CONTOUR MEDICAL, INC.
SUPPLEMENT TO PROSPECTUS
DATED JULY 8, 1996
Issuance of Debentures
On July 12, 1996, Contour Medical, Inc. (the "Company") issued two
Convertible Debentures totaling $5 million. The two Debentures, each in the
amount of $2.5 million, were purchased by Renaissance U.S. Growth and Income
Trust, P.C., a fund listed on the London Stock Exchange, and by Renaissance
Capital Growth & Income Fund III, Inc., a closed-end, publicly traded fund that
invests in emerging growth companies. Both of these investment funds are
managed by Renaissance Capital Group, Inc. of Dallas, Texas.
The Company intends to use the proceeds from the Debentures to retire debt
as well as for capital expenditures and general working capital purposes.
The Debentures bear interest at 9% per annum and are immediately
convertible into shares of the Company's Common Stock at a conversion price of
$5.00 per share. Based on this conversion price, a total of 1,000,000 shares of
Common Stock could be issued upon a conversion of the Debentures, which would
represent approximately 16% of the Company's Common Stock then outstanding based
on the number of shares presently outstanding. The conversion price is subject
to adjustment under certain circumstances and will also be reduced to 75% of the
average closing bid price of the Common Stock for the 21 consecutive trading
days following the Company's public press release of the 1997 fiscal year end
financial results if (a) the Company has failed to earn, before taxes, a minimum
of $3,372,000, and (b) the average closing bid price of the Common Stock for the
21 consecutive trading days following the Company's public press release of the
1997 fiscal year end financial results is less than the then existing conversion
price. The Company also granted certain demand and piggy-back registration
rights with respect to the Common Stock issuable upon the conversion of the
Debentures.
The Debentures are to be repaid, if not earlier redeemed or converted,
commencing on July 1, 1999, in monthly installments of 1% of the principal
amount outstanding, and are due in full on July 1, 2003. Commencing August 1,
1996, the Company may redeem all, but not part, of the Debentures at 120% of
par under certain conditions. In addition, in the event that the Company
should (a) fail to have its Common Stock listed on Nasdaq or the New York or
American Stock Exchange, or (b) any person (other than Retirement Care
Associates, Inc.) should acquire a majority of the Company's Common Stock,
the Company will be required to redeem the Debentures at the greater of (y)
the market value of the Debentures or (z) at 111% of par prior to July 12,
1997, thereafter at 123% of par until July 12, 1998, thereafter at 137% of
par until July 12, 1999, thereafter at 152% of par until July 12, 2000, and
thereafter at 167% of par. This provision could have the effect of
discouraging a possible takeover of the Company.
In connection with the issuance of the Debentures, the Company has agreed
not to pay any cash dividends on its Common Stock as long as the Debentures are
outstanding. The Company has also agreed to pay the two Debenture holders
financial advisory fees totaling $1,000 per month.
Change of Auditors
On July 10, 1996, the Company engaged Coopers & Lybrand, LLP as its
independent accountants for the fiscal year ended June 30, 1996. BDO Seidman,
LLP was dismissed as the Company's independent accountants on that date. The
decision to engage Coopers & Lybrand, LLP was not a result of any disagreements
with BDO Seidman, LLP.
The date of this Supplement is July 18, 1996
