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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 14, 1997
Community Care Services, Inc.
(Exact name of registrant as specified in its charter)
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New York 333-1700 13-3677548
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<S> <C> <C>
(State or other (Commission File No.) (IRS Employer
Jurisdiction of Identification No.)
Incorporation or Organization)
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18 Sargent Place, Mount Vernon, New York 10550
(Address of principal executive offices)
Registrant's telephone number, including area code (914) 665-9050
Not Applicable
(Former name or former address, if changed since last report)
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Item: [2] Acquisition of Metropolitan Respirator Service, Inc.:
On May 10, 1997, the Company acquired 68% of the outstanding shares of
Metropolitan Respirator Service, Inc. ("MRS"). The purchase price was
approximately $5,993,000, consisting of approximately $2,800,000 in cash,
Promissory Notes with a face value of $2,967,000 accruing interest at a rate of
6% per annum, a portion of which was issued to certain MRS employees (including
a Promissory Note for $444,340 issued to Wade Wilson, the brother-in-law of Alan
T. Sheinwald), and 62,243 shares of the Company's common stock with a value of
$226,000 (See Security Ownership of Certain Beneficial Owners and Management).
The notes are payable in two payments. On January 2,1999, one half of the
principal and accrued interest is payable and the remaining one half of the
principal and accrued interest is payable January 2, 2000. In lieu of cash
payment, the Promissory Note Holder ("Note Holder") may elect to convert up to
eighty percent (80%) of the outstanding principal balance of the Promissory Note
and the accrued interest thereon payable on the dates set forth above into
shares of common stock, par value $.01 per share, based on a valuation of $4.00
per share, irrespective of the actual market value of the shares on the date of
such conversion. If the Note Holder does not make such election, the Company may
do so. With respect to the remaining twenty (20%) of the payment due, the Note
Holder may, but is not obligated to, require that such amount be converted into
shares or take such payment in cash. In the aggregate, the Promissory Notes may
be converted into 835,000 shares of common stock of the Company.
At any time subsequent to the first anniversary of the execution of the
Promissory Note, if the Company conducts a secondary public offering of
Company's common stock, the Note Holder shall have the opportunity to sell the
shares in such offering to the same extent and in proportion to the rights that
the other executive officers of the Company have.
Also on May 10, 1997, the Company purchased the remaining 32% of the
outstanding shares of MRS in a separate transaction. The purchase price was
approximately $2,487,000 consisting of $1,300,000 in cash, 300,000 shares of
common shares of the Company with a value of $1,087,000 and a one year
Promissory Note with a face value of $100,000 accruing interest at a rate of 6%
per annum payable quarterly.
The Company also incurred direct transaction costs amounting to
approximately $378,000.
As part of the acquisition, the Company made customary representations
to the sellers, including representations regarding government regulations.
MRS was incorporated on April 15, 1974 and is engaged in the sale and
rental of medical supplies and durable medical equipment within the New York
Metropolitan area.
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The Company intends to continue operating MRS's existing business and
will treat MRS as a wholly owned subsidiary.
The Company primarily used cash from its October 1996 initial public
offering and, to a lesser extent, funding through an existing credit line to pay
for the acquisition at closing.
Upon the closing of the MRS acquisition, Donald Fargnoli was appointed
to the Company's Board of Directors, Mr. Fargnoli and Louis Rocco were appointed
as Vice Presidents of the Company, Saverio D. Burdi was appointed as Senior Vice
President of the Company, and Wade Wilson was appointed as Senior Vice
President, Operation Systems, of the Company. The Company entered into three
year employment agreements with Messrs. Fargnoli, Rocco, Burdi and Wilson,
providing for annual base compensation of $110,000 for Messrs. Fargnoli and
Rocco and $120,000 for Messrs. Burdi and Wilson. Messrs. Burdi and Wilson were
granted options to purchase 25,000 and 20,000 common shares, respectively, under
the Company's Incentive Stock Option Plan. Each of the agreements provides for
certain employee benefits and contains a noncompetitive provision covering the
term of the agreement plus one year following termination. Messrs. Fargnoli,
Rocco, Burdi and Wilson also entered into Non-Competition Agreements with the
Company which run through May 10, 2001, or the length of their respective
Employment Agreement plus one year, whichever is longer. Mr. Wilson is the
brother-in-law of Alan T. Sheinwald, the former President and Chief Executive
Officer of the Company.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Community Care Services, Inc.
(Registrant)
Date: August 6, 1997 /s/ Joel Quall
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Joel Quall,
Chief Financial Officer
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