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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
July 30, 1998
RESPONSE USA, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-20770 52-1441922
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11-H Princess Road
Lawrenceville, New Jersey 08648
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(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (609) 896-4500
Not Applicable
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(Former Address, if changed since last report)
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Item 5. OTHER EVENTS.
On July 30, 1998, United Security Systems, Inc. ("USS"), a wholly-owned
subsidiary of Response USA, Inc. (the "Company"), sold certain of its alarm
monitoring contracts (the "Purchased Contracts") to its newly created,
wholly-owned subsidiary, Response Acquisition Corp. ("RAC"), for aggregate
consideration of approximately $26 million pursuant to a Purchase Agreement
dated as of July 30, 1998 (the "Purchase Agreement"), between USS and RAC.
The Purchased Contracts generate approximately $700,000 in monthly recurring
revenue. Also on July 30, 1998, in a related transaction, RAC entered into a
Receivable Financing Agreement dated as of July 30, 1998 (the "Financing
Agreement"), among RAC, USS and McGinn, Smith Capital Holdings Corp.
("MSCH"). Pursuant to the terms of the Financing Agreement, RAC received
initial financing from MSCH in the amount of $26 million (the "Initial Loan")
and granted MSCH a first priority perfected security interest in the
receivables derived from the Purchased Contracts (the "Receivables"). KeyBank
National Association ("KeyBank") provided the funds utilized by MSCH to
provide the Initial Loan to RAC. The Initial Loan has a term of five years
and bears interest at a rate of 8% per annum. The Receivables are paid
directly into a lockbox administered by USS as Collection Agent under the
Financing Agreement for which USS will receive a monthly fee equal to $5.00
per Purchased Contract from RAC. Under the terms of the Financing Agreement,
all funds derived from the Receivables will be paid to the lockbox account
and MSCH will be paid its monthly payment of principal and interest under the
Loan out of such lockbox account prior to any payments to USS as Collection
Agent or any other funds being distributed to the Company or its
subsidiaries. RAC may finance, from time to time, up to an additional $24
million pursuant to the Financing Agreement by pledging additional Purchased
Contracts which it may purchase from USS pursuant to the Purchase Agreement
to MSCH, which funds will be provided to MSCH by KeyBank. A portion of the
proceeds form the Initial Loan was used to satisfy existing indebtedness of
the Company and the remaining amount will be used for acquisitions and
general working capital. In the event of a default under the Financing
Agreement, MSCH would be entitled to all amounts derived from the Receivables
necessary to satisfy all outstanding obligations to MSCH under the Financing
Agreement.
In consideration for providing the funds for the Initial Loan, KeyBank
received a fee from MSCH in cash of $2,730,000 out of the fees which were
received by MSCH from RAC of approximately $3,900,000, $3,120,000 of which was
paid in cash at the closing and $780,000 was paid in 119,632 shares of common
stock, par value $.008 per share, of the Company (the "Fee Shares") to be
issued to MSCH. The Company has agreed to file a registration statement to
register the sale of the Fee Shares by MSCH under the Securities Act of 1933,
as amended. The Company has agreed that in the event the proceeds to be derived
by MSCH from the sale of the Fee Shares is less than $780,000, the Company is
obligated to, at its option, pay cash or issue additional shares equal to the
amount of the shortfall, if any.
The above descriptions of the Purchase Agreement and Financing Agreement
are incomplete and are qualified in their entirety by reference to the copies of
such agreements filed as Exhibits 2.1 and 2.2 annexed hereto.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits:
2.1 Purchase Agreement dated as of July 30, 1998, between
RAC and USS (excluding all exhibits and schedules).
2.2 Receivable Financing Agreement dated as of July 30,
1998, among MSCH, RAC and USS (excluding all exhibits
and schedules).
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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.
August 6, 1998
RESPONSE USA, INC.
By: /s/ Richard M. Brooks
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Richard M. Brooks, President
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INDEX TO EXHIBITS
Exhibit No. Description
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2.1. Purchase Agreement dated as of July 30, 1998, between Response
Acquisition Corp. and United Security Systems, Inc. (excluding
all exhibits and schedules).
2.2. Receivable Financing Agreement dated as of July 30, 1998, among
McGinn, Smith Capital Holdings Corp., Response Acquisition Corp.
and United Security Sytems, Inc. (excluding all exhibits and
schedules).
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