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 ) July 3, 1997
DRUG GUILD DISTRIBUTORS, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 2-96510-NY 11-2269958
(State of other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
350 Meadowland Parkway, Secaucus, New Jersey 07096
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code, (201) 348-3700
Item 2: ACQUISITION OR DISPOSITION OF ASSETS
On July 3, 1997 (the "Closing Date"), Drug Guild Distributors, Inc. (the
"Company") consummated a sale of substantially all of its assets pursuant to an
asset purchase agreement dated as of July 1, 1997 (the "Agreement"), by and
among the Company, Neuman Health Services, Inc. and Neuman Distributors, Inc.
(hereinafter collectively referred to as "Neuman") pursuant to which Neuman
acquired substantially all of the assets, business and goodwill of the Company,
including the exclusive right for use of the name "Drug Guild." The Agreement
specifically excludes any claims for tax refunds, any claims the Company may
have against its officers, employees and third parties, certain insurance
policies, certain motor vehicles, any net operating loss carry forward and any
other assets or claims of the Company that do not involve its inventory or are
not specified on the Company's closing balance sheet.
Neuman has agreed to assume and to pay, perform or discharge certain
specified liabilities of the Company, including trade accounts payable, accrued
expenses as reflected on the closing balance sheet, the collective bargaining
agreement with Local 815, each of the Company's leases, all expenses incurred in
the ordinary course of business, the bank debt and long term notes. However,
Neuman did not assume severance or termination payments, worker compensation
claims, liability for any federal, state or income taxes, environmental claims,
undisclosed or contingent liabilities, penalties, fines that may be assessed by
the Drug Enforcement Administration or liabilities with respect to the preferred
stock of the Company.
The purchase price consists of cash and promissory notes and is equal to
$1,000,000 plus the net asset value of the Company, $18,684,000, which was
determined by subtracting the value of the assumed liabilities from the assets
being purchased by Neuman, as estimated by a Closing Balance Sheet prepared by
the Company as of May 31, 1997. An audit of such assets and liabilities as of
the Closing Date will be conducted by Neuman's auditors and, accordingly, the
purchase price will be subject to adjustment based on the Audited Balance Sheet
and subsequently subject to adjustment until the first anniversary of the
Closing Date for items effecting accounts payable, accrued expenses and accounts
receivable.
On the Closing Date, Neuman provided the Company with the following
consideration in addition to the assumption of liabilities described above:
(a) a cash payment of $4,000,000;
(b) the balance of the purchase price reflected by a four-year
promissory note, secured by a letter of credit, for $14,684,000, bearing
interest at a rate determined quarterly equal to the higher of 1% plus the
180-day Libor rate, or the rate specified for U.S. Treasury Notes with
maturities equal to the remaining term of the note, but no lower than the
Federal Rate as disseminated by the Internal Revenue Service from time to
time (the "Secured Note");
(c) an unsecured promissory note for $1,000,000 payable four years
after the closing without interest (the "Unsecured Note"); and
(d) an option in favor of the Company's shareholders to purchase,
under certain conditions, an aggregate amount of Neuman shares equal to 10%
of Neuman shares to be made available in a public offering in the event
Neuman files a registration statement with the Securities and
Exchange Commission prior to the fourth anniversary of the closing date for
the purpose of an initial public offering of Neuman shares, at a purchase
price equal to 85% of the per share offering price.
The Secured Note is to be paid as follows:
(a) $2,000,000 during the first year in equal quarterly payments
together with interest on the amount being paid;
(b) the first year's interest on the balance of the Secured Note shall
be calculated based on the Adjusted Principal Amount and shall be paid
along with the first payment due after the Adjusted Principal Amount
(hereinafter defined) has been determined; and
(c) the remaining principal of the Secured Note shall be paid over the
following three years in 12 equal quarterly principal payments, with
interest on the unpaid balance.
At the end of the first year following the closing, provided Neuman is not
in default under the Secured Note, Neuman will have the right to reassign
uncollected accounts receivable and notes to the Company and have the principal
of the Secured Note reduced by an amount equal to the reassigned receivables and
notes, less certain credits to which the Company may be entitled (the "Adjusted
Principal Amount"). Neuman is prohibited from doing business with any customer
whose indebtedness has been reassigned for a period of two years. Neuman has
also agreed to various provisions preserving the payment terms of current
customers of the Company and providing employment offers to the Company's
current employees.
ITEM 5. OTHER EVENTS
On June 27, 1997, a Special Shareholders Meeting was held at which time the
Board of Directors of the Company was reduced to seven persons with five persons
constituting a quorum. The following persons were elected at the meeting to the
Company's Board of Directors for a term of one year or until their replacements
are elected and qualify:
Harold Blumenkrantz Paul Emanuel
Alfred Hertel Michael Katz
Gerald Koblin Howard Sternheim
Ernest Wyre
At a Board of Directors Meeting immediately following the Shareholders
Meeting, the following persons were elected as officers of the Company:
President Harold Blumenkrantz
Vice-President Michael Katz
Vice-President Howard Sternheim
Secretary/Treasurer Gerald Koblin
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amended Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 17, 1997
DRUG GUILD DISTRIBUTORS, INC.
By: /s/ Harold Blumenkrantz
---------------------------
Harold Blumenkrantz
President