U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the
quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number 0-21427
INTEGRATED MEDICAL RESOURCES, INC.
(Exact name of Small Business Issuer as specified in its charter)
KANSAS 48-1096410
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11320 WEST 79TH STREET, LENEXA, KS 66214
(Address of principal executive offices) (Zip code)
Issuer's Telephone Number: (913) 962-7201
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
AS OF OCTOBER 31, 1997, THERE WERE 6,717,517 OUTSTANDING SHARES OF COMMON STOCK,
PAR VALUE $.001 PER SHARE.
Transitional Small Business Disclosure Format (Check one): Yes No X
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31,
ASSETS (UNAUDITED) 1996
------------------- ---------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 758,167 $ 6,739,697
Accounts receivable, less allowance of $ 906,587 in
1997 and $605,315 in 1996 4,267,954 1,382,968
Receivable from Centers 2,208,455 499,083
Supplies 191,831 99,788
Prepaid expenses 242,231 260,619
------------------- ---------------------
Total current assets 7,668,638 8,982,155
NON-CURRENT ASSETS:
Property and equipment
Office equipment and software 1,802,157 1,624,411
Furniture, fixtures and equipment 5,153,713 4,295,722
Leasehold improvements 150,668 125,476
------------------- ---------------------
7,106,538 6,045,609
Accumulated depreciation 2,264,408 1,355,995
------------------- ---------------------
4,842,130 4,689,614
Intangible assets 159,373 504,182
Other assets 404,754 335,947
------------------- ---------------------
TOTAL ASSETS $ 13,074,895 $ 14,511,898
=================== =====================
</TABLE>
See accompanying notes to financial statements
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<PAGE>
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
(UNAUDITED)
----------------- ------------------
<S> <C> <C>
CURRENT LIABILITIES:
Working capital line of credit $ 1,983,304 $ ---
Accounts payable 976,783 929,564
Accrued payroll 308,431 289,470
Accrued advertising 352,398 350,725
Other accrued expenses 337,284 41,086
Current portion of long-term debt 1,192,754 623,603
Current portion of capital lease obligations 373,672 320,586
----------------- ------------------
Total current liabilities 5,524,626 2,555,034
NON-CURRENT LIABILITIES:
Deferred rent 175,932 175,932
Long-term debt, less current portion 840,494 1,008,278
Capital lease obligations, less current portion 321,413 473,281
----------------- ------------------
Total non-current liabilities 1,337,839 1,657,491
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value:
Authorized shares - 1,696,698
Issued and outstanding shares - none --- ---
Common stock, $.001 par value:
Authorized shares - 10,000,000
Issued and outstanding shares - 6,717,517 6,717 6,715
Additional paid-in capital 17,960,029 17,960,029
Accumulated deficit (11,742,969) (7,667,371)
Treasury stock (11,347) ---
----------------- ------------------
Total stockholders' equity 6,212,430 10,299,373
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,074,895 $ 14,511,898
================= ==================
</TABLE>
See accompanying notes to financial statements
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<PAGE>
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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1997 1996 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
NET CENTER REVENUES: $ 6,230,921 $ 2,910,537 $15,352,920 $ 8,062,403
Center expenses:
Physician salaries 909,859 637,927 2,736,186 1,447,500
Cost of services 1,570,801 634,044 3,674,009 1,813,383
---------------------------------------------------------
2,480,660 1,271,971 6,410,195 3,260,883
---------------------------------------------------------
Net management revenue 3,750,261 1,638,566 8,942,725 4,801,520
---------------------------------------------------------
OPERATING EXPENSES:
Center staff salaries 641,460 505,554 1,749,569 1,300,159
Center facilities rent 341,922 205,658 1,015,287 525,100
Advertising 1,432,182 1,053,657 4,138,388 2,657,268
Depreciation and amortization 514,790 329,058 1,617,815 695,947
Selling, general and administrative 1,597,121 1,156,398 4,316,807 2,367,585
---------------------------------------------------------
4,527,475 3,250,325 12,837,866 7,546,059
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Operating loss (777,214) (1,611,759) (3,895,141) (2,744,539)
---------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 14,754 25,573 115,487 25,573
Interest expense (106,410) (118,569) (285,039) (210,094)
Other (19,258) --- (10,905) ---
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(110,914) (92,996) (180,457) (184,521)
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NET LOSS $ (888,128) $(1,704,755) $ (4,075,598) $(2,929,060)
---------------------------------------------------------
Net loss per common and
common equivalent share $ (0.13) $ (0.56) $ (0.61) $ (0.97)
---------------------------------------------------------
Weighted average common and
common equivalent shares 6,717,517 3,019,981 6,717,517 3,019,981
=========================================================
</TABLE>
See accompanying notes to financial statements
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<PAGE>
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------------------
1997 1996
-------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (4,075,598) $ (2,929,060)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 924,098 406,883
Amortization 693,717 289,064
Deferred rent --- 59,460
Pre-opening costs incurred (116,090) (544,344)
Changes in operating assets and liabilities:
Accounts receivable (2,884,986) (654,086)
Receivable from centers (1,709,372) 122,149
Payable to centers --- 354,799
Supplies (92,043) (2,624)
Prepaid expenses 18,388 (616,511)
Accounts payable 47,219 515,162
Accrued payroll 18,961 (12,324)
Accrued advertising 1,673 271,464
Other accrued expenses 296,198 (12,961)
-------------------- --------------------
Net cash used in operating activities (6,877,835) (2,752,929)
-------------------- --------------------
INVESTING ACTIVITIES
Purchases of property and equipment (584,614) (3,062,686)
Other (301,625) (249,483)
-------------------- --------------------
Net cash used in investing activities (886,239) (3,312,169)
-------------------- --------------------
FINANCING ACTIVITIES
Borrowings on line of credit 1,983,304 1,100,000
Proceeds from issuance of notes payable and 490,000 2,438,950
long-term debt
Principal payments on long-term debt (580,633) (126,945)
Debt issuance costs incurred --- (22,941)
Net principal payments on capital lease obligations (98,782) (193,652)
Net proceeds from issuance of preferred stock --- 924,771
Purchase of common stock (11,347) ---
Net proceeds from issuance of common stock 2 30,249
-------------------- --------------------
Net cash provided by financing activities 1,782,544 4,150,432
-------------------- --------------------
Net decrease in cash and cash equivalents (5,981,530) (1,914,666)
Cash and cash equivalents at beginning of period 6,739,697 2,122,794
-------------------- --------------------
Cash and cash equivalents at end of period $ 758,167 $ 208,128
==================== ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 202,108 $ 204,183
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Additions to property and equipment through
issuance of long term debt $ 492,000 $ ---
==================== ====================
</TABLE>
See accompanying notes to financial statements
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Integrated Medical Resources, Inc. and subsidiaries (the Company) is a
provider of management services to clinics providing disease management services
for men suffering from sexual dysfunction. At September 30, 1997, the Company
managed 33 diagnostic clinics operated under the name The Diagnostic Center for
Men in 19 states (collectively the Centers). Each of those 33 clinics has
entered into long-term management contracts and lease agreements with the
Company. Pursuant to these contracts and agreements, the Company provides a wide
array of business services to the Centers in exchange for management fees.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company, in accordance with generally accepted accounting
principles for interim financial information, and with the instructions to Form
10-QSB. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's December 31,
1996 annual report on Form 10-KSB. The results of operations for the three and
nine month periods ended September 30, 1997 are not necessarily indicative of
the operating results that may be expected for the year ended December 31, 1997.
NOTE 2 - CONTINGENCIES
The Company is subject to extensive federal and state laws and
regulations, many of which have not been the subject of judicial or regulatory
interpretation. Management believes the Company's operations are in substantial
compliance with laws and regulations. Although an adverse review or
determination by any such authority could be significant to the Company,
management believes the effects of any such review or determination would not be
material to the Company's financial condition. See "Factors That May Affect
Future Results of Operations - Medicare Reimbursement."
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's managed Centers are the leading provider of disease
management services for men suffering from sexual dysfunction, focusing
primarily on the diagnosis and treatment of erectile dysfunction, commonly known
as impotence. The Centers provide comprehensive diagnostic, educational and
treatment services designed to address the medical and emotional needs of its
patients and their partners through the largest network of medical clinics in
the United States dedicated to the diagnosis and treatment of impotence. The
Company currently manages 33 Centers in 19 states.
For the quarter ended September 30, 1997, approximately 75% of patient
billings were covered by medical insurance plans subject to applicable
deductible and other co-pay provisions paid by the patient. Approximately 36% of
patient billings were covered by Medicare and 39% were covered by numerous other
commercial insurance plans that offer coverage for impotence treatment services.
Patient billings average less for Medicare patients due to restrictions on
laboratory test reimbursement and standard professional fee discounts.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the consolidated statements of operations of the Company as a percentage of
net Center revenues:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
============================= =============================
1997 1996 1997 1996
============== ============== ============== ==============
<S> <C> <C> <C> <C>
Net center revenues 100.0% 100.0% 100.0% 100.0%
Center expenses 39.8 43.7 41.8 40.4
---- ---- ---- ----
Net management revenue 60.2 56.3 58.2 59.6
Operating expenses:
Center staff salaries 10.3 17.4 11.3 16.1
Center facilities rent 5.5 7.1 6.6 6.5
Advertising 23.0 36.2 27.0 33.0
Depreciation and amortization 8.3 11.3 10.5 8.6
Selling, general and 25.6 39.7 28.1 29.4
administrative ---- ----- ---- ----
Total operating expenses 72.7 111.7 83.5 93.6
---- ----- ---- ----
Operating loss (12.5) (55.4) (25.3) (34.0)
Interest expense, net (1.8) (3.2) (1.2) (2.3)
----- ----- ----- -----
Net loss (14.3) (58.6) (26.5) (36.3)
===== ===== ===== =====
</TABLE>
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net Center Revenues. Net Center revenues increased approximately 114%
from $2,910,537 in 1996 to $6,230,921 in 1997. This growth was attributable not
only to the revenue growth in the number of Centers open during each period,
which grew from 28 at September 30, 1996, to 33 at September 30, 1997, but also
to higher revenues in existing Centers, many of which were newly opened in 1996.
The revenue growth in existing clinics resulted from more effective marketing
strategies, which increased both new patient volume and recurring revenue from
existing patients. Further, marketing strategies utilized in the third quarter
1997 were effective in countering the seasonal downturn experienced in the
summer months (May through September) in years prior to 1997.
Center Expenses. Center expenses represent direct operating expenses of
the Centers, including physician salaries, costs for laboratory and outsourced
services, diagnostic and treatment supplies, and treatment devices and
medications dispensed through the Centers. Center expenses increased
approximately 95% from $1,271,971 in 1996 to $2,480,660 in 1997 due to the
operation of additional Centers during the 1997 period and also to higher
patient volumes in existing centers. As a percentage of net Center revenues,
Center expenses decreased from 43.7% to 39.8%. This decrease results from
efficiencies of scale, as the Centers are able to treat increased numbers of
patients without a corresponding increase in baseline center expenses.
Net Management Revenue. Net management revenue increased approximately
129% from $1,638,566 in 1996 to $3,750,261 in 1997. As a percentage of net
Center revenue, net management revenue increased from 56.3% to 60.2%. This
increase resulted from the increase in net Center revenues and Center expenses
discussed above.
Center Staff Salaries. Center staff salaries increased approximately 27%
from $505,554 in 1996 to $641,460 in 1997 due to the operation of additional
Centers. As a percentage of net Center revenue, Center staff salaries decreased
from 17.4% to 10.3%. The effect of the reduction in average staff size from 3 to
4 employees per clinic in 1996 to 2 to 3 employees per clinic in 1997 was offset
partially by lower revenues per clinic in 1997 as patient volumes continue to
grow over the initial six months of operations at newly opened centers.
Center Facilities Rent. Center facilities rent increased approximately
66% from $205,658 in 1996 to $341,922 in 1997 due primarily to the operation of
additional Centers during the period and higher rental rates in new markets. As
a percentage of net Center revenue, Center facilities rent decreased from 7.1%
to 5.5%.
Advertising. Advertising expense increased approximately 36% from
$1,053,657 in 1996 to $1,432,182 in 1997 due to the increased number of Centers.
As a percentage of net Center revenue, advertising expense decreased from 36.2%
to 23.0% due to more effective advertising which produced higher patient volumes
at a lower cost per patient seen.
Depreciation and Amortization. Depreciation and amortization increased
approximately 56% from $329,058 in 1996 to $514,790 in 1997 due to increased
depreciation charges for clinical and office equipment purchased to support new
Centers and increased staffing at the Company's headquarters, and increased
amortization of pre-opening costs incurred with respect to the significant
growth in new Centers during the past year. As a percentage of net Center
revenues, depreciation and amortization decreased from 11.3% to 8.3%.
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expense increased approximately 38% from $1,156,398 in 1996 to $1,597,121 in
1997 due principally to the addition of additional experienced management
personnel and staff at the Company's corporate headquarters and expansion of the
telephone appointment center staff to support additional Centers. As a
percentage of net Center revenues, selling, general and administrative expense
decreased from 39.7% to 25.6%.
Interest Expense, Net. Interest expense increased slightly from $92,996
in 1996 to $110,914 in 1997.
Income Taxes. No income tax provision or benefit was recorded in 1996 or
1997 as the deferred taxes otherwise provided were offset by valuation reserves
on deferred tax assets.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net Center Revenues. Net Center revenues increased approximately 90%
from $8,062,403 in 1996 to $15,352,920 in 1997. This growth was attributable
primarily to the increase in the number of Centers open during each period which
grew from 28 at September 30, 1996 to 33 at September 30, 1997 and also to
higher revenues in existing centers.
Center Expenses. Center expenses increased approximately 97% from
$3,260,883 in 1996 to $6,410,195 in 1997 due to the operation of additional
Centers during the 1997 period. As a percentage of net Center revenues, Center
expenses increased from 40.4% to 41.8%.
Net Management Revenue. Net management revenue increased approximately
86% from $4,801,520 in 1996 to $8,942,725 in 1997. As a percentage of net Center
revenue, net management revenue decreased from 59.6% to 58.2%.
Center Staff Salaries. Center staff salaries increased approximately 35%
from $1,300,159 in 1996 to $1,749,569 in 1997 due to the operation of additional
Centers. As a percentage of net Center revenue, Center staff salaries decreased
from 16.1% to 11.3%. The effect of the reduction in average staff size from 3 to
4 employees per clinic in 1996 to 2 to 3 employees per clinic in 1997 was
partially offset by lower revenues per clinic in 1997 as patient volumes
continue to grow over the initial six months of operations at Centers opened in
late 1996 and early 1997.
Center Facilities Rent. Center facilities rent increased approximately
93% from $525,100 in 1996 to $1,015,287 in 1997 due primarily to the operation
of additional Centers during the period and higher rental rates in new markets.
As a percentage of net Center revenue, Center facilities rent increased slightly
from 6.5% to 6.6% due primarily to the fact that a large number of clinics were
opened in late 1996 and early 1997.
Advertising. Advertising expense increased approximately 56% from
$2,657,268 in 1996 to $4,138,388 in 1997 due to the increased number of Centers.
As a percentage of net Center revenue, advertising expense decreased from 33.0%
to 27.0% due to more effective advertising which produced higher patient volumes
at a lower cost per patient seen.
<PAGE>
Depreciation and Amortization. Depreciation and amortization increased
approximately 132% from $695,947 in 1996 to $1,617,815 in 1997 due to increased
depreciation charges for clinical and office equipment purchased to support new
Centers and increased staffing at the Company's headquarters, and increased
amortization of pre-opening costs incurred with respect to the significant
growth in new Centers during the past year. As a percentage of net Center
revenues, depreciation and amortization increased from 8.6% to 10.5% due to the
significant amount of amortization of pre-opening costs in 1997 related to
Centers opened in 1996.
Selling, General and Administrative. Selling, general and administrative
expense increased approximately 82% from $2,367,585 in 1996 to $4,316,807 in
1997 due principally to the addition of additional experienced management
personnel and staff at the Company's corporate headquarters and expansion of the
telephone appointment center staff to support additional Centers. As a
percentage of net Center revenues, selling, general and administrative expense
decreased from 29.4% to 28.1%.
Interest Expense, Net. Interest expense decreased slightly from $184,521
in 1996 to $180,457 in 1997.
Income Taxes. No income tax provision or benefit was recorded in 1996 or
1997 as the deferred taxes otherwise provided were offset by valuation reserves
on deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and met its capital requirements
with cash flows from services provided to existing Centers, proceeds from
private placements of equity securities, an initial public offering of equity
securities, the utilization of bank lines of credit, bank loans and capital
lease obligations. In March 1996, the Company raised $1.0 million from the
issuance of Series B Preferred Stock which was converted to Common Stock upon
the consummation of the initial public offering. The Company raised $12.6
million in net proceeds from its initial public offering completed in November
1996. The Company has a working capital line of credit with its bank under which
it may borrow up to $2.0 million through December 31, 1997, based on specified
percentages of eligible accounts receivable. At September 30, 1997, the Company
had $1,983,304 outstanding under this line. The interest rate applicable to the
line of credit is 1% above the bank's prime lending rate (which prime lending
rate was 8.5% at September 30, 1997). On September 30, 1997 the Company executed
a $500,000 promissory note due December 31, 1997. The note bears interest at
9.5% and is secured by accounts receivable and fixed assets.
At September 30, 1997, the Company had cash and cash equivalents of
$758,167. On October 23, 1997, the Company secured a revolving line of credit
providing for borrowings of up to $5.0 million, secured by accounts receivable,
and a $500,000 term loan secured by property and equipment. Proceeds from the
revolving line of credit were used to retire $1,983,304 outstanding under the
Company's existing $2.0 million line of credit as well as the $500,000 note
dated September 30, 1997.
As of September 30, 1997, the Company had, for tax purposes, net
operating loss carry forwards of approximately $12.7 million, which are
available to offset future taxable income and expire in varying amounts through
2011, if unused.
<PAGE>
Due to the growth in the number of new Center openings in the past two
years, the Company has experienced increased and varied operating cash flow
deficits from 1994 through 1997. This resulted primarily from differences in
working capital levels (particularly, accounts receivable) required to
accommodate the increased services to Centers and variances in operating
results. The variances were principally attributable to the fact that revenues
at new Centers and, accordingly, net management revenues have generally
increased with patient volumes over the first six months of operations while
operating expenses have remained relatively fixed from the first month of
operation. In addition, the Company had increased corporate staff, expanded the
national call center and increased advertising costs to support new Center
openings, thereby significantly increasing administrative expenses in advance of
expected revenues.
Accounts receivable, net of allowance, increased $2,884,986 from
$1,382,968 at December 31, 1996 to $4,267,954 at September 30, 1997 due to
increases in net Center revenues. Receivable from Centers, which relates to
Medicare receivables due to the Centers, increased $1,709,372, primarily due to
an increase in receivables attributable to services to Medicare patients from
$499,083 at December 31, 1996 to $2,208,455 at September 30, 1997. The September
30, 1997 amount includes $1.9 million pending submission for Medicare
reimbursement awaiting completion of appropriate provider registration
requirements, which the Company anticipates will be completed by the first
quarter 1998. In addition, $668,000 in Medicare billings were under payment
suspension, see "Factors That May Affect Future Results of Operations - Medicare
Reimbursement.".
Despite the Company's existing resources and those provided from
additional debt, opportunities may arise for new Center openings or acquisitions
that management believes would enhance the value of the Company which could
require financing not currently provided for.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Ability to Manage Growth. The Company experienced rapid growth that has
resulted in new and increased responsibilities for management personnel and has
placed increased demands on the Company's management, operational and financial
systems and resources. To accommodate this recent growth and to compete
effectively and manage future growth, the Company will be required to continue
to implement and improve its operational, financial and management information
systems, and to expand, train, motivate and manage its work force. There can be
no assurance that the Company's personnel, systems, procedures and controls will
be adequate to support the Company's operations. Any failure to implement and
improve the Company's operational, financial and management systems or to
expand, train, motivate or manage employees could have a material adverse effect
on the Company's financial condition and results of operations.
The Company intends to establish Centers in new markets where it has
never before provided services. As part of its market selection analysis, the
Company has invested and will continue to invest substantial funds in the
compilation and examination of market data. There can be no assurance that the
market data will be accurate or complete or that the Company will select markets
in which it will achieve profitability.
<PAGE>
In addition, the Company may pursue acquisitions of medical clinics or practices
providing male sexual health services. There are various risks associated with
the Company's acquisition strategy, including the risk that the Company will be
unable to identify, recruit or acquire suitable acquisition candidates or to
integrate and manage the acquired clinics or practices. There can be no
assurance that clinics and practices will be available for acquisition by the
Company on acceptable terms, or that any liabilities assumed in an acquisition
will not have a material adverse effect on the Company's financial condition and
results of operations.
Seasonality and Fluctuations in Quarterly Results. The Company's
historical quarterly revenues and financial results prior to 1997 demonstrated a
seasonal pattern in which the first and fourth quarters were typically stronger
than the second and third quarters. The summer months of May through August
showed seasonal decreases in patient volume and billings. Through September 30,
1997, this seasonal downturn was not indicated in patient volumes. The Company
cannot predict that this seasonality will not be demonstrated in the future and
there can be no assurance that such seasonal fluctuations will not produce
decreased revenues and poorer financial results. The failure to open new Centers
on anticipated schedules, the opening of multiple Centers in the same quarter or
the timing of acquisitions may also have the effect of increasing the volatility
of quarterly results. Any of these factors could have a material adverse impact
on the Company's stock price.
Dependence on Reimbursement bv Third Party Payors. For the quarter ended
September 30, 1997, approximately 75% of patient billings were covered by
medical insurance plans subject to applicable deductibles and other co-pay
provisions paid by the patient. Approximately 36% of patient billings were
covered by Medicare and 39% were covered by numerous other commercial insurance
plans that offer coverage for impotence treatment services. The health care
industry is undergoing cost containment pressures as both government and
non-government third party payors seek to impose lower reimbursement and
utilization rates and to negotiate reduced payment schedules with providers.
This trend may result in a reduction from historical levels of per-patient
revenue for such health care providers. Further reductions in third party
payments to physicians or other changes in reimbursement for health care
services could have a direct or indirect material adverse effect on the
Company's financial condition and results of operations. In addition, as managed
Medicare arrangements continue to become more prevalent, there can be no
assurance that the Centers will qualify as a provider for relevant arrangements,
or that participation in such arrangements would be profitable. Any loss of
business due to the increased penetration of managed Medicare arrangements could
have a material adverse effect on the Company's financial condition and results
of operations.
The Company's net income is affected by changes in sources of the
Centers' revenues. Rates paid by commercial insurers, including those which
provide Medicare supplemental insurance, are generally based on established
provider charges, and are generally higher than Medicare reimbursement rates. A
change in the payor mix of the Company's patients resulting in a decrease in
patients covered by commercial insurance could adversely affect the Company's
financial condition and results of operations.
Health Care Industry and Regulation. The health care industry is highly
regulated at both the state and federal levels. The Company and the Centers are
subject to a number of laws governing issues as diverse as relationships between
health care providers and their referral sources, prohibitions against a
provider referring patients to an entity with which the provider has a financial
relationship, licensure and other regulatory approvals, professional advertising
restrictions, corporate practice of medicine, Medicare billing regulations,
dispensing of pharmaceuticals and regulation of unprofessional conduct of
providers, including fee-splitting arrangements. Many facets of the contractual
and operational structure of the
<PAGE>
Company's relationships with each of the Centers have not been the subject of
judicial or regulatory interpretation. An adverse review or determination by any
one of such authorities, or changes in the regulatory requirements, or
otherwise, could have a material adverse effect on the operations, financial
condition and results of operations of the Company. In addition, expansion of
the operations of the Company into certain jurisdictions may require
modifications to the Company's relationships with the Centers located there.
These modifications could include changes in such states in the way in which the
Company's services and lease fees are determined and the way in which the
ownership and control of the Centers are structured. Such modifications may have
a material adverse effect on the Company's financial condition and results of
operations.
In recent years, numerous legislative proposals have been introduced or
proposed in the United States Congress and in some state legislatures that would
effect major changes in the United States health care system at both the
national and state level. It is not clear at this time which proposals, if any,
will be adopted or, if adopted, what effect such proposals would have on the
Company's business. There can be no assurance that currently proposed or future
health care legislation or other changes in the administration or interpretation
of governmental health care programs will not have a material adverse effect on
the Company's financial condition and results of operations.
Furthermore, there can be no assurance that the method of payment for
the products and services furnished by the Centers will not be radically altered
in the future by changes in the health care industry. Changes in the system of
reimbursement, including Medicare, for the products and services provided by the
Centers that increase the difficulty of obtaining payment for medical services
could have a material adverse effect on the Company's financial condition and
results of operations, as the Company's income stream depends upon revenues of
the Centers. If revenues of the Centers are diminished, either in quantity or in
continuity, the Company will be adversely affected.
Medicare Reimbursement. Historically, the percent of DCM patients for
which reimbursement is sought from Medicare has averaged approximately 30%
system-wide, although such average ranges from approximately 23% to 56% among
individual Centers. Medicare reimbursements for professional services are
processed by numerous carriers ("Service Carriers") and reimbursements for
durable medical equipment are handled by four regional carriers ("DMERCs").
These Service Carriers and DMERCs routinely review the billing practices and
procedures of health care providers and during such reviews these Carriers often
temporarily suspend all reimbursement payments to the providers whether or not
related to the billing issue being reviewed.
Currently, there are two DMERCs and three Service Carriers that have
notified a DCM that a review is being conducted and that Medicare claims are
being held in suspense pending such review. The Company also learned in the
second quarter 1997 that the Federal Bureau of Investigation is reviewing
certain aspects of its Medicare billing practices. System-wide, the total amount
of billings under suspension and included in Receivables from Centers as of
September 30, 1997 was approximately $668,000.
The Company is fully cooperating in these reviews and believes that its
billing practices and procedures are proper. One earlier review by another DMERC
has been concluded and the amounts suspended are being released to the Company.
However, in the event the other carriers were to disallow the reimbursement
requests under review, some or all of the suspended payments would not be
collected. In addition, depending upon the particular facts and circumstances
involved in the review, the carriers could seek repayment of prior
reimbursements and deny reimbursement for such claims in the future.
<PAGE>
Under certain circumstances, the submission of improper Medicare reimbursement
claims can result in civil and criminal penalties and disqualification from
seeking any reimbursement from Medicare in the future.
The Company is conducting an internal review of the matters that have
been raised by the carriers and believes that these pending reviews and
inquiries will be concluded without any material adverse effect on the Company.
Corporate Practice of Medicine. Most states limit the practice of
medicine to licensed individuals or professional organizations comprised of
licensed individuals. Many states also limit the scope of business relationships
between business entities such as the Company and licensed professionals and
professional corporations, particularly with respect to fee-splitting between a
physician and another person or entity and non-physicians exercising control
over physicians engaged in the practice of medicine. Most of the Centers are
organized as professional corporations, entities authorized to employ
physicians, so as to comply with state statutes and state common law prohibiting
the corporate practice of medicine. Because the laws governing the corporate
practice of medicine vary from state to state and the application of those laws
is often ambiguous, any expansion of the operations of the Company to a state
with strict corporate practice of medicine laws, or the application of these
laws in states with existing Centers, may require the Company to modify its
operations with respect to one or more Centers, which could result in increased
financial risk to the Company. Further, there can be no assurance that the
Company's arrangements will not be successfully challenged as constituting the
unauthorized practice of medicine or that certain provisions of its services
agreements with the Centers (the "Services Agreements"), options to designate
ownership of the professional corporations, employment agreements with
physicians or covenants not to compete will be enforceable. Alleged violations
of the corporate practice of medicine doctrine have also been used successfully
by physicians to declare a contract to be void as against public policy. There
can be no assurance that a state or professional regulatory agency would not
attempt to revoke or suspend a physician's license or the corporate charter or
license of a professional corporation owning a Center or the corporate charter
of the Company or one of its subsidiaries.
Dependence on Rigiscans; Potential Impact of Innovations. Rigiscan
patient monitoring devices accounted for approximately 26% of the Centers'
revenues for the quarter ended September 30, 1997. As a consequence, any
material adverse development with respect to the Rigiscan devices, limitation in
the availability of such devices or material increase in the costs of such
devices could have a material adverse effect on the financial condition and
results of operations of the Company. In addition, innovations in diagnostic
tools and therapies for male sexual dysfunction or changes in reimbursement
practices by third party payors for such diagnostic tools and therapies could
have a material adverse effect on the financial condition and results of
operations of the Company.
Competition. Competition in the diagnosis and treatment of impotence
stems from a wide variety of sources. The Centers face competition from
urologists, general practitioners, internists and other primary care physicians
who treat impotent patients, as well as hospitals, physician practice management
companies ("PPMs"), HMOs and non-physician providers of services related to
sexual dysfunction. If federal or state governments enact laws that attract
other health care providers to the male sexual dysfunction market, the Company
may encounter increased competition from other parties which seek to increase
their presence in the managed care market and which have substantially greater
resources than the Company. Any of these providers, many of which have far
greater resources than the Company, could adversely affect the Centers or
preclude the Company from entering those markets that can sustain only limited
competition. There can be no assurance that the Centers will be able to compete
effectively with their competitors, or that additional competitors will not
enter the market.
There are also many companies that provide management services to
medical practices, and the management industry continues to evolve in response
to pressures to find the most cost-effective method of providing quality health
care. There can be no assurance that the Company will be able to compete
effectively with its competitors, that additional competitors will not enter the
market, or that such competition will not make it more difficult to acquire the
assets of, and provide management services for, medical practices on terms
beneficial to the Company.
Developing Market; Uncertain Acceptance of the Company's Services. Over
90% of new patient visits result from the Company's direct-to-patient
advertising. The market for the Company's services has only recently begun to
develop, and there can be no assurance that the public will accept the Company's
services on a widespread basis. The Company's future operating results are
highly dependent upon its ability to continually attract new patients. There can
be no assurance that demand for the Company's services will continue in existing
markets, or that it will develop in new markets. The Company makes significant
expenditures for advertising, and there can be no assurance that such
advertising will be effective in increasing market acceptance of, or generating
demand for, the Company's services. Failure to achieve widespread market
acceptance of the Company's services or to continually attract new patients
could have a material adverse effect on the Company's financial condition and
results of operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Not Applicable
ITEM 2: CHANGES IN SECURITIES
Not Applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable
ITEM 5: OTHER INFORMATION
Not Applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-B
3(b)(ii) Bylaws
4(c)(i) Security Agreement dated September 30, 1997, by and
between the Company and P&C Investments
4(c)(ii) Promissory Note dated September 30, 1997, in favor
of P&C Investments
4(d) Revolving Loan and Security Agreement dated October
23, 1997 by and between the Company and DVI
Business Credit Corporation
4(e) Loan and Security Agreement dated October 23, 1997
by and between the Company and DVI Financial
Services, Inc.
10(f)(i) Amendment to Services Agreement dated July 1, 1997
by and between Strategem, Inc. and the Company
10(f)(ii) Termination of Services Agreement dated September
30, 1997 by and between Strategem, Inc. and the
Company
10(f)(iii) Amendment to the Rigiscan Purchase Agreement dated
October 15, 1997 by and between Imagyn Medical
Technologies, Inc. (formerly known as UROHEALTH
Systems, Inc.) and the Company
11 Statement re: computation of Per Share Earnings
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTEGRATED MEDICAL RESOURCES, INC.
Date: November 14, 1997 By: /s/ Beverly O. Elving
-------------------------
Beverly O. Elving
Chief Financial Officer and Vice President,
Finance and Administration
(Authorized Officer and Principal Financial
and Accounting Officer)
<PAGE>
EXHIBIT 3(b)(ii)
AMENDED AND RESTATED BYLAWS
OF
INTEGRATED MEDICAL RESOURCES, INC.
ARTICLE I
Offices
The principal office of the Corporation in the State of Kansas shall be
located at 8326 Melrose Drive, Lenexa, Kansas 66214. The Corporation may have
such other offices, either within or without the State of Kansas, as the
business of the Corporation may require from time to time.
The registered office of the Corporation, as required by the Kansas General
Corporation Code to be maintained in the State of Kansas, may be, but need not
be, identical with the principal office and may be changed from time to time by
the Board of Directors.
ARTICLE II
Stockholders
Section 1. Annual Meeting. The Annual Meeting of the Stockholders for the
election of Directors, and for such other business as may be stated in the
notice of the meeting shall be held at such place, either within or without the
State of Kansas, and at such time and date as the Board of Directors, by
resolution shall determine and set forth in the notice of the meeting. If the
Board of Directors fails to so determine the time, date and place of meeting,
the Annual Meeting of Stockholders shall be held at the Corporation's principal
office on the third Friday of May in each year, or if that day is a legal
holiday in the place where the meeting is to be held, then on the next
succeeding business day.
Section 2. Special Meeting. Special Meetings of the Stockholders may be
called by the Chief Executive Officer, the President, the Board of Directors or
the holders of not less than one-fourth (1/4) of all of the outstanding shares
of the Corporation entitled to vote at such meeting.
Section 3. Place of Meeting. Meetings of the Stockholders shall be held at
such time and place, either within or without the State of Kansas, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof. If no designation
is made, or if a Special Meeting should otherwise be called, the place of the
meeting shall be at the principal office of the Corporation.
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Section 4. Notice of Meetings. Written or printed notice of each meeting of
the Stockholders, stating the place, day and hour of the meeting and, in the
case of a Special Meeting, the purpose or purposes for which the meeting is
called, shall be delivered or given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, either personally or by mail, to each
of the Stockholders of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, directed to the Stockholder at his address as it appears on the
records of the Corporation. Except as otherwise provided by statute, notice of
any adjourned meeting of the Stockholders shall not be required.
Section 5. Quorum. Except as otherwise provided by law or by the Articles
of Incorporation, a majority of the outstanding shares of the Corporation
entitled to vote at any meeting, represented in person or by proxy, shall
constitute a quorum at any meeting of the Stockholders; provided, however, that
if less than a majority of the outstanding shares are represented at said
meeting, a majority of the shares so represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder entitled to vote at the meeting.
Section 6. Proxies. At all meetings of the Stockholders, a Stockholder may
vote by proxy executed in writing by the Stockholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution unless otherwise provided in
the proxy.
Section 7. Voting of Shares. Except as otherwise stated in the Articles of
Incorporation, each outstanding Share of capital stock having voting rights
shall be entitled to one (1) vote upon each matter submitted to a vote at a
meeting of the Stockholders, and the Stockholders shall not be entitled to
cumulate their votes. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of Stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
Section 8. Informal Action by the Stockholders. Any actions that may be
taken at a meeting of the Stockholders may be taken without a meeting if
consents in writing, setting forth the actions so taken, shall be signed by all
of the Stockholders entitled to vote with respect to the subject matter thereof.
Such consents shall have the same force and effect as a unanimous vote of the
Stockholders at a meeting duly held, and may be stated as such in any
certificate at a meeting duly held or in any certificate or document filed under
the Kansas General Corporation Code. The Secretary shall file such consents with
the minutes of the meetings of the Stockholders.
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ARTICLE III
Directors
Section 1. General Powers. Except as otherwise provided by law or by the
Articles of Incorporation, the business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors.
Section 2. Number, Election and Term. The current number of Directors of
the Corporation shall be eight (8). Thereafter, the number of Directors which
shall constitute the Board of Directors shall be established from time to time
by resolution duly adopted by a majority of the Directors then constituting the
entire Board of Directors. The Board of Directors of the Corporation shall be
divided into three classes, designated Class I, Class II and Class III, which
shall be as nearly equal in number as possible, as determined by the Board of
Directors. The term of office of the various classes of Directors shall be as
set forth in the Articles of Incorporation. Except as otherwise provided in
Section 5 of this Article or in the Articles of Incorporation, a Director shall
be elected at an annual meeting of the Stockholders by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote in the election of Directors. A Director shall hold office
until the annual meeting for the year in which such Director's term expires and
until a successor shall be duly elected and qualified, or until such Director's
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal of Directors. Except as otherwise provided by law or by
the Articles of Incorporation, the holders of a majority of the shares entitled
at the time to vote at an election of Directors may remove any Director with
cause, but may not remove any Director without cause.
Section 4. Vacancies and Newly Created Directorships. Any vacancy occurring
in the Board of Directors by death, resignation, removal or otherwise, and newly
created directorships resulting from any increase in the authorized number of
Directors may be filled by a majority of the Directors then in office, though
less than a quorum, or by a sole remaining Director, and the Directors so chosen
shall hold office for a term expiring at the next Annual Meeting of Stockholders
at which the term of the class or classes to which they have been elected
expires and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 5. Committees. The Board of Directors may, by resolution passed by
a majority of the total number of Directors fixed in the manner provided by
these Bylaws, designate one or more committees, each committee to consist of one
or more directors of the Corporation. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any absent or disqualified member. Any committee,
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<PAGE>
to the extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 6. Compensation. The compensation of the Directors, if any, may be
set by the Board of Directors unless otherwise provided herein, by law, or in
the Articles of Incorporation.
ARTICLE IV
Meetings of the Board of Directors
Section 1. Annual Meetings. An Annual Meeting of the Board of Directors
shall be held without other notice than these Bylaws immediately after and at
the same place as the Annual Meeting of the Stockholders. Other regular meetings
of the Board of Directors shall be held without notice at such times and places
as the Board may by resolution from time to time determine.
Section 2. Special Meetings. Special Meetings of the Board of Directors may
be called by or at the request of the Chief Executive Officer, the President or
any Director upon at least four (4) days' written or printed notice served
personally, by mail or by a nationally recognized overnight delivery service to
each Director at his address as it appears on the records of the Corporation and
shall be held at such place or places as may be determined by the Directors, or
as shall be stated in the call of the Special Meeting.
Section 3. Place of Meeting. Meetings of the Board of Directors shall be
held at such place within or without the State of Kansas as shall be provided
for in the resolution, notice, waiver of notice or call of such meeting, or if
not otherwise designated, at the Corporation's principal office.
Section 4. Quorum. A majority of the total number of Directors shall
constitute a quorum for the transaction of business and the vote of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by law, the Articles of Incorporation or these Bylaws; provided,
however, that if less than a majority of the Directors is present at said
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice, until a quorum shall be present.
Section 5. Actions of the Board of Directors Without a Meeting. Except as
otherwise provided by law or by the Articles of Incorporation, any action which
is required to be or may be taken at a meeting of the Directors may be taken
without a meeting if consents in writing, setting forth the actions so taken,
are signed by all of the Directors. The consents shall have the same force and
effect as a unanimous vote of the Directors at a meeting duly held, and may be
4
<PAGE>
stated as such in any certificate or document filed under the Kansas General
Corporation Code. The Secretary shall file such consents with the minutes of the
meetings of the Board of Directors.
Section 6. Participation. Members of the Board of Directors or of any
committee designated by the Board of Directors may participate in a meeting of
the Board or committee by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other, and participation in a meeting in this manner shall constitute
presence in person at the meeting.
ARTICLE V
Officers
Section 1. Number. The officers of the Corporation shall consist of a
President and a Secretary. The Board of Directors may also elect a Chairman of
the Board (who must be a Director), a Chief Executive Officer, a Chief Operating
Officer, a Chief Financial Officer, a Chief Medical Officer, one or more Vice
Presidents (one of whom may be designated the Executive Vice President), a
Treasurer, Assistant Secretaries and Assistant Treasurers and one or more
Controllers. Any two or more offices may be held by the same person at the same
time except President and Secretary.
All officers and agents of the Corporation, as between themselves and the
Corporation, shall have such authority and perform such duties in the management
of the property and affairs of the Corporation as may be provided in these
Bylaws, or, in the absence of such provision, as may be determined by resolution
of the Board of Directors.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at the Annual Meeting of the
Board of Directors. If the election of the officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
New offices may be created and filled at any meeting of the Board of Directors.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
Section 3. Removal. Except as otherwise provided by law, any officer or
agent may be removed by the Board of Directors, with or without cause, at any
time by vote of a majority of the total number of Directors.
Section 4. Vacancies. If the office of any officer of the Corporation
becomes vacant because of death, resignation, removal, disqualification or for
any other reason, or if any officer of the Corporation is unable to perform the
duties of his office for any reason, the Board of Directors may choose a
successor who shall replace such officer, or the Board of Directors may delegate
the duties of any such vacant office to any other officer or to any Director of
the Corporation until a successor is elected at the next meeting of the Board of
Directors.
5
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Section 5. The Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at meetings of the Board of Directors and of the
Stockholders, and, subject to the direction and control of the Board of
Directors, he shall direct the policy and management of the Corporation. He
shall perform such other duties as may be prescribed by the Board of Directors
from time to time. In the absence of the Chairman of the Board, the President
shall have and may exercise all of the powers of the Chairman of the Board.
Section 6. Chief Executive Officer. The Chief Executive Officer shall have
general charge and management of the business of the Corporation, shall carry
out such duties as are delegated by the Board, shall see that all orders and
resolutions of the Board are carried out, shall have power to execute all
contracts and agreements authorized by the Board, shall make reports to the
Board of Directors and Stockholders, and shall perform such other duties as are
incident to the office or are properly required by the Board of Directors. The
Chief Executive Officer may sit with the Board of Directors in deliberation upon
all matters pertaining to the general business and policies of the Corporation.
In the absence of the Chief Executive Officer, the President shall have and may
exercise all of the powers of the Chief Executive Officer.
Section 7. The President. Subject to the direction and under the
supervision of the Board of Directors and the Chairman of the Board, if there be
one, the President shall have general charge of the business, affairs and
property of the Corporation and control over its officers, agents and employees
and shall do and perform such other duties and may exercise such other powers as
from time to time may be assigned to him by these Bylaws or by the Board of
Directors. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Stockholders and the Board of Directors.
Section 8. The Chief Operating Officer. The Chief Operating Officer shall
have overall operational responsibility for the Corporation.
Section 9. Chief Financial Officer. The Chief Financial Officer shall have
overall responsibility for the financial and accounting operations of the
Corporation, shall have supervision of the funds, securities, receipts and
disbursements of the Corporation, shall cause all monies and other valuable
effects of the Corporation to be deposited in its name and to its credit in such
depositories as shall be selected by the Board of Directors or pursuant to
authority conferred by the Board of Directors, shall cause to be kept at the
accounting office of the Corporation correct books of account, proper vouchers
and other papers pertaining to the Corporation's business and shall render to
the Chief Executive Officer, President or the Board of Directors, whenever
requested, an accounting of the financial condition of the Corporation.
Section 10. The Treasurer. The Treasurer shall, in the absence or
disability of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer, and shall perform such other duties and
have such other powers as the Board of Directors, the Chief Executive Officer,
the Chief Financial Officer or these Bylaws may from time to time prescribe.
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Section 11. The Vice Presidents. At the request of the President or, in the
event of the President's absence, disability or refusal to act, the Vice
President or Vice Presidents, as designated by the Board of Directors, shall
perform all of the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall have such powers and discharge such duties as may be
assigned to him from time to time by the Chief Executive Officer, President or
the Board of Directors.
Section 12. The Secretary. The Secretary shall keep the minutes of the
meetings of the Stockholders and the Board of Directors in one or more books
provided for that purpose, shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or filed
are properly kept or filed, as the case may be, and shall perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Chief Executive Officer, President or by the Board
of Directors.
Section 13. The Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers, in order of their seniority, in
the absence or disability of the Secretary or Treasurer, shall perform the
duties and exercise the powers of the Secretary or Treasurer and shall perform
such other duties as the Chief Executive Officer, President or the Board of
Directors shall prescribe.
Section 14. Other Duties and Powers. Each officer, in addition to the
duties and powers specifically set forth by these Bylaws, shall perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these Bylaws or by the Board of Directors.
Section 15. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
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ARTICLE VI
Contracts, Loans, Checks and Deposits
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and delivery
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors. Endorsements of instruments for deposit to
the credit of the Corporation in any of its duly authorized depositories may be
made by rubber stamp of the Corporation or in such other manner as the Board of
Directors may from time to time determine.
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VII
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such Certificates shall be signed by, or shall have placed upon them
the facsimile signatures of, the Chairman of the Board, President or Vice
President, and the Secretary, Treasurer or an Assistant Secretary or Treasurer,
and shall be sealed with the seal of the Corporation or a facsimile thereof. All
Certificates for shares shall be consecutively numbered. The name of the person
owning the shares represented thereby with the number of shares and the date of
issue shall be entered on the books of the Corporation.
Section 2. Transfers of Shares. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof or by his attorney thereunto authorized by a Power of Attorney duly
executed, and upon the surrender of the Certificate therefore, which shall be
cancelled before a new Certificate shall be issued.
Section 3. Lost Certificates. In the event a Certificate of Stock is
allegedly lost, stolen or destroyed, the Corporation may issue a new Certificate
and the Board of Directors may, in its
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discretion, require the owner thereof to give the Corporation a good and
sufficient bond, in such sum as the Board of Directors may direct, not exceeding
double the value of the stock, to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
or the issuance of the new Certificate.
Section 4. Treasury Stock. All issued and outstanding Stock of the
Corporation that may be purchased or otherwise acquired by the Corporation shall
be Treasury Stock, and the Directors of the Corporation shall be vested with the
authority to resell said shares for such price and to such person or persons as
the Board of Directors may determine. Such Stock shall neither vote nor
participate in dividends while held by the Corporation.
Section 5. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the last day of December in each year.
ARTICLE IX
Dividends
The Board of Directors may from time to time declare and the Corporation
may pay dividends on its outstanding shares in cash, property or shares, and
upon the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X
Seal
The Corporation shall have a corporate seal which shall have inscribed
around the circumference thereof "INTEGRATED MEDICAL RESOURCES, INC." and
elsewhere thereon shall bear the words "Corporate Seal." The Corporate Seal may
be affixed by impression or may be by facsimile.
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ARTICLE XI
Miscellaneous
Section 1. Waiver of Notice. Whenever any notice is required to given under
the provisions of these Bylaws or under the provisions of the Articles of
Incorporation or under the provisions of the Kansas General Corporation Code,
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section 2. Indemnification of Officers, Directors and Others. The
Corporation will indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other than
an action by or in the right of the Corporation, by reason of the fact that he
is or was a Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a Director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
The Corporation will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for such expenses which the Court shall
deem proper.
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To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with the
action, suit or proceeding.
Any indemnification under either of the first two paragraphs of this
Section, unless ordered by a Court, shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in this Section. The
determination shall be made by the Board of Directors of the Corporation by a
majority vote of a quorum consisting of Directors who were not parties to the
action, suit or proceeding, or, if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or by the Stockholders of the Corporation.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
the action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation.
The indemnification provided by this Section shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any Bylaw, agreement, vote of Stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Section.
ARTICLE XII
Amendments
These Bylaws may be altered, amended or repealed, in whole or in part, or
new Bylaws may be adopted by the Stockholders of the Corporation; provided,
however, that notice of such amendment, repeal or adoption of new Bylaws be
contained in the notice of such meeting of Stockholders. All such amendments
must be approved by the holders of a majority of the
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outstanding capital stock entitled to vote thereon. If authorized by the
Articles of Incorporation, these Bylaws may also be altered, amended or
repealed, in whole or in part, by the Board of Directors at any Annual Meeting
of the Board of Directors, or at any Special Meeting of the Board of Directors
called for that purpose, except with respect to any provision hereof which by
law, the Articles of Incorporation or these Bylaws requires action by the
Stockholders.
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EXHIBIT 4(c)(i)
SECURITY AGREEMENT
SECURITY AGREEMENT dated September 30, 1997, made by INTEGRATED MEDICAL
RESOURCES, INC., a Kansas corporation IMR OF ARIZONA, INC., an Arizona
corporation, INTEGRATED MEDICAL RESOURCES OF CALIFORNIA, INC., a California
corporation, INTEGRATED MEDICAL RESOURCES OF COLORADO, INC., a Colorado
corporation, IMR OF CONNECTICUT, INC., a Connecticut corporation, IMR INTEGRATED
DIAGNOSTICS OF FLORIDA, INC.,a Florida corporation, IMR OF ILLINOIS, INC., an
Illinois corporation, IMR OF INDIANA, INC., an Indiana corporation, INTEGRATED
MEDICAL RESOURCES OF MASSACHUSETTS, INC., a Massachusetts corporation, IMR OF
MICHIGAN, INC., a Michigan corporation, IMR OF NEVADA, INC., a Nevada
corporation, INTEGRATED DIAGNOSTICS, INC., a New York corporation, IMR OF NORTH
CAROLINA, INC., a North Carolina corporation, IMR OF OHIO, INC., an Ohio
corporation, IMR INTEGRATED DIAGNOSTICS OF OKLAHOMA, INC., an Oklahoma
corporation, INTEGRATED MEDICAL RESOURCES OF PENNSYLVANIA, INC., a Pennsylvania
corporation, IMR OF SOUTH CAROLINA, INC., a South Carolina corporation, IMR
INTEGRATED DIAGNOSTICS, INC., a Texas corporation, IMR OF VIRGINIA, INC., a
Virginia corporation, IMR OF WISCONSIN, INC., a Wisconsin corporation,
DIAGNOSTIC CENTER FOR MEN - PHOENIX, P.C., an Arizona professional corporation,
CALIFORNIA DIAGNOSTIC CENTER FOR MEN MEDICAL CLINIC, PROF. CORP., a California
professional corporation, DIAGNOSTIC CENTER FOR MEN - DENVER, P.C., a Colorado
professional corporation, DIAGNOSTIC CENTER FOR MEN - TAMPA, P.A., a Florida
professional association, DIAGNOSTIC CENTER FOR MEN - JACKSONVILLE, P.A., a
Florida professional association, DIAGNOSTIC CENTER FOR MEN - CHICAGO, S.C., an
Illinois corporation, DIAGNOSTIC CENTER FOR MEN - DEERFIELD, S.C., an Illinois
corporation, DIAGNOSTIC CENTER FOR MEN - INDIANAPOLIS, P.C., an Indiana
professional corporation, DIAGNOSTIC CENTER FOR MEN - KANSAS CITY, P.A., a
Kansas professional association, DIAGNOSTIC CENTER FOR MEN - BOSTON, P.C., a
Massachusetts professional corporation, DIAGNOSTIC CENTER FOR MEN - DETROIT,
P.C., a Michigan professional corporation, MEDICAL DIAGNOSTIC SERVICES FOR MEN -
WESTCHESTER, P.C., a New York professional corporation, MEDICAL DIAGNOSTIC
SERVICES FOR MEN - NEW YORK, P.C., a New York professional corporation, MEDICAL
DIAGNOSTIC SERVICES FOR MEN - MANHATTAN, P.C., a New York professional
corporation, MEDICAL DIAGNOSTIC SERVICES FOR MEN - BUFFALO, P.C., a New York
professional corporation, DIAGNOSTIC CENTER FOR MEN - GREENSBORO/WINSTON-SALEM,
P.C., a North Carolina professional corporation, DIAGNOSTIC CENTER FOR MEN
- -CLEVELAND, P.A., INC., an Ohio professional association, DIAGNOSTIC CENTER FOR
MEN - COLUMBUS, P.A., INC.,an Ohio professional association, DIAGNOSTIC CENTER
FOR MEN - CINCINNATI, P.A., INC., an Ohio professional association, DIAGNOSTIC
CENTER FOR MEN - OKLAHOMA CITY, P.C., an Oklahoma professional corporation,
DIAGNOSTIC CENTER FOR MEN - PITTSBURGH, P.C., a Pennsylvania professional
corporation, DIAGNOSTIC CENTER FOR MEN - PHILADELPHIA, P.C., a Pennsylvania
professional corporation, DIAGNOSTIC CENTER FOR MEN - GREENVILLE, P.C., a South
Carolina professional corporation, DIAGNOSTIC CENTER FOR MEN - ARLINGTON, P.A.,
<PAGE>
a Texas professional association, DIAGNOSTIC CENTER FOR MEN - HOUSTON, P.A., a
Texas professional association, DIAGNOSTIC CENTER FOR MEN - ALEXANDRIA, P.C., a
Virginia professional corporation, DIAGNOSTIC CENTER FOR MEN - NORFOLK, P.C., a
Virginia professional corporation, DIAGNOSTIC CENTER FOR MEN - MILWAUKEE, S.C.,
a Wisconsin corporation, (collectively referred to as the "Debtor") in favor of
P & C INVESTMENTS, a Kansas general partnership (the "Secured Party");
Preliminary Statement
The Secured Party has agreed to extend a loan to the Debtor in the amount
of Five Hundred Twenty Thousand and No/100 ($520,000.00) Dollars pursuant to a
Promissory Note in the face amount of Five Hundred Twenty Thousand and No/100
($520,000.00) Dollars (the "Promissory Note"), upon the express condition that
Debtor secure the Promissory Note by the execution of this Security Agreement
granting Secured Party a security interest in certain furniture, fixtures,
equipment and accounts receivable of Debtor.
NOW, THEREFORE, in consideration of the premises the Debtor hereby agrees
with the Secured Party as follows:
1. Grant of Security Interest. The Debtor hereby grants to the Secured Party for
its benefit a security interest in all of the Debtor's right, title, and
interest, now owned or hereafter acquired, in and to the "Collateral" listed in
Schedule A, attached hereto and incorporated herein by reference, as security
for all "Obligations" (as defined in paragraph 2 of this Security Agreement) now
existing or hereafter arising.
2. Obligations Secured. The term "Obligations" means all obligations,
indebtedness or liabilities of Debtor to the Secured Party of every kind,
including but not limited to Debtor's obligations pursuant to the Promissory
Note, now or hereafter existing, whether absolute or contingent, primary or
secondary, as Debtor or otherwise, and whether for principal, interest, fees,
costs, expenses or otherwise, including all fees and expenses incurred in the
enforcement or collection of amounts due under the Promissory Note or other
indebtedness, obligation or liability. The term "Obligations" also includes
reasonable attorney's fees incurred both before and after default to the extent
allowed by federal Bankruptcy Law.
3. Warranties With Respect to Collateral. Debtor represents and warrants, with
respect to the Collateral hereunder, that Debtor is, or contemporaneously with
the execution of this Agreement will become, and will continue to be, the
absolute and exclusive owner thereof, clear of all liens, encumbrances and
security interests other than Secured Party's security interest, and other than
the acknowledged liens of Citizens Bank.
4. Covenants of Debtor. So long as this Agreement is in effect and until such
time as the Obligations secured hereunder have been fully paid and discharged,
Debtor covenants and agrees that:
(a) Debtor will execute and deliver to Secured Party, in a form
acceptable to Secured Party, any instrument, document, stock
certificate, stock power, financing statement, assignment or
other writing which Secured Party may
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deem reasonably necessary or desirable to carry out the terms of
this Agreement, to perfect Secured Party's security interest in
the Collateral for the Obligations to Secured Party, or to enable
Secured Party to enforce conveniently its security interest in
any of the foregoing;
(b) Debtor will maintain, in accordance with sound accounting
practice, accurate records and books of account showing, among
other things, all Collateral, the proceeds of the sale or other
disposition thereof and the collections therefrom; and Secured
Party shall have the right upon reasonable notice, to inspect the
Collateral and to inspect, audit, check and make extracts from
the books, records, journals, orders, receipts, correspondence
and other data relating to Collateral;
(c) Debtor will, if requested by Secured Party, mark its records
concerning its Collateral in a manner satisfactory to Secured
Party to show the latter's security interest therein;
(d) Debtor will furnish Secured Party, from time to time, with
balance sheets, operating statements and net worth
reconciliations financial statements of Debtor as of the close of
such accounting periods as Secured Party may reasonably request;
and such other information respecting the financial condi tion
and affairs of Debtor (including, without limitation, copies of
federal income tax returns) as Secured Party may, from time to
time, reasonably re quest. Such balance sheets and operating
statements shall be prepared in accordance with generally
accepted accounting principals ("GAAP") certified by a firm of
certified public accountants at least annually when requested by
Secured Party;
(e) Debtor will pay and discharge when due all premiums of insurance
required hereunder and all taxes, levies and other charges on its
property; and authorizes Secured Party to pay for the account of
Debtor any of the foregoing (or, as to insurance, premiums for
insurance of Secured Party's interest alone) which Debtor fails
to pay, and any such payment by Secured Party shall constitute an
item of Obligations to Secured Party;
(f) Debtor will pay Secured Party, upon demand, the cost of
collection or enforcement (including reasonable attorneys' fees)
of any Collateral for Obligations to Secured Party, if Secured
Party itself undertakes such collection or enforcement, together
with all charges and expenses of every kind or description
(including taxes with respect to Collateral) paid or incurred by
Secured Party under or with respect to the Obligations or any
Collateral therefor, or execution or levy on such Collateral, and
any such charges shall be considered part of the Obligations;
(g) Except with the prior written consent of Secured Party; which
consent shall not be unreasonably withheld:
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(1) Debtor will not create, incur or assume any liability
for borrowed money in excess of $100,000, in the
aggregate, except for borrowings from the Secured
Party;
(2) Debtor will not assume, guarantee, endorse or
otherwise become liable in connection with the
obligations of any person, firm or corporation,
except by endorsement of instruments for deposit or
collection or similar transactions in the ordinary
course of business;
(3) Debtor will not sell or lease all or substantially
all of its assets;
(4) Debtor will not factor, nor will Debtor in any other
manner, or for any other purpose, assign or transfer,
either absolutely or as collateral, any of the
Collateral, except in favor of Secured Party;
(5) Debtor will not mortgage, pledge, hypothecate or give
or contract to give any security interest of any
kind, including, without limitation, a security
interest in the Collateral, to anyone except Secured
Party; nor sell or otherwise dispose of any of its
property or assets of any kind except in the normal
course of business;
(6) Debtor will not change its name, nor alter or amend
its capital structure;
(7) Debtor will not increase the compensation of any
executive officer or employee of Debtor by more than
$50,000 in a twelve (12) month period;
(8) Debtor will not pay or increase any kind or type of
dividends paid to shareholders above those paid
during the immediately preceding quarter year.
(h) Debtor shall keep the Collateral insured and the Secured Party
shall appear as a named insured (to whom loss shall be payable)
in such amounts, in such companies and against such risks as may
be satisfactory to Secured Party; pay the cost of all such
insurance; secure the obligation of the insurer to notify Secured
Party at least ten (10) days prior to the modification,
expiration, revocation or cancellation of such insurance; deliver
certificates evidencing such insurance to Secured Party; and, up
to the amount of any and all of the Obligations, Debtor assigns
to Secured Party all right to receive proceeds of such insurance;
directs any insurer to pay all proceeds directly to Secured
Party, and authorizes Secured Party to endorse Debtor's name to
any draft or check for such proceeds; which proceeds Secured
Party may set-off against Obligations, or hold as security for
Obligations; any proceeds in excess of Obligations to be
delivered to Debtor;
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(i) In addition to insuring its Collateral as required above, Debtor
will maintain adequate insurance against loss or damage to all of
its other properties in such manner and to the extent which like
properties are so insured by others owning, operating or leasing
properties of similar character, and will maintain adequate
insurance against liability for damage to the person or property
of others;
(j) Debtor's chief executive office and the location where Debtor
keeps its records concerning all Collateral is 11320 West 79th
Street, Lenexa, Kansas 66214.
(k) Debtor will promptly advise Secured Party in writing of any new
address or of its opening of any new places of business, and of
any change in the Debtor's name.
(l) Debtor expressly authorizes Blackwell Sanders Matheny Weary &
Lombardi, L.C., or any other person whom it or Secured Party may
designate, as attorney for Debtor, with power to receive, open
and dispose of all mail addressed to Debtor and to notify the
Post Office authorities to change the address for delivery of
mail addressed to Debtor to such address as Secured Party may
designate;
(m) Debtor is and will be a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Kansas. Debtor has the lawful power to own properties and to
engage in the business it conducts and is duly qualified and in
good standing as a foreign corporation in the jurisdictions
wherein the nature of the business transacted by it or property
owned by it makes such qualifications necessary; and Debtor has
the proper authority, governmental permits, and other consents,
licenses and authorizations which are necessary to own and
operate its property and carry on its business as and where it is
now carried on, and to execute, deliver and perform its
obligations under this Agreement;
(n) Neither the execution and delivery of this Agreement and the
documents contemplated herein, the consummation of the
transactions herein and therein contemporaneously contemplated,
nor compliance with the terms and provisions thereof, will
conflict with or result in any breach of any of the terms,
conditions or provisions of any law, rule, regulation, order,
writ, injunction or decree of any court or governmental authority
or of any in denture, contract, or other instrument or agreement
of Debtor. Such execution and consummation will not result in the
creation or imposition of any security interests, liens or
encumbrances of any nature whatsoever upon any of the property or
assets of the Debtor, except security interests created in favor
of the Secured Party pursuant to this Agreement;
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(o) Any financial statements of the Debtor heretofore delivered to
Secured Party fairly represent the financial condition of Debtor
as of the date thereof; no material adverse changes in the
condition, financial or otherwise, of Debtor has occurred since
the respective date thereof;
(p) This Agreement, the Promissory Note and all other documents
executed in connection therewith, constitute legal, valid and
binding obligations of Debtor to Secured Party enforceable in
accordance with their respective terms, unless limited by
bankruptcy, insolvency, reorganization, moratorium or other law
affecting creditor's rights;
(q) Debtor has filed or will immediately file all tax returns which
are required to be filed, and has paid or will pay all taxes due
pursuant to such returns or pursuant to any assessment received
by it, except such taxes, if any, as are being contested in good
faith and for which adequate reserves have been provided. The
charges, accruals and reserves on the books of Debtor in respect
to any taxes or other governmental charges are adequate;
(r) There are no material litigation matters, proceedings,
investigations, or matters of inquiry, audit or review, on a
formal or informal basis pending or threatened against Debtor.
For purposes of this subparagraph a matter shall be considered
"material" if the amount in controversy exceeds $10,000.00.
(s) Neither the business nor the properties (both real and personal)
of Debtor is now affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail,
earthquake, act of God or of the public enemy or other casualty
(whether or not covered by insurance) materially adversely
affecting such business or properties;
(t) No information furnished by Debtor to Secured Party in connection
with the negotiation of this Agreement or other documents or
instruments executed in connection with this Agreement contains
any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statements contained
therein not misleading;
(u) No representation or warranty by the Debtor contained herein or
in any certificate or other document furnished by the Debtor
pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such
representation or warranty not misleading in light of the
circumstances under which it was made;
(v) Debtor will immediately give notice in writing to Secured Party
of any development, financial or otherwise, which would
materially adversely affect its business, properties, affairs, or
the Collateral or the ability of it to perform its obligations to
Secured Party under this Agreement, the Promissory Note or any
documents executed in connection therewith. The Debtor will
notify
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the Secured Party immediately if it becomes aware of the
occurrence of any event of default under this Agreement; or of
any fact, condition or event that only with the giving of notice
or passage of time or both, could become an event of default
under this Agreement, or of the failure of the Debtor to observe
any of its respective undertakings hereunder;
(w) Debtor will promptly pay and discharge all taxes, assessments and
governmental charges and levies upon its income, profits or
property, real, personal or mixed, or any part thereof; provided,
that Debtor shall not be required to pay or cause to be paid any
tax, assessment, charge or levy which is contested in good faith
by appropriate proceedings and with respect to which it shall
have set aside on its books reserves adequate therefor;
(x) Each consent, approval or authorization of, or filing,
registration or qualification with, any entity required to be
obtained or effected by the Debtor in connection with the
execution and delivery of this Agreement, the Promissory Note and
all other documents in connection therewith or the undertaking or
performance of any obligation hereunder or thereunder has been
duly obtained or effected;
(y) Debtor will provide to Secured Party: (i) certificates of its
good standing and authority to do business in the State of Kansas
within 15 days after request by Secured Party; (ii) certified
copies of its Articles of Incorporation and all amendments
thereto within 15 days after request by Secured Party; (iii)
copies of its by-laws and any amendments thereof certified as
being true and complete by its Secretary within 15 days after
request by Secured Party; and (iv) contemporaneously herewith
certified resolutions in form and content satisfactory to Secured
Party authorizing the execution and delivery of this Agreement,
the Promissory Note and all supporting documentation to Secured
Party and the consummation of the transactions contemplated by
such documents and instruments. Secured Party may exercise its
rights to request documents hereunder from time to time as it
reasonably deems necessary to maintain its security;
(z) Debtor will carry on and conduct its business in substantially
the same manner as it is presently conducted, and Debtor will do
all things necessary to preserve and keep in force and effect its
legal existence as a corporation and its authority to do business
in the State of Kansas, and Debtor will do all things necessary
to preserve and keep in force and effect all of Debtor's other
material contracts, rights and franchises;
(aa) Debtor will comply with all laws, rules and regulations of any
governmental body or entity to which it may be subject, including
without limitation federal and state securities laws and
regulations and will keep and maintain in full force all
franchises, licenses (including those of its employees required
to be
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so licensed), permits, approvals or certificates required by
governmental authorities and which are material to the conduct of
its business;
(bb) Debtor has no mortgages, guaranties or other liabilities
contingent or otherwise currently outstanding, other than as
disclosed in Schedule 4(cc).
5. Additional Security. The Secured Party shall have the right to call for and
be provided with additional security satisfactory to the Secured Party should
the value of the security decline or be deemed by the Secured Party to be
inadequate or unsatisfactory.
6. Impairment of Collateral. Debtor agrees not to take any action whatsoever
which would impair the Collateral as security for the Obligations.
7. Waiver of Rights. The Secured Party may, at its option, without notice to
Debtor extend the maturity of the Obligations and/or exchange and/or release
collateral held without affecting the liability of said Debtor. Debtor of the
Obligations severally waive presentment for payment, notice of nonpayment,
protest and notice of protest.
8. Default. DEBTOR SHALL BE IN DEFAULT under this Security Agreement upon the
happening of any one or more of the following events:
(a) Default in the payment or performance of any Obligations,
covenant or liability of the Debtor (or of any endorser,
guarantor or surety for any liability or Obligations of the
Debtor to the Secured Party) contained or referred to herein,
including but not limited to those Obligations, covenants or
liabilities referenced in the Promissory Note, or any other
document executed in connection therewith, and such Default is
not cured within five (5) days of such default, after receipt
of notice.
(b) Any warranty, representation or statement made or furnished to
the Secured Party by the Debtor (or any endorser, guarantor or
surety for any liability of the Debtor to Secured Party) for
the purpose of obtaining credit or pursuant to this Agreement
or the Promissory Note, proves to have been false in any
material respect when made or furnished.
(c) Loss, theft, damage, destruction, misuse, sale, lease or
additional encumbrances on any of the Collateral, or the
making of any levy, seizure or attachment or any other
proceedings which in the opinion of the Secured Party would
impair the Secured Party's rights to or diminish the value of
the Collateral.
(d) Dissolution, death, insolvency, business failure, appointment
of a receiver of any part of the property of, assignment for
the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against the Debtor.
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(e) Failure by the Debtor to keep, observe or perform any of the
provisions of this Agreement required hereunder to be kept,
observed or performed by Debtor.
(f) Actions by the Debtor or by any other person, which in the
reasonable opinion of the Secured Party would impair or
endanger the Collateral.
(g) The Secured Party's good faith feeling of insecurity in the
prospect of payment of the Obligations or realization on the
Collateral.
9. Remedies. In the event of default, Secured Party shall have the right to:
(a) avail itself of such rights with respect to any and all
Collateral which are provided for herein, in the Promissory
Note or in any other agreement between Secured Party and
Debtor;
(b) all rights with respect to the Collateral which are provided
for in the Uniform Commercial Code as adopted in Kansas or
other state with proper jurisdiction over the Collateral or
this Agreement (hereinafter the "Code"), including the right
to require Debtor to promptly assemble any Collateral for
Obligations to Secured Party, and to make it available to
Secured Party at a place reasonably convenient to both
parties;
(c) deem that any notice of sale or other disposition of the whole
or any part of the Collateral, received by Debtor at least
five (5) days prior to such action, shall constitute
reasonable notice to Debtor;
(d) collect from Debtor and Debtor agrees that Debtor shall pay to
Secured Party the reasonable costs and expenses (including
attorneys' fees and dis bursements) of the collection of the
Obligations secured hereunder and of all of the Obligations,
and that in the event of foreclosure upon Debtor's Collateral,
the proceeds shall be first applied to such expenses;
(e) take any and all actions and incur any and all expenses
with respect to the Collateral which the Secured Party
reasonably deems necessary and proper in order to enhance
the Secured Party's ability to effectively levy on such
Collateral, including without limitation, causing such
Collateral to be completed, cleaned or repaired, or in the
case of securities, to cause same to be registered. Debtor
shall assist Secured Party in such actions; any such ex
penses incurred by the Secured Party shall be included as
Obligations; and any proceeds from the Collateral shall be
first applied to such expenses;
(f) take control of any and all contracts with respect to which
Contract Rights which form part of the Collateral have arisen
or may arise at the time of such default and perform and take
title to such contracts, however, Secured Party shall be under
absolutely no obligation to do so and shall not incur
additional liability if Secured Party elects to do so or not.
9
<PAGE>
(g) take control of any and all general intangibles, including
without limitation, good will, customer lists, trade names,
patents, trademarks and trade secrets, which exist or may
arise at the time of default and which form part of the
Collateral, and take title to and use or dispose of such
general intangibles as the Secured Party shall deem
appropriate in its sole discretion.
(h) avail itself of any and all other remedies at law or equity
which may be available to Secured Party with respect to Debtor
and the Collateral.
The parties hereto hereby declare that all Collateral transferred to Secured
Party hereunder is transferred in fact to secure loans and is not, in fact, sold
to Secured Party regardless whether any assignment thereof, which is separate
from this Agreement, is in form absolute. All rights and remedies of Secured
Party whether granted hereunder, under the Code or otherwise are cumulative and
not alternative. The exercise, full or partial, or the commencement of the
exercise of any one right or remedy, shall not preclude the further exercise of
it or any other remedy.
10. Notices. All notices referred to in this Agreement shall be sent by ordinary
or certified or registered mail, or delivered in person, and in the case of
Secured Party shall be sent to it, to the attention of the President, at 11320
West 79th Street, Lenexa, Kansas 66214 and in the case of Debtor shall be sent
to it at 5425 Martindale, Shawnee, Kansas 66218 or such other address as may
appear for Debtor on the Secured Party's records. Any notice hereunder shall be
deemed to be received two (2) days following the date of mailing, provided that
such notice is properly addressed and sufficient postage is affixed thereto, or
the actual date of receipt, whichever is earlier. The failure of Secured Party
to enforce any of the terms and provisions hereof, or its failure to declare a
default hereunder, shall apply only in the particular instance, and shall not
operate as a continuing waiver.
11. Written Amendment. No amendment, modification or termination of any
provision of this Agreement shall be effective unless set forth in a writing by
all of the parties hereto.
12. Saving Clause. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, or affecting the validity or enforceability of such
provision in any other jurisdiction.
13. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and the successors or assigns of Secured Party
or participating lenders within the meaning of the following paragraph, but
shall not inure to the benefit of any other person, firm or corporation. Debtor
shall not assign or delegate its rights, liabilities or obligations hereunder.
Secured Party shall have the right to sell, transfer, delegate or assign its
rights, liabilities or obligations under this Agreement, the Promissory Note and
any documents executed or delivered to Secured Party in connection therewith.
14. Participation Agreements. Notwithstanding any other provisions of this
Agreement, the Debtor understands that the Secured Party may at any time enter
into participation agreements with one or more participating lenders whereby the
Secured Party will allocate any or all of its rights, liabilities or obligations
under this Agreement, the Promissory Note and any documents executed or
10
<PAGE>
delivered to Secured Party in connection therewith to such participating
lenders. The Debtor acknowledges that, for the convenience of all parties, this
Agreement is being entered into with the Secured Party only and that its
obligations under this Agreement are undertaken for the benefit of and as an
inducement to, any such participating lender as well as the Secured Party, and
the Debtor hereby grants to each participating lender, to the extent of its
participation in the loan transactions, the right to set off deposit accounts
maintained by the Debtor with such lender upon notice to the Debtor by such
lender of a default hereunder.
15. State Law. The laws of Kansas shall govern the construction and the rights
and duties of the parties with respect to this Agreement, the Promissory Note,
any documents executed or delivered in connection therewith and any and all
Collateral therefor.
16. Captions. All captions are for ease of reference only and shall in no way be
construed to alter or limit the substance of the provisions of this Agreement.
If more than one person executes this Security Agreement as a debtor, the term
"Debtor" shall mean all such persons, shall apply to each person both
individually and collectively and such persons shall be jointly and severally
liable.
17. Schedules. All Schedules referred to in this Agreement shall be attached
hereto and incorporated herein by reference.
18. Entire Agreement. This Agreement contains the entire agreement between the
parties respecting the matters herein set forth and supersedes all prior
agreements between the parties respecting such matters. Time is of the essence
of this Agreement. If any party obtains a judgment against any other party by
reason of a breach of this Agreement, a reasonable attorneys' fee as fixed by
the court shall be included in such judgment. No remedy conferred upon a party
in this Agreement is intended to be exclusive of any other remedy herein or by
law provided or permitted, but each shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law, in
equity or by statute. The parties waive trial by jury in any action, proceeding
or counterclaim brought by any party against any other on any matter arising out
of or in any way connected with this Agreement or the relationship of the
parties created hereunder. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
19. Continuing Agreement. This Security Agreement shall remain in full force and
effect until all Obligations pursuant to the Promissory Note have been fully and
completely terminated or discharged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
11
<PAGE>
THE PARTIES BY THEIR SIGNATURES HERETO ACKNOWLEDGE THAT THEY
HAVE READ, UNDERSTAND AND AGREE TO THE TERMS AND PROVISIONS OF THIS
AGREEMENT.
DEBTOR:
INTEGRATED MEDICAL RESOURCES, INC., a Kansas corporation
IMR OF ARIZONA, INC., an Arizona corporation
INTEGRATED MEDICAL RESOURCES OF CALIFORNIA, INC., a California corporation
INTEGRATED MEDICAL RESOURCES OF COLORADO, INC., a Colorado corporation
IMR OF CONNECTICUT, INC., a Connecticut corporation
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC., a Florida corporation
IMR OF ILLINOIS, INC., an Illinois corporation
IMR OF INDIANA, INC., an Indiana corporation
INTEGRATED MEDICAL RESOURCES OF MASSACHUSETTS, INC., a Massachusetts
corporation
IMR OF MICHIGAN, INC., a Michigan corporation
IMR OF NEVADA, INC., a Nevada corporation
INTEGRATED DIAGNOSTICS, INC., a New York corporation
IMR OF NORTH CAROLINA, INC., a North Carolina corporation
IMR OF OHIO, INC., an Ohio corporation
IMR INTEGRATED DIAGNOSTICS OF OKLAHOMA, INC., an Oklahoma corporation
INTEGRATED MEDICAL RESOURCES OF PENNSYLVANIA, INC., a Pennsylvania
corporation
IMR OF SOUTH CAROLINA, INC., a South Carolina corporation
IMR INTEGRATED DIAGNOSTICS, INC., a Texas corporation
IMR OF VIRGINIA, INC., a Virginia corporation
IMR OF WISCONSIN, INC., a Wisconsin corporation
DIAGNOSTIC CENTER FOR MEN - PHOENIX, P.C., an Arizona professional corporation
CALIFORNIA DIAGNOSTIC CENTER FOR MEN MEDICAL CLINIC, PROF. CORP., a
California professional corporation
DIAGNOSTIC CENTER FOR MEN - DENVER, P.C., a Colorado professional corporation
DIAGNOSTIC CENTER FOR MEN - TAMPA, P.A., a Florida professional association
DIAGNOSTIC CENTER FOR MEN - JACKSONVILLE, P.A., a Florida professional
association
DIAGNOSTIC CENTER FOR MEN - CHICAGO, S.C., an Illinois corporation DIAGNOSTIC
CENTER FOR MEN - DEERFIELD, S.C., an Illinois corporation
DIAGNOSTIC CENTER FOR MEN - INDIANAPOLIS, P.C., an Indiana professional
corporation
DIAGNOSTIC CENTER FOR MEN - KANSAS CITY, P.A., a Kansas professional association
DIAGNOSTIC CENTER FOR MEN - BOSTON, P.C., a Massachusetts professional
corporation
DIAGNOSTIC CENTER FOR MEN - DETROIT, P.C., a Michigan professional
corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - WESTCHESTER, P.C., a New York
professional corporation
12
<PAGE>
MEDICAL DIAGNOSTIC SERVICES FOR MEN - NEW YORK, P.C., a New York
professional corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - MANHATTAN, P.C., a New York
professional corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - BUFFALO, P.C., a New York professional
corporation
DIAGNOSTIC CENTER FOR MEN - GREENSBORO/WINSTON-SALEM, P.C., a North
Carolina professional corporation
DIAGNOSTIC CENTER FOR MEN - CLEVELAND, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - COLUMBUS, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - CINCINNATI, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - OKLAHOMA CITY, P.C., an Oklahoma professional
corporation
DIAGNOSTIC CENTER FOR MEN - PITTSBURGH, P.C., a Pennsylvania professional
corporation
DIAGNOSTIC CENTER FOR MEN - PHILADELPHIA, P.C., a Pennsylvania professional
corporation
DIAGNOSTIC CENTER FOR MEN - GREENVILLE, P.C., a South Carolina professional
corporation
DIAGNOSTIC CENTER FOR MEN - ARLINGTON, P.A., a Texas professional association
DIAGNOSTIC CENTER FOR MEN - HOUSTON, P.A., a Texas professional association
DIAGNOSTIC CENTER FOR MEN - ALEXANDRIA, P.C., a Virginia professional
corporation
DIAGNOSTIC CENTER FOR MEN - NORFOLK, P.C., a Virginia professional
corporation
DIAGNOSTIC CENTER FOR MEN - MILWAUKEE, S.C., a Wisconsin corporation
By: /s/ T. Scott Jenkins
T. Scott Jenkins or Beverly Evling
Pursuant to Limited Power of Attorney
THE SECURED PARTY:
P & C INVESTMENTS,
a Kansas general partnership
By: /s/ Charles A. Holtgraves
Name: Charles A. Holtgraves
Title: Partner
13
<PAGE>
SCHEDULE 1 TO SECURITY AGREEMENT
Collateral Description
The Debtor hereby grants to Secured Party a security interest in all of
the Debtor's right, title and interest in and to the following property,
wherever located, whether such property or interest therein is now owned or
existing or hereafter acquired or arising (collectively, the "Collateral") (all
capitalized terms to have the meanings set forth in the Uniform Commercial Code
as in effect in the state in which this financing statement is filed):
(a) All Accounts, accounts receivable, contract rights, Chattel
Paper, instruments, Documents, tax refunds, insurance proceeds,
General Intangibles and all other obligations of any kind arising
our of or in connection with the sale or lease of Goods or the
rendering of services or otherwise due the Debtor, and all rights
in and to all security agreements, leases and other contracts
securing or otherwise relating to any such Accounts, accounts
receivable, contract rights, Chattel Paper, Instruments,
Documents, General Intangibles and obligations are hereinafter
collectively referred to as the "Receivables"; except receivables
arising from the federal government or otherwise sponsored by the
federal government, including Medicare, Medicaid and CHAMPUS, to
the extent a security interest is prohibited by federal law;
(b) All Fixtures, Furniture and Equipment, and all parts,
accessories, attachments, special tools, additions, replacements,
substitutions and accessions to or for the foregoing; and
(c) All products and Proceeds of the property described in
subsections (a) and (b) above and, to the extent not otherwise
included, all payment under any insurance policy or payments
(whether or not Secured Party is the loss payee thereof), and any
indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing
collateral.
14
<PAGE>
EXHIBIT 4(c)(ii)
PROMISSORY NOTE
Date: September 30, 1997 Principal: $520,000
Due Date: December 31, 1997
FOR VALUE RECEIVED, the undersigned, INTEGRATED MEDICAL RESOURCES,
INC., a Kansas corporation, IMR OF ARIZONA, INC., an Arizona corporation,
INTEGRATED MEDICAL RESOURCES OF CALIFORNIA, INC., a California corporation,
INTEGRATED MEDICAL RESOURCES OF COLORADO, INC., a Colorado corporation, IMR OF
CONNECTICUT, INC., a Connecticut corporation, IMR INTEGRATED DIAGNOSTICS OF
FLORIDA, INC.,a Florida corporation, IMR OF ILLINOIS, INC., an Illinois
corporation, IMR OF INDIANA, INC., an Indiana corporation, INTEGRATED MEDICAL
RESOURCES OF MASSACHUSETTS, INC., a Massachusetts corporation, IMR OF MICHIGAN,
INC., a Michigan corporation, IMR OF NEVADA, INC., a Nevada corporation,
INTEGRATED DIAGNOSTICS, INC., a New York corporation, IMR OF NORTH CAROLINA,
INC., a North Carolina corporation, IMR OF OHIO, INC., an Ohio corporation, IMR
INTEGRATED DIAGNOSTICS OF OKLAHOMA, INC., an Oklahoma corporation, INTEGRATED
MEDICAL RESOURCES OF PENNSYLVANIA, INC., a Pennsylvania corporation, IMR OF
SOUTH CAROLINA, INC., a South Carolina corporation, IMR INTEGRATED DIAGNOSTICS,
INC., a Texas corporation, IMR OF VIRGINIA, INC., a Virginia corporation, IMR OF
WISCONSIN, INC., a Wisconsin corporation, DIAGNOSTIC CENTER FOR MEN -PHOENIX,
P.C., an Arizona professional corporation, CALIFORNIA DIAGNOSTIC CENTER FOR MEN
MEDICAL CLINIC, PROF. CORP., a California professional corporation, DIAGNOSTIC
CENTER FOR MEN - DENVER, P.C., a Colorado professional corporation, DIAGNOSTIC
CENTER FOR MEN - TAMPA, P.A., a Florida professional association, DIAGNOSTIC
CENTER FOR MEN - JACKSONVILLE, P.A., a Florida professional association,
DIAGNOSTIC CENTER FOR MEN - CHICAGO, S.C., an Illinois corporation, DIAGNOSTIC
CENTER FOR MEN - DEERFIELD, S.C., an Illinois corporation, DIAGNOSTIC CENTER FOR
MEN - INDIANAPOLIS, P.C., an Indiana professional corporation, DIAGNOSTIC CENTER
FOR MEN - KANSAS CITY, P.A., a Kansas professional association, DIAGNOSTIC
CENTER FOR MEN - BOSTON, P.C., a Massachusetts professional corporation,
DIAGNOSTIC CENTER FOR MEN - DETROIT, P.C., a Michigan professional corporation,
MEDICAL DIAGNOSTIC SERVICES FOR MEN - WESTCHESTER, P.C., a New York professional
corporation, MEDICAL DIAGNOSTIC SERVICES FOR MEN - NEW YORK, P.C., a New York
professional corporation, MEDICAL DIAGNOSTIC SERVICES FOR MEN - MANHATTAN, P.C.,
a New York professional corporation, MEDICAL DIAGNOSTIC SERVICES FOR MEN -
BUFFALO, P.C., a New York professional corporation, DIAGNOSTIC CENTER FOR MEN -
GREENSBORO/WINSTON-SALEM, P.C., a North Carolina professional corporation,
DIAGNOSTIC CENTER FOR MEN - CLEVELAND, P.A., INC., an Ohio professional
association, DIAGNOSTIC CENTER FOR MEN - COLUMBUS, P.A., INC.,an Ohio
professional association, DIAGNOSTIC CENTER FOR MEN - CINCINNATI, P.A., INC., an
Ohio professional association, DIAGNOSTIC CENTER FOR MEN -OKLAHOMA CITY, P.C.,
an Oklahoma professional corporation, DIAGNOSTIC CENTER FOR MEN - PITTSBURGH,
P.C., a Pennsylvania professional corporation, DIAGNOSTIC
1
<PAGE>
CENTER FOR MEN - PHILADELPHIA, P.C., a Pennsylvania professional corporation,
DIAGNOSTIC CENTER FOR MEN - GREENVILLE, P.C., a South Carolina professional
corporation, DIAGNOSTIC CENTER FOR MEN - ARLINGTON, P.A., a Texas professional
association, DIAGNOSTIC CENTER FOR MEN - HOUSTON, P.A., a Texas professional
association, DIAGNOSTIC CENTER FOR MEN - ALEXANDRIA, P.C., a Virginia
professional corporation, DIAGNOSTIC CENTER FOR MEN - NORFOLK, P.C., a Virginia
professional corporation, DIAGNOSTIC CENTER FOR MEN - MILWAUKEE, S.C., a
Wisconsin corporation, (collectively referred to as "Maker"), do hereby promise
to pay to the order of P & C INVESTMENTS, a Kansas general partnership (referred
to as "Holder"), the sum of Five Hundred Twenty Thousand and No/100
($520,000.00) Dollars, plus interest thereon at the rate of nine and one-half
percent (9.5%) per annum on the outstanding principal balance. Such principal
amount is to be repaid in full, together with interest on the remaining unpaid
principal and a Fifty Thousand and No/100 ($50,000.00) Dollar interest payment
(the "Bonus Interest Payment"), on or before December 31, 1997. The principal
and interest shall be paid by the undersigned in lawful money of the United
States of America, at 5425 Martindale, Shawnee, Kansas 66218, or such other
address of Holder as Holder designates to Maker, as follows:
The principal, together with interest on the remaining unpaid principal
and the Bonus Interest Payment, shall be payable in full on or before December
31, 1997. This Promissory Note may be prepaid in part or in full together with
accrued interest without penalty at any time.
The net proceeds of this Loan shall be disbursed to the Maker in
accordance with Schedule A, attached hereto and incorporated herein by
reference. From time to time, this Promissory Note may be extended or renewed in
whole or in part upon mutual written agreement of Maker and Holder. As to any
extension or renewal, the rate of interest thereon may be changed or fees in
consideration of loan extensions may be imposed and any related right or
security therefor may be waived, exchanged, surrendered, or otherwise dealt with
and any of the acts mentioned in this Promissory Note may be done, all without
affecting the liability of the Maker or endorsers, each of whom agrees to remain
liable under said Promissory Note until the debt represented thereby is actually
paid in full to Holder. The release of any party liable upon or in respect to
said Promissory Note shall not release any other such party. The Maker hereby
waives presentment, demand of payment, protest, and notice of non-payment, and
of protest and any and all other notices and demands whatsoever. The acceptance
by Holder of additional security for the performance of the terms and provisions
herein contained shall not in any way affect the liability of the Maker.
Maker expressly agrees that upon failure to pay any sums herein
specified when due, or the occurrence of an Event of Default under this
Promissory Note, or under any and all Agreements executed contemporaneously
herewith, the entire principal debt, or so much thereof as may remain unpaid at
the time, together with all accrued interest, shall, at the continuing option of
Holder, become immediately due and payable, and in addition thereto, there shall
be due and payable all costs incurred and, to the extent permitted by law,
reasonable attorney's fees in the event collection efforts are commenced by the
placement of this Promissory Note into the possession of an attorney, such
reasonable attorney's fees to be paid irrespective of whether or not actions or
foreclosure proceedings are commenced or continued into judgment.
2
<PAGE>
No delay on the part of the Holder in exercising any right hereunder
shall operate as a waiver of any rights; acceptance of any payment after its due
date shall not be deemed a waiver of the right to require prompt payment when
due of all other sums; acceptance of any payment after the Holder has declared
the entire indebtedness due and payable shall not cure any default of the Maker
or operate as a waiver of any right of the Holder hereunder.
Maker agrees to pay on demand any expenditures made by Holder relating
to collection of amounts owed by Maker to Holder under this Promissory Note
including, but not limited to, any action required to foreclose on any
collateral given by Maker to Holder hereunder. At the option of Maker, all such
expenditures may be added to the unpaid principal balance on this Promissory
Note and become a part of and on a parity with the principal indebtedness
secured by the collateral referred to herein and other instruments executed
herewith, and shall accrue interest at the rate as may be payable from time to
time on the original principal indebtedness or may be declared immediately due
and payable.
In no event shall interest (including any charge or fee held to be
interest by a court of competent jurisdiction) accrue to be payable hereon in
excess of the highest contract rate allowable by law at the time such
indebtedness shall be outstanding and unpaid, and if, by reason of the
acceleration of maturity of such indebtedness or for any other reason, interest
in excess of the highest legal rate shall be due or paid, any such excess shall
constitute and be treated as a payment on the principal hereof and shall operate
to reduce such principal by the amount of such excess, or if in excess of the
principal indebtedness, such excess shall be waived or refunded to the Maker.
This Promissory Note is to be construed in accordance with the laws of
the State of Kansas. If any charges made in connection with this loan at any
time whatsoever or provisions hereof are judicially determined to be invalid,
then the interest rate shall be reduced to an amount which is legally
permissible, and that portion thereof which is declared invalid shall not affect
the remaining provisions hereof.
The Security Agreement between Integrated Medical Resources, Inc. and P
& C Investments of even date herewith (the "Security Agreement") shall
constitute security for the payment in full performance of this obligation as
well as all expenditures made and sums advanced on principal hereunder.
Incorporated herein by reference are the terms, conditions, covenants,
representations, and warranties of the Security Agreement and any other
instrument securing this Promissory Note, all of even date herewith.
In this Promissory Note and any instrument securing the payment of the
same, the singular shall include the plural; the masculine shall include the
feminine and the neuter genders; "maker" or "undersigned" shall include the
Maker, endorser, guarantor, and assumer. In the event this Promissory Note is
executed, endorsed, guaranteed, or assumed by more than one person and/or firm,
and/or corporations, all of the obligations herein contained shall be joint and
several as among all of said parties. All persons liable, either now or
hereafter, for the payment of this Promissory Note shall be jointly and
severally liable, and waive presentment, demand, protest, and notice of
non-payment and of protest, and agree that any modifications of the terms of
payment or extension of time or payment shall in no way impair its/their joint
and several liability.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby executes this Promissory
Note on the date first above written.
MAKER:
INTEGRATED MEDICAL RESOURCES, INC., a Kansas corporation
IMR OF ARIZONA, INC., an Arizona corporation
INTEGRATED MEDICAL RESOURCES OF CALIFORNIA, INC., a California corporation
INTEGRATED MEDICAL RESOURCES OF COLORADO, INC., a Colorado corporation
IMR OF CONNECTICUT, INC., a Connecticut corporation
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC., a Florida corporation
IMR OF ILLINOIS, INC., an Illinois corporation
IMR OF INDIANA, INC., an Indiana corporation
INTEGRATED MEDICAL RESOURCES OF MASSACHUSETTS, INC., a Massachusetts
corporation
IMR OF MICHIGAN, INC., a Michigan corporation
IMR OF NEVADA, INC., a Nevada corporation
INTEGRATED DIAGNOSTICS, INC., a New York corporation
IMR OF NORTH CAROLINA, INC., a North Carolina corporation
IMR OF OHIO, INC., an Ohio corporation
IMR INTEGRATED DIAGNOSTICS OF OKLAHOMA, INC., an Oklahoma corporation
INTEGRATED MEDICAL RESOURCES OF PENNSYLVANIA, INC., a Pennsylvania
corporation
IMR OF SOUTH CAROLINA, INC., a South Carolina corporation
IMR INTEGRATED DIAGNOSTICS, INC., a Texas corporation
IMR OF VIRGINIA, INC., a Virginia corporation
IMR OF WISCONSIN, INC., a Wisconsin corporation
DIAGNOSTIC CENTER FOR MEN - PHOENIX, P.C., an Arizona professional corporation
CALIFORNIA DIAGNOSTIC CENTER FOR MEN MEDICAL CLINIC, PROF. CORP., a
California professional corporation
DIAGNOSTIC CENTER FOR MEN - DENVER, P.C., a Colorado professional corporation
DIAGNOSTIC CENTER FOR MEN - TAMPA, P.A., a Florida professional association
DIAGNOSTIC CENTER FOR MEN - JACKSONVILLE, P.A., a Florida professional
association
DIAGNOSTIC CENTER FOR MEN - CHICAGO, S.C., an Illinois corporation
DIAGNOSTIC CENTER FOR MEN - DEERFIELD, S.C., an Illinois corporation
DIAGNOSTIC CENTER FOR MEN - INDIANAPOLIS, P.C., an Indiana professional
corporation
DIAGNOSTIC CENTER FOR MEN - KANSAS CITY, P.A., a Kansas professional association
DIAGNOSTIC CENTER FOR MEN - BOSTON, P.C., a Massachusetts professional
corporation
DIAGNOSTIC CENTER FOR MEN - DETROIT, P.C., a Michigan professional
corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - WESTCHESTER, P.C., a New York
professional corporation
4
<PAGE>
MEDICAL DIAGNOSTIC SERVICES FOR MEN - NEW YORK, P.C., a New York
professional corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - MANHATTAN, P.C., a New York
professional corporation
MEDICAL DIAGNOSTIC SERVICES FOR MEN - BUFFALO, P.C., a New York professional
corporation
DIAGNOSTIC CENTER FOR MEN - GREENSBORO/WINSTON-SALEM, P.C., a North
Carolina professional corporation
DIAGNOSTIC CENTER FOR MEN - CLEVELAND, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - COLUMBUS, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - CINCINNATI, P.A., INC., an Ohio professional
association
DIAGNOSTIC CENTER FOR MEN - OKLAHOMA CITY, P.C., an Oklahoma professional
corporation
DIAGNOSTIC CENTER FOR MEN - PITTSBURGH, P.C., a Pennsylvania professional
corporation
DIAGNOSTIC CENTER FOR MEN - PHILADELPHIA, P.C., a Pennsylvania professional
corporation
DIAGNOSTIC CENTER FOR MEN - GREENVILLE, P.C., a South Carolina professional
corporation
DIAGNOSTIC CENTER FOR MEN - ARLINGTON, P.A., a Texas professional association
DIAGNOSTIC CENTER FOR MEN - HOUSTON, P.A., a Texas professional association
DIAGNOSTIC CENTER FOR MEN - ALEXANDRIA, P.C., a Virginia professional
corporation DIAGNOSTIC CENTER FOR MEN - NORFOLK, P.C., a Virginia professional
corporation DIAGNOSTIC CENTER FOR MEN - MILWAUKEE, S.C., a Wisconsin corporation
By: /s/ T. Scott Jenkins
T.Scott Jenkins or Beverly Evling
Pursuant to Limited Power of Attorney
5
<PAGE>
SCHEDULE A
SCHEDULE OF DISBURSEMENT
INTEGRATED MEDICAL RESOURCES
ALLOCATION OF LOAN PROCEEDS
USING 6-30-97 FIXED ASSET COSTS
SUB CLINIC % ALLOCATION
- --------------------- ------ ------ ----------
IMR 1,128,281 25.25% 123,706
ARIZONA PHX 88,936 1.99% 9,751
CALIFORNIA LGH 111,465
SDG 151,623
PAS 92,217
SJO 130,384
WAL 106,819
----------
592,508 13.26% 64,963
COLORADO DEN 10,681 0.24% 1,171
CONNECTICUT HAR 154,307 3.45% 16,918
FLORIDA TAM 115,089
JAX 88,250
-------
203,339 4.55% 22,294
ILLINOIS CH1 134,698
CH2 135,238
-------
269,936 6.04% 29,596
INDIANA IND 9,868 0.22% 1,082
KANSAS MKC 215,385 4.82% 23,615
MASSACHUSETTS BOS 23,703 0.53% 2,599
<PAGE>
INTEGRATED MEDICAL RESOURCES
ALLOCATION OF LOAN PROCEEDS
USING 6-30-97 FIXED ASSET COSTS
SUB CLINIC % ALLOCATION
- --------------------- ------ ------ ----------
MICHIGAN DET 33,048 0.74% 3,623
NEVADA LVG 128,542 2.88% 14,093
NEW YORK NYC 82,847
TAR 24,264
MAN 133,638
BUF 88,374
-------
329,123 7.36% 36,085
NORTH CAROLINA GWS 13,436 0.30% 1,473
OHIO COL 161,688
CLE 139,963
CIN 64,112
-------
365,763 8.18% 40,103
OKLAHOMA OKC 98,510 2.20% 10,801
PENNSYLVANIA PGH 36,546
PHL 20,372
------
56,918 1.27% 6,241
SOUTH CAROLINA GSF 1,638 0.04% 180
TEXAS ARL 240,913
HOU 182,741
-------
423,654 9.18% 46,450
<PAGE>
INTEGRATED MEDICAL RESOURCES
ALLOCATION OF LOAN PROCEEDS
USING 6-30-97 FIXED ASSET COSTS
SUB CLINIC % ALLOCATION
- --------------------- ------ ------ ----------
VIRGINIA WAS 99,065
NOR 109,141
-------
208,206 4.66% 22,828
WISCONSIN MIL 113,343 2.54% 12,427
---------- ------ -------
TOTAL OF SUBS 4,469,125 100.0% 490,000
========= ===== =======
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EXHIBIT 4(d)
REVOLVING LOAN AND SECURITY AGREEMENT
No. 97-10-099
THIS REVOLVING LOAN AND SECURITY AGREEMENT ("Agreement") is dated and
effective as of October 23, 1997 ("Effective Date") by and between DVI Business
Credit Corporation, a Delaware corporation ("Lender"), and Integrated Medical
Resources, Inc., a Kansas corporation and the entities listed on Exhibit B
attached hereto and made a part hereof ("Borrower") .
SECTION 1
DEFINITIONS
Section 1.1 Specific Definitions. The following definitions shall apply:
(a) "Account Debtors" shall mean Borrower's and Clinic's, as
applicable, customers and all other persons who are obligated or indebted to
Borrower or Clinic, as applicable, in any manner, whether directly or
indirectly, primarily or secondarily, contingently or otherwise, with respect to
Accounts.
(b) "Accounts" shall mean all accounts, accounts receivable,
monies and debt obligations in any form owing to Borrower (whether arising in
connection with contracts, contract rights, instruments, general intangibles or
chattel paper) arising out of the rendition of services by Borrower or Clinic,
as applicable, whether or not earned by performance; all deposit accounts,
credit insurance, guaranties, letters of credit, advises of credit and other
security for any of the above; Borrower's Books relating to any of the
foregoing.
(c) "Advance" shall mean an advance of loan proceeds constituting
all or a part of the Loan.
(d) "Borrower's Books" shall mean all of Borrower's books and
records including but not limited to: minute books, ledgers; records indicating,
summarizing or evidencing Borrower's assets, liabilities and the Accounts; all
information relating to Borrower's business operations or financial condition;
and all computer programs, disk or tape files, printouts, runs and other
computer-prepared information and the equipment containing such information;
provided, however, that confidential patient records shall not be included
therein, except to the extent otherwise provided by law.
(e) "Borrowing Base" shall mean, on the date of determination
thereof, an amount equal to the sum of eighty-five percent (85%) of the Net
Collectible Value for each type of Eligible Account.
(f) "Cash Flow Percentage": as of any day, a fraction (a) the
numerator of which is equal to (i) the aggregate collections received during the
two immediately preceding calendar months in respect of Eligible Accounts
receivable divided by (ii) 2.0 and (b) the denominator of which is an amount
equal to the average daily aggregate NCV of Eligible Accounts receivable during
such two immediately preceding calendar months.
(g) "Closing Date" shall mean the date of the first Advance of
the Loan.
(h) "Clinics" shall mean collectively the entities which are
contractually obligated to Borrower under a Service Agreement which include, but
not limited to, the entities described on Schedule 1.1(h).
(i) "Clinic Collateral" shall mean the Collateral, as defined in
the Security Agreement.
(j) "Collateral" shall have the meaning specified in Section 3.1
hereof.
(k) "Commitment Amount" shall have the meaning set forth in
Section 2.1.
(l) "Distribution" shall mean, with respect to any shares of
capital stock or any warrant or right to acquire shares of capital stock or any
other equity security, (i) the retirement, redemption, purchase or other
acquisition, directly or indirectly, for value by the issuer of any such
security, except to the extent that the consideration therefore consists of
shares of stock, (ii) the declaration or (without duplication) payment of any
dividend in cash, directly or indirectly, on or with respect to any such
security, (iii) any investment in the holder of five percent (5%) or more of any
such security if a purpose of such investment is to avoid characterization of
the transaction as a Distribution, and
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(iv) any other cash payment constituting a distribution under applicable laws
with respect to such security.
(m) "Eligible Accounts" shall mean (i) Borrower's accounts
receivable from commercial insurance, Medicare, HMO/PPO payors (referred to as
"Retail Accounts") which have been due and payable for one hundred eighty (180)
or fewer days from the date of service, and Borrower's accounts receivable under
contracts with hospitals and other similar health service providers (referred to
as "Institutional Accounts") which have been due and payable for one hundred
eighty (180) or fewer days from the date of service, and (ii) Clinic's Retail
Accounts which have been due and payable for one hundred eighty (180) or fewer
days from the date of service, to the extent that (A) such Clinic Accounts are
pledged under the Security Agreement and (B) such pledge, as determined by
Lender from time to time, in its reasonable discretion, is not likely to
constitute a fraudulent conveyance or transfer under applicable law.
(n) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all references to sections thereof shall include such
sections and any predecessor provisions thereto, including any rules or
regulations issued in connection therewith.
(o) "Event of Default" shall have the meaning specified in
Section 10 hereof.
(p) "Fair Value" means (i) with respect to Borrower's assets, if
Net Fair Value is being determined as of a date on or prior to the first
anniversary of the date hereof, the lower of (1) the value of such assets as
determined in accordance with Bankruptcy Code ss.548 or (2) the value of such
assets as determined in accordance with the state fraudulent conveyance or
fraudulent transfer law that would be applicable to the determination whether
the obligations and/or the security interest relating thereto would constitute a
fraudulent conveyance or a fraudulent transfer (the "Applicable State Law"),
(ii) with respect to Borrower's assets, if Net Fair Value is being determined as
of a date after the first anniversary of the date hereof, the value of such
assets as determined in accordance with the Applicable State Law, (iii) with
respect to Borrower's liabilities, if Net Fair Value is being determined as of a
date on or prior to the first anniversary of the date hereof, the lower of (1)
the value of such liabilities as determined in accordance with Bankruptcy Code
ss.548 or (2) the value of such liabilities as determined in accordance with the
Applicable State Law, and (iv) with respect to Borrower's liabilities, if Net
Fair Value is being determined as of a date after the first anniversary of the
date hereof, the value of such liabilities as determined in accordance with the
Applicable State Law.
(q) "GAAP" means generally accepted accounting principles set
forth in the opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and/or in statements of the Financial
Accounting Standards Board, consistently applied.
(r) "Governmental Authority" shall mean any governmental or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality thereof, or any court, tribunal, grand
jury or arbitrator, in any case whether foreign or domestic.
(s) "Health Care Laws" shall mean all federal, state and local
laws specifically relating to health care providers and health care services,
including, but not limited to, Section 1877(a) of the Social Security Act as
amended by the Omnibus Budget Reconciliation Act of 1993, 42 USC ss. 1395nn.
(t) "Indebtedness" of a Person shall mean (i) all items (except
items of capital stock, capital or paid-in surplus or of retained earnings)
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date as of which Indebtedness is to be determined, including any lease
which, in accordance with GAAP would constitute indebtedness; (ii) all
indebtedness secured by any mortgage, pledge, security, lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed; and (iii) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for the collection
or deposit in the ordinary course of business), discounted or sold with recourse
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which such Person has agreed to supply or advance
funds (whether by way of loan, stock or equity purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.
(u) "Lender Expenses" shall mean (i) all costs or expenses
(including, without limitation, taxes and insurance premiums) required to be
paid by Borrower under this Agreement or under any of the other Loan
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Documents that are paid or advanced by Lender; (ii)filing, recording,
publication and search fees paid or incurred by Lender in connection with
Lender's transactions with Borrower and Clinic; (iii) reasonable costs and
expenses incurred by Lender to correct any Event of Default or enforce any
provision of the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, and preparing for sale or
advertising to sell the Collateral, whether or not a sale is consummated, after
the occurrence of an Event of Default; (iv) reasonable costs and expenses of
suit incurred by Lender in enforcing or defending the Loan Documents or any
portion thereof; (v) costs and expenses incurred by Lender to convert any data
submitted to Lender by Borrower or Clinic to an acceptable form; and (vi)
Lender's reasonable attorney fees and expenses incurred (before or after
execution of this Agreement) in advising Lender with respect to, or in
structuring, drafting, reviewing, negotiating, amending, terminating, enforcing,
defending or otherwise concerning, the Loan Documents or any portion thereof,
irrespective of whether suit is brought.
(v) "Lien" shall mean any security interest, mortgage, pledge,
assignment, lien or other encumbrance of any kind, including any interest of a
vendor under a conditional sale contract or consignment and any interest of a
lessor under a capital lease.
(w) "Loan" shall mean each loan or any other loan or loans made
by Lender to Borrower pursuant to this Agreement.
(x) "Loan Availability" shall mean the lesser of (a) the
Commitment Amount or (b) the Borrowing Base minus the aggregate Advances and
other Obligations outstanding under this Agreement.
(y) "Loan and Security Agreement" means the Loan and Security
Agreement dated as of the date hereof by and among DVI Financial Services Inc.
("DVIF") and Borrower.
(z) "Loan Documents" shall mean (i) this Agreement; (ii) the
Note; (iii) any other agreements or documents hereafter delivered to secure
repayment of the Loan; (iv) the Lock Box Agreement; (v) the Security Agreement;
and (vi) any other certificates, documents, instruments, or financing statements
delivered by Borrower or Clinic, as applicable, to Lender pursuant to the terms
of this Agreement or the Security Agreement, as applicable.
(aa) "Lock Box Agreement" shall mean those certain Lock Box
Agreements between Borrower or Clinic, as applicable, and lock box servicer(s)
("Servicer(s)") chosen by Lender and Borrower or Clinic, as applicable, and the
letter of instructions with respect thereto among Lender, Borrower or Clinic, as
applicable, and Servicer.
(bb) "Net Collectible Percentage" shall mean the percentages
described on Exhibit A attached hereto. In accordance with Section 5.4, the Net
Collectible Percentage may change from time to time in Lender's sole and
absolute discretion, written notification of which shall be given to Borrower by
Lender.
(cc) "Net Collectible Value" shall mean, for each type of
Eligible Account, the Net Collectible Percentage times the aggregate current
outstanding amount for such type of Eligible Account.
(dd) "Net Fair Value" the amount by which the Fair Value of
Borrower's assets exceeds the Fair Value of Borrower's liabilities (including
contingent liabilities).
(ee) "Note" shall mean the Secured Promissory Note executed by
Borrower pursuant to the terms of this Agreement.
(ff) "Obligations" means (i) all obligations (monetary or
otherwise) of Borrower arising under or in connection with this Agreement, the
Note and all other Loan Documents.
(gg) "Permitted Liens" shall mean (i) Liens for property taxes
and assessments or governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment thereof is not yet
due or is being contested as permitted in this Agreement; (ii) Liens of or
resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not expired, or in respect of which Borrower is in good
faith prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured;
(iii) Liens and priority claims incidental to the conduct of business or the
ownership of properties and assets (including warehouse's and attorney's Liens
and statutory landlord's Liens); deposits, pledges or Liens to secure the
performance of bids, tenders, or trade contracts, or to secure statutory
obligations; and
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surety or appeal bonds or other Liens of like general nature incurred in
the ordinary course of business and not in connection with the borrowing of
money; provided that in each case the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate actions or proceedings;
and further provided that any such warehouse's or statutory landlord's Liens
have been subordinated to the Liens of Lender in a manner satisfactory to
Lender; and (iv) Liens existing on the date of this Agreement that secure
Indebtedness of Borrower outstanding on such date and that are disclosed on
Schedule 1.1 hereto;
(hh) "Person" shall mean an individual, corporation, partnership,
limited liability company, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions), Governmental
Authority or any other entity.
(ii) "Prime Rate" shall mean the rate of interest announced
publicly by Bank of America from time to time as its prime rate.
(jj) "Proceeds" shall mean all proceeds and products of
Collateral and documents covering Collateral; all property received wholly or
partly in trade or exchange for Collateral; all claims against third parties
arising out of damage, destruction or decrease in value of the Collateral; all
leases of Collateral; and all rents, revenues, issues, profits and proceeds
arising from the sale, lease, license, encumbrance, collection or any other
temporary or permanent disposition of the Collateral or any interest therein.
(kk) "Security Agreement" shall mean the Security Agreement,
dated as of the date hereof, by and among Lender and the Clinics.
(ll) "Subordinate Obligations" shall mean all Indebtedness of
Borrower subordinated to the Obligations pursuant to subordination and/or
intercreditor agreements in form satisfactory to Lender.
(mm) "Termination Date" shall mean the last day of any term as to
which a written notice of non-renewal pursuant to Section 2.7 has been received.
(nn) "Unmatured Default" shall mean any event or condition that,
with notice, passage of time, or a determination by Lender or any combination of
the foregoing would constitute an Event of Default.
Section 1.2. Generally Accepted Accounting Principles and Uniform
Commercial Code. All financial terms used in this Agreement, other than those
defined in this Section 1, have the meanings accorded to them under GAAP. All
other terms used in this Agreement, other than those defined in this Section 1,
have the meanings accorded to them in the Uniform Commercial Code as enacted in
any applicable jurisdiction.
Section 1.3. Construction
(a) Unless the context of this Agreement clearly requires
otherwise, the plural includes the singular, the singular includes the plural,
the part includes the whole, "including" is not limiting, and "or" has the
inclusive meaning of the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder" and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by each of the parties and its counsel and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
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SECTION 2
LOAN
Section 2.1 The Loan. Subject to the terms and conditions and relying on
the representations and warranties set forth herein, Lender agrees to make
Advances to Borrower from time to time in an aggregate amount not to exceed the
least of (i) Five Million and 00/100 Dollars ($5,000,000.00) (the "Commitment
Amount"), or (ii) the Borrowing Base. Within the limits of the Loan
Availability, Borrower may borrow, make repayments pursuant to Section 2.4 and
reborrow. If, at any time, the aggregate Advances and other Obligations
outstanding exceed the then Loan Availability, then Borrower shall pay to Lender
a sum sufficient to reduce the Advances and other Obligations outstanding to an
amount not greater than the Loan Availability. Notwithstanding the foregoing,
Lender has agreed to extend an initial overadvance of $250,000. To the extent
such overadvance is not adjusted, Borrower must repay such overadvance at the
time of the next equity investment of $250,000 or more. Lender's commitment to
make Advances shall expire, and the amount of the Loan then outstanding shall
mature and be repaid by Borrower, without further action on the part of Lender,
on the Termination Date.
Section 2.2 Note. All Loans made by the Lender under this Agreement shall
be evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in substantially the form of Exhibit 2.02 duly
completed, in the original principal amount equal to the initial Commitment
Amount, dated the Effective Date, payable to the Lender and maturing as to
principal on the Termination Date (the "Note"). The amount of each Advance and
payment of principal amount received by the Lender shall be recorded in the
books and records of the Lender, which books and records shall, in the absence
of manifest error, be conclusive as to the outstanding balance of and other
information related to the Loan. Lender shall be entitled at any time to endorse
on a schedule attached to the Note the amount and type of each Advance and
information relating thereto.
Section 2.3 The Borrowing Base. On a weekly basis the Borrowing Base will
be recalculated by adding weekly billings to the prior week's Eligible Accounts
and subtracting deposits and adjustments, if applicable, and then multiplying
this amount by the Net Collectible Percentage. The Borrowing Base shall be
calculated on the basis of the reports delivered to Lender pursuant to Section
5.4.
Section 2.4 Notice of Borrowing. Whenever Borrower desires to borrow under
Section 2.1, Borrower shall deliver to Lender a Drawdown Request Form, in a form
reasonably satisfactory to Lender, signed by an authorized officer no later than
2:00 p.m. Pacific Standard Time at least one (1) business day in advance of the
proposed funding date. The Drawdown Request Form shall specify (i) the funding
date (which shall be a business day) with respect to the requested Loan and (ii)
the amount of the proposed Advance.
Section 2.5 Use of Proceeds. The proceeds of the Loan shall be used by
Borrower to provide for working capital.
Section 2.6 Loan Repayment Via Lock Box/Servicer Account. Upon the
execution hereof, Borrower shall become a party to the Tri-Party Remittance
Banking Agreement ("Lock Box Agreement") which provides for the receipt and
processing of Account payments. Borrower shall irrevocably direct: (i) all
non-government payors, including patient pay receivables, to remit payment to
the Servicer's post office box in Lender's name and control, and (ii) all
government payors to remit payment to a second post office box of such Servicer
in Borrower's name. Prior to funding and upon receipt of the lock box post
office box number(s), Borrower shall provide Lender re-direct letters (in a form
satisfactory to Lender) to all of Borrower's payors on Borrower's letterhead,
including envelopes for Lender to process and mail (Lender will add postage
which shall be charged to Borrower). The Lock Box Agreement provides for the
Servicer to deposit daily all receipts of the post office boxes into deposit
accounts, with non-government payor receipts paid into an account subject to
Lender's control and, government payor receipts paid into an account in
Borrower's name; such accounts shall be (i) at a financial institution
acceptable to Lender, and (ii) governed by terms and conditions acceptable to
Lender. Borrower agrees and acknowledges that all government payor receipts will
be immediately transferred to an account in the name and control of Lender. Upon
collectibility, deposits (net of fees) shall be applied to reduce the Loan
balance including Advances, interest, fees, all charges and other payments, if
applicable. Deposits/receipts will reduce the Borrowing Base in accordance with
Section 2.3 above. Any receipts (net of such Servicer's fees) remaining after
all such payments to Lender will be paid to Borrower within 24 hours of
availability. Borrower shall bear all charges for establishing and maintaining
the post office box accounts and all bank
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charges for such deposit accounts. Lender shall deduct from the deposit accounts
all sums Borrower owes to it hereunder, including fees, interest, reimbursements
and principal payments. Any Obligations not paid by such deduction shall be
satisfied by direct payment to Lender at 4041 MacArthur Blvd., Suite 401,
Newport Beach, California 92660. Any amounts hereunder not paid as agreed shall
be assessed a late payment penalty of five percent (5%).
(b) Borrower is indebted to DVIF pursuant to the Loan and Security
Agreement. Borrower will make payments on the Loan and Security Agreement ("DVIF
Payments") by having Lender deduct from the Lock Box Accounts the amount of each
of the DVIF Payments when due in accordance with the Loan and Security
Agreement, in addition to the payments required under this Agreement. Borrower
agrees that Lender will first deduct from the Lock Box Accounts payments due to
Lender under this Agreement, and then, to the extent that there are sufficient
funds remaining, deduct the DVIF Payments and remit such payments to DVIF. Any
funds remaining in the deposit accounts after all such payments have been made
shall be remitted to Borrower as provided in Section 2.6(a).
Section 2.7. Term of Agreement; Prepayment. The Term of this Agreement is
two (2) years from the Effective Date and is non-cancelable. This Agreement
shall be renewed for consecutive one (1) year terms unless this Agreement is
terminated, effective as of the last day of a term, by written notice by Lender
or Borrower no later than thirty (30) days before the expiration of such term.
All of Lender's obligations, responsibilities and duties shall cease upon the
date of termination of this Agreement, except for its obligation to remit excess
receipts from the lock box deposit accounts in accordance with the terms of this
Agreement.
Section 2.8 Lender's Fee. Upon execution hereof, Lender shall be entitled
to an origination fee equal to one percent (1.0%) of the Commitment Amount, less
$25,000.00 currently on deposit. Increases to the Commitment Amount during the
term will be charged on the incremental increase at the same origination
percentage. On or before the first day of each month following the Effective
Date, Borrower shall pay Lender a monthly maintenance fee of Two Thousand Five
Hundred and 00/100 Dollars ($2,500.00). On or before the first day of each month
following the Effective Date, Borrower shall pay Lender an unutilized loan fee
of equal to one half of one percent (.5%) of the difference between the
Commitment Amount and the average outstanding Loan amount as of the previous
month. Lender's fees will be deducted, when due, directly from receipts
deposited in accordance with Section 2.6.
Section 2.9 Interest on the Loans. All Advances shall bear interest on the
unpaid principal amount thereof from the date made until paid in full at a
fluctuating rate equal to the Prime Rate plus two and one half percent (2.5%).
Interest shall be payable monthly in arrears on the first day of each month for
the preceding month. Interest shall be calculated on the basis of a year of 360
days, but for the actual number of days elapsed. Interest accrued but not paid
pursuant to Section 2.6 shall be treated as an Advance if not otherwise paid
within five (5) days of the end of the month in which it accrues.
Section 2.10 Conditions to the Closing. Lender's obligation to make the
initial Advance hereunder on the Closing Date is subject to Lender's
determination that Borrower as of the date of the Advance has satisfied, and
continues to satisfy, the following conditions:
(a) The representations and warranties set forth in this Agreement and in
the other Loan Documents shall be true and correct on and as of the date hereof
and shall be true and correct in all material respects as of the Closing Date
and Borrower shall have performed all obligations which were to have been
performed by it hereunder.
(b) Borrower shall have executed and delivered to Lender (or shall cause to
be executed and delivered to Lender by the appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
(iii) UCC-1 Financing Statements with Borrower and Clinic,
as applicable, as Debtors thereunder;
(iv) UCC Assignments showing Lender as assignee under the
UCC-1 Financing Statements filed by Borrower, as Secured Party, and Clinic, as
Debtor;
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(v) UCC Assignments showing Lender as assignee under
the UCC-1 Financing Statements filed by Borrower, as Purchaser of accounts
and Clinic as seller thereof;
(vi) the Lock Box Agreement;
(vii) Payor redirect letters;
(viii) pay-off letters, UCC Termination Statements and Lien
Releases as required to grant Lender a first priority security interest other
than Permitted Liens in Collateral pledged as security for repayment of the
Loan;
(ix) certified copies of resolutions of the Board of
Directors of Borrower authorizing the execution and delivery of Loan
Documents to be executed by Borrower;
(x) copies of the Articles of Incorporation of Borrower
certified by the Secretary of State of the applicable issuing state;
(xi) a certificate from an officer of Borrower indicating
that the representations and warranties contained herein are true and correct as
of the Closing Date;
(xii) the Loan and Security Agreement;
(xiii) the Collateral Assignment and Security Interest
agreement along with the original Promissory Notes and Security Agreements and
endorsement of such Promissory Notes, and the original Lease Agreements and the
Acknowledgment thereto executed by the Clinic; and
(xiv) the Security Agreement.
(c) Neither an Event of Default nor an Unmatured Default shall
have occurred and be continuing as of the Closing Date,
(d) Borrower or Clinic shall not have suffered a material adverse
change in its business, operations or financial condition from that reflected in
the Financial Statements of Borrower or Clinic delivered to Lender or otherwise.
(e) Lender shall have received such additional supporting
documents, certificates and assurances as Lender shall reasonably request which
shall be satisfactory to Lender in form and substance.
Section 2.11. If there is more than one Borrower, the obligations hereunder
are joint and several obligations of the Borrowers. Notwithstanding any other
provision hereof, a Borrower's liability for the obligations at any time shall
not exceed the greater of (1) the sum of (a) the total principal of the
obligations that such Borrower directly or indirectly received and (b) the
interest and expenses accrued with respect to such principal, and (2) the
greater of (a) ninety-five percent (95%) of such Borrower's Net Fair Value on
the date hereof, or (b) ninety-five percent (95%) of such Borrower's highest Net
Fair Value during the period commencing after such date and terminating on the
date of determination of liability hereunder.
Section 2.12. Borrower Authorizations. Each Borrower, in its capacity as a
guarantor of the Obligations hereunder and not in its capacity as a borrower
hereunder, authorizes Lender, without notice or demand and without affecting its
liability hereunder, from time to time to (a) renew, extend, or otherwise change
the terms hereof; (b) take and hold security for the payment of the Obligations
hereunder, and exchange, enforce, waive and release any such security; and (c)
apply such security and direct the order or manner of sale thereof as Lender, in
its sole discretion, may determine.
Section 2.13. Borrower Waivers. Each Borrower, in its capacity as a
guarantor of the Obligations hereunder and not in its capacity as a borrower
hereunder, waives any right to require Lender to (a) proceed against another
Borrower; (b) proceed against or exhaust any security held from another
Borrower; or (c) pursue any other remedy in Lender's power. Lender may, at its
election, exercise or decline or fail to exercise any right or remedy it
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may have against another Borrower or any security held by Lender,
including, without limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale, without affecting or impairing in any way the
Borrower's guarantor liability with respect to the Obligations. Each Borrower,
in its capacity as a guarantor of the Obligations hereunder and not in its
capacity as a borrower hereunder, waives any defense arising by reason of any
disability or other defense of another Borrower or by reason of the cessation
from any cause whatsoever of another Borrower's liability for the Obligations.
Each Borrower, in its capacity as a guarantor of the Obligations hereunder and
not in its capacity as a borrower hereunder, waives (I); any setoff, defense or
counterclaim that it may have against Lender, (ii) any defense arising out of
the absence, impairment or loss of any right of reimbursement or subrogation or
any other rights against another Borrower, (iii) all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of such Borrower's guaranty of the
Obligations and of the existence, creation, or incurring of new or additional
indebtedness, and (iv) any right to terminate its liability with respect to
another Borrower's liability, and (v) any defense to its liability with respect
to another Borrower's liability for the Obligations based on (A) any changes to
this Agreement, (B) any impairment or suspension of Lender's rights and remedies
against such other Borrower, (C) any obligations of Lender to proceed first
against such other Borrower or any of such other Borrower's assets, (D) any
obligation of Lender to marshall Collateral or other assets, (E) any law
providing that a guarantor's obligations to a lender may not be greater than the
obligations of the principal debtor whose obligations are guaranteed, and (F)
any law providing that a guarantor is released from liability for guaranteed
obligations to the extent that the principal debtor is not liable for such
obligations. Each Borrower assumes the responsibility for being and keeping
itself informed of the financial condition of the other Borrowers and of all
other circumstances bearing upon the risk of nonpayment of any Obligations
hereunder, warrants to Lender that it will keep so informed, and agrees that
absent a request for particular information by it, Lender shall have no duty to
advise it of information known to Lender regarding such condition or any such
circumstances.
SECTION 3
SECURITY INTEREST
Section 3.1 Grant of Security Interest. In order to secure prompt payment
and performance of all Obligations, Borrower hereby grants to Lender a
continuing first-priority pledge and security interest all of Borrower's present
and future Accounts, contract rights, including, but not limited to, the
Services Agreements, Promissory Notes, and Security Agreements, and equipment
Lease Agreements listed on Exhibit C which is attached hereto and made a part
hereof (the "Collateral"), whether now owned or existing or hereafter acquired
or arising and regardless of where located, subject only to Permitted Liens.
This security interest in the Collateral shall attach to all Collateral without
further action on the part of Lender or Borrower. The Collateral shall be
subject in each case only to Permitted Liens together with such third-party
consents, lien waivers and estoppel certificates as Lender shall reasonably
require.
The Collateral, as defined in the Loan and Security Agreement dated as of
the date hereof, shall also secure all Obligations of Borrower under this
Agreement.
SECTION 4
SPECIFIC REPRESENTATIONS
Section 4.1. Name of Borrower
(a) The exact name of Borrower is (See Exhibit D attached hereto and made a
part hereof). Borrower was organized under the laws of the State of (See Exhibit
D attached hereto and made a part hereof. The following are all previous legal
names of Borrower: Male Sexual Health Resources, Inc. Borrower uses the
following trade names: None. The following are all other trade names used by
Borrower in the past: None.
Section 4.2 Mergers and Consolidations. Except as disclosed on Schedule
4.2, no entity has merged into any of Borrower or been consolidated with
Borrower.
Sections 4.3 Purchase of Assets. Except as disclosed on Schedule 4.3 no
entity has sold substantially all of its assets to Borrower or sold assets to
Borrower outside the ordinary course of such seller's business at any time in
the past.
<PAGE>
Section 4.4 Change of Name of Identity. Borrower shall not change its name,
business structure or identity or use a new trade name without prior
notification to Lender or merge into or consolidate with any other entity.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
Section 5.1 Office and Records of Borrower. Borrower's chief executive
offices are located at: (See Exhibit E attached hereto and made a part hereof.)
Borrower maintains all of its records with respect to Accounts at (See Exhibit E
attached hereto and made a part hereof.) Borrower has not at any time within the
past four (4) months maintained its chief executive office or its records with
respect to Accounts at any other location and shall not do so hereafter except
with the prior written consent of Lender.
Section 5.2 Representations. Borrower represents and warrants that each
Account at the time of its assignment to Lender (a) will be owned solely by
Borrower or Clinic, as applicable; (b) will be for a liquidated amount maturing
as stated in Borrower's Books or Clinic's books and records, as applicable; (c)
will be a bona fide existing obligation created by the rendition of services to
Account Debtors or their insured by Borrower or Clinic, as applicable, in the
ordinary course of its business; and (d) will not be subject to any known
deduction, offset, counterclaim, return privilege, or other condition, except as
reflected on Borrower's Books or Clinic's books and records, as applicable.
Borrower shall neither redate any invoices nor reissue new invoices in full or
partial satisfaction of old invoices. Allowances, if any, as between Borrower
and its customers will be on the same basis and in accordance with the usual
customary practices of Borrower as they exist on the date of this Agreement.
Section 5.3 Returns and Repossessions. Borrower shall notify Lender within
five (5) business days of occurrence of all material claims asserted by Account
Debtors.
Section 5.4 Borrowing Base Reports. Borrower shall on a weekly basis
execute and deliver to Lender, in form and content satisfactory to Lender, (i) a
Borrowing Base report; (ii) a summary by payor class aging of Accounts; and
(iii) a charges, collections and adjustment summary for the week. Borrower
shall, upon the request of Lender execute and deliver to Lender an updated
Borrowing Base report reflecting additional billings, write-offs and deposits
and all of Borrower's accounts receivable data in a computer disc or tape format
acceptable to Lender. On a monthly basis, and no later than the 10th day of each
month, Borrower shall submit to Lender (i) a month-end Borrowing Base Report,
(ii) a detailed accounts receivable aging report as of the last day of the
preceding month, (iii) charges, collections and adjustments summary for the
preceding month, and (iv) a payor concentration schedule. Lender shall
periodically review Borrower's and Clinic's actual adjustments to cash receipts
and write-offs, as well as Borrower's and Clinic's payor profile. To the extent
Borrower's and Clinic's adjustments, write-offs and payor profile materially
changes, Lender may, in its sole discretion, change the Net Collectible
Percentage attributable to each type of account by written notice to Borrower of
such change.
Section 5.5. Compliance Certificate. With each final month-end Borrowing
Base report which Borrower delivers to Lender, Borrower also shall deliver to
Lender a Compliance Certificate in the form of Exhibit 5.5 attached hereto,
which Compliance Certificate shall be completed and signed by an officer of
Borrower.
Section 5.6 Lender's Rights. Any officer, employee or agent of Lender
shall have the right, at any time or times hereafter, in the name of Lender or
its nominee (including Borrower or Clinic), to verify the validity, amount or
any other matter relating to any Accounts by mail, telephone or otherwise; and
all reasonable costs thereof shall be payable by Borrower to Lender. Lender, or
its designee may at any time after default by Borrower hereunder notify
customers or Account Debtors that Accounts have been assigned to Lender or of
Lender's security interest therein and after default by Borrower hereunder
collect the same directly and charge all reasonable collection costs and
expenses to Borrower's account.
Section 5.7 Disclaimer of Liability. Lender shall not be liable to Borrower
or any third person for the correctness, validity or genuineness of any
instruments or documents released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event) or for
the existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; and Lender, by
accepting a Lien on the Collateral or by releasing any Collateral to Borrower,
shall not be deemed to have
<PAGE>
assumed any obligation or liability to any supplier or creditor of Borrower or
to any other third party. Borrower agrees to indemnify and defend Lender and
hold it harmless in respect to any claim or proceeding arising out of any matter
referred to in this Section 5.7.
Section 5.8 Post Default Rights. If an Event of Default has occurred and is
continuing hereunder, no discount, credit or allowance shall be granted or
permitted by Borrower to any Account Debtor; provided, however, that,
notwithstanding the existence of an Event of Default, (i) Borrower may continue
to invoice and bill Account Debtors under discount, credit and allowance
arrangements that Borrower maintained in the ordinary course of business prior
to such Event of Default occurring, and (ii) Account Debtors may, during the
continuance of an Event of Default, utilize discount, credit and allowance
arrangements that Borrower extended to them in the ordinary course of business.
Lender may, after default by Borrower, settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms that Lender considers
advisable, and in such cases, Lender will credit Borrower's account with only
the net amounts received by Lender in payment of such disputed Accounts, after
deducting all Lender Expenses incurred in connection therewith.
Section 5.9 Accounts Owed by Federal Government. If any Accounts shall
arise out of a contract with the United States of America or any department,
agency, subdivision or instrumentality thereof, Borrower shall promptly notify
Lender thereof in writing and take all other action requested by Lender to
protect Lender's Lien on such Accounts under the provisions of the federal laws
on assignment of claims.
Section 5.10 Business Activity Reports. Borrower has filed and shall file
all legally required notices and reports of its business activities with all the
appropriate taxing authorities and the appropriate Governmental Authority of
each jurisdiction in which Borrower is legally required to file such a notice or
report.
SECTION 6
PROVISIONS CONCERNING CONTRACTS
Section 6.1. Contracts
(a) Schedule 6.1. is a true and complete list of all material
contracts and agreements to which Borrower is a party.
(b) Borrower shall not amend, modify or supplement any contract
or agreement included in the Collateral or waive any provision thereof other
than in accordance with Borrower's standard business practice, nor shall such
standard business practice be materially changed without Lender's consent, which
shall not be unreasonably withheld.
(c) Borrower shall remain liable to perform all of its duties and
obligations under any contracts and agreements included in the Collateral to the
same extent as if this Agreement had not been executed; and Lender shall not
have any obligation or liability under such contracts and agreements by reason
of this Agreement or otherwise.
(d) Borrower need not pay any amount due under any contract or
agreement listed on Schedule 6.1, nor otherwise perform any action required
under the terms of any such contract or agreement, if such payment or
performance is being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted, if Lender is notified in advance of such
contest, and if Borrower establishes any reserve or other appropriate provision
required by GAAP and deposits with Lender cash or an acceptable bond reasonably
requested by Lender.
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL
Section 7.1 Further Assurances. Borrower shall execute and deliver to
Lender, or cause Clinic to execute and deliver to Lender, concurrent with
Borrower's execution of this Agreement and at any time or times hereafter at the
request of Lender, all financing statements, continuation financing statements,
security agreements, chattel mortgages, assignments, endorsements of
certificates of title, applications for titles, affidavits, reports, notices,
<PAGE>
schedules of Accounts, letters of authority and all other documents Lender may
reasonably request, in form satisfactory to Lender, to perfect and maintain
perfected Lender's Liens in the Collateral and in order to consummate fully all
of the transactions contemplated under the Loan Documents. Borrower hereby
irrevocably makes, constitutes and appoints Lender (and any of Lender's
officers, employees or agents designated by Lender) as Borrower's true and
lawful attorney with power to sign the name of Borrower on any of the
above-described documents or on any other similar documents that need to be
executed, recorded or filed in order to perfect or continue to be perfected
Lender's Liens in the Collateral.
Section 7.2 Lender's Duty of Care. Lender shall have no duty of care with
respect to the Collateral except that Lender shall exercise reasonable care with
respect to the Collateral in Lender's custody. Lender shall be deemed to have
exercised reasonable care if such property is accorded treatment substantially
equal to that which Lender accords its own property or if Lender takes such
action with respect to the Collateral as Borrower shall request or agree to in
writing provided that neither failure to comply with any such request nor any
omission to do any such act requested by Borrower shall be deemed a failure to
exercise reasonable care. Lender's failure to take steps to preserve rights
against any parties or property shall not be deemed to be failure to exercise
reasonable care with respect to the Collateral in Lender's custody. All risk,
loss, damage or destruction of the Collateral shall be borne by Borrower.
Section 7.3 Reinstatement of Liens. If, at any time after payment in full
by Borrower of all Obligations and termination of Lender's Liens, any payments
on Obligations previously made by Borrower or any other Person must be disgorged
by Lender for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy, or reorganization of Borrower or such other Person),
this Agreement and Lender's Liens granted hereunder shall be reinstated as to
all disgorged payments as though such payments had not been made, and Borrower
shall sign and deliver to Lender all documents and other items necessary to
perfect all terminated Liens.
Section 7.4 Lender Expenses. If Borrower fails, as required by the terms
hereof, (i) to pay any moneys (whether taxes, assessments, insurance premiums or
otherwise) due to third persons or entities, (ii) to make any deposits or
furnish any required proof of payment or deposit or (iii) to discharge any Lien
not permitted hereby, then Lender may, to the extent that it determines that
such failure by Borrower could have a material adverse effect on Lender's
interests in the Collateral, in its discretion and without prior notice to
Borrower, make payment of the same or any part thereof. Any amounts paid or
deposited by Lender shall constitute Lender Expenses, shall become part of the
Obligations, shall bear interest at the rate of eighteen percent (18%) per
annum, and shall be secured by the Collateral. Any payments made by Lender shall
not constitute (a) an agreement by Lender to make similar payments in the future
or (b) a waiver by Lender of any Event of Default under this Agreement. Lender
need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance or Lien and the receipt of the usual official
notice for the payment of moneys to a governmental entity shall be conclusive
evidence that the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender for all sums
expended by Lender that constitute Lender Expenses, and Borrower hereby
authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
Section 7.5 Inspection of Records. During usual business hours, Lender
shall have the right to inspect Borrower's Books and records in order to verify
the amount or condition of, or any other matter relating to, the Collateral and
Borrower's financial condition and to copy and make extracts therefrom. Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Lender pursuant to this Agreement and agrees that Lender may
directly contact any such accounting firm or service bureau in order to obtain
such information.
Section 7.6 Waivers. Except as specifically provided for herein, Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, documents, instruments, chattel paper and guaranties at any
time held by Lender on which Borrower may in any way be liable.
SECTION 8
REPRESENTATIONS AND WARRANTIES
As of the date hereof Borrower hereby warrants and represents to Lender the
following:
<PAGE>
Section 8.1. Corporate Status Borrower is a corporation validly existing
and in good standing under the laws of the state of its incorporation; and is
qualified and licensed to do business and is in good standing in any state in
which the conduct of its business or its ownership of property requires that it
be so qualified or licensed, and has the power and authority (corporate and
otherwise) to execute and carry out the terms of the Loan Documents to which it
is a party, to own its assets and to carry on its business as currently
conducted.
Section 8.2. Authorization The execution, delivery, and performance by
Borrower of this Agreement and each other Loan Document to which it is a party
have been duly authorized by all necessary corporate or partnership action.
Borrower, has duly executed and delivered this Agreement and each other Loan
Document to which it is a party, and each of them constitutes a valid and
binding obligation of Borrower, as applicable, enforceable according to its
terms except as such enforceability may be limited by equitable principles and
by bankruptcy, insolvency or similar laws affecting the rights of creditors
generally.
Section 8.3. No Breach The execution, delivery and performance by Borrower
of this Agreement and each other Loan Document to which it is a party (a) will
not contravene any law or any governmental rule or order binding on Collateral;
(b) will not violate any provision of the articles of incorporation, bylaws or
partnership agreement, as applicable, of Borrower; (c) will not violate any
agreement or instrument by which Borrower, as applicable, is bound; (d) do not
require any notice to consent by any Governmental Authority; and (e) will not
result in the creation of a Lien on any assets of Borrower except the Lien to
Lender granted herein.
Section 8.4. Taxes All assessments and taxes, whether real, personal or
otherwise, due or payable by or imposed, levied or assessed against Borrower or
any of its property have been paid in full before delinquency or before the
expiration of any extension period; and Borrower has made due and timely payment
or deposit of all federal, state, and local taxes, assessments or contributions
required of it by law, except only for items that Borrower is currently
contesting diligently and in good faith and that have been fully disclosed in
writing to Lender.
Section 8.5. Deferred Compensation Plan Borrower has made all required
contributions to all deferred compensation plans to which it is required to
contribute, and Borrower has no liability for any unfunded benefits of any
single-employer or multi-employer plans. Borrower is not and at no time has been
a sponsor of, provided, or maintained for any employees any defined benefit
plan.
Section 8.6. Litigation and Proceedings Except as set forth on Schedule 8.6
attached hereto, there are no outstanding judgments against Borrower or any of
its assets and there are no actions or proceedings pending by or against
Borrower before any court or administrative agency. Borrower has no knowledge or
belief of any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower, except for ongoing collection matters in which Borrower is the
plaintiff and except as set forth in Schedule 8.6 hereto.
Section 8.7. Business Borrower has all franchises, authorizations, patents,
trademarks, copyrights and other rights necessary to advantageously conduct its
business. They are all in full force and effect and are not in known conflict
with the rights of others. Borrower is not a party to or subject to any
agreement or restriction that is so unusual or burdensome that it might have a
material adverse effect on Borrower's business, properties or prospects.
Section 8.8. Laws and Agreements Borrower is in compliance with all
material agreements applicable to it, including obligations to contribute to any
employee benefit plan or pension plan regulated by ERISA. Borrower is in
material compliance with all laws applicable to it.
Section 8.9. Ownership of Accounts Prior to the Lender making any Loan as
set forth herein, the Borrower will be the sole owner of, and have good and
marketable title to the Accounts pledged as security for such Loan.
Section 8.10. No Conflict The granting of a security interest in the
pledged Accounts of Borrower to the Lender will not violate the terms or
provisions of any loan document or any other agreement to which the Borrower
then is a party or by which it is bound.
Section 8.11. Security Interest After giving effect to each Loan
contemplated by this Agreement,
<PAGE>
the Lender will be the holder of a valid perfected first priority security
interest in the pledged Accounts. Accounts pledged to the Lender in connection
with any Loan will be free and clear of all liens.
Section 8.12. No Defaults As of the date on which an Account is pledged to
the Lender pursuant to the terms hereof there shall have been no default under
such Account.
Section 8.13. Origination Each Account will have been originated by the
Borrower or Clinic, as applicable, in the ordinary course of its business in
accordance with the Borrower's or Clinic's, as applicable, regular credit
approval process and does not contravene any laws, rules or regulations
applicable thereto. No pledged Account will have been selected on any basis
which would have any adverse effect on the Lender.
Section 8.14. Legality No pledged Account will have been originated in, or
be subject to the laws of, any jurisdiction whose laws would make the terms
hereof or any transaction contemplated hereby unlawful.
Section 8.15. Consents No consent or approval is required for the pledging
of any Accounts to the Lender pursuant to the terms of this Agreement, except
for such consents or approvals as have been obtained.
Section 8.16. Financial Condition All financial statements and information
relating to Borrower that have been or may hereafter be delivered by Borrower to
Lender are accurate and complete and have been prepared in accordance with GAAP.
Borrower has no material obligations or liabilities of any kind not disclosed in
that financial information, and there has been no material adverse change in the
financial condition of Borrower since the date of the most recent financial
statements submitted to Lender.
Section 8.17. Health Care Laws
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws applicable to Borrower
and, to the best of Borrower's knowledge, it is in compliance in all material
respects with all terms and conditions of the required permits, licenses and
authorizations, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such Health
Care Laws.
(b) Except as shown in Schedule 8.6, Borrower is not aware of,
and has not received notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that may
interfere with or prevent compliance or continued compliance in any material
respect with Health Care Laws.
(c) Except as shown in Schedule 8.6, There is no civil, criminal
or administrative action, suit, demand, claim, hearing, notice or demand letter,
notice of violation, investigation or proceeding pending or threatened against
Borrower, relating in any way to Health Care Laws.
Section 8.18. Cumulative Representation The warranties, representations and
agreements set forth herein shall be cumulative and in addition to any and all
other warranties, representations and agreements that Borrower shall give, or
cause to be given, to Lender, either now or hereafter.
<PAGE>
SECTION 9
COVENANTS
Section 9.1. Encumbrance of Collateral Borrower shall not create, incur,
assume or permit to exist any Lien on any Collateral now owned or hereafter
acquired by Borrower, except for Liens to Lender and Permitted Liens.
Section 9.2. Business Borrower shall engage primarily in business of the
same general character as that now conducted by Borrower.
Section 9.3. Condition and Repair Borrower shall maintain in good repair
and working order all properties used in its business and from time to time
shall make all appropriate repairs and replacements thereof.
Section 9.4. Borrower shall pay all taxes, assessments and other
governmental charges imposed upon it or any of its assets or in respect of any
of its franchises, business, income or profits before any penalty or interest
accrues thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums that have become due and
payable and that by law have or might become a Lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited or materially impaired as a result thereof) no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted, if Lender is notified in advance of
such contest, and if Borrower establishes any reserve or other appropriate
provision required by GAAP. Borrower shall make timely payment or deposit of all
FICA payments and withholding taxes required of it by applicable laws and will,
upon request, furnish Lender with proof satisfactory to Lender indicating that
Borrower has made such payments or deposits.
Section 9.5. Accounting System Borrower at all times hereafter shall
maintain a standard and modern system of accounting in accordance with GAAP,
with ledger and account cards or computer tapes, disks, printouts and records
that contain information pertaining to the Collateral that may from time to time
be requested by Lender. Borrower shall not modify or change its method of
accounting or enter into any agreement hereafter with any third-party accounting
firm or service bureau for the preparation or storage of Borrower's accounting
records without said accounting firm's or service bureau's agreeing to provide
to Lender information regarding the Collateral and Borrower's financial
condition.
Section 9.6. Quarterly Financial Statements Borrower shall furnish Lender
as soon as practicable but in no event later than forty-five (45) days after the
end of each of the first three quarterly fiscal periods of each fiscal year with
unaudited quarterly financial statements in form and substance as required by
Lender, including a balance sheet, an income statement and a statement of cash
flows, prepared in accordance with GAAP together with a certificate executed by
the chief financial officer of Borrower stating that the financial statements
fairly present the financial condition of Borrower as of the date and for the
periods covered and that as of the date of such certificate there has not been
any violation of any provision of this Agreement or the happening of any Event
of Default or Unmatured Default hereunder.
Section 9.7. Annual Financial Statements. Borrower shall furnish Lender as
soon as practicable but in no event later than ninety (90) days after the close
of each fiscal year with audited annual financial statements, which financial
statements shall be prepared in accordance with GAAP and shall be certified
without qualification by an independent certified public accounting firm
satisfactory to Lender. With all financial statements, Borrower will also
deliver a certificate of its chief financial officer attesting that no Event of
Default or Unmatured Default under the Agreement has occurred and is continuing.
Section 9.8. Cash Flow Borrower's Cash Flow Percentage shall not be less
than 15 percent (15%) for two (2) consecutive reporting periods.
Section 9.9. Further Information Borrower shall promptly supply Lender with
such other information concerning its affairs as Lender may reasonably request
from time to time hereafter and shall promptly notify Lender of any material
adverse change in Borrower's financial condition and any condition or event that
constitutes a breach of or event that constitutes an Event of Default under this
Agreement. In addition, Borrower
<PAGE>
authorizes Lender to contact credit reporting agencies concerning, Borrower's
credit standing. Borrower also authorizes Lender to utilize Borrower's name in
Lender's marketing materials.
Section 9.10. ERISA Covenants Borrower shall comply with all applicable
provisions of ERISA and all other laws applicable to any deferred compensation
plans with which Borrower is associated, and shall promptly notify Lender of the
occurrence of any event that could result in any material liability of Borrower
to any person whatsoever with respect to any such plan.
Section 9.11. Restrictions on Merger, Consolidation, Sale of Assets,
Issuance of Stock, etc Without prior written consent of Lender, which shall not
be unreasonably withheld, Borrower shall not:
(a) merge or consolidate with any Person;
(b) sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business);
(c) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(d) acquire interests of any business in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00) in the aggregate in any calendar year in
any business (whether by purchase of assets, purchase of stock, merger or
otherwise);
(e) become subject to any agreement or instrument which by its
terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents; or
(f) authorize or issue any additional stock or equity interest of
any Borrower, other than Integrated Medical Resources, Inc..
Section 9.12. Health Care Covenants
(a) Borrower shall comply in all material respects with, and
shall obtain all permits required by, all Health Care Laws applicable to
Borrower.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from any Governmental Authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any Governmental Authority with jurisdiction over Health Care Laws.
Section 9.13. Borrower shall not make any Distributions except as (i) set
forth on Schedule 9.13 hereto, and (ii) authorized by Lender, upon Borrower's
request, which authorization shall not be unreasonably withheld and which
authorization shall not be deemed to authorize any Distributions while an Event
of Default is continuing or if such Distribution would cause an Event of Default
to occur.
Section 9.14. Subordinate Obligations Borrower shall not voluntarily prepay
any principal (including the making of any sinking fund payment), interest or
any other amount in respect of Subordinate Obligations.
Section 9.15. Amendments Borrower shall not amend any provision of any
Subordinate Obligation if such amendment would (i) affect any of the
subordination provisions thereof, (ii) advance the date of any required payment
or prepayment thereunder, (iii) make covenants therein more burdensome, when
considered in their entirety, to Borrower, (iv) reduce any default or grace
period therein provided, or (v) otherwise have a material adverse effect on the
interests of Lender.
<PAGE>
SECTION 10
EVENTS OF DEFAULT
An Event of Default shall be deemed to exist if any of the
following events shall have occurred and be continuing:
(a) Borrower fails to make any payment of principal or interest
or any other payment on the Note or any other Obligation when due and payable,
by acceleration or otherwise, and such failure shall continue for five (5)
business days after the payment is due; provided, however, that Lender shall not
be obligated to make any Advances during such 5-day cure period;
(b) Borrower or Clinic, as applicable, fails to observe or
perform any covenant, condition or agreement to be observed or performed
pursuant to the terms hereof or any other Loan Document to which it is a party
and such failure is not cured as soon as reasonably practicable and in any event
within thirty (30) days after written notice thereof by Lender; provided,
however, that Lender shall not be obligated to make any Advances during such
cure period;
(c) A court enters a decree or order for relief in respect of
Borrower or Clinic, as applicable, in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law then in effect, or appoints a
receiver, liquidator, assignee, custodian, trustee, or sequestrator (or other
similar official) of Borrower or Clinic, as applicable, or for any substantial
part of its property, or orders the windup or liquidation of Borrower's or
Clinic's, as applicable, affairs; or a petition initiating an involuntary case
under any such bankruptcy, insolvency, or similar law is filed against Borrower
or Clinic and is pending for sixty (60) days without dismissal;
(d) Borrower or Clinic commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law then in effect, makes any
general assignment for the benefit of creditors, fails generally to pay its
debts as such debts become due, or takes corporate action in furtherance of any
of the foregoing;
(e) Final judgment for the payment of money on any claim in
excess of $100,000 is rendered against Borrower or Clinic and remains
undischarged for twenty (20) days during which execution is not effectively
stayed;
(f) Any guarantor of the Obligations revokes or attempts to
revoke its guaranty of any of the Obligations, or becomes the subject of an
insolvency proceeding of the type described in clauses (c) or (d) above with
respect to Borrower or fails to observe or perform any covenant, condition or
agreement to be performed under any Loan Document to which it is a party;
(g) Borrower makes any payment on account of any Subordinate
Obligations, other than payments specifically permitted by the terms of such
subordination or this Agreement;
(h) Any Person holding any Subordinate Obligations becomes the
subject of any proceeding resulting in the termination of the subordination
arrangement, terminates the subordination arrangement or asserts that it is
terminated.
(i) Any Collateral or any Clinic Collateral or any part thereof
is sold, agreed to be sold, conveyed or allocated by operation of law or
otherwise;
(j) Borrower or Clinic defaults under the terms of any
Indebtedness or lease involving total payment obligations of Borrower or Clinic,
as applicable, in excess of $100,000 and such default is not cured within the
time period permitted pursuant to the terms and conditions of such Indebtedness
or lease, or an event occurs that gives any creditor or lessor the right to
accelerate the maturity of any such indebtedness or lease payments;
(k) Demand is made for payment of any Indebtedness of Borrower or
Clinic in excess of $100,000 that was not originally payable upon demand when
incurred but the terms of which were later changed to provide for payment upon
demand;
<PAGE>
(l) Borrower or Clinic is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
(m) A judgment or other claim in excess of $100,000 becomes a
Lien upon any or all of Borrower's or Clinic's assets, other than a Permitted
Lien;
(n) A notice of Lien, levy or assessment in excess of $100,000 is
filed of record with respect to any or all of Borrower's assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal or other Government Authority; or any tax or debt
owing at any time hereafter to any one or more of such entities becomes a Lien
upon any or all of Borrower's or Clinic's assets and the same is not paid on the
payment date thereof, except to the extent such tax or debt is being contested
by Borrower as permitted in Section 8.4 or by Clinic as permitted in the
Security Agreement;
(o) There is a material impairment of the value of the Collateral
or the Clinic Collateral or priority of Lender's Liens on the Collateral or the
Clinic Collateral;
(p) Any of Borrower's or Clinic's assets in excess of $100,000 or
any Collateral or Clinic Collateral are seized, subjected to a distress warrant,
levied upon or come into the possession of any judicial officer;
(q) Any representation or warranty made in writing to Lender by
any officer of Borrower or Clinic in connection with the transactions
contemplated in this Agreement is materially incorrect when made;
(r) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (e), (j), (k), (m) and (n)
hereof exceeds $200,000;
(s) Borrower or Clinic shall fail to direct all receipts for
Accounts to the Lock Box; or
(t) an Event of Default, as defined in the Term Loan and Security
Agreement.
SECTION 11
REMEDIES
Section 11.1. Specific Remedies Upon the occurrence of any Event of
Default:
(a) Lender may cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any other Loan Document,
or under any other agreement between Borrower and Lender.
(b) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by Borrower.
(c) Lender may set off against the Obligations all Collateral or
Clinic Collateral, balances, credits, deposits, accounts, or monies of Borrower
then or thereafter held with Lender, including amounts represented by
certificates of deposit.
(d) Upon five (5) business days after an occurrence of any Event
of Default, Lender may pay, purchase, contest or compromise any encumbrance,
charge or Lien that, in the opinion of Lender, appears to be prior or superior
to its Lien and pay all reasonable expenses incurred in connection therewith.
(e) Lender may (i) notify Account Debtors to make payment on
Accounts directly to Lender; (ii) settle, adjust, compromise, extend or renew
Accounts, whether before or after legal proceedings to collect such Accounts
have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (iv) prepare and file any notice,
assignment, satisfaction, or release of Lien, UCC termination statement or any
similar document; (v) sell or assign Accounts, individually or in bulk, upon
such terms, for such amounts, and at such time or times as Lender deems
advisable; and (vi) complete the performance required of Borrower under any
<PAGE>
contract or agreement to which Borrower is a party and out of which
Accounts arise or may arise.
(f) Lender may (i) endorse Borrower's name on all checks, notes,
drafts, money orders or other forms of payment of or security for Accounts or
other Collateral; (ii) sign Borrower's name on drafts drawn on Account Debtors
or issuers of letters of credit; and (iii) notify the postal authorities in
Borrower's name to change the address for delivery of Borrower's mail to an
address designated by Lender, receive and open all mail addressed to Borrower,
copy all mail, return all mail relating to Collateral, and hold all other mail
available for pickup by Borrower.
Section 11.2 Power of Attorney Borrower hereby appoints Lender (and any of
Lender's officers, employees, or agents designated by Lender) as Borrower's
attorney, with power whether before or after the occurrence of an Event of
Default: (a) to endorse Borrower's name on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may come into Lender's
possession; (b) to sign Borrower's name on drafts against Account Debtors, on
schedules and assignments of Accounts, on verifications of Accounts, and on
notices to Account Debtors; (c) to notify the post office authorities to change
the address for delivery of Borrower's mail to an address designated by Lender,
to receive and open all mail addressed to Borrower and to retain all mail
relating to the Collateral and forward all other mail to Borrower; (d) to send
requests for verification of Accounts; (e) to execute UCC Financing Statements;
and (f) to do all things necessary to carry out this Agreement. The appointment
of Lender as Borrower's attorney and each and every one of Lender's rights and
powers, being coupled with an interest, are irrevocable as long as any
Obligations are outstanding. Lender agrees not to exercise the power granted in
clause 11.2(b) prior to the occurrence of an Event of Default and agrees not to
exercise the power granted in clause 11.2(d) prior to notification of Borrower
of its intent to do so, but such limitations do not limit the effectiveness of
such power of attorney at any time. Any person dealing with Lender shall be
entitled to rely conclusively on any written or oral statement of Lender that
this power of attorney is in effect. Lender may also use Borrower's stationery
in connection with exercising its rights and remedies and performing the
Obligations of Borrower.
Section 11.3 Expenses Secured All expenses, including attorney fees,
incurred by Lender in the exercise of its rights and remedies provided in this
Agreement, in the other Loan Documents or by law shall be payable by Borrower to
Lender, shall be part of the Obligations, and shall be secured by the
Collateral.
Section 11.4 Equitable Relief Borrower recognizes that in the event
Borrower fails to perform, observe, or discharge any of its Obligations or
liabilities under this Agreement, no remedy of law will provide adequate relief
to Lender, and Borrower agrees that Lender shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
Section 11.5 Remedies Are Cumulative No remedy set forth herein is
exclusive of any other available remedy or remedies, but each is cumulative and
in addition to every other right or remedy given under this Agreement or under
any other agreement between Lender and Borrower or now or hereafter existing at
law or in equity or by statute. Lender may pursue its rights and remedies
concurrently or in any sequence, and no exercise of one right or remedy shall be
deemed to be an election. No delay by Lender shall constitute a waiver, election
or acquiescence by it.
SECTION 12
INDEMNITY
Section 12.1 General Indemnity. Borrower shall protect, indemnify and
defend and save harmless Lender and its directors, officers, agents and
employees from and against any and all loss, cost, liability (including
negligence, tort and strict liability), expense, damage, suits or demands
(including fees and disbursements of counsel) on account of any suit or
proceeding before any Governmental Authority which arises from the transactions
contemplated in this Agreement or otherwise arising in connection with or
relating to the Loan and any security therefor, unless such suit, claim or
damages are caused by the negligence or intentional malfeasance of Lender or its
directors, officer, agents or employees. Upon receiving knowledge of any suit,
claim or demand asserted by a third-party that Lender believes is covered by
this indemnity, Lender shall give Borrower timely notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel acceptable to Lender. Lender may, at its option, also require Borrower
to so defend the matter. This obligation on the part of Borrower shall survive
the termination of this Agreement and the repayment of the Note.
SECTION 13
<PAGE>
MISCELLANEOUS
Section 13.1. Delay and Waiver No delay or omission to exercise any right
shall impair any such right or be a waiver thereof, but any such right may be
exercised from time to time and as often as may be deemed expedient. A waiver on
one occasion shall be limited to that particular occasion.
Section 13.2. Complete Agreement This Agreement and the Schedules are the
complete agreement of the parties hereto and supersede all previous
understandings relating to the subject matter hereof. This Agreement may be
amended only by an instrument in writing that explicitly states that it amends
this Agreement and is signed by the party against whom enforcement of the
amendment is sought. This Agreement may be executed in counterparts, each of
which will be an original and all of which will constitute a single agreement.
Section 13.3. Severablity; Headings If any part of this Agreement or the
application thereof to any Person or circumstance is held invalid, the remainder
of this Agreement shall not be affected thereby. The section headings herein are
included for convenience only and shall not be deemed to be a part of this
Agreement.
Section 13.4. Binding Effect This Agreement shall be binding upon and inure
to the benefit of the respective legal representatives, successors and assigns
of the parties hereto; however, Borrower may not assign any of its rights or
delegate any of its Obligations hereunder. Lender (and any subsequent assignee)
may transfer and assign this Agreement and deliver the Collateral to the
assignee, who shall thereupon have all of the rights of Lender; and Lender (or
such subsequent assignee who in turn assigns as aforesaid) shall then be
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
Section 13.5 Notices Any notices under or pursuant to this Agreement shall
be deemed duly sent when delivered in hand or when mailed by registered or
certified mail, return receipt requested, or when delivered by courier or when
transmitted by telex, telecopy, or similar electronic medium to the following
addresses:
To Borrower: Integrated Medical Resources, Inc.
11320 West 79th Street
Lenexa, KS 66214
Attention: Beverly O. Elving
Chief Financial Officer
Telephone: (913) 962-7201
Telecopier: (913) 962-7063
To Lender: DVI Business Credit Corporation
4041 MacArthur Blvd., Suite 401
Newport Beach, CA 92660
Attention: Cynthia J. Cohn
Executive Vice President
Telephone: (714) 474-6100
Telecopier: (714) 474-6199
Copies to: DVI Business Credit Corporation
500 Hyde Park
Doylestown, PA 18901
Attention: Melvin C. Breaux, Esquire
General Counsel
Telephone: (215) 230-2931
Telecopier: (215) 230-3537
Either party may change such address by sending notice of the change to the
other party; such change of address shall be effective only upon actual receipt
of the notice by the other party.
Section 13.6 Governing Law. ALL ACTS AND TRANSACTIONS HEREUNDER AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND
<PAGE>
INTERPRETED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA, WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES.
Section 13.7 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN LENDER AND BORROWER.
Section 13.8. Submission to Jurisdiction. (a) BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY CALIFORNIA OR FEDERAL COURT SITTING IN ORANGE
COUNTY, CALIFORNIA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT. BORROWER HEREBY AGREES THAT SERVICE OF COPIES OF SUMMONS AND
COMPLAINTS AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY ACTION OR PROCEEDING
ARISING HEREUNDER MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET
FORTH AT THE BEGINNING OF THIS AGREEMENT.
(b) NOTHING IN THIS PARAGRAPH 13.8 SHALL AFFECT THE RIGHT OF LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ANY OF ITS
PROPERTIES IN THE COURTS OF OTHER JURISDICTIONS TO THE EXTENT OTHERWISE
PERMITTED BY LAW.
(c) TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE (I) ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OF CALIFORNIA OR ANY FEDERAL COURT
SITTING IN ORANGE COUNTY, CALIFORNIA OR FROM ANY LEGAL PROCESS OUT OF ANY SUCH
COURT (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, OR (ii) ANY OBJECTION TO THE LAYING OF THE VENUE OR OF AN
INCONVENIENT FORUM OF ANY SUIT, ACTION OR PROCEEDING, IF BROUGHT IN CALIFORNIA
OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA UNDER PROCESS SERVED IN
ACCORDANCE WITH SUBPARAGRAPH (a) ABOVE, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY OR OBJECTION IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE LOANS.
SECTION 13.9 Counterparts. This Agreement may be signed in any number of
counterparts, each of which will constitute an original, and all of which, taken
together, shall constitute but one and the same agreement.
THIS AGREEMENT SHALL BECOME EFFECTIVE ONLY UPON WRITTEN ACCEPTANCE BY LENDER.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement by
their duly authorized officers as of the date first above written.
BORROWER: LENDER:
INTEGRATED MEDICAL RESOURCES, INC. DVI BUSINESS CREDIT CORPORATION
By: /s/ T. Scott Jenkins By: /s/ Cynthia J. Cohn
Print Name: T. Scott Jenkins Print Name: Cynthia J. Cohn
Title: President Title: Executive Vice President
<PAGE>
IMR OF ARIZONA, INC. INTEGRATED MEDICAL RESOURCES OF
CALIFORNIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
INTEGRATED MEDICAL RESOURCES OF IMR OF CONNECTICUT, INC.
COLORADO, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC. IMR OF ILLINOIS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF INDIANA, INC. INTEGRATED MEDICAL RESOURCES OF
MASSACHUSETTS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF MICHIGAN, INC. IMR OF NEVADA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
INTEGRATED DIAGNOSTICS, INC. IMR OF NORTH CAROLINA, INC
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF OHIO, INC. IMR INTEGRATED DIAGNOSTICS OF
OKLAHOMA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
<PAGE>
INTGRATED MEDICAL RESOURCES OF IMR OF SOUTH CAROLINA, INC.
PENNSYLVANIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR INTEGRATED DIAGNOSTICS, INC. IMR OF VIRGINIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF WISCONSIN, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
<PAGE>
EXHIBIT B
(ADDITIONAL BORROWERS)
IMR of Arizona, Inc., an Arizona corporation
Integrated Medical Resources of California, Inc. a California corporation
Integrated Medical Resources of Colorado, Inc., a Colorado corporation
IMR of Connecticut, Inc., a Connecticut corporation
IMR Integrated Diagnostic of Florida, Inc., a Florida corporation
IMR of Illinois, Inc., an Illinois corporation
IMR of Indiana, Inc., an Indiana corporation
Integrated Medical Resources of Massachusetts, Inc., a Massachusetts corporation
IMR of Michigan, Inc., a Michigan corporation
IMR of Nevada, Inc., a Nevada corporation
Integrated Diagnostics, Inc., a New York corporation
IMR of North Carolina, Inc., a North Carolina corporation
IMR of Ohio, Inc., an Ohio corporation
IMR Integrated Diagnostics of Oklahoma, Inc., an Oklahoma corporation
Integrated Medical Resources of Pennsylvania, Inc., a Pennsylvania corporation
IMR of South Carolina, Inc., a South Carolina corporation
IMR Integrated Diagnostics, Inc., a Texas corporation
IMR of Virginia, Inc., a Virginia corporation
IMR of Wisconsin, Inc., a Wisconsin corporation
<PAGE>
EXHIBIT D
(EXACT NAME OF BORROWER)
INTEGRATED MEDICAL RESOURCES, INC., a Kansas corporation
IMR OF ARIZONA, INC., an Arizona corporation
INTEGRATED MEDICAL RESOURCES OF CALIFORNIA, INC., a California corporation
INTEGRATED MEDICAL RESOURCES OF COLORADO, INC., a Colorado corporation
IMR OF CONNECTICUT, INC., a Connecticut corporation
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC., a Florida corporation
IMR OF ILLINOIS, INC., an Illinois corporation
IMR OF INDIANA, INC., an Indiana corporation
INTEGRATED MEDICAL RESOURCES OF MASSACHUSETTS, INC., a Massachusetts
corporation
IMR OF MICHIGAN, INC., a Michigan corporation
IMR OF NEVADA, INC., a Nevada corporation
INTEGRATED DIAGNOSTICS, INC., a New York corporation
IMR OF NORTH CAROLINA, INC., a North Carolina corporation
IMR OF OHIO, INC., an Ohio corporation
IMR INTEGRATED DIAGNOSTICS OF OKLAHOMA, INC., an Oklahoma corporation
INTEGRATED MEDICAL RESOURCES OF PENNSYLVANIA, INC., a Pennsylvania
corporation
IMR OF SOUTH CAROLINA, INC., a South Carolina corporation
IMR INTEGRATED DIAGNOSTICS, INC., a Texas corporation
IMR OF VIRGINIA, INC., a Virginia corporation
IMR OF WISCONSIN, INC., a Wisconsin corporation
<PAGE>
EXHIBIT 2.02
SECURED PROMISSORY NOTE
Dated October 23, 1997
FOR VALUE RECEIVED, the undersigned (collectively and individually
"Maker") jointly and severally hereby promise to pay to DVI Business Credit
Corporation or its assignee (the "Holder") or order, the principal sum of Five
Million and 00/100 Dollars ($5,000,000.00) or such amount thereof as may be from
time to time advanced hereunder, pursuant to the terms of that certain Revolving
Loan and Security Agreement dated as of the date hereof between Holder as
Lender, and Maker as Borrower (the "Agreement"), with interest on the unpaid
principal balance from time to time outstanding until paid at the fluctuating
rate of interest announced publicly by Bank of America, NT&SA in San Francisco,
California, from time to time as its prime rate plus two and one half percent
(2.50%) per annum, computed on the basis of a 360-day year and actual days
elapsed, until paid. Interest shall be payable on the first of each month this
Note is outstanding in accordance with the terms of the Agreement, with all
unpaid principal and interest due and payable in full on the second anniversary
of the date hereof.
If any part of the interest due on this Note is not paid when due, it
shall be added to the principal amount of this Note and thereafter bear interest
at the rate provided above. If the specified interest rate shall at any time
exceed the maximum allowed by law, then the applicable interest rate shall be
reduced to the maximum allowed by law.
1. This Note shall be subject to prepayment or redemption in whole or in
part at any time without penalty or premium. Notwithstanding the foregoing, the
Agreement may not be terminated, and will not be terminated by any prepayment.
2. Principal and interest shall be payable to Holder at 4041 MacArthur
Blvd., Suite 401, Newport Beach, CA 92660, or such other place as the Holder
may, from time to time in writing, appoint.
3. This Note is made pursuant to, and secured by the Agreement. This
Note is also secured by any Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated by reference in and made a
part of this Note.
4. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character.
5. Failure of the Holder to exercise the acceleration option of
paragraph 4 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
6. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. Maker waives presentment, demand for
payment, notice of nonpayment, protest and notice of protest, and all other
notices and demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note. Maker consents to any and all assignments
of this Note, extensions of time, renewals and waivers that may be made or
granted by the Holder. Maker expressly agrees that such assignments, extensions
of time, renewals or waivers shall not affect Maker's liability. Maker agrees
that Holder may, without notice to Maker and without affecting the liability of
Maker, accept additional or substitute security for this Note, release any
security or any party liable for this Note or extend or renew this Note.
7. If Maker shall fail to make any payment of interest or principal,
including the payment due upon maturity, when the same is due and payable and
such failure shall continue for five (5) business days after nonpayment, a late
charge by way of damages shall be immediately due and payable. Maker recognizes
that default
<PAGE>
by Maker in making the payments herein agreed to be paid when due will result in
the Holder incurring additional expenses, in loss to the Holder of the use of
the money due and in frustration to the Holder in meeting its other commitments.
Maker agrees that, if for any reason Maker fails to pay any amount due under
this Note when due, the Holder shall be entitled to damages for the detriment
caused thereby, but that it is extremely difficult and impractical to ascertain
the extent of such damages. Maker therefore agrees that a sum equal to five
cents ($.05) for each one dollar ($1.00) of each payment which is not received
within five (5) business days after the date it is due and payable is a
reasonable estimate of the said damages to the Holder, which sum Maker agrees to
pay on demand.
8. If action be instituted on this Note (including without limitation,
any proceedings for collection hereof in any bankruptcy or probate matter or
case), or if proceedings are commenced on or under any of the Loan and Security
Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, reasonable attorneys' fees.
9. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
10. This Note shall inure to the benefit of the Holder's successors and
assigns. References to the "Holder" shall be deemed to refer to the holder(s) of
this Note at the time such reference becomes relevant.
11. If any term, provision, covenant, or condition of this Note is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greater extent
permitted by law and shall in no other way be affected, impaired or invalidated.
12. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
13. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF CALIFORNIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE
AND/OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.
MAKER(S):
INTEGRATED MEDICAL RESOURCES, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
IMR OF ARIZONA, INC. INTEGRATED MEDICAL RESOURCES OF
CALIFORNIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
INTEGRATED MEDICAL RESOURCES OF IMR OF CONNECTICUT, INC.
COLORADO, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC. IMR OF ILLINOIS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF INDIANA, INC. INTEGRATED MEDICAL RESOURCES OF
MASSACHUSETTS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF MICHIGAN, INC. IMR OF NEVADA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
INTEGRATED DIAGNOSTICS, INC. IMR OF NORTH CAROLINA, INC
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF OHIO, INC. IMR INTEGRATED DIAGNOSTICS OF
OKLAHOMA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
INTGRATED MEDICAL RESOURCES OF IMR OF SOUTH CAROLINA, INC.
PENNSYLVANIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR INTEGRATED DIAGNOSTICS, INC. IMR OF VIRGINIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
IMR OF WISCONSIN, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
<PAGE>
EXHIBIT 4(e)
LOAN AND SECURITY AGREEMENT
Loan 97-10-100
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of
October 23, 1997, between Integrated Medical Resources, Inc. and the entities
listed on Exhibit A attached hereto and made a part hereof as debtors
(collectively and individually referred to as "Debtor") and DVI Financial
Services Inc. as secured party ("Secured Party").
1. Certain Definitions. The following terms shall have the following
respective meanings:
(a) Advance. The Advance of funds to the Debtor pursuant to Section 2
hereof and the Schedule which may be executed between Secured Party and Debtor
from time to time.
(b) Collateral. "Collateral" shall have the meaning set forth in Section
2.2 hereof.
(c) Event of Default. Those events set forth in Section 9 hereof.
(d) Monthly Loan Repayment. The amount set forth in any Schedule executed
in connection with any Advance under this Agreement.
(e) Revolving Loan and Security Agreement. The Revolving Loan and Security
Agreement between Debtor and DVI Business Credit Corporation dated as of the
date hereof.
(f) Schedule(s). And and all or each (as the context shall require) of the
Loan and Collateral Schedules of the Debtor, to be executed by the parties under
this Agreement.
(g) Secured Obligations. The payment of the principal and interest as set
forth in each and all of the Schedules, and the payment of all additional
amounts and other sums at any time due and owing under the Schedules for this
Agreement, and the performance and observance of all covenants and conditions
contained herein and therein.
(h) Supplier. The entity from whom the Debtor purchased the Collateral
including manufacturers, dealers, sellers and vendors.
2. Purpose of Financing and Description of Loans; Grant of Security
Interest; Collateral.
(a) Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount up to
$500,000.00.
(b) Debtor agrees that the proceeds of any Advance will be used solely to
acquire the Collateral as described in the Schedule executed in connection with
said advance.
(c) The amount of any Advances to Debtor shall be set forth on the Schedule
executed in connection with said Advance.
(d) The term of repayment of any Advance made under this Agreement (the
"Term") shall commence on the date set forth in the Schedule executed in
connection with said Advance and shall continue for the period set forth in said
Schedule, and for all extensions and renewals of such period.
(e) Debtor shall pay to Secured Party the Monthly Loan Repayment for each
Advance in amounts and on the dates set forth in the Schedule executed in
connection with said Advance, whether or not Secured Party has rendered an
invoice to Debtor. Debtor agrees to pay the Monthly Loan Repayment to Secured
Party at the office of the Secured Party set forth below, or to such entity
and/or at such other place as Secured Party may from time to time designate by
notice to Debtor. Any other amounts required to be paid to Secured Party under
this Agreement are due upon Debtor's receipt of Secured Party's invoice and will
be payable as directed in the invoice. Payments under this Agreement may be
applied to the Debtor's then accrued Secured Obligations in such order as
Secured Party may choose.
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(f) The Advances shall not be subject to prepayment or redemption in whole
or in part prior to the expiration of the Term set forth in the Schedule
executed in connection with said Advance.
2.1 Grant of Security Interest. In consideration of the Advances to be made
by Secured Party to Debtor under this Agreement, and to secure the payment and
performance of the Secured Obligations, Debtor hereby grants and assigns to
Secured Party, its successors and assigns, a security interest in all of its
right, title and interest in the equipment described in Exhibit B hereto, and
all additions, improvements, accessions and accumulations to said equipment,
replacements and substitutions of components of said equipment, together with
all rents, issues, income, profits and proceeds therefrom and Debtor's books and
records relating to the foregoing (the "Collateral").
Each item of Collateral shall secure not only the specific Advances made by
Secured party to Debtor as set forth in the Schedule, but also all other present
and future indebtedness or obligations of debtor to Secured party of every kind
and nature whatsoever. Debtor warrants and agrees that the Collateral will be
used primarily for business or commercial purposes and that regardless of the
manner of affixation, the Collateral shall remain personal property and shall
not become part of the real estate. Debtor agrees to keep the Collateral at the
locations set forth in the Schedule(s) covering said Collateral and will not
make any change in the location of the Collateral within such state, and will
not remove the Collateral from such state without the prior written consent of
Secured Party.
3. Time is of the Essence; Late Charges. Time is of the essence in this
Agreement and if any Monthly Loan Repayment is not paid within the ten (10) days
after the due date thereof, Secured Party shall have the right to add and
collect, and Debtor agrees to pay:
(a) A late charge on and in addition to, such Monthly Loan Repayment equal
to five percent (5%) of such Monthly Loan Repayment or a lesser amount if
established by any State or Federal statute applicable thereto; and
(b) Interest on such Monthly Loan Repayment from thirty (30) days after the
due date until paid at the rate of eighteen (18%) per annum.
4. No Warranties. This Agreement is solely a financing agreement. Debtor
acknowledges that: The Collateral has or will have been selected and acquired
solely by Debtor for Debtor's purposes; Secured Party is not the manufacturer,
dealer, vendor or supplier of the Collateral; the Collateral is of a size,
design, capacity, description and manufacture selected by Debtor; Debtor is
satisfied that the Collateral is suitable and fit for its purposes; and SECURED
PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER,
EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION, MERCHANTABILITY, DESIGN
OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE
VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE
COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER.
4.1 No Agency. Debtor acknowledges and agrees that none of the
manufacturer, vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer, dealer
vendor or supplier is authorized to waive or alter any term or condition of this
Agreement, and no representation as to the Collateral or any other matter by any
manufacturer, dealer, vendor or supplier shall in any way affect Debtor's duty
to pay the Monthly Loan Repayment and perform his other obligations as set forth
in this Agreement.
5. Acceptance. Execution by Debtor and Secured Party of the Schedule
covering the Collateral will conclusively establish that such Collateral has
been included under and will be subject to all of the terms and conditions of
this Agreement. If Debtor has not furnished Secured Party with an executed
Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment set forth in any applicable equipment financing
commitment, Secured Party may terminate its obligation to make any Advances with
respect to any applicable Collateral.
6. Insurance and Risk of Loss. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor will
procure forthwith and maintain property and general liability insurance with
extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or
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assigns as additional insureds and loss payees. Each insurer shall agree by
endorsement upon such policy issued by it or by independent instrument furnished
to Secured Party and Debtor that it will give Secured Party and Debtor thirty
(30) days written notice before the policy in question shall be materially
altered or canceled. Secured Party's acceptance of policies in lesser amounts or
risks shall not be a waiver of Debtor's foregoing obligation.
7. Debtor's Representations and Warranties.
Debtor represents and warrants to Secured Party as follows:
(a) Debtor is duly organized and existing under the laws of the State of
its formation without limit as to the duration of its existence, and is
authorized and in good standing to do business in said State; Debtor has
corporate powers and adequate authority, rights and franchises to own its own
property and to carry on its business as now conducted, and is duly qualified
and in good standing in each state in which the character of the properties
owned by it therein or the conduct of its business makes such qualifications
necessary; and Debtor has the corporate power and adequate authority to make and
carry out this Agreement.
(b) The execution, delivery and performance of this Agreement are duly
authorized and do not, to the best of the Debtor's knowledge, require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law, regulation or any term or
provision of its articles of formation or bylaws, and this Agreement is a valid
and binding obligation of Debtor legally enforceable in accordance with its
terms.
(c) The execution, delivery and performance of this Agreement will not
contravene or conflict with any agreement, indenture or undertaking to which
Debtor is a party or by which it or any of its property may be bound by or
affected, and will not cause any lien, charge or other encumbrance to be created
or imposed upon any such property by reason thereof.
(d) Except as shown on Exhibit C, there is no material litigation or other
proceeding pending or threatened against or affecting Debtor, and it is not in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority. The balance sheets of
Debtor and the related profit and loss statements and other financial data as
submitted in writing by Debtor to Secured Party in connection with this
Agreement, are true and correct, and said balance sheets and profit and loss
statements truly represent the financial condition of Debtor as of the dates
thereof.
(e) Debtor has good and valid title to the Collateral which is free from
and will be kept free from all liens, claims, security interests and
encumbrances, except for the security interest granted hereby.
(f) No financing statement covering the Collateral or any proceeds thereof
is on file in favor of anyone other than Secured Party, but if such other
financing statement is on file, it will be terminated or subordinated.
(g) All necessary action, including the filing of UCC-1 Financing
Statements, has or will be made to give Secured Party a first priority security
interest in the Collateral. Debtor agrees to permit Secured Party to pre-file
any UCC-1 Financing Statement pursuant to California Commercial Code '9402.
(h) Debtor hereby appoints Secured Party (and any of Secured Party's
officers, mployees, or agents designated by Secured Party) as Debtor's attorney,
with power whether before or after the occurrence of an Event of Default: (a) to
execute UCC Financing Statements; and (b) to do all things necessary to carry
out this Agreement. The appointment of Secured Party as Debtor's attorney and
each and every one of Secured Party's rights and powers, being coupled with an
interest, are irrevocable as long as any Obligations are outstanding. Any person
dealing with Secured Party shall be entitled to rely conclusively on any written
or oral statement of Secured Party that this power of attorney is in effect.
8. Debtor's Agreements. Debtor agrees:
(a) To defend at Debtor's own cost and expense any action, proceeding or
claim affecting the Collateral.
(b) To pay reasonable attorneys fees and other expenses incurred by Secured
Party in enforcing its rights in the event of Debtor's default under this
Agreement.
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(c) To pay promptly all taxes, assessments, license fees and other public
or private charges when levied or assessed against the Collateral or this
Agreement and this obligation shall survive the termination of this Agreement.
(d) That if a certificate of title is required or permitted by law, Debtor
shall obtain such certificate with respect to the Collateral, showing the
security interests of Secured Party thereon and in any event do everything
necessary or expedient to preserve or perfect the security interest of Secured
Party.
(e) That Debtor will not misuse, fail to keep in good repair, secrete, or
without the prior written consent of Secured Party, and notwithstanding Secured
Party's claim to proceeds, sell, rent, lend, encumber or transfer any of the
Collateral. The Collateral shall be maintained in accordance with the
manufacturer's specifications and shall at all times be eligible for the
manufacturer's maintenance program.
(f) That Secured Party may enter upon Debtor's premises or wherever the
Collateral may be located at any reasonable time to inspect the Collateral and
Debtor's books and records pertaining to the Collateral, and Debtor shall assist
Secured Party in making such inspection.
(g) That the security interest granted by Debtor to Secured Party shall
continue effective irrespective of the payment of the Secured Obligations, so
long as there are any obligations of any kind, including obligations under
guaranties or assignments, owed by Debtor to Secured Party.
(h) To mark and identify the Collateral with all information and in such
manner as Secured Party may request from time to time and replace promptly any
such markings or identifications which are removed, defaced or destroyed.
(i) except as required herein, not to make any addition or improvement to
any item of Collateral that is not readily removable without causing material
damage to any item or impairing its original value or utility. Any addition or
improvement that is so required or cannot be so removed will immediately become
part of the Collateral.
(j) To indemnify and hold Secured Party harmless from and against all
claims, losses, liabilities (including negligence, tort and strict liability),
damages, judgments, suits and all legal proceedings, and any and all costs and
expenses in connection therewith (including attorney's fees) arising out of or
in any manner connected with the manufacture, purchase, financing, ownership,
delivery, rejection, non-delivery, possession, use, transportation, storage,
operation, maintenance, repair, return or other disposition of the Collateral or
with this Agreement, including, without limitation, claims for injury to, or
death of, persons and for damage to property, and give Secured Party prompt
notice of such claims or liability.
(k) That Debtor will not part with possession of or control of or suffer or
allow to pass out of its possession or control items of Collateral or change the
location of the Collateral or any part thereof from the address shown in the
appropriate Schedule without the prior written consent of Secured Party.
(l) That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART
OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL, LEASE, TRANSFER,
PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S INTEREST IN THIS
AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL NOT BE ASSIGNED OR
TRANSFERRED BY OPERATION OF LAW. CONSENT TO ANY OF THE FOREGOING PROHIBITED ACTS
APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT CONSENT TO SUBSEQUENT LIKE ACT BY
DEBTOR OR ANOTHER ENTITY.
The foregoing notwithstanding, Debtor, Debtor may dispose of any of the
Collateral that Debtor has reasonably determined is obsolete or surplus
equipment, provided that (i) as of the disposition date no Event of Default is
continuing and such disposition would not cause an Event of Default to occur,
(ii) the proceeds of the Collateral disposition, if any , are delivered to
Secured Party to be held as Collateral hereunder, (iii) the equipment, if any,
acquired in replacement for the Collateral disposed of is of equal or greater
value than the Collateral disposed and is pledged by Debtor to Secured party
hereunder as Collateral
9. Events of Default. Any of the following events or conditions shall
constitute an Event of Default hereunder:
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(a) Debtor's failure to pay any Monthly Loan Repayment or any installment
of the principal or interest due under any Schedule when and after the same
shall become due and payable, whether at the due date thereof, or at the date
fixed for prepayment or by acceleration or otherwise;
(b) Debtor's failure to observe or perform any covenant or agreement to be
observed or performed by Debtor under this Agreement, any Schedule or any other
instrument or agreement delivered by Debtor to Secured Party in connection with
this or any other transaction;
(c) Any representation or warranty made by Debtor herein or in any report,
certificate, financial or other statement furnished in connection with this
Agreement shall prove to be false or misleading in any material respect; or
(d) Debtor is (i) adjudicated insolvent or a bankrupt, or ceases, becomes
unable, or admits in writing its inability, to pay its debts as they mature, or
makes a general assignment for the benefit of, or enters into any composition or
arrangement with, creditors; (ii) applies for or consents to the appointment of
a receiver, trustee or liquidator of it or of a substantial part of its
property, or authorizes such application or consent, or proceedings seeking such
appointment shall be instituted against it without such authorization, consent
or application and continues undismissed for a period of 60 calendar days; (iii)
authorizes or files a voluntary petition in bankruptcy or applies for or
consents to the application of any bankruptcy, reorganization in bankruptcy,
arrangement, readjustments or debts, insolvency, dissolution, moratorium or
other similar laws of any jurisdiction, or authorizes such application or
consent, or proceedings to such end shall be instituted against it without such
authorization, application or consent and such proceedings instituted against it
shall continue undismissed for a period of 60 calendar days; or
(e) Secured Party, in good faith, believes the prospect of payment or
performance is impaired or in good faith believes the Collateral is insecure;
(f) Any agreement made by a guarantor, surety or endorser for Debtor's
default in any obligation or liability to Secured Party or any guaranty obtained
in connection with this transaction is terminated or breached.
(g) an Event of Default, as defined in the Revolving Loan and Security
Agreement.
10. Secured Party's Remedies. Debtor agrees that when an Event of Default
has occurred and is continuing, Secured Party shall have the rights, options,
duties and remedies of a Secured Party and Debtor shall have the rights and
duties of a Debtor under the Uniform Commercial Code in effect in each
jurisdiction where the Collateral or any part thereof is located and, without
limiting the foregoing, Secured Party may exercise one or more or all, and in
any order, of the remedies hereinafter set forth:
(a) By notice in writing to Debtor, declare the entire unpaid principal
balance due under any, each and all Schedule(s) to be immediately due and
payable; and thereupon all such unpaid balance(s), together with all accrued and
unpaid interest thereon, shall be immediately due and payable;
(b) Personally, or by agents or attorneys, take immediate possession of the
Collateral or any portion thereof and for that purpose pursue the same wherever
it may be found and enter any of the premises of Debtor with or without notice,
demand, process of law or legal procedure, and search for, take possession of,
remove, keep and store the same, or use, operate, or lease the same until sold
and otherwise exercise any and all of the rights and powers of Debtor in respect
thereof;
(c) Either with or without taking possession and without instituting any
legal proceedings whatsoever (having first given notice of such sale by mail to
Debtor once at least 10 calendar days prior to the date of such sale, and any
other notice of such sale which may be required by law, if said notice is
sufficient), sell and dispose of the Collateral or any part thereof at public
auction(s) to the highest bidder, or at a private sale(s) in one lot as an
entirety or in several lots, and either for cash or for credit and on such terms
as Secured Party may determine, and at any place (whether or not it is the
location of the Collateral or any part thereof, designated in the notice above
referred to. Any such sale or sales may be adjourned from time to time by
announcement of the time and place appointed for such sale or sales, or for such
adjourned sales or sales without further notice, and Secured Party may bid and
become the purchaser at any such sale;
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(d) Secured Party may proceed to protect and enforce this Agreement and any
Schedule(s) by suit or suits or proceedings in equity, at law or in bankruptcy,
and whether for the specific performance of any covenant or agreement herein
contained, or execution or aid of any power herein granted, or for foreclosure
hereunder, or for the appointment of a receiver or receivers for the Collateral,
or any party thereof, or for the enforcement of any proper, legal or equitable
remedy available under applicable law.
(e) Secured Party may require Debtor to assemble the Collateral and return
it to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties.
(f) Debtor agrees to pay the Secured Party all expenses or retaking,
holding, preparing for sale, or selling the Collateral in addition to attorneys'
fees as set forth above.
11. Acceleration Clause. In case of any sale of the Collateral, or any part
thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. Exercise of Rights. No delay or omission of Secured Party in the
exercise of any right or power arising from any default shall act as a waiver of
or impair any such right or power or prevent its exercise during the continuance
of such default. No waiver by Secured Party of any such default, whether such
waiver be full or partial, shall extend to or be taken to affect any subsequent
default, nor shall it impair the rights resulting therefrom except as may be
otherwise provided therein. The giving, taking or enforcement of any other or
additional security, collateral, or guarantee for the payment of the Secured
Obligations shall not operate to prejudice, waive, or affect the security of
this Agreement or any rights, powers, or remedies hereunder, and Secured Party
shall not be required to look first to enforce or exhaust such other additional
security, collateral, or guarantees. All rights, remedies, and options of
Secured Party hereunder, or by law shall be cumulative.
13. Assignment by Secured Party. SECURED PARTY MAY ASSIGN OR TRANSFER THIS
AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party any defense,
counterclaim or offset that Debtor may have against Secured Party.
14. Non-Terminable Agreement; Obligations Unconditional. This Agreement
cannot be canceled or terminated except as expressly provided herein. Debtor
hereby agrees that Debtor's obligation to pay all Secured Obligations shall be
absolute and unconditional and Debtor will not be entitled to any abatement of
Monthly Loan Repayments or other payments due under this Agreement or any
reduction thereof under circumstances or for any reason whatsoever. Debtor
hereby waives any and all existing and future claims, as offsets, against any
Monthly Loan Repayments and other payments due under this Agreement as and when
due regardless of any offset or claim which may be asserted by Debtor or on its
behalf. The obligations and liabilities of Debtor hereunder will survive the
termination of this Agreement.
15. Additional Documents. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature.
Debtor further agrees to furnish Secured Party:
(a) On a timely basis, Debtor's future financial statements, including
Debtor's most recent annual report, balance sheet and income statement, prepared
in accordance with generally accepted accounting principles, which reports,
Debtor warrants, shall fully and fairly represent the true financial condition
of Debtor;
(b) Any other financial information normally provided by Debtor to the
public; and
(c) Such other financial data or information relative to this Agreement and
the Collateral, including, without limitation, copies of Suppliers' proposals
and purchase orders and agreements, listings of serial numbers or other
identification data and confirmations of such information, as Secured Party may
from time to time reasonably request. Debtor will procure and/or execute, have
executed, have acknowledged, and/or deliver to Secured Party, record and file
such other documents and notices as Secured Party deems necessary or desirable
to
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protect its interest in and rights under this Agreement and Collateral. Debtor
will pay for all filings, searches, title reports, legal and other fees incurred
by Secured Party in connection with any documents to be provided by Debtor
pursuant to this Agreement and any other similar documents Secured Party may
procure.
16. Miscellaneous.
(a) Successors and Assigns. Whenever any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
parties, and all the covenants, promises, and agreements in this Agreement
contained by or on behalf of Debtor or Secured Party shall bind and inure to the
benefit of the respective successors and assigns of each party whether so
expressed or not.
(b) Partial Invalidity. The enforceability or invalidity of any
provision(s) of this Agreement shall not render any other provision(s) herein
contained unenforceable or invalid.
(c) Communications. All communications provided for herein shall be in
writing and shall be deemed to have been given (unless otherwise required by the
specific provisions in respect of any matter) ((i) when addressed and delivered
personally or (ii) three (3) calendar days following deposit in the United
States mail, registered or certified, postage prepaid, and addressed to the
address set forth beneath the respective parties' signature lines below, or as
to Debtor or Secured Party at such other address as they may designate by notice
duly given in accordance with this Section to the other party.
(d) Governing Law. ALL ACTS AND TRANSACTIONS HEREUNDER AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICTS OF
LAW PRINCIPLES.
(e) Waiver of Trial by Jury. SECURED PARTY AND DEBTOR HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN SECURED PARTY AND DEBTOR.
(f) Submission to Jurisdiction. DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY CALIFORNIA OR FEDERAL COURT SITTING IN ORANGE COUNTY,
CALIFORNIA, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. DEBTOR HEREBY AGREES THAT SERVICE OF COPIES OF SUMMONS AND COMPLAINTS
AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY ACTION OR PROCEEDING ARISING
HEREUNDER MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO DEBTOR AT ITS ADDRESS SET
FORTH AT THE BEGINNING OF THIS AGREEMENT.
NOTHING IN THIS PARAGRAPH (f) SHALL AFFECT THE RIGHT OF SECURED PARTY TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
SECURED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST DEBTOR OR ANY OF ITS
PROPERTIES IN THE COURTS OF OTHER JURISDICTIONS TO THE EXTENT OTHERWISE
PERMITTED BY LAW.
TO THE EXTENT THAT DEBTOR HAS OR HEREAFTER MAY ACQUIRE (I) ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OF CALIFORNIA OR ANY FEDERAL COURT SITTING IN
ORANGE COUNTY, CALIFORNIA OR FROM ANY LEGAL PROCESS OUT OF ANY SUCH COURT
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, OR (ii) ANY OBJECTION TO THE LAYING OF THE VENUE OR OF AN INCONVENIENT
FORUM OF ANY SUIT, ACTION OR PROCEEDING, IF BROUGHT IN CALIFORNIA OR FEDERAL
COURT SITTING IN ORANGE COUNTY, CALIFORNIA UNDER PROCESS SERVED IN ACCORDANCE
WITH SUBPARAGRAPH (a) ABOVE, DEBTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY OR
OBJECTION IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE LOANS.
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(g) Counterparts. This Agreement may be signed in any number of
counterparts, each of which will constitute an original, and all of which, taken
together, shall constitute but one and the same agreement.
(h) Entire Agreement. This Agreement constitutes the entire understanding
or agreement between Secured Party and Debtor and there is no understanding or
agreement, oral or written, which is not set forth herein. This Agreement may
not be amended except by a writing signed by Secured Party and Debtor and shall
be binding upon and inure to the benefit of the parties hereto, their permitted
successors and assigns.
THIS AGREEMENT SHALL BECOME EFFECTIVE ONLY UPON WRITTEN ACCEPTANCE BY SECURED
PARTY.
IN WITNESS WHEREOF, Debtor and Secured Party have executed this
Agreement by their duly authorized officers as of the date first above written.
DEBTOR: LENDER:
INTEGRATED MEDICAL RESOURCES, INC. DVI FINANCIAL SERVICES INC.
By: /s/ T. Scott Jenkins By: /s/ Cynthia J. Cohn
Print Name: T. Scott Jenkins Print Name: Cynthia J. Cohn
Title: President Title: Executive Vice President
DEBTOR: DEBTOR:
IMR OF ARIZONA, INC. INTEGRATED MEDICAL RESOURCES OF
CALIFORNIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTEGRATED MEDICAL RESOURCES OF IMR OF CONNECTICUT, INC.
COLORADO, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC. IMR OF ILLINOIS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF INDIANA, INC. INTEGRATED MEDICAL RESOURCES OF
MASSACHUSETTS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
<PAGE>
IMR OF MICHIGAN, INC. IMR OF NEVADA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTEGRATED DIAGNOSTICS, INC. IMR OF NORTH CAROLINA, INC
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF OHIO, INC. IMR INTEGRATED DIAGNOSTICS OF
OKLAHOMA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTGRATED MEDICAL RESOURCES OF IMR OF SOUTH CAROLINA, INC.
PENNSYLVANIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
<PAGE>
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS, INC. IMR OF VIRGINIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR:
IMR OF WISCONSIN, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
<PAGE>
EXHIBIT A
TO LOAN AND SECURITY AGREEMENT
(ADDITIONAL DEBTORS)
IMR of Arizona, Inc., an Arizona corporation
Integrated Medical Resources of California, Inc. a California corporation
Integrated Medical Resources of Colorado, Inc., a Colorado corporation
IMR of Connecticut, Inc., a Connecticut corporation
IMR Integrated Diagnostic of Florida, Inc., a Florida corporation
IMR of Illinois, Inc., an Illinois corporation
IMR of Indiana, Inc., an Indiana corporation
Integrated Medical Resources of Massachusetts, Inc., a Massachusetts corporation
IMR of Michigan, Inc., a Michigan corporation
IMR of Nevada, Inc., a Nevada corporation
Integrated Diagnostics, Inc., a New York corporation
IMR of North Carolina, Inc., a North Carolina corporation
IMR of Ohio, Inc., an Ohio corporation
IMR Integrated Diagnostics of Oklahoma, Inc., an Oklahoma corporation
Integrated Medical Resources of Pennsylvania, Inc., a Pennsylvania corporation
IMR of South Carolina, Inc., a South Carolina corporation
IMR Integrated Diagnostics, Inc., a Texas corporation
IMR of Virginia, Inc., a Virginia corporation
IMR of Wisconsin, Inc., a Wisconsin corporation
<PAGE>
LOAN AND COLLATERAL SCHEDULE NO. 1
TO
LOAN AND SECURITY AGREEMENT DATED OCTOBER 23, 1997
LOAN NO. 97-10-100
THIS LOAN AND COLLATERAL SCHEDULE is executed pursuant to that certain Loan
and Security Agreement dated October 23, 1997 ("Agreement"), between Integrated
Medical Resources, Inc. and the entities listed on Exhibit A attached hereto and
made a part hereof as debtors (collectively and individually referred to as
"Debtor") and DVI Financial Services Inc. as secured party ("Secured Party").
1. Incorporation by Reference.
The Agreement is fully incorporated herein by reference.
2. Description of Collateral.
In consideration of the terms and conditions of the Agreement, and of
this Schedule, Secured Party has concurrently herewith made a cash Advance to
Debtor on the security of the Collateral described as follows:
See Exhibit B attached hereto and made a part hereof.
, TOGETHER WITH ALL PARTS, ACCESSORIES, ATTACHMENTS, ACCESSIONS, ADDITIONS,
REPLACEMENT AND SUBSTITUTION COMPONENTS THEREOF.
3. Amount of Advance.
The total amount of the Advance pursuant to this Schedule is Five
Hundred Thousand and 00/100 Dollars ($500,000.00)
4. Term.
The Term for the Monthly Loan Repayments of the Advance made pursuant to
this Schedule shall commence on the date set forth below in Section 5, and
unless earlier terminated provided in the Loan and Security Agreement shall
continue for a period of thirty-six (36) months.
5. Monthly Loan Repayments.
As Monthly Loan Repayments of the Advance made under this Schedule, Debtor
agrees to pay Secured Party the sum of Five Hundred Ninety Seven Thousand Eight
Hundred Fifty Seven and 40/100 Dollars ($597,857.40), payable, in successive
monthly installments of: thirty-six (36) payments of Sixteen Thousand Six
Hundred Seven and 15/100 Dollars ($16,607.15), beginning on October 23, 1997 and
on the same day of each month thereafter until paid in full. In the event there
is an increase in the thirty (30) month Treasury Note rate from the rate quoted
in the proposal/commitment letter to the rate in effect on the date this
Schedule funds, then Secured Party reserves the right to increase the Monthly
Loan Repayment Amount by that same rate of increase. Monthly Loan Repayments
will be made to Secured Party by having DVI Business Credit Corporation deduct
from the Lock Box Accounts, as defined in the Revolving Loan and Security
Agreement the Monthly Loan Repayments in accordance with Section 2.6 of the
Revolving Loan and Security Agreement. To the extent there are not sufficient
funds in the Lock Box Accounts, Debtor shall make the Monthly Loan Repayments
directly to Secured Party as follows:
DVI Financial Services Inc.
500 Hyde Park
Doylestown, PA 18901
<PAGE>
6. Duty to Pay Absolute.
Until the Debtor's obligation to make Monthly Loan Repayments has been
terminated as provided herein, it shall be absolute, unconditional, and without
deduction, offset, or abatement for any reason, and shall continue in full force
and effect regardless of Debtor's ability to use any item of Collateral or any
reason.
7. Collateral Location.
The Collateral shall be located at: See Exhibit C attached hereto and
made a part hereof.
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Schedule
by their duly authorized officers as of the date first above written.
DEBTOR: LENDER:
INTEGRATED MEDICAL RESOURCES, INC. DVI FINANCIAL SERVICES INC.
By: /s/ T. Scott Jenkins By: /s/ Cynthia J. Cohn
Print Name: T. Scott Jenkins Print Name: Cynthia J.Cohn
Title: President Title: Executive Vice President
DEBTOR: DEBTOR:
IMR OF ARIZONA, INC. INTEGRATED MEDICAL RESOURCES OF
CALIFORNIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTEGRATED MEDICAL RESOURCES OF IMR OF CONNECTICUT, INC.
COLORADO, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC. IMR OF ILLINOIS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF INDIANA, INC. INTEGRATED MEDICAL RESOURCES OF
MASSACHUSETTS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
<PAGE>
DEBTOR: DEBTOR:
IMR OF MICHIGAN, INC. IMR OF NEVADA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTEGRATED DIAGNOSTICS, INC. IMR OF NORTH CAROLINA, INC
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF OHIO, INC. IMR INTEGRATED DIAGNOSTICS OF
OKLAHOMA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTGRATED MEDICAL RESOURCES OF IMR OF SOUTH CAROLINA, INC.
PENNSYLVANIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS, INC. IMR OF VIRGINIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR:
IMR OF WISCONSIN, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
<PAGE>
EXHIBIT A
TO LOAN AND COLLATERAL SCHEDULE NO. 1
(ADDITIONAL DEBTORS)
IMR of Arizona, Inc., an Arizona corporation
Integrated Medical Resources of California, Inc. a California corporation
Integrated Medical Resources of Colorado, Inc., a Colorado corporation
IMR of Connecticut, Inc., a Connecticut corporation
IMR Integrated Diagnostic of Florida, Inc., a Florida corporation
IMR of Illinois, Inc., an Illinois corporation
IMR of Indiana, Inc., an Indiana corporation
Integrated Medical Resources of Massachusetts, Inc., a Massachusetts corporation
IMR of Michigan, Inc., a Michigan corporation
IMR of Nevada, Inc., a Nevada corporation
Integrated Diagnostics, Inc., a New York corporation
IMR of North Carolina, Inc., a North Carolina corporation
IMR of Ohio, Inc., an Ohio corporation
IMR Integrated Diagnostics of Oklahoma, Inc., an Oklahoma corporation
Integrated Medical Resources of Pennsylvania, Inc., a Pennsylvania corporation
IMR of South Carolina, Inc., a South Carolina corporation
IMR Integrated Diagnostics, Inc., a Texas corporation
IMR of Virginia, Inc., a Virginia corporation
IMR of Wisconsin, Inc., a Wisconsin corporation
<PAGE>
ACCEPTANCE CERTIFICATE
TO
LOAN AND SECURITY AGREEMENT DATED OCTOBER 23, 1997
LOAN NO. 97-10-100
LOAN AND COLLATERAL SCHEDULE NO. 1 DATED OCTOBER 23, 1997
THIS ACCEPTANCE CERTIFICATE ("Certificate") is being executed and
delivered pursuant to the Loan and Security Agreement and Loan and Collateral
Schedule No. 1 ("Schedule") each dated as of October 23, 1997 between Integrated
Medical Resources, Inc. and the entities listed on Exhibit A attached hereto and
made a part hereof (collectively and individually referred to as "Debtor") and
DVI Financial Services Inc. (referred to as "Secured Party") for the following
equipment ("Equipment"):
MANUFACTURER, MODEL AND SERIAL/IDENTIFICATION NUMBER:
Refer to the attached Exhibit "B" which by this reference is made a part hereof.
, TOGETHER WITH ALL PARTS, ACCESSORIES, ATTACHMENTS, ACCESSIONS, ADDITIONS,
REPLACEMENT AND SUBSTITUTION COMPONENTS THEREOF.
WE HEREBY CERTIFY AND ACKNOWLEDGE that all the Equipment subject to the
above-referenced Schedule and as described herein has been delivered to us; that
any necessary installation of the Equipment has been fully and satisfactorily
performed; that the Equipment has been examined and/or tested and is in good
operating order and condition and is of the manufacture, design and
specifications selected by us and is in all respects satisfactory to Debtor; and
that, after full inspection thereof, we have accepted the Equipment for all
purposes as of the date hereof, including, without limitation, for purposes of
the above-referenced Schedule. We hereby represent and warrant that any right we
may have now or in the future to reject the Equipment or to revoke our
acceptance thereof has terminated as of the date of this Certificate, and we
hereby waive any such right by the execution hereof.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that Secured Party has fully
and satisfactorily satisfied all its obligations under the Schedule, and that
any and all conditions to the effectiveness of the Schedule or to our
obligations under the Schedule have been satisfied, and that we have no
defenses, set-offs or counterclaims to any such obligations, and that the
Schedule is in full force and effect, and that no event of default has occurred
thereunder.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE THAT SECURED PARTY MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE CAPACITY, CONDITION,
DESIGN, DURABILITY, MATERIAL, MERCHANTABILITY, PERFORMANCE, QUALITY,
SUITABILITY, WORKMANSHIP OR VALUE OF THE EQUIPMENT OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE OR THAT THE EQUIPMENT WILL SATISFY THE REQUIREMENTS OF ANY
LAW, RULE, REGULATION, SPECIFICATION OR CONTRACT, OR ANY OTHER REPRESENTATION OR
WARRANTY OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE EQUIPMENT OR ANY
ASSOCIATED ITEM OR ANY ASPECT THEREOF.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that in the event the
Equipment subject to the Schedule fails to perform as expected or represented by
the manufacturer/supplier, Debtor shall continue to make monthly payments to
Secured Party as required under the terms of the Schedule and Debtor shall look
solely to the manufacturer or supplier for the performance of all covenants and
warranties with respect to the Equipment and hereby agrees to indemnify Secured
Party and hold it harmless from such non-performance or breach of warranty with
respect to the Equipment.
<PAGE>
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that Secured Party is not the
manufacturer, supplier, distributor or seller of the Equipment and has no
control, knowledge or familiarity with the conditioning, capacity, functioning
or other characteristics of the Equipment.
<PAGE>
WE HEREBY FURTHER ACKNOWLEDGE that Secured Party is relying upon this
Certificate as a condition to making payment to Debtor under the Schedule.
Date Equipment Accepted: October 23, 1997
DEBTOR:
INTEGRATED MEDICAL RESOURCES, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
DEBTOR: DEBTOR:
IMR OF ARIZONA, INC. INTEGRATED MEDICAL RESOURCES OF
CALIFORNIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTEGRATED MEDICAL RESOURCES OF IMR OF CONNECTICUT, INC.
COLORADO, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS OF FLORIDA, INC. IMR OF ILLINOIS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF INDIANA, INC. INTEGRATED MEDICAL RESOURCES OF
MASSACHUSETTS, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF MICHIGAN, INC. IMR OF NEVADA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
<PAGE>
DEBTOR: DEBTOR:
INTEGRATED DIAGNOSTICS, INC. IMR OF NORTH CAROLINA, INC
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR OF OHIO, INC. IMR INTEGRATED DIAGNOSTICS OF
OKLAHOMA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
INTGRATED MEDICAL RESOURCES OF IMR OF SOUTH CAROLINA, INC.
PENNSYLVANIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR: DEBTOR:
IMR INTEGRATED DIAGNOSTICS, INC. IMR OF VIRGINIA, INC.
By: /s/ T. Scott Jenkins By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins Print Name: T. Scott Jenkins
Title: President Title: President
DEBTOR:
IMR OF WISCONSIN, INC.
By: /s/ T. Scott Jenkins
Print Name: T. Scott Jenkins
Title: President
<PAGE>
EXHIBIT A
TO ACCEPTANCE CERTIFICATE
(ADDITIONAL DEBTORS)
IMR of Arizona, Inc., an Arizona corporation
Integrated Medical Resources of California, Inc. a California corporation
Integrated Medical Resources of Colorado, Inc., a Colorado corporation
IMR of Connecticut, Inc., a Connecticut corporation
IMR Integrated Diagnostic of Florida, Inc., a Florida corporation
IMR of Illinois, Inc., an Illinois corporation
IMR of Indiana, Inc., an Indiana corporation
Integrated Medical Resources of Massachusetts, Inc., a Massachusetts corporation
IMR of Michigan, Inc., a Michigan corporation
IMR of Nevada, Inc., a Nevada corporation
Integrated Diagnostics, Inc., a New York corporation
IMR of North Carolina, Inc., a North Carolina corporation
IMR of Ohio, Inc., an Ohio corporation
IMR Integrated Diagnostics of Oklahoma, Inc., an Oklahoma corporation
Integrated Medical Resources of Pennsylvania, Inc., a Pennsylvania corporation
IMR of South Carolina, Inc., a South Carolina corporation
IMR Integrated Diagnostics, Inc., a Texas corporation
IMR of Virginia, Inc., a Virginia corporation
IMR of Wisconsin, Inc., a Wisconsin corporation
<PAGE>
EXHIBIT 10(f)(i)
AMENDMENT TO
SERVICES AGREEMENT
THIS AMENDMENT is made and entered into as of this 1st day of July,
1997, by and between Integrated Medical Resources, Inc., a Kansas Corporation
("IMR"), and Strategem, Inc., a Kansas corporation ("Strategem").
RECITALS
A. IMR and Strategem entered into a Services Agreement dated as of
January 6, 1997 (the "Agreement"), pursuant to which Strategem provides various
marketing services to IMR.
B. IMR and Strategem desire to amend the Agreement in accordance with
the terms of this Amendment.
AGREEMENT
In consideration of the premises hereof and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, IMR
and Strategem agree as follows:
1. Definitions. Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Agreement.
2. Amendments.
2.1 Amendment -- Incident Fee, Payment. Section 2.1 of the
Agreement is hereby amended and restated in its entirety as follows:
"In consideration of the Services to be provided by Strategem
hereunder, IMR shall pay to Strategem a fee equal to (a) during Phase
1, the greater of (i) $375.00 per Incident (as defined in Section 2.2
below) and (ii) $15,000.00 per calendar month, beginning July 1997, and
(b) during Phase 2 and Phase 3, $250.00 per Incident (the "Incident
Fee"). The Incident Fee shall be calculated as of the last business day
of each calendar month and payable to Strategem as soon as practicable
(but in no event later than 20 days) thereafter."
2.2 Amendment -- Phase 1 Stock Option. Section 3.1 of the
Agreement is hereby amended and restated in its entirety as follows:
"On July 1, 1997, Strategem shall receive from IMR an option
(the "Phase 1 Option") to purchase 75,000 shares of IMR common stock
("Stock"). The Phase 1 Option shall (a) be evidenced by (and subject to
the terms and conditions of) an option agreement
1
<PAGE>
in substantially the form attached hereto as Exhibit B (the "Phase 1
Option Agreement"), (b) have a per share exercise price equal to $2.00,
and (c) vest on the date of grant."
2.3 Amendment -- Term. Section 4.1 of the Agreement is
hereby amended and restated in its entirety as follows:
(a) "Phase 1" of this Agreement shall commence on the
date hereof and shall continue in effect until the earlier to occur of
(i) September 30, 1997, or (ii) the date on which the Field
Representatives have generated an aggregate of 800 Incidents.
(b) Subject to Section 4.2 below, "Phase 2" of this
Agreement shall commence on the earlier to occur of (i) October 1,
1997, or (ii) the date on which the Field Representatives have
generated an aggregate of 800 Incidents and shall continue in effect
for the approximately one-year period ending on September 30, 1998.
(c) Subject to Section 4.2 below, "Phase 3" of this
Agreement shall commence on the earlier to occur of (i) October 1,
1998, or (ii) the date on which the Field Representatives have
generated, during Phase 2, an aggregate of 79,200 Incidents and shall
continue in effect for a period of 12 months from such commencement
date.
2.4 Amendment -- Phase 1 Option Agreement. Exhibit B of the
Agreement is hereby amended and restated in its entirety as set forth in
Schedule 1 attached hereto.
3. References to Services Agreement. From and after the date hereof,
all references in the Agreement to "this Agreement," "hereof," "herein," and
similar terms shall mean and refer to the Agreement as amended by this
Amendment, and all references in other documents to the Agreement shall mean the
Agreement as amended by this Amendment. This Amendment shall not be modified,
supplemented, or terminated in any manner whatsoever except by written
instrument signed by the party against which such modification, supplement, or
termination is sought to be enforced.
4. Ratification and Confirmation. The Agreement is hereby ratified and
confirmed and, except as herein amended, remains in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment on the day and year first above written.
IMR:
INTEGRATED MEDICAL RESOURCES, INC.
/s/ T. Scott Jenkins
T. Scott Jenkins
President
STRATEGEM:
STRATEGEM, INC.
/s/ Ben A. Blackshire
Ben A. Blackshire
President
3
<PAGE>
Schedule 1
Phase 1 Option Agreement
THIS AGREEMENT is dated as of July 1, 1997, by and between Integrated
Medical Resources, a Kansas corporation ("IMR"), and Strategem, Inc., a Kansas
corporation ("Strategem").
RECITALS
A. IMR and Strategem have entered into a Services Agreement, of even
date herewith (the "Services Agreement"), pursuant to which Strategem has agreed
to provide valuable services to IMR.
B. The Services Agreement provides, in addition to the payment of fees
by IMR to Strategem, that Strategem shall receive an option to purchase 75,000
shares of IMR's common stock ("Stock") on the date hereof pursuant to the terms
and conditions of this Agreement.
AGREEMENT
In consideration of the premises hereof, the promises made herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, IMR and Strategem hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meaning ascribed to them in the Services Agreement.
2. Grant of Option. IMR hereby grants to Strategem an option (the
"Option") to purchase 75,000 shares of Stock upon the terms and conditions
hereof.
3. Vesting of Option. The Option shall vest and become exercisable as
provided in Section 3.1 of the Services Agreement.
4. Exercise of Option. Upon vesting, Strategem may exercise the Option
in whole or in part by delivery to IMR of a written notice indicating that
Strategem desires to exercise the Option and the number of shares of Stock
Strategem desires to purchase. Such notice shall be accompanied by cash or a
certified check payable to IMR in an amount equal to the aggregate Exercise
Price (as defined in Section 5 below) of the shares purchased. Upon receipt of
such notice and payment, IMR shall deliver to Strategem a certificate or
certificate representing the number of shares of Stock stated in such notice.
5. Exercise Price. The per share exercise price of the Option shall be
$2.00.
4
<PAGE>
6. Limitation and Non-Transferability. The Option is personal to
Strategem, may be exercised only by Strategem, and may not be transferred in any
manner.
7. Stock Dividends, Recapitalizations, Etc. IMR shall make such
adjustments to the Exercise Price and number of shares of Stock subject to the
Option as IMR reasonably deems appropriate in light of any change made to the
Stock during the term of this Agreement (whether by reason of any
recapitalization, exchange of shares, stock split, stock dividend, stock
issuance, combination of shares, or otherwise).
8. Dividends and Voting Rights. Strategem shall not be entitled to any
cash or other dividends, or to any voting rights, in respect of any share of
Stock subject to the Option until such time as Strategem has purchased such
share in accordance with the terms hereof.
9. Termination. This Agreement shall terminate and the Option granted
herein (to the extent unexercised) shall no longer be exercisable or of any
effect whatsoever upon the earlier to occur of (a) 5 years from the date on
which the Option vests or (b) the date on which the total aggregate number of
shares subject to the Option have been purchased in accordance with the terms
hereof.
10. Representations, Warranties, and Covenants of Strategem. Strategem
represents, warrants, and covenants as follows:
10.1 Acquisition for Investment. Strategem is acquiring the
Option for its own account for investment only, and not with a view to, or for
sale in connection with, any resale, fractionalization, division, or
distribution.
10.2 Acknowledgment of Restrictions. Strategem understands and
acknowledges that the Option and the shares of Stock subject to the Option (i)
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), (ii) are "restricted securities" within the meaning of Rule
144 under the Securities Act, and (iii) as such may not be sold, transferred, or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available.
10.3 Acknowledgment of Restrictive Legend. Strategem
understands and acknowledges that a legend substantially in the following form
will be placed on the certificate or certificates representing the shares of
Stock purchased pursuant to the Option:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR
SIMILAR RULE OR UNLESS THE COMPANY RECEIVES AN OPINION OF
5
<PAGE>
COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
11. Miscellaneous.
11.1 Successors. This Agreement shall be binding upon and
shall inure to the benefit of both of the parties hereto and to their respective
successors and permitted assigns.
11.2 Waiver. The observance of any provision of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) if the waiver is in writing and signed by the
party making the waiver. No delay or omission by either party in exercising any
of its rights hereunder shall operate as a waiver of that or any other right.
Unless otherwise expressly stated, a waiver given by either party on any one
occasion shall be effective only in that instance and shall not be construed as
a waiver of that right on any other occasion.
11.3 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, and such invalid or unenforceable provision shall be
enforced in accordance with its terms to the greatest extent permitted by law.
11.4 Notices. All notices and other communications hereunder
shall be given in writing and deemed to be duly given if delivered by hand, sent
by certified or registered mail (return receipt requested, postage prepaid), or
sent by facsimile (with receipt confirmed), in each case to the address and
facsimile number as follows:
If to IMR, to:
Integrated Medical Resources, Inc.
Attention: Mr. T. Scott Jenkins
11320 W. 79th Street
Lenexa, Kansas 66214
Facsimile No.: (913) 962-7063
with a copy to:
Blackwell Sanders Matheny Weary & Lombardi LLP
Attention: James M. Ash, Esq.
2300 Main Street, Suite 1100
Kansas City, Missouri 64108
Facsimile No.: (816) 274-6914
6
<PAGE>
If to Strategem, to:
Strategem, Inc.
Attention: Mr. Ben A. Blackshire
8012 State Line Road
Leawood, Kansas 66208
Facsimile No.: (913) 385-7777
with a copy to:
Payne & Jones, Chartered
Attention: Thomas K. Jones, Esq.
11000 King
Overland Park, Kansas 66210
Facsimile No.: (913) 469-8182
or to such other address as either party may provide to the other in writing.
All such notices and other communications shall be effective on the date of
delivery, mailing, or facsimile transmission.
11.5 Entire Agreement. This Agreement embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein and supersedes all prior agreements and understandings
relating to such subject matter. There have been and are no agreements,
representations, warranties, or covenants between the parties other than those
set forth or provided for herein.
11.6 Headings. The headings used in this Agreement are for
convenience only and shall not constitute a part of this Agreement.
11.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
11.8 Amendment. This Agreement may be amended only pursuant to
a writing signed by both parties hereto.
11.9 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the state of Kansas,
without regard to the choice of law rules of such state.
7
<PAGE>
IN WITNESS WHEREOF, IMR and Strategem have duly signed this Agreement
as of the date first written above.
IMR:
INTEGRATED MEDICAL RESOURCES, INC.
/s/ T. Scott Jenkins
T. Scott Jenkins, President
STRATEGEM:
STRATEGEM, INC.
/s/ Ben A. Blackshire
Ben A. Blackshire, President
8
<PAGE>
EXHIBIT 10(f)(ii)
[IMR LETTERHEAD]
September 30, 1997
Strategem, Inc.
Attention: Ben A. Blackshire
8012 State Line Road
Leawood, Kansas 66208
Re: Termination of Services Agreement
Dear Ben:
This letter confirms that, pursuant to Subsection 4.2(a) of the
Services Agreement, dated January 6, 1997 (the "Agreement") between Integrated
Medical Resources, Inc. ("IMR"), and Strategem, Inc. ("Strategem"), IMR and
Strategem mutually consent to the termination of the Agreement, effective as of
the date hereof. For the avoidance of doubt, (a) the Agreement is hereby
terminated prior to the commencement of either Phase 2 or Phase 3, each as
defined in the Agreement and (b) despite the termination of this Agreement, the
Registration Rights Agreement dated January 6, 1997 between IMR and Strategem
remains in full force in effect.
Please affirm the termination of the Agreement pursuant to the terms
set forth above by signing and dating each of the two enclosed copies of this
letter. Kindly return one signed copy to IMR. The other should be kept by
Strategem for its records.
INTEGRATED MEDICAL RESOURCES, INC.
/s/ T. Scott Jenkins
T. Scott Jenkins
President
ACCEPTED AND AGREED:
STRATEGEM, INC.
/s/ Ben A. Blackshire
Ben A. Blackshire
President
Date: September 30, 1997
cc: James M. Ash, Esq.
Thomas K. Jones, Esq.
<PAGE>
EXHIBIT 10(f)(iii)
October 15, 1997
RIGISCAN PURCHASE
AGREEMENT and TERMS
AMENDMENT TO AGREEMENT
Dated December 1, 1995
AMENDED PAYMENT SCHEDULE
to AMENDED AGREEMENT
Dated December 19, 1996
This Amendment to the December 1, 1995, Agreement which is attached, is an
Agreement made and entered into, effective the 19th day of December, 1996, with
Amended Payment Terms effective October 15, 1997, by and between Integrated
Medical Resources, Inc. ("IMR") (Buyer) and Imagyn Medical Technologies, Inc.
(fka UROHEALTH Systems, Inc.) ("Imagyn") (Seller and Leaseholder) and expiring
on December 31, 1998.
WHEREAS, IMR to insure availability and delivery of all Rigiscan requirements
for calendar year 1997 and 1998 which it estimates to be 360 units and Imagyn
has offered non-recourse financing terms desirous by IMR which includes
amortizing the purchase price over 36 months at a favorable rate.
NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of,
which is hereby acknowledged, the parties agree as follows:
1. The price and all conditions in the December 1, 1995 agreement prevail and
shall be extended through December 31, 1998.
2. The payment terms shall be:
a.25% of the total purchase price due payable according to the following
schedule:
Schedule Due Date 25% Deposit Due
I. March 1, 1997 $123,000
II. November 30, 1997 $246,000
III. February 15, 1998 $123,000
IV. August 15, 1998 $123,000
V. December 15, 1998 $123,000
<PAGE>
The balance of each purchase amount shall be amortized on a 36 month
straight line basis plus interest at rates consistent with the current
Agreement (December 1, 1995 Agreement) and begins 30 days after
projected Due Date of the Schedule above.
3. Seller will retain first position interest in all Rigiscan units until
IMR has paid in full its obligations or returned the units. UCC filings
will occur on these units.
4. This Agreement shall be binding on and inure to the benefit of the
successors and assigns of both Imagyn and IMR.
5. This Agreement shall be interpreted in accordance with the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have executed, signed and sealed this
Agreement to the effective the day and year first written above.
IMAGYN MEDICAL TECHNOLOGIES, INC.
(fka UROHEALTH Systems, Inc.)
By: /s/ Randall L. Condi
Title: President - Med/Surg Division
INTEGRATED MEDICAL RESOURCES, INC.
By: /s/ Beverly O. Elving
Title: Chief Financial Officer
<PAGE>
EXHIBIT 11
INTEGRATED MEDICAL RESOURCE'S INC. AND CENTERS
NET LOSS per COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
For the three months ended September 30 For the nine months ended September 30
1997 1996 1997 1996
---------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net Loss per Common and
Common Equivalent Share
Net loss $(888,128) $(1,704,755) $(4,075,598) $(2,929,060)
================================== ================================
Weighted average common shares
outstanding 6,717,517 2,910,688 6,717,517 2,910,688
Shares of common stock issuable upon
exercise of options issued with an
exercise price below the initial public
offering price (determined using the
"treasury stock method") 0 108,414 0 108,414
---------------------------------- --------------------------------
Weighted average common and common
equivalent shares outstanding 6,717,517 3,019,000 6,717,517 3,019,000
================================== ================================
Net loss per common and
common equivalent share $ (0.13) $ (0.56) $ (0.61) $ (0.97)
================================== ================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
INTEGRATED MEDICAL RESOURCES, INC.
</LEGEND>
<CIK> 0000918591
<NAME> INTEGRATED MEDICAL RESOURCES, INC.
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 758,167
<SECURITIES> 0
<RECEIVABLES> 7,382,996
<ALLOWANCES> 906,587
<INVENTORY> 191,831
<CURRENT-ASSETS> 7,668,638
<PP&E> 7,106,538
<DEPRECIATION> 2,264,408
<TOTAL-ASSETS> 13,074,895
<CURRENT-LIABILITIES> 5,524,626
<BONDS> 0
0
0
<COMMON> 6,717
<OTHER-SE> 6,175,713
<TOTAL-LIABILITY-AND-EQUITY> 13,074,895
<SALES> 6,230,921
<TOTAL-REVENUES> 6,230,921
<CGS> 2,480,660
<TOTAL-COSTS> 7,008,135
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,914
<INCOME-PRETAX> (888,128)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (888,128)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
