hereto as annexes A, B and C
to Exhibit 2.1.
The foregoing description of the terms and provisions of the Agreement
is qualified in its entirety by reference to the Agreement and annexes thereto
filed as Exhibit 2.1 and Exhibits 10.01 through 10.03 hereof.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The audited financial statements of Sunshine for the Twelve Months Ended
June 30, 1998 will be filed by amendment hereto not later than January 12, 1999.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Combined Condensed Balance Sheets at September
30, 1998 and the Unaudited Pro Forma Combined Condensed Statements of Operations
for the Nine Months ended September 30, 1998 and the years Ended December 31,
1997 and 1996 will be filed by amendment hereto not later than January 12, 1999.
(c) Exhibits:
2.1 Stock Purchase Agreement with annexes dated October 29, 1998 by and
among Derma Sciences, Inc., the John G. Vogel, Jr. Revocable Trust U/A
dated August 23, 1995, Martha A. Crimmins, the Gordon E. Cory Revocable
Trust U/A dated August 24, 1995, John G. Vogel, Jr., Gordon E. Cory and
Sunshine Products, Inc.
10.01 Stock Option Agreement dated October 29, 1998 by and between Derma
Sciences, Inc. and John G. Vogel, Jr.
10.02 Stock Option Agreement dated October 29, 1998 by and between Derma
Sciences, Inc. and Martha A. Crimmins.
10.03 Stock Option Agreement dated October 29, 1998 by and between Derma
Sciences, Inc. and Gordon E. Cory.
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: November 13, 1998 By:/s/ Stephen T. Wills
Stephen T. Wills, CPA, MST
Vice President and Chief Financial Officer
STOCK PURCHASE AGREEMENT
BY AND AMONG
DERMA SCIENCES, INC.
JOHN G. VOGEL, JR. REVOCABLE TRUST
GORDON E. CORY REVOCABLE TRUST
JOHN G. VOGEL, JR.
MARTHA A. CRIMMINS
GORDON E. CORY
AND
SUNSHINE PRODUCTS, INC.
DATED AS OF AUGUST 28, 1998
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TABLE OF CONTENTS
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ARTICLE I THE PURCHASE......................................................................... 1
Section 1.1 The Purchase ........................................................................ 1
Section 1.2 Closing ............................................................................. 1
ARTICLE II PURCHASE CONSIDERATION .............................................................. 1
Section 2.1 Purchase Price ...................................................................... 1
Section 2.2 Officers Loan Repayment ............................................................. 2
Section 2.3 Release of Guarantees ............................................................... 2
Section 2.4 Grant of Stock Options............................................................... 2
Section 2.5 Executive Contracts.................................................................. 2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS AND SUNSHINE.......................................................... 2
Section 3.1 Corporate Organization; Related Entities ............................................ 2
Section 3.2 Capitalization ...................................................................... 3
Section 3.3 Consents and Approvals; No Violations ............................................... 3
Section 3.4 Absence of Certain Changes or Events ................................................ 3
Section 3.5 Litigation .......................................................................... 4
Section 3.6 Absence of Undisclosed Liabilities .................................................. 4
Section 3.7 No Default .......................................................................... 4
Section 3.8 Taxes ............................................................................... 4
Section 3.9 Intellectual Property ............................................................... 6
Section 3.10 Employee Benefit Plans; ERISA ....................................................... 8
Section 3.11 Affiliate Transactions .............................................................. 9
Section 3.12 Brokers ............................................................................. 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DERMA
SCIENCES .......................................................................... 9
Section 4.1 Organization ........................................................................ 9
Section 4.2 Authority Relative to This Agreement ................................................ 9
Section 4.3 Consents and Approvals; No Violations ............................................... 10
ARTICLE V CONDUCT OF BUSINESS PENDING THE PURCHASE ............................................ 10
Section 5.1 Conduct of Business by Sunshine...................................................... 10
ARTICLE VI ADDITIONAL AGREEMENTS ............................................................... 11
Section 6.1 Access and Information .............................................................. 11
Section 6.2 No Other Negotiations ............................................................... 11
Section 6.3 Expenses ............................................................................ 12
Section 6.4 Supplemental Disclosure ............................................................. 12
Section 6.5 Non-solicitation of Employees........................................................ 12
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE PURCHASE........................................... 12
Section 7.1 Conditions to Obligations of Derma Sciences.......................................... 12
Section 7.2 Conditions to Obligations of the Shareholders........................................ 13
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ARTICLE VIII TERMINATION ......................................................................... 13
Section 8.1 Termination ......................................................................... 13
ARTICLE IX GENERAL PROVISIONS .................................................................. 14
Section 9.1 Amendment and Modification .......................................................... 14
Section 9.2 Waiver .............................................................................. 14
Section 9.3 Investigations ...................................................................... 14
Section 9.4 Notices ............................................................................. 14
Section 9.5 Descriptive Headings; Interpretation ................................................ 15
Section 9.6 Entire Agreement; Assignment ........................................................ 15
Section 9.7 Governing Law ....................................................................... 15
Section 9.8 Severability ........................................................................ 15
Section 9.9 Liability............................................................................ 16
Section 9.10 Counterparts ........................................................................ 16
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 28, 1998 ("Agreement")
by and among Derma Sciences, Inc., ("Derma Sciences"), the John G. Vogel, Jr.
Revocable Trust U/A dated August 23, 1995 ("Vogel Trust"), Martha A. Crimmins
("Crimmins"), the Gordon E. Cory Revocable Trust U/A dated August 24, 1995
("Cory Trust") (the Vogel Trust, Crimmins and the Cory Trust collectively,
"Shareholders"), John G. Vogel, Jr. ("Vogel"), Gordon E. Cory ("Cory") (Vogel,
Crimmins and Cory collectively, "Officers") and Sunshine Products, Inc.
("Sunshine").
WHEREAS, the Board of Directors of Derma Sciences deems it advisable
and in the best interests of the stockholders of Derma Sciences that Derma
Sciences acquire all of the issued and outstanding common stock of Sunshine (the
"Shares"),
WHEREAS, the Shareholders have determined to sell, and Derma Sciences
has determined to purchase, the Shares upon the terms and conditions herein set
forth,
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE PURCHASE
SECTION 1.1 THE PURCHASE. In accordance with the provisions of this Agreement,
Derma Sciences will purchase the Shares from the Shareholders and the
Shareholders will sell the Shares to Derma Sciences for the consideration set
forth in Article II hereof.
SECTION 1.2 CLOSING. The closing of the purchase contemplated by this Agreement
(the "Closing") shall take place at the offices of Derma Sciences, Inc.,
Princeton, New Jersey, at 10:00 a.m., local time, on the day on which all of the
conditions set forth in Article VII are satisfied or waived or on such other
date and at such other time and place as Derma Sciences and the Shareholders
shall agree (such date, the "Closing Date").
ARTICLE II
PURCHASE CONSIDERATION
SECTION 2.1 PURCHASE PRICE. At Closing, Derma Sciences shall pay to each of the
Shareholders via wire transfer in accordance with the Shareholders'
instructions, and shall receive certificates for the Shares duly endorsed for
transfer, as indicated below:
Shareholder Number of Shares Price
----------- ---------------- --------
Vogel Trust 1,300 $500,000
Crimmins 1,300 $500,000
Cory Trust 1,300 $500,000
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SECTION 2.2 OFFICERS LOAN REPAYMENT. At Closing, Derma Sciences shall pay to the
Officers, via wire transfer in accordance with the Officers' instructions, the
outstanding loan balances due to the Officers from Sunshine as indicated below:
Officers Loan Balances
-------- -------------
John G. Vogel, Jr. $9,844.52
Martha A. Crimmins $9,844.52
Gordon E. Cory $9,844.52
SECTION 2.3 RELEASE OF GUARANTEES. At Closing, Derma Sciences: (i) shall have
caused those financial institutions to which Sunshine is indebted to release the
Officers from any and all personal guarantees relative to such indebtedness,
including, without limitation, guarantees relative to indebtedness to Southwest
Bank, St. Louis, Missouri, and (ii) shall tender to the Officers evidence of
such releases.
SECTION 2.4 GRANT OF STOCK OPTIONS. At Closing, Derma Sciences shall grant to
each of the Officers the fully vested right and option to purchase at any time
prior the expiration of Ten (10) years from the Closing Date, all or any portion
of Twenty-five Thousand (25,000) shares of the common stock of Derma Sciences at
an exercise price per share equal to the closing bid price quoted on the Nasdaq
SmallCap Market on the business day preceding the Closing Date.
SECTION 2.5 EXECUTIVE CONTRACTS. At Closing, Derma Sciences shall execute
executive contracts ("Executive Employment Agreements") with each of the
Officers in the form attached hereto as Annexes A, B and C.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OFFICERS AND SUNSHINE
The Officers and Sunshine represent and warrant to Derma Sciences as follows:
SECTION 3.1 CORPORATE ORGANIZATION; RELATED ENTITIES.
(a) Sunshine is a corporation duly organized, validly existing and in
good standing under the laws of the State of Missouri and has the corporate
power and authority to own or lease its properties and to carry on its business,
as it is presently being conducted. Sunshine is duly qualified or licensed as a
foreign corporation to do business, and is in good standing in, every
jurisdiction where the character of Sunshine's properties (owned or leased) or
the nature of its activities makes such qualification or licensure necessary
except where non-qualification would not reasonably be expected to have a
Material Adverse Effect.
(b) Sunshine does not own, directly or indirectly, any capital stock
of any corporation or have any direct or indirect equity or ownership interest
of any kind in any business, joint venture, partnership or other entity.
(c) The copies of the Articles of Incorporation and Bylaws of
Sunshine heretofore delivered to Derma Sciences are complete and correct copies
of such instruments as presently in effect.
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(d) As used in this Article III, any reference to any event, change
or effect having a "Material Adverse Effect" shall mean that such event, change
or effect is, individually or in the aggregate, materially adverse to the
business, operations, prospects, properties, assets (including intangible
assets), liabilities (including contingent liabilities), condition (financial or
other) or results of operations of Sunshine or to the ability of Sunshine to
consummate the transactions contemplated by this Agreement.
SECTION 3.2 CAPITALIZATION.
(a) As the date hereof, the authorized capital stock of Sunshine
consists of: (i) 9,000 shares of Sunshine Common Stock 3,900 of which are issued
and outstanding, (ii) 30,000 shares of preferred stock of which 9 are issued and
outstanding. All of the issued and outstanding shares of Sunshine capital stock
are validly issued, fully paid and nonassessable. The outstanding preferred
stock is subject to redemption at the option of Sunshine at a price of less than
$50.00. Holders of the preferred stock have no voting, dividend, preemptive,
dissenters or appraisal rights or any other rights of approval with respect to:
(i) consummation of the Closing by the Officers, and (ii) the operations of
Sunshine.
(b) Except as disclosed in subsection (a) hereof, there is no
outstanding right, subscription, warrant, call, unsatisfied preemptive right,
option or other agreement or arrangement of any kind to purchase or otherwise to
receive from Sunshine any of the outstanding authorized but unissued shares of
the capital stock or any other security of Sunshine; there is no outstanding
security of any kind convertible into or exchangeable for such capital stock;
and there is no voting trust or other agreement or understanding to which
Sunshine is a party or is bound with respect to the voting of the capital stock
of Sunshine.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution,
delivery and performance of this Agreement by Sunshine, nor the consummation by
Sunshine of the transactions contemplated hereby, will: (i) conflict with or
result in any breach of any provisions of the charter, Bylaws or other
organizational documents of Sunshine, (ii) require a filing with, or a permit,
authorization, consent or approval of, any federal, state, local or foreign
court, arbitration tribunal, administrative agency or commission or other
governmental or other regulatory authority or administrative agency or
commission (a "Governmental Entity"), (iii) to the best knowledge of the
Officers and Sunshine result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any mortgage, pledge, security interest, encumbrance, lien, claim or
charge of any kind or right of others of whatever nature ("Liens"), on any
property or asset of Sunshine pursuant to, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation (each, a "Contract") to
which Sunshine is a party or by which it or any of its properties or assets may
be bound or (iv) to the best knowledge of the Officers and Sunshine violate any
law, order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to Sunshine or any of its properties or assets.
SECTION 3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Subsequent to June 30, 1998, Sunshine has not conducted its
business and operations other than in the ordinary course of business and
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consistent with past practices or taken any actions that, if it had been in
effect, would have violated or been inconsistent with the provisions of Section
5.1.
(b) Subsequent to June 30, 1998, there has not been any fact, event,
circumstance or change affecting or relating to Sunshine which has had or is
reasonably likely to have a Material Adverse Effect. Except as set forth on
Schedule 3.4 or as would not represent Material Adverse Effect, the transactions
contemplated by this Agreement will not constitute a change of control under or
require the consent from or the giving of notice to a third party pursuant to
the terms, conditions or provisions of any Contract to which Sunshine is a
party.
SECTION 3.5 LITIGATION. As of the date hereof, there is no suit, action,
proceeding or investigation pending or, to the best knowledge of the Officers,
either threatened against Sunshine or with respect to which Sunshine could be
required to provide indemnification or to otherwise contribute to liabilities or
damages relating thereto, the outcome of which could reasonably be expected to
have a Material Adverse Effect; nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity outstanding against Sunshine having, or
which, insofar as can reasonably be foreseen, in the future may have a Material
Adverse Effect.
SECTION 3.6 ABSENCE OF UNDISCLOSED LIABILITIES. To the best knowledge of the
Officers and Sunshine, except for liabilities or obligations which are accrued
or reserved against in Sunshine's financial statements (or reflected in the
notes thereto) or which were incurred after December 31, 1997 in the ordinary
course of business and consistent with past practice, Sunshine has no
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a balance sheet (or reflected in
the notes thereto) or which could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.7 NO DEFAULT. Sunshine is not in breach or violation of, or in default
under (and no event has occurred which with notice or lapse of time or both
would constitute such a breach, violation or default), any term, condition or
provision of (a) Sunshine's Articles of Incorporation or Bylaws, or (b) to the
best knowledge of the Officers and Sunshine: (i) any order, writ, decree,
statute, rule or regulation of any Governmental Entity applicable to Sunshine or
any of its properties or assets or (ii) any Contract to which Sunshine is a
party or by which Sunshine or any of its properties or assets may be bound,
except in the case of this clause (b), which breaches, violations or defaults,
individually or in the aggregate, would not have a Material Adverse Effect.
Sunshine has, and is in compliance with, all licenses, permits, variances,
exemptions, orders, approvals and other authorizations of all Governmental
Entities as are necessary in order to enable it to own its business and conduct
its business as currently conducted and as currently proposed to be conducted by
Sunshine and to enter into the transactions contemplated hereby, the lack of
which, under applicable law, rule or regulation, (A) would render legally
impermissible the transactions contemplated hereby or (B) could reasonably be
expected to result in the material impairment of the continued use or exercise
by Sunshine after the date hereof of any material right used or exercised (or
reasonably expected to be used or exercised) by Sunshine, in the conduct of
Sunshine's business as currently conducted and as currently proposed to be
conducted by Sunshine or (C) could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.8 TAXES.
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(a) Sunshine has heretofore delivered correct and complete copies of
the federal, state and local income, franchise sales and other Tax Returns (as
hereinafter defined) filed by Sunshine for the years ended December 31, 1995,
1996 and 1997.
(b)(i) All returns, declarations, reports, estimates, statements,
schedules or other information or document with respect to Taxes (as hereinafter
defined) (collectively, "Tax Returns") required to be filed by Sunshine have
been timely filed (giving effect to extensions granted with respect thereto),
and all such Tax Returns are true, correct and complete in all material
respects. Except as set forth on Schedule 3.8, to the best knowledge of the
Officers and Sunshine, Sunshine is not required to file any state Tax Returns
other than in the State of Missouri.
(ii) Sunshine has timely paid, or established adequate reserves
therefor on its books, all Taxes due or claimed to be due from it by any
federal, state, local, foreign or other taxing authority.
(iii) There are no Liens for Taxes upon the assets of Sunshine except
Liens for Taxes not yet due and payable.
(iv) Sunshine has not received notice of any examination by the
Internal Revenue Service (the "Service"). No deficiency for any Taxes has been
proposed, asserted or assessed against Sunshine which has not been resolved and
paid in full. There are no outstanding waivers, extensions or comparable
consents regarding the application of the statute of limitations with respect to
any Taxes or Tax Returns that have been given by Sunshine (including the time
for filing of Tax Returns or paying Taxes).
(v) Sunshine has not made any change in accounting methods, received
a ruling from any taxing authority or signed an agreement with any taxing
authority which could reasonably be expected to have a Material Adverse Effect.
(vi) Sunshine has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign laws)
and has, within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws.
(vii) No audit or other proceeding by any federal, state, local or
foreign court, governmental, regulatory, administrative or similar authority is
presently pending with respect to any Taxes or Tax Return of Sunshine and
Sunshine has not received a written notice of any pending audits or proceedings.
(viii) Sunshine is not a party to, is not bound by and has no
obligation under, any Tax sharing, allocation or indemnity agreement or similar
contract or arrangement.
(ix) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against Sunshine.
(x) Except as previously disclosed, no power of attorney granted by
Sunshine with respect to any Taxes is currently in force.
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(xi) Sunshine has not, with regard to any assets or property held,
acquired or to be acquired, filed a consent to the application of Section 341(f)
of the Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Sunshine.
(xii) Sunshine has identified for Derma Sciences all agreements,
contracts and arrangements with Sunshine, and has provided to Derma Sciences all
such information as of the date hereof concerning Sunshine and its employees as
may be necessary to enable Derma Sciences to determine the amount, if any, of
any "excess parachute payment" within the meaning of Section 280G of the Code
that could result solely from the transactions contemplated by this Agreement.
(xiii) Sunshine is not and has not been during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code a "United States real property
holding company" (as defined in Section 897(c)(2) of the Code).
(xiv) Sunshine has not participated in, or cooperated with, an
"international boycott" within the meaning of Section 999 of the Code.
(xv) The charges, accruals and reserves for Taxes reflected on the
books of Sunshine are adequate under GAAP to cover the Tax liabilities accruing
or payable by Sunshine in respect of periods prior to the date hereof.
(xvi) Sunshine is not subject to any joint venture, partnership or
other arrangement or contract that is treated as a partnership for U.S. federal
income tax purposes.
(xvii) Sunshine is not subject to liability for Taxes of any other
person, including, without limitation, liability arising from the application of
U.S. Treasury Regulation Section 1.1502-6 or any analogous provision of Tax law.
(c) For purposes of this Agreement, "Taxes" (including, with
correlative meaning, the term "Tax") shall include all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, service, service use, ad valorem,
transfer, franchise, profits, license, withholding, social security, payroll,
employment, excise, estimated, severance, stamp, recording, occupation, property
or other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, whether computed on a separate consolidated, unitary, combined or
other basis, together with any interest, fines, penalties, additions to tax or
other additional amounts imposed thereon or with respect thereto imposed by any
taxing authority (domestic or foreign).
SECTION 3.9 INTELLECTUAL PROPERTY. Sunshine owns, licenses or otherwise has such
rights to use, sell, license or dispose of all industrial and intellectual
property rights, including without limitation all patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright registrations, technology,
know-how, trade secrets, proprietary processes and formulae (collectively,
"Intellectual Property") as are material to the conduct of the business of
Sunshine as currently conducted. Set forth on Schedule 3.9 is a true and
complete listing of: (i) all products currently marketed by Sunshine, whether
owned by Sunshine or licensed from others, indicating which are owned by
Sunshine and, for any that are licensed from others, the identity of the
licensor, (ii) all of Sunshine's patents and pending patent applications, (iii)
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all of Sunshine's registered trademarks and pending applications for trademark
registrations, (iv) trademarks that are used in conjunction with the products
currently marketed by Sunshine and are licensed from third parties, indicating
the identity of the licensor, and (v) Sunshine's registered copyrights and
pending applications for copyright registration. The rights of Sunshine to all
such Intellectual Property are in full force except as set forth on Schedule
3.9.
(a) Sunshine has the rights to bring actions for the infringement of
its rights to the Intellectual Property necessary to protect such rights in the
Intellectual Property, with such exceptions as could not reasonably be expected
to have in the aggregate a Material Adverse Effect; and the consummation of the
transactions contemplated hereby will not: (i) give rise to any right of
termination, amendment, renegotiation, cancellation or acceleration with respect
to any license or other agreement to use, sell, license or dispose of such
Intellectual Property which could reasonably be expected to have in the
aggregate a Material Adverse Effect, or (ii) in any way impair any currently
existing right of Sunshine to use, sell, license or dispose of or to bring any
action for the infringement of any of the rights of Sunshine to the Intellectual
Property or any portion thereof.
(b) None of the former or present employees, officers or directors of
Sunshine holds any right, title or interest, directly or indirectly, in whole or
in part, in or to any Intellectual Property owned by Sunshine and Sunshine does
not license from any present or, to Sunshine's knowledge, former employees,
officers or directors of Sunshine any Intellectual Property which is necessary
for the business of Sunshine as presently conducted; Sunshine is not a party to
any employment contract, patent disclosure agreement or any other contract or
agreement with any employee of Sunshine relating to any Intellectual Property.
(c) Each license and other agreement with respect to the use of any
Intellectual Property currently used in Sunshine's business is a valid, legally
binding obligation of Sunshine and, to the best knowledge of the Officers and
Sunshine, all other parties thereto, enforceable in accordance with its terms,
with such exceptions as could not reasonably be expected to have in the
aggregate a Material Adverse Effect and except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally, and Sunshine is not in breach, violation or
default thereof (and no event has occurred which with the giving of notice or
the passage of time or both would constitute such a breach, violation or default
or give rise to any right of termination, amendment, renegotiation, cancellation
or acceleration under any such license or agreement), and Sunshine has no reason
to believe that any other party to any such license or other agreement is in
breach, violation or default thereof, other than, in each case, such breaches,
violations and defaults as could not reasonably be expected to have in the
aggregate a Material Adverse Effect.
(d) The manufacture, marketing, use, sale, licensure or disposition
of any Intellectual Property in the manner currently used, sold, licensed or
disposed of by Sunshine or in the manner currently proposed to be used, sold,
licensed or disposed of by Sunshine does not and will not violate any license or
agreement between Sunshine and any third party or, to the knowledge of the
Officers and Sunshine based on representations and warranties from third parties
from whom Intellectual Property is licensed by Sunshine, infringe on the rights
of any person, nor has such an infringement been alleged within three years
preceding the date of this Agreement (other than such as have been resolved);
except as previously disclosed, there is no pending or to the best knowledge of
the Officers and Sunshine threatened claim or litigation challenging or
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questioning the validity, ownership or right to use, sell, license or dispose of
any Intellectual Property in the manner in which currently used, sold, licensed
or disposed of by Sunshine, nor to the best knowledge of the Officers and
Sunshine is there a valid basis for any such claim or litigation, nor to the
best knowledge of the Officers and Sunshine has Sunshine received any notice
asserting that the proposed use, sale, license or disposition by Sunshine of any
of the Intellectual Property of Sunshine conflicts or will conflict with the
rights of any other party, nor is there a valid basis for any such assertion in
each case, with such exceptions as could not reasonably be expected in the
aggregate to have a Material Adverse Effect; and Sunshine has not asserted any
claim of infringement, misappropriation or misuse within the past three years.
SECTION 3.10 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 3.10 hereto sets forth a true and complete list of each
employee benefit plan, arrangement or agreement that is maintained, or was
maintained or contributed to at any time during the six (6) calendar years
preceding the date of this Agreement ("Sunshine Plans"), by Sunshine or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), which
together with Sunshine would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Neither Sunshine nor any ERISA Affiliate has any formal plan or
commitment to create any additional plan or modify any existing Sunshine Plan.
(b) To the best knowledge of the Officers and Sunshine: (i) each of
Sunshine's Plans that is subject to ERISA is in compliance with ERISA in all
material respects, (ii) each of Sunshine's Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) no event
has occurred which may affect such qualification and the trusts maintained
thereunder are exempt from taxation under Section 401(a) of the Code; no
Sunshine Plan has an accumulated or waived funding deficiency within the meaning
of Section 412 of the Code, (iv) neither Sunshine nor an ERISA Affiliate has
incurred, directly or indirectly, any material liability (including any material
contingent liability) to or on account of a Sunshine Plan pursuant to Title IV
of ERISA, (v) no proceedings have been instituted to terminate any Sunshine Plan
that is subject to Title IV of ERISA, (vi) no "reportable event," as such term
is defined in Section 4043(b) of ERISA, has occurred with respect to any
Sunshine Plan; and (vii) no condition exists that presents a material risk to
Sunshine or an ERISA Affiliate of incurring a liability to or on account of a
Sunshine Plan pursuant to Title IV of ERISA.
(c) The current value of the assets of each of Sunshine Plans that
are subject to Title IV of ERISA, based upon the actuarial assumptions (to the
extent reasonable) presently used by Sunshine Plans, equals or exceeds the
present value of the accrued benefits under each such Sunshine Plan; no Sunshine
Plan is a multi-employer plan (within the meaning of Section 4001(a)(3) of
ERISA) and no Sunshine Plan is a multiple employer plan as defined in Section
413 of the Code; and all contributions or other amounts payable by Sunshine as
of the Closing with respect to each Sunshine Plan in respect of current or prior
plan years have been either paid or accrued on the balance sheet of Sunshine.
There are no pending, or to the best knowledge of the Officers and Sunshine,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of Sunshine Plans or any trusts related thereto.
(d) To the best knowledge of the Officers and Sunshine, neither
Sunshine nor any ERISA Affiliate, nor any Sunshine Plan, nor any trust created
thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which Sunshine or any ERISA Affiliate, any
Sunshine Plan, any such trust, or any trustee or administrator thereof, or any
party dealing with any Sunshine Plan or any such trust could be subject to
either a material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code. No
amounts payable under Sunshine Plans will, individually or in the aggregate,
fail to be deductible for federal income tax purposes by virtue of Section 280G
of the Code. Except for those benefits granted under Sunshine previously
disclosed executive contracts, no Sunshine Plan provides death or medical
benefits (whether or not insured), with respect to current or former employees
of Sunshine or any ERISA Affiliate beyond their retirement or other termination
of service other than: (i) coverage mandated by applicable law or (ii) death
benefits under any "employee pension plan," as that term is defined in section
3(2) of ERISA. Except for those benefits granted under Sunshine previously
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disclosed executive contracts, the consummation of the transactions contemplated
by this Agreement will not: (i) entitle any current or former employee or
officer of Sunshine or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
SECTION 3.11 AFFILIATE TRANSACTIONS. Except for the executive contracts
heretofore delivered to Derma Sciences and except as set forth on Schedule 3.11,
there are no material contracts or other transactions between Sunshine, on the
one hand, and any: (i) officer or director of Sunshine, (ii) record or
beneficial owner of any of the securities of Sunshine or (iii) affiliate (as
such term is defined in Regulation 12b-2 promulgated under the Exchange Act) of
any such officer, director or beneficial owner, on the other hand.
SECTION 3.12 BROKERS. No broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the Purchase
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Sunshine.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DERMA SCIENCES
Derma Sciences represents and warrants to the Shareholders and Sunshine as
follows:
SECTION 4.1 ORGANIZATION.
(a) Derma Sciences is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Derma Sciences is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified will not have a Material Adverse Effect (as
hereinafter defined).
(b) The copies of the Articles of Incorporation and Bylaws of Derma
Sciences heretofore delivered to Sunshine are complete and correct copies of
such instruments as presently in effect.
(c) As used in this Article IV, any reference to any event, change or
effect having a "Material Adverse Effect" shall mean that such event, change or
effect is, individually or in the aggregate, materially adverse to the business,
operations, prospects, properties, assets (including intangible assets),
liabilities (including contingent liabilities), condition (financial or other)
or results of operations of Derma Sciences or to the ability of Derma Sciences
to consummate the Purchase. For purposes of this Article IV, "material" shall be
determined in a manner consistent with the standards consistently applied by
Derma Sciences' regular independent accountants in conducting its audit of Derma
Sciences' financial statements.
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SECTION 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Derma Sciences has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the Purchase contemplated hereby. The execution and delivery
of this Agreement by Derma Sciences and the consummation by Derma Sciences of
the Purchase contemplated hereby have been duly authorized by its Board of
Directors and no other corporate proceedings on the part of Derma Sciences are
necessary to authorize this Agreement or the Purchase contemplated hereby. This
Agreement has been duly and validly executed and delivered by Derma Sciences and
constitutes a valid and binding agreement of Derma Sciences enforceable in
accordance with its terms.
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution,
delivery and performance of this Agreement by Derma Sciences, nor the
consummation by Derma Sciences of the Purchase contemplated hereby will: (i)
conflict with or result in any breach of any provisions of the Articles of
Incorporation or Bylaws of Derma Sciences, (ii) require a filing with, or a
permit, authorization, consent or approval of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of a Lien on any
property or asset of Derma Sciences pursuant to, any of the terms, conditions or
provisions of any material contract to which Derma Sciences is a party or by
which any of them or any of their properties or assets may be bound; or (iv)
violate any law, order, writ, injunction, decree, statute, rule or regulation of
any Governmental Entity applicable to Derma Sciences or any of its properties or
assets, except, in the case of clauses (ii), (iii) and (iv), where the failure
to make such filing or obtain such authorization, consent or approval would not
have, or where such violations, breaches or defaults or Liens would not have, in
any such case, a Material Adverse Effect.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE PURCHASE
SECTION 5.1 CONDUCT OF BUSINESS BY SUNSHINE PENDING THE PURCHASE. Prior to the
Closing, unless Derma Sciences shall otherwise agree in writing, or as otherwise
expressly contemplated by this Agreement:
(a) Sunshine shall conduct its business only in the ordinary and
usual course consistent with past practice, and Sunshine shall use its
reasonable efforts to preserve intact the present business organization, keep
available the services of its present officers and key employees, and preserve
the goodwill of those having business relationships with it; Sunshine shall not
hire any person to any position within Sunshine or as a consultant to Sunshine
where the total annual compensation payable to such person, whether in cash or
otherwise, would exceed $50,000.
(b) Sunshine shall not: (i) amend its charter, Bylaws or other
organizational documents, (ii) split, combine or reclassify any shares of its
outstanding capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or indirectly
redeem or otherwise acquire any shares of its capital stock saving and excepting
therefrom the redemption of its currently outstanding preferred stock at a price
not to exceed $100.00 in the aggregate.
(c) Sunshine shall not: (i) authorize for issuance, issue or sell or
agree to issue or sell any shares of, or rights or securities of any kind to
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acquire, rights or securities convertible into any shares of, its capital stock
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), (ii) merge or consolidate with
another entity, (iii) acquire or purchase an equity interest in or a substantial
portion of the assets of another corporation, partnership or other business
organization or otherwise acquire any assets outside the ordinary and usual
course of business and consistent with past practice or otherwise enter into any
material contract, commitment or transaction outside the ordinary and usual
course of business consistent with past practice, (iv) sell, lease, license,
waive, release, transfer, encumber or otherwise dispose of any of its assets
outside the ordinary and usual course of business and consistent with past
practice, (v) incur, assume or prepay any material indebtedness or any other
material liabilities other than in the ordinary course of business and
consistent with past practice, (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person in the ordinary course of business and
consistent with past practice, (vii) make any loans, advances or capital
contributions to, or investments in, any other person, (viii) authorize or make
capital expenditures in excess of the amounts currently budgeted therefor, (ix)
permit any insurance policy naming Sunshine as a beneficiary or a loss payee to
be cancelled or terminated other than in the ordinary course of business; or (x)
enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing.
(d) Sunshine shall not: (i) adopt, enter into, terminate or amend
(except as may be required by applicable law) any Sunshine arrangement for the
current or future benefit or welfare of any director, officer or current or
former employee, (ii) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except for normal
increases in salaried compensation in the ordinary course of business consistent
with past practice), or (iii) take any action to fund or in any other way
secure, or to accelerate or otherwise remove restrictions with respect to, the
payment of compensation or benefits under any employee plan, agreement,
contract, arrangement or other Sunshine.
(e) Sunshine shall not take any action with respect to, or make any
material change in, its accounting policies or procedures.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS AND INFORMATION. Sunshine shall (and shall cause its
officers, directors, employees, auditors and agents to) afford to Derma Sciences
and to its officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access during normal business
hours throughout the period prior to the Closing to all of its books and records
(other than privileged documents and subject to any confidentiality provisions
applicable to communications between any party and its counsel) and its
properties, facilities and personnel; provided that no investigation pursuant to
this Section 6.1 shall affect any representations or warranties made herein or
the conditions to the obligations of the Shareholders to consummate the
transactions contemplated hereby; and provided further that all recipients of
information furnished hereunder shall either be bound by the confidentiality
agreement currently in effect between Derma Sciences and Sunshine or shall have
independent duties of confidentiality with respect to such information.
SECTION 6.2 NO OTHER NEGOTIATIONS.
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(a) Upon execution of this Agreement, the Shareholders and Sunshine
will not, and will use their best efforts to cause Sunshine's officers,
directors, employees, agents and affiliates not to, directly or indirectly,
solicit, authorize, initiate or encourage submission of, any proposal, offer,
tender offer or exchange offer from any person or entity (including any of its
or their officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Sunshine or other
similar transaction or business combination involving Sunshine.
SECTION 6.3 EXPENSES. Whether or not the Closing is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be the responsibility of the party incurring such
expenses. Derma Sciences consents to the reimbursement of the Officers by
Sunshine for their respective expenses incurred in connection with this
Agreement upon the following conditions: (i) such expenses shall not exceed
$25,000 in the aggregate, (ii) reimbursement of such expenses shall be accounted
for as compensation to the subject Officers.
SECTION 6.4 SUPPLEMENTAL DISCLOSURE. The Shareholders and Sunshine shall give
prompt notice to Derma Sciences, and Derma Sciences shall give prompt notice to
the Shareholders and Sunshine, of: (i) the occurrence, or non-occurrence of any
event the occurrence, or non-occurrence, of which would be likely to cause (A)
any representation or warranty contained in this Agreement to be untrue or
inaccurate or (B) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied and (ii) any failure of Sunshine
or Derma Sciences, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.4
shall not have any effect for the purpose of determining the satisfaction of the
conditions set forth in Article VII of this Agreement or otherwise limit or
affect the remedies available hereunder to any party.
SECTION 6.5 NON-SOLICITATION OF EMPLOYEES. Each of Derma Sciences and Sunshine
agree, for a period of one year from the date hereof, not to directly or
indirectly solicit any employee of the other or to induce or encourage any
employee of the other to terminate such employee's employment.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE PURCHASE
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF DERMA SCIENCES. The obligations of
Derma Sciences to Consummate the Purchase shall be subject to the satisfaction
at or prior to the Closing of the following conditions, unless waived in writing
by Derma Sciences:
(a) Representations and Warranties. (i) The aggregate effect of all
inaccuracies in the representations and warranties of the Shareholders and
Sunshine set forth in this Agreement does not and will not have a material
adverse effect on the business, operations, prospects, properties, assets
(including intangible assets), liabilities (including contingent liabilities)
condition (financial or other) or results of operations of Sunshine and (ii) the
representations and warranties of the Shareholders and Sunshine that are
qualified with reference to a Material Adverse Effect or materiality shall be
true and correct and the representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case as of
the date hereof, and, except to the extent such representations and warranties
speak as of an earlier date, as of the Closing Date as though made at and as of
the Closing Date, and Derma Sciences shall have received a certificate signed on
behalf of Sunshine by the chief executive officer or the chief financial officer
of Sunshine to such effect.
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(b) Performance of Obligations of Sunshine. Sunshine shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing, and Derma Sciences shall
have received a certificate signed on behalf of Sunshine by the chief executive
officer or the chief financial officer of Sunshine to such effect.
(c) Sunshine Audit. The financial statements of Sunshine for the twelve month
period ending either December 31, 1997 or June 30, 1998, at Derma Sciences'
option, shall have been audited, and an unqualified opinion expressed thereon,
by independent auditors selected by Derma Sciences.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The obligation of the
Shareholders and Sunshine to Consummate the Purchase shall be subject to the
satisfaction at or prior to the Closing of the following additional conditions:
(a) Representations and Warranties. (i) The aggregate effect of all
inaccuracies in the representations and warranties of Derma Sciences set forth
in this Agreement does not and will not have a material adverse effect on the
business, operations, prospects, properties, assets (including intangible
assets), liabilities (including contingent liabilities), condition (financial or
other) or results of operations of the Derma Sciences and (ii) the
representations and warranties of Derma Sciences contained in this Agreement
that are qualified with reference to a Material Adverse Effect or materiality
shall be true and correct and the representations and warranties that are not so
qualified shall be true and correct in all material respects as of the date
hereof, and, except to the extent such representations and warranties speak as
of an earlier date, as of the Closing Date as though made on and as of the
Closing Date, and Shareholders shall have received a certificate signed on
behalf of Derma Sciences by the chief executive officer or the chief operating
officer of Derma Sciences to such effect.
(b) Performance of Obligations of Derma Sciences. Derma Sciences
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date and
Shareholders shall have received a certificate signed on behalf of Derma
Sciences by the chief executive officer or the chief operating officer of Derma
Sciences to such effect.
(c) Offers of Employment. Derma Sciences shall have extended offers
of continued employment, conditioned solely upon consummation of Closing
hereunder, to: Beth Mayhew, Dennis Rioux, Connie Duncan, Steve McEntire, Pete
Sebena and Karen Hensley. Such offers shall provide for employment for a period
of not less than six months following Closing at rates of compensation and upon
such other terms and conditions as prevailed on August 1, 1998.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) By mutual consent of Derma Sciences and the Shareholders.
(b) By either Derma Sciences or the Shareholders if the Purchase
shall not have been consummated before October 30, 1998 (unless the failure to
so consummate the Purchase by such date shall be due to the action or failure to
act of the party seeking to terminate this Agreement which action or failure to
act constitutes a breach of this Agreement).
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(c) By Derma Sciences if: (i) there has been a breach of any
representations or warranties of the Shareholders or Sunshine set forth herein
the effect of which is a Material Adverse Effect under Article III, or (ii)
there has been a breach in any material respect of any of the covenants or
agreements set forth in this Agreement on the part of the Shareholders or
Sunshine which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Derma Sciences to the
Shareholders and Sunshine.
(d) By the Shareholders if: (i) there has been a breach of any
representations or warranties of Derma Sciences set forth herein the effect of
which is a Material Adverse Effect under Article IV, or (ii) there has been a
breach in any material respect of any of the covenants or agreements set forth
in this Agreement on the part of Derma Sciences which breach is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by the Shareholders or Sunshine to Derma Sciences.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 AMENDMENT AND MODIFICATION. At any time prior to the Closing, this
Agreement may be amended, modified or supplemented only by written agreement
(referring specifically to this Agreement) of Derma Sciences, the Shareholders
and Sunshine.
SECTION 9.2 WAIVER. At any time prior to the Closing, Derma Sciences, on the one
hand, and the Shareholders and Sunshine, on the other hand, may: (i) extend the
time for the performance of any of the obligations or other acts of the other,
(ii) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
SECTION 9.3 INVESTIGATIONS. The respective representations and warranties of
Derma Sciences, the Shareholders and Sunshine contained herein or in any
certificates or other documents delivered prior to or as of the Closing Date
shall not be deemed waived or otherwise affected by any investigation made by
any party hereto.
SECTION 9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by next-day courier
or telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery. a) If to Derma Sciences, to:
Derma Sciences, Inc.
214 Carnegie Center
Suite 100
Princeton, NJ 08540
Telecopier No.: 609-520-0712
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with a copy to:
Hedger & Hedger
1800 Linglestown Road
Suite 206
Harrisburg, PA 17110
Attn: Raymond C. Hedger, Jr.
Telecopier No.: 717-238-1828
and
(b) if to Sunshine, any Officer or Shareholder, to:
Sunshine Products, Inc.
1149 Reco Drive
St. Louis, MO 63126
Telecopier No.: 314-965-5443
Gallop, Johnson & Neuman, L.C.
Interco Corporate Tower
101 South Hanley
St. Louis, MO 63105
Attn: John P. Walsh, Esq.
Barbara Hartung-Wendel, Esq.
SECTION 9.5 DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. References to this Agreement shall
be deemed to include the Exhibits and Schedules hereto, unless the context
otherwise requires. The term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, an association, a trust, a
Governmental Entity or an unincorporated organization or other entity.
SECTION 9.6 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Schedules and other documents and instruments referred to herein), constitute
the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise; provided that Derma Sciences may assign its
rights and obligations hereunder to a direct or indirect subsidiary of Derma
Sciences, but no such assignment shall relieve Derma Sciences of its obligations
hereunder.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to the provisions thereof relating to conflicts of law.
SECTION 9.8 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect
against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
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SECTION 9.9 LIABILITY. The liability of the Shareholders and/or Officers
hereunder shall be several in proportion to their ownership of the Shares.
Anything hereinbefore to the contrary notwithstanding, no party hereto shall be
liable to any other party hereto relative to inaccuracies in respect of
representations, warranties, covenants or certifications hereunder unless such
inaccuracies, in the aggregate, have a Material Adverse Effect. Without limiting
the foregoing, neither Shareholders nor Officers shall have any liability (for
indemnification or otherwise) with respect to any: (i) representation, (ii)
warranty, (iii) covenant, or (iv) obligation to be performed and complied with
prior to the Closing Date, other than those set forth in Sections 3.1 (Corporate
Organization: Related Entities), 3.2 (Capitalization) and 3.8 (Taxes), unless on
or before two years after the Closing Date Derma Sciences notifies Shareholders
and Officers of a claim specifying the factual basis of the claim in reasonable
detail to the extent then known by Derma Sciences. Derma Sciences will have no
liability (for indemnification or otherwise) with respect to any: (i)
representation, (ii) warranty, (iii) covenant, or (iv) obligation to be
performed and complied with prior to the Closing Date unless on or before two
years after the Closing Date Shareholders or Officers notify Derma Sciences of a
claim specifying the factual basis of the claim in reasonable detail to the
extent then known by Shareholders or Officers.
SECTION 9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREFORE, the parties hereto have executed this Agreement
as of the date first above written.
DERMA SCIENCES, INC. JOHN G. VOGEL, JR. REVOCABLE TRUST
By: /s/ Edward J. Quilty By: /s/ John G. Vogel
- ----------------------------- ------------------------------
Edward J. Quilty, Chairman John G. Vogel, Trustee
SUNSHINE PRODUCTS, INC. GORDON E. CORY REVOCABLE TRUST
By: /s/ Martha A. Crimmins By: /s/ Gordon E. Cory
- ----------------------------- ------------------------------
Martha A. Crimmins, President Gordon E. Cory, Trustee
/s/ John G. Vogel, Jr. /s/ Gordon E. Cory
- ----------------------------- ------------------------------
John G. Vogel, Jr. Gordon E. Cory
/s/ Martha A. Crimmins
- -----------------------------
Martha A. Crimmins
<PAGE>
SCHEDULE 3.8
TAX AND OTHER RETURNS AND REPORTS
1. State income tax returns filed with State of Missouri.
2. State sales tax returns filed in the States of Arkansas, Tennessee,
Kentucky and Missouri.
3. Reports of possible mill assessments filed in State of California.
4. On or about August 26, Sunshine received a written notice from the State
of Texas requesting information concerning direct sales to Texas
purchasers from November 1992 through June 1998. Sunshine estimated that
such direct sales were approximately $60,000 in 1997 and lesser amounts
in prior years. Sunshine has considered these to be sales in Missouri
and has paid Missouri state and local sales taxes on all such sales (at
approximately 6.75%). The highest Texas state and local sales tax
appears to be 8.25%. Giving Sunshine credit for Missouri sales tax (most
of which Sunshine believes can be reclaimed if Texas prevails on its
claim), the maximum overall exposure should not exceed $5,000.
The same notice from the State of Texas also asserts that Sunshine is
liable for franchise tax for the years 1994 through 1997. Based on
Sunshine's stated capital of $3,900, franchise tax, if payable, should
not exceed $1,500.
<PAGE>
SCHEDULE 3.9
1. All products currently marketed by Sunshine:
(a) Aprivera (Trademark Registration No. 1,635,918)
(b) Bathe Away (Trademark Registration No. 1,289,485)
(c) In Between (Trademark Registration No. 2,011,117 and also
Registration No. 1,244,191 for stylized version)
(d) Mysotrol (Trademark Registration No. 1,833,066)
(e) Therabath
(f) Swash
(g) Three To One Concentrate
(h) Sunshine's Antibacterial Soap
(i) Skin Care Lotion
(j) Optima Bath Additive
(k) MPH Ointment
(l) Hydro-Soft
(m) Sunshine's Whirlpool/Hard Surface Detergent/Disinfectant
(n) Hospi-Bath
2. Sunshine owns all of the foregoing products. None are licensed from
others.
3. Sunshine's logo is also registered under Trademark Registration No.
1,638,822.
4. Sunshine has no registered copyrights or pending applications for
copyright registrations.
<PAGE>
SCHEDULE 3.10
EMPLOYEE BENEFIT PLANS
Sunshine maintains a "SIMPLE" IRA program, a medical and dental
healthcare program and a disability insurance program. Other than the
requirements imposed by law under the SIMPLE IRA program, Sunshine has no other
employee benefit plan that requires any contribution by Sunshine.
<PAGE>
SCHEDULE 3.11
AFFILIATE TRANSACTIONS
1. John G. Vogel, Jr. is a licensed insurance agent with respect to
placement of the health insurance currently in force for Sunshine.
2. The Shareholders have made loans to Sunshine as set forth in Section 2.2
of the Agreement.
3. Sunshine and the Shareholders have entered into a Shareholder Agreement,
which Shareholders will cause to be terminated at or prior to closing.
4. Barbara A. Broeker is a non-employee Director of Sunshine Products, Inc.
Mrs. Broeker is also the CEO of Broeker & Associates, Inc., management
consultants. Mrs. Broeker has from time to time received compensation
from Sunshine Products, on a fee-for-service basis, for advice on
various personnel and strategic issues. Currently, Mrs. Broeker is
assisting Sunshine Products in seeking a replacement for our Manager of
Quality Control.
::ODMA\PCDOCS\SL01\4026942\1
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 29th day of October, 1998, by and between
Sunshine Products, Inc., a Missouri corporation ("Sunshine"), Derma Sciences,
Inc., a Pennsylvania corporation ("Derma Sciences") and John G. Vogel, Jr.
("Vogel").
WHEREAS, Sunshine desires to employ Vogel and Vogel desires to be
employed by Sunshine.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants herein contained, hereby agree as follows:
1. Employment. Sunshine hereby employs Vogel and Vogel accepts
employment by Sunshine upon the terms and conditions herein set forth.
2. Title and Duties. Vogel shall occupy a senior management position
with such title and duties as the chief executive officer of Sunshine may, from
time to time, determine.
3. Term. Vogel's employment hereunder shall begin on the date hereof
and shall terminate on the first anniversary hereof.
4. Compensation. Sunshine shall pay compensation to Vogel relative to
his services hereunder in the total amount of Seventy Four Thousand Dollars
($74,000) payable ratably over the term hereof at intervals not less often than
bi-weekly.
5. Time and Efforts. Vogel shall devote substantially all of his
business time and efforts to the affairs of Sunshine and shall not, without the
consent of Sunshine, accept other employment or engage of other commercial
activities during the term hereof.
6. Termination. Vogel may terminate this agreement at any time upon
60 days written notice to Sunshine.
<PAGE>
7. Guarantee of Performance. Derma Sciences, Inc. hereby guarantees
the performance of Sunshine hereunder.
8. Restrictive Covenant. For a period of three years after the
termination or expiration hereof, Vogel will not, within the greater of the
currently existing marketing area of Sunshine or any future marketing area of
Sunshine established during Vogel's employment, directly or indirectly own,
manage, operate, control, be employed by, participate in or be connected in any
manner with the ownership, management, operation or control of any business
providing general purpose and specialized skin care products to hospitals,
nursing homes and other institutional facilities or any business otherwise
similar to the business conducted by Sunshine at the time of the termination or
expiration hereof. In the event of Vogel's actual or threatened breach of the
provisions of this paragraph, Sunshine shall be entitled, inter alia, to an
injunction restraining Vogel therefrom.
9. Anti-Relocation. Vogel may not be required as a condition of his
employment hereunder to relocate outside the St. Louis metropolitan area.
10. Vacation. During the Term hereof, Vogel shall be entitled to Four
weeks compensated vacation.
11. Health and Accident Insurance. During the Term hereof, Vogel
shall be entitled to participate in such health, accident and similar benefit
plans as are generally made available to senior Derma Sciences executives.
12. Indemnification. For a period of Five years from the date
hereof, Sunshine shall maintain in effect the indemnification provisions of
2
<PAGE>
Article XI of its Bylaws or substantially similar provisions. Sunshine affirms
that Vogel is, and under the terms hereof shall continue to be, a member of the
class entitled to indemnification under the foregoing indemnification
provisions.
13. Entire Agreement. This agreement contains the entire
understanding of the parties and may be modified only by a writing signed by the
party against whom enforcement of any waiver, change, extension or modification
is sought to be enforced.
IN WITNESS WHEREOF, parties have hereunder set their hands and seals
as of the date first hereinabove written.
SUNSHINE PRODUCTS, INC. DERMA SCIENCES, INC.
By: /s/ Martha A. Crimmins By: /s/ Edward J. Quilty
--------------------------- ------------------------------
MARTHA A. CRIMMINS Edward J. Quilty, Chairman and
Chief Executive Officer
/s/ John J. Vogel, Jr.
---------------------------
JOHN G. VOGEL, JR.
3
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 29th day of October, 1998, by and between
Sunshine Products, Inc., a Missouri corporation ("Sunshine"), Derma Sciences,
Inc., a Pennsylvania corporation ("Derma Sciences") and Martha A. Crimmins
("Crimmins").
WHEREAS, Sunshine desires to employ Crimmins and Crimmins desires to
be employed by Sunshine.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants herein contained, hereby agree as follows:
1. Employment. Sunshine hereby employs Crimmins and Crimmins
accepts employment by Sunshine upon the terms and conditions herein set forth.
2. Title and Duties. Crimmins shall occupy a senior management
position with such title and duties as the chief executive officer of Sunshine
may, from time to time, determine.
3. Term. Crimmins' employment hereunder shall begin on the date
hereof and shall terminate on the first anniversary hereof.
4. Compensation. Sunshine shall pay compensation to Crimmins relative
to her services hereunder in the total amount of Seventy Four Thousand Dollars
($74,000) payable ratably over the term hereof at intervals not less often than
bi-weekly.
5. Time and Efforts. Crimmins shall devote substantially all of her
business time and efforts to the affairs of Sunshine and shall not, without the
consent of Sunshine, accept other employment or engage of other commercial
activities during the term hereof.
<PAGE>
6. Termination. Crimmins may terminate this agreement at any time
upon 60 days written notice to Sunshine.
7. Guarantee of Performance. Derma Sciences, Inc. hereby guarantees
the performance of Sunshine hereunder.
8. Restrictive Covenant. For a period of three years after the
termination or expiration hereof, Crimmins will not, within the greater of the
currently existing marketing area of Sunshine or any future marketing area of
Sunshine established during Crimmins' employment, directly or indirectly own,
manage, operate, control, be employed by, participate in or be connected in any
manner with the ownership, management, operation or control of any business
providing general purpose and specialized skin care products to hospitals,
nursing homes and other institutional facilities or any business otherwise
similar to the business conducted by Sunshine at the time of the termination or
expiration hereof. In the event of Crimmins' actual or threatened breach of the
provisions of this paragraph, Sunshine shall be entitled, inter alia, to an
injunction restraining Crimmins therefrom.
9. Anti-Relocation. Crimmins may not be required as a condition
of her employment hereunder to relocate outside the St. Louis metropolitan area.
10. Vacation. During the Term hereof, Crimmins shall be entitled to
Four weeks compensated vacation.
11. Health and Accident Insurance. During the Term hereof, Crimmins
shall be entitled to participate in such health, accident and similar benefit
plans as are generally made available to senior Derma Sciences executives.
12. Indemnification. For a period of Five years from the date
hereof, Sunshine shall maintain in effect the indemnification provisions of
2
<PAGE>
Article XI of its Bylaws or substantially similar provisions. Sunshine affirms
that Crimmins is, and under the terms hereof shall continue to be, a member of
the class entitled to indemnification under the foregoing indemnification
provisions.
13. Entire Agreement. This agreement contains the entire
understanding of the parties and may be modified only by a writing signed by the
party against whom enforcement of any waiver, change, extension or modification
is sought to be enforced.
IN WITNESS WHEREOF, parties have hereunder set their hands and seals
as of the date first hereinabove written.
SUNSHINE PRODUCTS, INC. DERMA SCIENCES, INC.
By: Martha A. Crimmins By: /s/ Edward J. Quilty
--------------------------- ------------------------------
MARTHA A. CRIMMINS Edward J. Quilty, Chairman and
Chief Executive Officer
/s/ Martha A. Crimmins
---------------------------
MARTHA A. CRIMMINS
3
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 29th day of October, 1998, by and between
Sunshine Products, Inc., a Missouri corporation ("Sunshine"), Derma Sciences,
Inc., a Pennsylvania corporation ("Derma Sciences") and Gordon E. Cory ("Cory").
WHEREAS, Sunshine desires to employ Cory and Cory desires to be
employed by Sunshine.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants herein contained, hereby agree as follows:
1. Employment. Sunshine hereby employs Cory and Cory accepts
employment by Sunshine upon the terms and conditions herein set forth.
2. Title and Duties. Cory shall occupy a senior management position
with such title and duties as the chief executive officer of Sunshine may, from
time to time, determine.
3. Term. Cory's employment hereunder shall begin on the date hereof
and shall terminate on the first anniversary hereof.
4. Compensation. Sunshine shall pay compensation to Cory relative to
his services hereunder in the total amount of Seventy Four Thousand Dollars
($74,000) payable ratably over the term hereof at intervals not less often than
bi-weekly.
5. Time and Efforts. Cory shall devote substantially all of his
business time and efforts to the affairs of Sunshine and shall not, without the
consent of Sunshine, accept other employment or engage of other commercial
activities during the term hereof.
6. Termination. Cory may terminate this agreement at any time upon 60
days written notice to Sunshine.
<PAGE>
7. Guarantee of Performance. Derma Sciences, Inc. hereby guarantees
the performance of Sunshine hereunder.
8. Restrictive Covenant. For a period of three years after the
termination or expiration hereof, Cory will not, within the greater of the
currently existing marketing area of Sunshine or any future marketing area of
Sunshine established during Cory's employment, directly or indirectly own,
manage, operate, control, be employed by, participate in or be connected in any
manner with the ownership, management, operation or control of any business
providing general purpose and specialized skin care products to hospitals,
nursing homes and other institutional facilities or any business otherwise
similar to the business conducted by Sunshine at the time of the termination or
expiration hereof. In the event of Cory's actual or threatened breach of the
provisions of this paragraph, Sunshine shall be entitled, inter alia, to an
injunction restraining Cory therefrom.
9. Anti-Relocation. Cory may not be required as a condition of
his employment hereunder to relocate outside the St. Louis metropolitan area.
10. Vacation. During the Term hereof, Cory shall be entitled to Four
weeks compensated vacation.
11. Health and Accident Insurance. During the Term hereof, Cory shall
be entitled to participate in such health, accident and similar benefit plans as
are generally made available to senior Derma Sciences executives.
12. Indemnification. For a period of Five years from the date hereof,
Sunshine shall maintain in effect the indemnification provisions of Article XI
2
<PAGE>
of its Bylaws or substantially similar provisions. Sunshine affirms that Cory
is, and under the terms hereof shall continue to be, a member of the class
entitled to indemnification under the foregoing indemnification provisions.
13. Entire Agreement. This agreement contains the entire
understanding of the parties and may be modified only by a writing signed by the
party against whom enforcement of any waiver, change, extension or modification
is sought to be enforced.
IN WITNESS WHEREOF, parties have hereunder set their hands and seals
as of the date first hereinabove written.
SUNSHINE PRODUCTS, INC. DERMA SCIENCES, INC.
By: Martha A. Crimmins By: /s/ Edward J. Quilty
--------------------------- ------------------------------
MARTHA A. CRIMMINS Edward J. Quilty, Chairman and
Chief Executive Officer
/s/ Gordon E. Cory
---------------------------
GORDON E. CORY
3
DERMA SCIENCES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 29th day of
October, 1998 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and John G. Vogel, Jr. (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Twenty Five Thousand
(25,000) shares (the "Option") which Option is intended as a "nonqualified stock
option". The Option is in all respects limited and conditioned as hereinafter
provided.
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be the closing bid
price quoted on the Nasdaq SmallCap Market on October 28, 1998, to wit: $0.75.
3. TERM. The Option shall expire at midnight on the tenth anniversary
hereof (the "Expiration Date").
4. EXERCISE OF OPTION. The right of the Optionee to purchase the Option
Shares may be exercised, in whole or in part, at any time or times prior to the
expiration of the Option.
5. METHOD OF EXERCISING OPTION. (a) Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by giving written notice
to the Company at its principal office specifying the number of Option Shares to
be purchased and accompanied by payment in full of the aggregate purchase price
for the Shares. Only full Shares shall be delivered and any fractional share
2
<PAGE>
which might otherwise be deliverable upon exercise of an Option granted
hereunder shall be forfeited. Attached as Exhibit 1 is a form of written notice
acceptable to the Company.
(b) The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) in whole or in part through the transfer of Common Stock previously
acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly as
possible, shall deliver or cause to be delivered a certificate or certificates
representing the Shares with respect to which the Option is so exercised. The
certificate or certificates for such Shares shall be registered in the name of
the person or persons exercising the Option (or, if the Optionee shall so
request in the notice exercising the Option, in the name of the Optionee and his
spouse, jointly, with right of survivorship) and shall be delivered as provided
above to or upon the written order of the person or persons exercising the
Option. In the event the Option is exercised by any person or persons after the
death or legal disability of the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that are purchased upon the exercise of the Option as provided herein
shall be fully paid and nonassessable.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
nonqualified stock options and its interpretation shall otherwise be governed by
Pennsylvania law.
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
day and year first hereinabove written.
DERMA SCIENCES, INC.
By: /s/ Stephen T. WIlls
-----------------------------
Stephen T. Wills, CPA, MST
Vice President and
Chief Financial Officer
OPTIONEE
/s/ John G. Vogel, Jr.
-------------------------------
John G. Vogel, Jr.
3
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________
Shares)(1). Please have the certificate or certificates representing the
purchased Shares registered in the following name or names(2)
________________________________ and sent to
_________________________________________________.
DATED: ______________, ____.
OPTIONEE
-------------------------
- --------
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Optionee's Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his/her spouse.
DERMA SCIENCES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 29th day of
October, 1998 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Martha A. Crimmins (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Twenty Five Thousand
(25,000) shares (the "Option") which Option is intended as a "nonqualified stock
option". The Option is in all respects limited and conditioned as hereinafter
provided.
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be the closing bid
price quoted on the Nasdaq SmallCap Market on October 28, 1998, to wit: $0.75.
3. TERM. The Option shall expire at midnight on the tenth anniversary
hereof (the "Expiration Date").
4. EXERCISE OF OPTION. The right of the Optionee to purchase the Option
Shares may be exercised, in whole or in part, at any time or times prior to the
expiration of the Option.
5. METHOD OF EXERCISING OPTION. (a) Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by giving written notice
to the Company at its principal office specifying the number of Option Shares to
be purchased and accompanied by payment in full of the aggregate purchase price
<PAGE>
for the Shares. Only full Shares shall be delivered and any fractional share
which might otherwise be deliverable upon exercise of an Option granted
hereunder shall be forfeited. Attached as Exhibit 1 is a form of written notice
acceptable to the Company.
(b) The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) in whole or in part through the transfer of Common Stock previously
acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly as
possible, shall deliver or cause to be delivered a certificate or certificates
representing the Shares with respect to which the Option is so exercised. The
certificate or certificates for such Shares shall be registered in the name of
the person or persons exercising the Option (or, if the Optionee shall so
request in the notice exercising the Option, in the name of the Optionee and her
spouse, jointly, with right of survivorship) and shall be delivered as provided
above to or upon the written order of the person or persons exercising the
Option. In the event the Option is exercised by any person or persons after the
death or legal disability of the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that are purchased upon the exercise of the Option as provided herein
shall be fully paid and nonassessable.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of her legal
disability, by her legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
nonqualified stock options and its interpretation shall otherwise be governed by
Pennsylvania law.
2
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
day and year first hereinabove written.
DERMA SCIENCES, INC.
By: /s/ Stephen T. WIlls
-----------------------------
Stephen T. Wills, CPA, MST
Vice President and
Chief Financial Officer
OPTIONEE
/s/ Martha A. Crimmins.
-------------------------------
Martha A. Crimmins
3
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________
Shares)(1). Please have the certificate or certificates representing the
purchased Shares registered in the following name or names(2)
________________________________ and sent to
_________________________________________________.
DATED: ______________, ____.
OPTIONEE
-------------------------
- --------
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Optionee's Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his/her spouse.
DERMA SCIENCES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 29th day of
October, 1998 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Gordon E. Cory (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Twenty Five Thousand
(25,000) shares (the "Option") which Option is intended as a "nonqualified stock
option". The Option is in all respects limited and conditioned as hereinafter
provided.
2. PURCHASE PRICE. The purchase price per share (the "Option Price") of
the Shares covered by the Option (the "Option Shares") shall be the closing bid
price quoted on the Nasdaq SmallCap Market on October 28, 1998, to wit: $0.75.
3. TERM. The Option shall expire at midnight on the tenth anniversary
hereof (the "Expiration Date").
4. EXERCISE OF OPTION. The right of the Optionee to purchase the Option
Shares may be exercised, in whole or in part, at any time or times prior to the
expiration of the Option.
5. METHOD OF EXERCISING OPTION. (a) Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by giving written notice
to the Company at its principal office specifying the number of Option Shares to
<PAGE>
be purchased and accompanied by payment in full of the aggregate purchase price
for the Shares. Only full Shares shall be delivered and any fractional share
which might otherwise be deliverable upon exercise of an Option granted
hereunder shall be forfeited. Attached as Exhibit 1 is a form of written notice
acceptable to the Company.
(b) The purchase price shall be payable: (i) in cash or its equivalent,
or (ii) in whole or in part through the transfer of Common Stock previously
acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly as
possible, shall deliver or cause to be delivered a certificate or certificates
representing the Shares with respect to which the Option is so exercised. The
certificate or certificates for such Shares shall be registered in the name of
the person or persons exercising the Option (or, if the Optionee shall so
request in the notice exercising the Option, in the name of the Optionee and his
spouse, jointly, with right of survivorship) and shall be delivered as provided
above to or upon the written order of the person or persons exercising the
Option. In the event the Option is exercised by any person or persons after the
death or legal disability of the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that are purchased upon the exercise of the Option as provided herein
shall be fully paid and nonassessable.
6. NON-TRANSFERABILITY OF OPTION. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. WITHHOLDING OF TAXES. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. GOVERNING LAW. This Agreement shall, to the maximum extent possible,
be construed in a manner consistent with the Code provisions concerning
nonqualified stock options and its interpretation shall otherwise be governed by
Pennsylvania law.
2
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
day and year first hereinabove written.
DERMA SCIENCES, INC.
By: /s/ Stephen T. WIlls
-----------------------------
Stephen T. Wills, CPA, MST
Vice President and
Chief Financial Officer
OPTIONEE
/s/ Gordon E. Cory
-------------------------------
Gordon E. Cory
3
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________
Shares)(1). Please have the certificate or certificates representing the
purchased Shares registered in the following name or names(2)
________________________________ and sent to
_________________________________________________.
DATED: ______________, ____.
OPTIONEE
-------------------------
- --------
(1) The option price may be paid in whole or in part by delivery of Shares,
subject to the terms of the Optionee's Stock Option Agreement.
(2) Certificates may be registered in the name of the Optionee alone or in
the joint names of the Optionee and his/her spouse.
