UNITED STATES
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
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Date of Report (Date of earliest event reported): January 30, 1998
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LIFERATE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 0-25530 41-1682994
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
7210 Metro Boulevard, Edina, Minnesota 55439
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 844-0599
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 14, 1997, LifeRate Systems, Inc. (the "Company") entered
into a Securities Purchase Agreement (the "Purchase Agreement") with Special
Situations Private Equity Fund, L.P., Special Situations Cayman Fund, L.P.,
Special Situations Fund III, L.P. (collectively, the "Funds") and the other
purchasers named in the Purchase Agreement (the Funds and such other purchasers
are collectively referred to herein as the "Purchasers"), pursuant to which the
Company agreed to sell for cash up to 9,000,000 shares (the "Shares") of common
stock, no par value (the "Common Stock") of the Company at prices ranging from
$.50 to $.56 per share and warrants (the "Warrants") to purchase up to 9,000,000
shares of Common Stock, as well as an additional 104,000 Shares and Warrants for
cancellation of certain indebtedness (the "Financing"). The Warrants are
exercisable for a period of 10 years at a price of $1.50 per share, subject to
adjustment as provided in the Warrants. The first closing under the Purchase
Agreement was held on November 14, 1997, at which the Company sold an aggregate
of 2,500,000 Shares at a price of $.50 per share and issued an aggregate of
2,500,000 Warrants to the Funds for an aggregate purchase price of $1,250,000
and an aggregate of 104,000 Shares and Warrant for the cancellation of $52,000
of indebtedness (the "First Closing"). The interim closing called for under the
Purchase Agreement was held on November 21, 1997 (the "Interim Closing"), at
which the Company sold an additional 1,790,000 Shares at a price of $.56 per
share and issued an additional 1,790,000 Warrants to purchasers other than the
Funds for an aggregate purchase price of $1,002,400.
The Purchase Agreement also provided that, in the event the Company
fulfilled certain conditions by January 15, 1998 (the "Second Closing
Conditions"), the Company would sell to the Funds and other Purchasers up to an
additional 4,500,000 Shares and Warrants to purchase 4,500,000 shares of Common
Stock at a purchase price of between $.50 and $.56 per share on or before
January 31, 1998 (the "Second Closing"). The Second Closing Conditions included
(a) the approval by the shareholders of the Company of an amendment to the
Company's Articles of Incorporation to increase the total number of authorized
shares of Common Stock to an aggregate of 75,000,000 and (b) the attainment by
the Company no later than January 15, 1998, of the following milestones: (i) the
Company's revenues derived from the sale of existing or new systems during the
period from October 1, 1997, through January 15, 1998, shall be at least
$200,000; (ii) the Company shall have executed letters of intent and/or sales
contracts, each with a minimum value of $5,000, with at least five new
(excluding current or previous) customers for the sale of any existing or new
systems during the period from October 1, 1997 through January 15, 1998; and
(iii) the Company shall have made generally available for sale a commercially
marketable entry level cardiac cath lab product designed to support the data
requirements of the American College of Cardiology, with a sales price range of
$5,000-$15,000.
The Company satisfied these Second Closing Conditions and a second
closing was held on January 30, 1998 (the "Second Closing"), at which the
Company sold an aggregate of 2,500,000 Shares at a price of $.50 per share and
issued an aggregate of 2,500,000 Warrants to the Funds for an aggregate purchase
price of $1,250,000 and an aggregate of 1,500,000 Shares at
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a price of $.56 per share and issued an additional 1,500,000 Warrants to
purchasers other than the Funds for an aggregate purchase price of $840,000. The
Shares and Warrants acquired by the Funds in the First and Second Closings
constitute "beneficial ownership" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of 57.2% of the Company's Common
Stock as of January 30, 1998.
The Shares and Warrants were offered pursuant to the Selling Agency
Agreement (the "Selling Agency Agreement") dated as of September 2, 1997, and as
amended as of November 14, 1997, by and between the Company and Miller Johnson &
Kuehn Incorporated ("MJK"). The Selling Agency Agreement provides that MJK is to
receive a commission of 10% of the purchase price of the Shares sold to
Purchasers other than the Funds and is to receive a non-accountable expense
allowance equal to 1% of the purchase price of Shares on which it is paid a
commission. Accordingly, the Company paid MJK total commissions of $184,240 and
a total non-accountable expense allowance of $18,424 with respect to the
3,290,000 Shares and Warrants sold to Purchasers other than the Funds at the
Interim and Second Closings. In addition, the Company paid the fees of counsel
to MJK, as well as the Funds.
The Company agreed to a number of covenants under the Purchase
Agreement. So long as the Purchasers own or have the right to acquire at least
20% of the outstanding shares of Common Stock, the Company has agreed not to do
any of the following without the consent of the Funds and the MJK Director: (a)
sell Common Stock or any rights or securities convertible into or exercisable or
exchangeable for Common Stock at a purchase, exercise or conversion price, as
the case may be, of less than $1.00 per share of Common Stock for a period of
three years from the date of the Purchase Agreement; (b) issue any securities
senior to the Common Stock; (c) effect any reclassification, capital
reorganization or other change of outstanding shares of capital stock of the
Company; (d) merge, consolidate or enter into any other business combination of
the Company with or into another entity (other than a merger of a wholly owned
subsidiary, in which merger the Company shall be the surviving entity); (e)
sell, lease or otherwise dispose of all or substantially all of its assets; or
(f) liquidate, dissolve or wind-up the Company.
All of the Shares and the shares of Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares") are "restricted stock," as defined in the
rules promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). The Shares and Warrant Shares have certain demand and "piggyback"
registration rights under the Securities Act and the rules and regulations
promulgated thereunder as more particularly set forth in Section 4 of the
Purchase Agreement and the Company has agreed not to grant any registration or
similar rights for a period of three years. Pursuant to the Purchase Agreement,
the Company filed a Registration Statement under the Securities Act on December
12, 1997, which became effective on December 19, 1997, registering the resale of
the Shares and Warrant Shares issued on November 14, 1997 and November 21, 1997.
The Company will also be required to file a Registration Statement under the
Securities Act by February 27, 1998 registering the resale of the Shares and
Warrant Shares issued on January 30, 1998 in the Second Closing.
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Additional information concerning the Shares and the Warrants is
contained in the Purchase Agreement, the form of which was filed as an exhibit
to the Company's Current Report on Form 8-K dated November 25, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits.
Exhibit Description Method of Filing
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No.
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10.1 Securities Purchase Agreement, dated Incorporated by reference
as of November 14, 1997, among the to Exhibit 10.1 of the
Company and the Purchasers. Omitted Company's Current Report on
from this Exhibit, as filed, are the Form 8-K dated November 25,
exhibits and schedules referenced in 1997 (File No. filed
such agreement. The Company will 0-25530)
furnish supplementally a copy of any
such exhibits and schedules to the
Commission upon request.
10.2 Form of Warrant to Purchase common Incorporated by reference
stock of the Company. to Exhibit 10.2 of the
Company's Current Report on
Form 8-K dated November 25,
1997 (File No. filed
0-25530)
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SIGNATURES
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 thereunto duly authorized.
LIFERATE SYSTEMS, INC.
(Registrant)
/s/ David J. Chinsky
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By: David J. Chinsky
Its: President and Chief Executive Officer
Dated: February 11, 1998
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INDEX TO EXHIBITS
Exhibit Description Method of Filing
------- ----------- ----------------
No.
---
10.1 Securities Purchase Agreement, dated Incorporated by reference
as of November 14, 1997, among the to Exhibit 10.1 of the
Company and the Purchasers. Omitted Company's Current Report on
from this Exhibit, as filed, are the Form 8-K dated November 25,
exhibits and schedules referenced in 1997 (File No. filed
such agreement. The Company will 0-25530)
furnish supplementally a copy of any
such exhibits and schedules to the
Commission upon request.
10.2 Form of Warrant to Purchase common Incorporated by reference
stock of the Company. to Exhibit 10.2 of the
Company's Current Report on
Form 8-K dated November 25,
1997 (File No. filed
0-25530)
