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
Date of Report (Date of earliest event reported): June 13, 2001
ENCORE MEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-26538 65-0572565
(Commission File Number) (IRS Employer Identification No.)
9800 Metric Blvd., Austin, Texas 78758
(Address of principal executive offices) (Zip Code)
512-832-9500
Registrant's telephone number, including area code
ITEM 1. CHANGE IN CONTROL OF THE REGISTRANT.
On June 12, 2001, the stockholders of Encore Medical Corporation, a
Delaware corporation (the "Company"), approved the issuance of shares of the
Company's Series A Preferred Stock, par value $0.001 per share (the "Series A
Stock"), pursuant to that certain Amended and Restated Series A Preferred Stock
Purchase Agreement dated as of May 3, 2001 (the "Agreement"), between the
Company, Galen Partners III, L.P. ("GPLP"), Galen Partners International III,
L.P. ("GPILP"), Galen Employees Fund III, L.P. ("GEFLP" and, together with GPLP
and GPILP, "Galen"), Ivy Orthopedic Partners, LLC, Kenneth W. Davidson (the
Company's Chairman of the Board, Chief Executive Officer and President), Richard
Martin, Kanter Family Foundation (an entity affiliated with Joel S. Kanter, a
director of the Company), Chicago Investments, Inc., Northlea Partners, Inc. (an
entity affiliated with John Abeles, a director of the Company), Ernest Henley,
Davis Henley, and Leon and Anita Lapidus.
The Agreement is set forth in Exhibit 1 to this Form 8-K and is
incorporated herein in its entirety by reference in response to this Item. The
description of the terms and provisions of the Agreement is a summary only, and
is qualified in its entirety by reference to such document.
Pursuant to the Agreement, on June 13, 2001 the Company issued to Galen and
the other investors a total of 132,353 shares of Series A Stock for an aggregate
purchase price of $13.5 million, or $102.00 per share. The number of shares
purchased and the total purchase price paid by each respective investor is
contained in Annex I to the Agreement. Galen purchased 115,158 of the shares of
Series A Stock for $11,746,100. The 132,353 shares of Series A Stock are
immediately convertible into 13,253,300 shares of the Company's common stock,
par value $0.001 per share (the "Common Stock"), which would represent
approximately 55.5% of the Common Stock outstanding after the conversion of all
of the shares of the Series A Stock. Galen, as a result of its ownership of
115,158 shares of Series A Stock and 780,362 shares of Common Stock,
beneficially owns 12,296,162 shares of Common Stock, or approximately 55.5% of
the Common Stock outstanding as of June 12, 2001.
As further described below, the holders of the Series A Stock have the
right to designate up to two individuals to serve on the Company's Board of
Directors, as permitted by Delaware law. However, the holders of the Series A
Stock are not entitled to vote on the election of any other of the eight
directors that currently comprise the Company's Board of Directors. The other
relative rights and preferences of the Series A Stock are as follows:
. Each share of the Series A Stock is entitled to one vote for each share
of Common Stock into which such share of the Series A Stock is then
convertible. Except as provided by law or as described below, holders of
the Series A Stock are not entitled to vote as a class on any matter.
. As long as 25% of the authorized shares of the Series A Stock are
outstanding, the holders of the Series A Stock are entitled to elect
members of the Company's Board of Directors. If the Board of Directors
consists of 10 or fewer members, the holders of the Series A Stock are
entitled to elect two members of the Board of Directors. If the Board of
Directors consists of more than 10 members, the holders of the Series A
Stock are entitled to elect 20% of the number of members of the Board of
Directors. Any vacancy of a directorship elected by the holders of the
Series A Stock will be filled by the majority vote of the remaining
directors elected by the holders of the Series A Stock. The holders of
the Series A Stock are not entitled to vote on the election of directors
other than the designated Series A Board members.
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. As long as shares of the Series A Stock are outstanding, the Company may
not, without the approval of the holders of at least 51% of the then
outstanding shares of the Series A Stock, take the following actions:
cause any amendment of the Company's Certificate or Incorporation or
Bylaws if such amendment would alter the rights or privileges of the
Series A Stock; increase the number of authorized shares of the Series A
Stock; create any new class of its capital stock, or reclassify any
class of its capital stock, having rights and privileges on a parity
with, or more beneficial than, the Series A Stock; except in certain
circumstances, effect any merger, consolidation or other business
combination where the Company is the acquiror prior to the second
anniversary of the date the Series A Stock was issued; unless the
holders of the Series A Stock are to receive at least $306.00 per share
as a result of such transaction, effect any sale of the Company or other
conveyance of all or substantially all of the Company's assets; or,
except upon satisfaction of certain criteria, incur any indebtedness.
. Shares of the Series A Stock bear non-cumulative dividends at a rate of
8% per annum, which will be payable semi-annually, if and only if,
declared by the Company.
. The Company may not declare a dividend on the Common Stock unless a
dividend is also concurrently declared and paid on the Series A Stock.
No dividend paid on the Common Stock shall exceed the dividend rate on
the Series A Stock.
. At the option of the holders thereof, shares of the Series A Stock may
be converted into the number of shares of the Common Stock equal to
$102.00 divided by the Conversion Price.
. The initial "Conversion Price" is $1.02. In certain circumstances, the
Conversion Rate is subject to downward adjustment if the Company issues
additional shares of the Common Stock for an amount less than the then
current Conversion Price. Additionally, the Conversion Price is subject
to appropriate adjustment upon the Company's approval of a stock
dividend, combination or subdivision of the Common Stock, or the
reclassification or reorganization of the Common Stock.
. If at any time less than 25% of the authorized shares of the Series A
Stock are outstanding, the Company has the right to convert all of the
outstanding shares of the Series A Stock into shares of the Common Stock
at the then current Conversion Price.
. If, after May 3, 2002, the average closing price per share for the
Common Stock, as reported by NASDAQ, exceeds three times the then
current Conversion Price for at least 20 consecutive trading days, the
Series A Stock will automatically convert into shares of the Common
Stock at the then current Conversion Rate.
. Upon the Company's dissolution, liquidation or winding up, whether
voluntary or involuntary, the holder of each outstanding share of the
Series A Stock is entitled to receive, out of the Company's assets,
$102.00 plus an amount equal to an 8% annual compounded return on such
amount from the date of the initial purchase less any dividends
previously paid; provided, however, the holders are not entitled to such
amount if, in connection with such dissolution, liquidation or winding
up, the holders receive at least $306.00 per outstanding share of the
Series A Stock.
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. After the payment to the holders of shares of the Series A Stock of the
full preferential amounts for those shares described in the prior
paragraph, the holders thereof have the further right to share, ratably,
in the distribution of our remaining assets based on the number of
shares of the Common Stock which they have the right to acquire based on
the then current Conversion Rate.
. In the event the Company's assets available for distribution to the
holders of the Series A Stock upon the Company's dissolution,
liquidation or winding up are insufficient to fully pay all amounts to
which the holders of the Series A Stock are entitled, no distribution
may be made on account of any shares of a class or series of the
Company's capital stock ranking on a parity with the shares of the
Series A Stock, if any, unless proportionate distributive amounts are
paid on account of the shares of the Series A Stock, ratably, in
proportion to the full distributive amounts for which holders of all
parity shares are respectively entitled upon a dissolution, liquidation
or winding up.
. The Company's consolidation with, or merger into, another entity or the
sale, transfer or other disposition of all or substantially all of the
Company's assets will be deemed a dissolution, liquidation or winding
up; provided, however, if the Company's stockholders prior to any such
transaction own, after consummation of such transaction, more than 50%
of the voting power of the surviving or purchasing entity, such
transaction will not be deemed a dissolution, liquidation or winding up.
. Any right or preference of the Series A Stock may be waived in writing
by the holders of at least 51% of the outstanding shares of the Series A
Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibits are filed herewith:
Exhibit 1. Amended and Restated Series A Preferred Stock Purchase
Agreement dated as of May 3, 2001 (the "Agreement"), between Encore Medical
Corporation, Galen Partners III, L.P. ("GPLP"), Galen Partners International
III, L.P. ("GPILP"), Galen Employees Fund III, L.P. ("GEFLP" and, together with
GPLP and GPILP, "Galen"), Ivy Orthopedic Partners, LLC, Kenneth W. Davidson,
Richard Martin, Kanter Family Foundation, Northlea Partners, Inc., Ernest
Henley, Davis Henley, and Leon and Anita Lapidus.
Exhibit 2. Press Release of Encore Medical Corporation dated June 13,
2001.
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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 hereunto duly authorized.
Date: June 25, 2001
ENCORE MEDICAL CORPORATION
By /s/ Harry L. Zimmerman
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Harry L. Zimmerman,
Executive Vice President
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