SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Integrated Medical Resources, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[LOGO]
INTEGRATED MEDICAL RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 29, 1998
Notice is hereby given that an Annual Meeting of Stockholders of
Integrated Medical Resources, Inc. (the "Company") will be held at 11320 West
79th Street, Lenexa, Kansas 66214, on the 29th day of May 1998, at 10:00 a.m.
(Central Time) for the following purposes:
1. To elect three Class II Directors to serve, in each
case, for a term of three years;
2. To ratify and approve the transaction (the
"Transaction") with Kardatzke Management, Inc.
("KMI"), whereby KMI loaned the Company $1,600,000 in
exchange for a note (the "Note") convertible into
744,186 shares of Common Stock of the Company and
related options to purchase Common Stock and entered
into a management consulting agreement with the
Company;
3. To approve an amendment to the Amended and Restated
Articles of Incorporation of the Company (the
"Amendment") which will increase the authorized
number of shares of the Company's Common Stock from
10,000,000 to 25,000,000 shares. A copy of the
Amendment is attached as Exhibit A to this Proxy
Statement; and
4. To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on April 29,
1998, as the record date for the determination of stockholders entitled to
receive notice of and to vote at the meeting.
You are cordially invited to attend the meeting. However, whether or
not you plan to be personally present at the meeting, please sign and date the
enclosed proxy card and promptly return it in the envelope provided. No postage
is necessary if mailed in the United States. If you attend the meeting, we will
be glad to return your proxy card so that you may vote in person.
PLEASE RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE.
THANK YOU.
By Order of the Board of Directors,
TROY A. BURNS, M.D.
Chairman of the Board,
Chief Executive Officer and
Chief Medical Officer
Lenexa, Kansas
May ____, 1998
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INTEGRATED MEDICAL RESOURCES, INC.
11320 West 79th Street
Lenexa, Kansas 66214
(913) 962-7201
PROXY STATEMENT
for
Annual Meeting of Stockholders
to be held May 29, 1998
GENERAL INFORMATION CONCERNING
PROXY SOLICITATION AND VOTING
General
This Proxy Statement is being furnished on or about May __, 1998, in
connection with the solicitation of proxies by the Board of Directors of
Integrated Medical Resources, Inc., a Kansas corporation (the "Company"), for
use at the Annual Meeting of Stockholders to be held at 11320 West 79th Street,
Lenexa, Kansas 66214, at 10:00 a.m. (Central Time) on May 29, 1998, for the
purposes set forth in the foregoing Notice of Annual Meeting of Stockholders.
In order to provide every stockholder with an opportunity to vote on
all matters scheduled to come before the Annual Meeting and to be able to
transact business at the meeting, proxies are being solicited by the Company's
Board of Directors. Upon execution and return of the enclosed proxy card, the
shares represented by it will be voted by the persons designated therein as
proxies, in accordance with the stockholder's directions. A stockholder may vote
on a matter by marking the appropriate box on the proxy card or, if no box is
marked for a specific matter, the shares will be voted as recommended by the
Board of Directors on that matter.
Revocability of Proxies
The proxy granted by the enclosed proxy card may be revoked at any time
before it is voted by (i) so notifying the Secretary of the Company, (ii)
executing a proxy card of a later date and delivering such later proxy card to
the Secretary of the Company prior to the Annual Meeting or (iii) attending the
Annual Meeting and voting in person. Unless the proxy card is revoked or is
received in a form that renders it invalid, the shares represented by it will be
voted in accordance with the instructions contained on the proxy card.
Solicitation
The Company will bear the cost of solicitation of proxies, which will
be principally conducted by the use of the mails; however, there may also be
further solicitation in person and by telegram, facsimile transmission and
telephone at nominal cost by officers, directors, employees and agents of the
Company, who will receive no additional compensation for such solicitation. The
Company's expenses may include ordinary charges and expenses of brokerage firms
and others for forwarding soliciting material to beneficial owners.
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Voting Rights and Outstanding Shares
Only stockholders of record on the books of the Company at the close of
business on April 29, 1998, the record date established for the Annual Meeting,
will be entitled to vote at the meeting. On April 29, 1998, the Company had
outstanding and entitled to vote 6,958,116 shares of common stock, par value
$.001 per share (the "Common Stock"), and no other voting securities. The
presence, in person or by proxy, of the holders of a majority of the shares of
Common Stock issued and outstanding on April 29, 1998, is necessary to
constitute a quorum at the Annual Meeting. Each outstanding share of Common
Stock entitles the record holder to one vote. Directors are elected by a
plurality of the votes cast by the shares of Common Stock represented in person
or by proxy at the Annual Meeting, so abstentions and broker non-votes will not
affect the outcome of the election of Directors. The approval of Proposal 2
requires the affirmative vote of a majority of the shares of Common Stock
represented at the meeting and entitled to vote. The approval of Proposal 3
requires the affirmative vote of a majority of the outstanding shares of Common
Stock that are entitled to vote. Abstentions and broker non-votes will have no
effect with respect to Proposal 2 and will have the effect of votes against
Proposal 3. Broker non-votes occur when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner. KMI will abstain from voting on
Proposal 2.
No Appraisal Rights
The Company's stockholders will not be entitled to appraisal or
dissenters' rights under Kansas law in connection with the matters to be voted
on.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Directors Being Nominated for Re-Election (Class II)
Dwayne Sigler, age 42, has been a Director of the Company since August
1997. He has served as Vice President of Marketing for General Nutrition Centers
since May 1996, and previously served as President and Chief Executive Office of
SOUNDadvice for Sports. Mr. Sigler has held various senior management and
marketing positions with NordicTrack, BBDO, General Mills and IBM.
Samuel D. Colella, age 58, has been a Director of the Company since
December 1995. He has been affiliated with Institutional Venture Partners VI, a
private venture capital firm located in Menlo Park, California since 1984 and
currently serves as general partner of Institutional Venture Management VI, the
general partner of Institutional Venture Partners VI. He has served as President
of Spectra-Physics, where he was employed from 1971 to 1994. Mr. Colella is a
Director of Onyx Pharmaceuticals, Inc., CV Therapeutics, Inc., Pangea Systems,
Inc., as well as several private companies.
T. Scott Jenkins, age 37, joined the Company as a strategic and
financial consultant in early 1992. He served as the Company's Vice President of
Finance and Administration from 1992 to 1995, and since 1995 has served as the
Company's President and Chief Operating Officer. Mr. Jenkins has been a member
of the Company's Board of Directors since December 1992. From 1988 to 1992, Mr.
Jenkins served as President of Northern Acceptance Bancorp, a medical finance
company. Mr. Jenkins also formed a sole proprietorship, Equicapital Holdings,
through which he worked as a financial and strategic consultant in 1992.
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Directors with Terms Expiring in 1999 (Class III)
Troy A. Burns, M.D., age 36, founded the first clinic operated under
the name of The Diagnostic Center for Men(sm) (a "Center") in 1990 and since
that time has been employed full-time by the Company or its predecessors. He
served as President of the Company from its inception to 1995 and currently
serves as Chairman of the Board, Chief Executive Officer and Chief Medical
Officer. Dr. Burns has been a Director of the Company since March 1991. Dr.
Burns also serves as the sole Director, President and Treasurer of most of the
Centers. Prior to establishing the first Center, he was engaged in general
medical practice at urgent care centers in the Kansas City area from 1987 to
1990. Dr. Burns was a founding member and remains on the Board of the American
Academy of Male Sexual Health. Dr. Burns received his medical degree from the
University of Missouri-Kansas City School of Medicine in 1986 and completed his
internship in Internal Medicine at St. Luke's Hospital of Kansas City in 1987.
James R. Kahl, age 56, has been a Director of the Company since
December 1997. He has served as President, Chief Executive Officer and Director
of LaPetite Academy since 1993. Mr. Kahl has held senior management positions
with Knott's Berry Farm and Marriott Corporation, and is a former Managing
Partner at Arthur Andersen & Co.
Bruce A. Hazuka, age 51, has been a Director and consultant of the
Company since April 1996. He has spent 27 years in general management, marketing
and operations positions in the health care field, including executive
management positions with C.R. Bard and Foster Medical, a subsidiary of Avon
Products. He is the founder of Healthcare Associates, Inc., an investment and
consulting firm, for which he has served as President and CEO. He was also the
Chairman and CEO for Allscrips Pharmaceuticals, Inc. from 1992 to 1994. He is
currently Chief Operating Officer of Imagyn Medical Technologies, Inc., a
publicly-traded urological products company.
Directors with Terms Expiring in 2000 (Class I)
Alan D. Frazier, age 46, has been a Director of the Company since March
1996. He is the managing partner of Frazier & Company, a private equity capital
provider to emerging health care companies. Prior to founding Frazier & Company
in 1991, he held executive management positions with Immunex Corporation,
Receptech Corporation and Immunology Ventures, a joint venture between Immunex
and Sterling Winthrop Pharmaceuticals. Mr. Frazier is a Director of IVI
Publishing, Inc., InControl, Inc. and Neopath, Inc., as well as two private
companies.
John K. Tillotson, M.D., age 46, has been a Director and consultant of
the Company since December 1995. He has been a Venture Capital Affiliate with
Institutional Venture Partners since 1993. From 1990 through 1993, he was
Chairman of Occu-MED, Inc., a workers compensation cost containment company
providing pre-placement medical examinations. Prior to that, he founded and was
Chairman and Chief Executive Officer of Managed Health Network, Inc., a managed
mental health company.
Committees of the Board of Directors
The standing committees of the Board of Directors consist of an Audit
Committee and a Compensation Committee.
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The Audit Committee consists of Messrs. Frazier, Kahl and Tillotson.
The Audit Committee annually makes recommendations to the Board regarding the
appointment of independent auditors of the Company and reviews the scope of
audits.
The Compensation Committee consists of Messrs. Colella and Hazuka. The
Compensation Committee annually reviews and makes recommendations to the Board
of Directors regarding compensation arrangements with the executive officers of
the Company.
During the 1997 fiscal year, the Board of Directors met eleven times,
the Audit Committee met five times and the Compensation Committee met one time.
All Directors attended at least 80% of the meetings of the Board of Directors
and the committees on which they served.
Compensation of Directors
Directors who are not employed by or otherwise affiliated with the
Company ("Outside Directors") received $1,000 for each meeting of the Board of
Directors attended in person and $500 for each Board or committee meeting
attended other than in person during 1997. Under the Company's Non-Employee
Director Stock Option Plan, each Outside Director has been granted options to
purchase shares of the Company's Common Stock in the amounts and at the exercise
price set forth as follows, of which approximately one-third becomes exercisable
annually:
<TABLE>
<CAPTION>
Options Granted Under the Non-Employee Director Stock Option Plan
Number of Securities
Underlying Options Exercise or
Granted Base Price Grant
Name (#) ($/Sh) Date
<S> <C> <C> <C>
Samuel D. Collella 10,000 $7.00 September 11, 1996
10,000 $2.25 October 1, 1997
Alan D. Frazier 10,000 $7.00 September 11, 1996
10,000 $2.25 October 1, 1997
Bruce A. Hazuka 10,000 $7.00 September 11, 1996
10,000 $2.25 October 1, 1997
James R. Kahl 20,000 $2.25 December 11, 1997
Dwayne Sigler 10,000 $2.25 October 1, 1997
John K. Tillotson 10,000 $7.00 September 11, 1996
12,500 $2.25 October 1, 1997
------
Total 112,500
</TABLE>
Directors who are not Outside Directors currently do not receive any cash
compensation from the Company for their services as members of the Board of
Directors, although they are reimbursed for reasonable out-of-pocket expenses in
attending any meetings of the Board.
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CERTAIN INFORMATION CONCERNING EXECUTIVE OFFICERS
In addition to Dr. Burns and Mr. Jenkins, the following individuals are
executive officers of the Company:
Beverly O. Elving, age 44, is a Certified Public Accountant who joined
the Company in September 1996. Ms. Elving currently serves as Chief Financial
Officer and Vice President, Finance and Administration. From 1990 to 1996, she
was employed by the Federal Deposit Insurance Corporation, where she served as
Associate Regional Director of Administration, Director of Financial Operations
and, most recently, as Vice President, Financial Operations and Accounting. Ms.
Elving has provided notice to the Company that she will be leaving the Company
effective approximately May 1, 1998.
Kathleen Piper, age 47, joined the Company in April 1997 as a marketing
consultant. In June 1997, Ms. Piper accepted the position of Vice President of
Marketing and Sales. From 1992 through 1997, she served as Direct
Marketing/Advertising Consultant for ERA Franchise Systems, Inc., and from 1989
through 1992 served as Direct Marketing/Advertising Consultant for Fasone
Garrett Boehm Advertising and Marketing. From 1973 through 1989, Ms. Piper
served as a Managing Partner with American Fitness Centers.
William C. Raup, age 40, joined the Company in September 1996 as Vice
President, Call Center Operations. From 1991 through 1996, Mr. Raup served as
Vice President, then Senior Vice President of Operations and New Business
Development with Consumer Health. From 1983 through 1991, he directed call
center operations and advertising for PROLOGUE/1-800-DOCTORS.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR the following nominees:
Samuel D. Colella
T. Scott Jenkins
Dwayne R. Sigler
The Board of Directors is divided into three classes for purposes of
election. One class is elected at each annual meeting of stockholders to serve
for a three-year term. At the Annual Meeting to be held on May 29, 1998, the
terms of three nominees are expiring. If elected, the nominees will hold office
for a three-year term expiring in 2001. Other Directors are not due for election
this year and will continue in office for the remainder of their terms.
All of the nominees are currently Directors of the Company. Mr. Colella
and Mr. Jenkins were elected at the 1996 Annual Meeting of the Stockholders. Mr.
Sigler was appointed by the Board of Directors to fill a newly created Board
seat in August 1997. The shares represented by your proxy will be voted, unless
authority to vote is withheld, FOR the election of Mr. Colella, Mr. Jenkins and
Mr. Sigler. In the event Mr. Colella, Mr. Jenkins or Mr. Sigler should become
unavailable for election, which is not anticipated, the proxies will be voted
for a Board-approved substitute, or the Board may reduce the number of
Directors. Mr. Colella, Mr. Jenkins and Mr. Sigler have agreed to serve if
elected, and the
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Company has no reason to believe that any of them will be unavailable to serve.
Additional information concerning the nominees is set forth in "Certain
Information Concerning the Board of Directors."
PROPOSAL 2
RATIFICATION AND APPROVAL OF KMI TRANSACTION
Description of the Transaction
Overview. On March 5, 1998, the Company entered into a transaction with
Kardatzke Management Inc. ("KMI"), whereby KMI loaned $1,600,000 to the Company
and Dr. E. Stanley Kardatzke, a principal of KMI, will have an opportunity to
become involved in the operation of the Company (the "Transaction"). As part of
the Transaction, the Company entered into a financing arrangement with KMI as
evidenced by a Note Purchase Agreement (the "Note Purchase Agreement"),
Convertible Note (the "KMI Note"), each as described in more detail below, and
other related documents discussed below. The KMI Note is convertible into shares
of the Company's common stock, $.001 par value per share (the "Common Stock")
and contains options to purchase additional shares of Common Stock. KMI has also
agreed to provide certain management consulting services to the Company. Upon
conversion of the KMI Note and the investment of an additional $1,000,000
through the complete exercise of the initial option, Dr. Kardatzke will join the
Company in the capacity of Chief Executive Officer and Chairman of the Board of
Directors of the Company.
Convertible Note. The KMI Note is in the principal amount of
$1,600,000, bears interest on the unpaid principal balance at the rate of 8.5%
per annum and is convertible into shares of Common Stock. All payments of
principal and interest are deferred until the initial maturity. The conversion
of the KMI Note and exercise of options would result in the issuance of shares
of Common Stock that would exceed 20% of the outstanding Common Stock and,
pursuant to the rules of the NASD, requires the approval of the Company's
Stockholders being sought pursuant to this Proxy Statement.
The initial maturity date of the KMI Note is September 1, 1998. KMI has
the sole option to extend the term of the KMI Note for three successive 90-day
periods. Upon its maturity, the principal and accrued interest on the KMI Note
will become payable over 18 equal monthly payments unless it is earlier
converted to shares of Common Stock. The KMI Note is secured by ultrasound
machines that were acquired by the Company from a portion of the proceeds of the
KMI Note, and a second position behind the Company's primary lender in all of
the Company's accounts, accounts receivable and other rights to receive money,
and certain computer equipment and software.
The KMI Note provides that KMI may, at its option, convert all or any
portion of the outstanding principal amount of the KMI Note and/or accrued and
unpaid interest thereon into such number of fully paid and nonassessable shares
of Common Stock determined by dividing the amount to be converted under the KMI
Note by the Conversion Price then in effect. The "Conversion Price" is defined
as the lesser of $2.15 per share of Common Stock or the average of the closing
market price for the Common Stock for the fifteen trading days prior to the
conversion (subject to adjustment). On the date of the KMI Note, the closing
price of the Common Stock as quoted on the Nasdaq Stock Market was $1.938. On
_________, 1998, the closing price of the Common Stock as quoted on the Nasdaq
Stock Market was $ .
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The KMI Note further grants options to KMI to purchase shares of Common
Stock of the Company as follows: (a) conditioned on previous conversion of the
KMI Note as described above, an option ("Option A") to purchase the number of
shares that equals the sum of (i) $1,600,000 divided by the Conversion Price and
(ii) $1,000,000 divided by the Conversion Price if exercised at the same time,
or by $2.15 if later, with such option expiring upon the later of conversion of
the KMI Note to a term loan or prepayment of the KMI Note, conversion of the KMI
Note to shares of Common Stock, or May 31, 1998; (b) conditioned on exercise of
Option A above, an option ("Option B") to purchase the number of shares that
equals 2,000,000 minus the number of shares issued pursuant to Option A above,
times 0.5, at $2.15 per share through May 31, 1998 (subject to adjustment) and
thereafter at $2.70 per share, with such option expiring upon the later of
conversion of the KMI Note to a term loan or prepayment of the KMI Note, the
conversion of the KMI Note to shares of Common Stock, or December 31, 1998; (c)
conditioned on exercise of Option B above, an option to purchase the number of
shares that equals 2,000,000 minus the number of shares issued pursuant to
Options A and B above, at $3.15 or $3.75 per share, with expiration dates of
December 31, 1999 and December 31, 2000, respectively, and subject further to
expiration upon the later of conversion of the KMI Note to a term loan or
prepayment of the KMI Note or the conversion of the KMI Note to shares of Common
Stock; and (d) conditioned on conversion of the KMI Note to Common Stock, an
option to purchase 300,000 shares at an exercise price of $2.15 per share, which
expires on March 5, 2000. The total number of shares which KMI may receive upon
conversion of the KMI Note and exercise of the options is 2,300,000.
On March 31, 1998, the Company waived a condition that the loan to KMI
be converted prior to KMI's exercise of its option. This waiver only applied to
$500,000 of the loan.
The KMI Note also provides certain registration rights to KMI with
respect to shares of Common Stock issued to KMI with respect to the KMI Note and
the foregoing options. As part of the Transaction, the Company has granted the
following rights to KMI (subject to certain limitations) to have shares
registered: (a) if at any time after March 31, 1998, stockholders holding at
least 40% of the registerable securities request that the Company file a
registration statement, then the Company will use its best efforts to cause such
shares to be registered; provided, however, that KMI may only exercise this
option twice; and (b) if the Company files a registration statement with respect
to other registrations of the Company's Common Stock, KMI will be entitled to
"piggyback" registration rights.
Management Consulting Agreement. As part of the Transaction, the
Company has also entered into several related agreements with KMI. Under the
Management Consulting Agreement between the Company and KMI, dated as of March
5, 1998 (the "Consulting Agreement"), KMI has agreed to perform such management
consulting services as the Company may request from time to time, including
consulting regarding the Company's corporate compliance plan, collection of
accounts receivable, Medicare billing disputes, and the development and
implementation of a strategic plan for the Company. In consideration for such
consulting services, the Company will pay KMI $25,000 per month; provided,
however, that one-half of such fee is deferred until KMI converts the KMI Note
and if KMI does not convert the KMI Note, then payment of the deferred fees is
waived. KMI shall also receive reimbursement of certain costs and expenses
incurred in performing under the Consulting Agreement.
The Consulting Agreement further grants KMI options to purchase 300,000
shares of the Company's Common Stock (the "Consulting Option"). The Consulting
Option becomes exercisable only if and at such time as the closing price of the
Common Stock of the Company averages $6.00 or above per share for ten
consecutive trading days before April 15, 1999. The Consulting Option has an
exercise price of $2.70 per share. Prior to its vesting, the Consulting Option
shall terminate on the earlier of April 16, 1999 or at such time as the
Consulting Agreement is terminated and Dr. Kardatzke does not become a
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director or executive officer of the Company. After it has vested, the
Consulting Option shall expire upon the later of twenty business days after the
date it becomes exercisable or ninety days after termination of the Consulting
Agreement, or termination, for whatever reason, of Dr. Kardatzke as a director
or executive officer of the Company.
Employment Agreement. The Company and Dr. Kardatzke have also agreed
upon the terms of an Employment Agreement whereby Dr. Kardatzke will be employed
as the Chief Executive Officer of the Company. The Employment Agreement shall
take effect only and at such time as KMI converts the KMI Note to Common Stock
and exercises its initial option to purchase additional shares of Common Stock,
as described above. At such time, Dr. Kardatzke shall also be appointed Chairman
of the Board of Directors of the Company. The Employment Agreement has a term of
three years (subject to earlier termination) and provides for a base salary of
$240,000 per year. Dr. Kardatzke shall also be entitled to a bonus of $72,000 in
each of 1998 and 1999 if the Company meets certain earnings targets in those
years.
Pursuant to the Employment Agreement, the Company will also grant an
option to Dr. Kardatzke to purchase 500,000 shares of the Company's Common Stock
at an exercise price of $2.15 per share, including options to purchase 300,000
shares in consideration of Dr. Kardatzke's services as a director of the Company
and options to purchase 200,000 shares in consideration of Dr. Kardatzke's
services as Chief Executive Officer of the Company. These options vest ratably
over three and four years, respectively. The Company has also granted an option
to Dr. Kardatzke to purchase an additional 100,000 shares at an exercise price
of $2.15 per share (subject to forfeiture in certain situations), which vest
only if the Company meets certain earnings targets. These options will not be
issued under the Company's 1995 Option Plan and are subject to ratification by
the stockholders of the Company being sought pursuant to this Proxy Statement.
DCM Option Agreement. In addition to the options to purchase Common
Stock of the Company that have been provided to KMI, Troy A. Burns, M.D. has
granted Dr. Kardatzke an option to purchase interests in various personal
service corporations which operate the Diagnostic Centers for Men that are
managed by the Company (the "DCM Option Agreement"). The DCM Option Agreement
grants Dr. Kardatzke an option to purchase a 50% ownership interest in 24
personal service corporations that operate Centers in the states of Florida,
Illinois, Indiana, Massachusetts, Michigan, Missouri, New York, North Carolina,
Ohio, Oklahoma, Pennsylvania, South Carolina, Texas, Virginia and Wisconsin for
a total purchase price of $10,000, exercisable only in the event of a "Defined
Default," which is defined in the KMI Note as a reduction in the Company's cash
receipts in any two consecutive months to less than $840,000 per month as a
result of a prior withholding payment due to any actions of the Company taken
prior to February 1, 1998.
Stockholders Agreement. As part of the Transaction, Dr. Burns,
individually and as Trustee of the Troy A. Burns Revocable Trust, Frazier
Healthcare II, L.P. ("Frazier"), Institutional Venture Partners VI,
Institutional Venture Management VI and IVP Founders Fund I, L.P. (collectively,
"IVP") (Dr. Burns, the Trust, Frazier and IVP are referred to collectively as
the "Principal Stockholders"), entered into a Principal Stockholders Agreement
dated as of March 5, 1998 (the "Stockholders Agreement"). The Stockholders
Agreement provides that the Principal Stockholders agree to vote in favor of the
Transaction and in favor of the Amendment to the Articles of Incorporation of
the Company as further described herein.
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The Stockholders Agreement further provides that if KMI converts the
full amount of the KMI Note into shares of the Company's Common Stock, then each
of the Principal Stockholders agrees to vote in favor of the election of Dr.
Kardatzke as Chairman of the Board of the Company, so long as Dr. Kardatzke
holds an aggregate of 5% or more of the Common Stock of the Company. The
Stockholders Agreement also provides that any Principal Stockholder who is a
member of the Board of Directors of the Company agrees to vote in favor of the
election of Dr. Kardatzke as the Chief Executive Officer of the Company until
the termination of Dr. Kardatzke's Employment Agreement.
Agreements with Principal Lender. Finally, as part of the Transaction,
the Company entered into agreements (the "DVI Amendment") to subordinate KMI's
Note and Security Agreement to all obligations, liabilities and indebtedness
owed by the Company to DVI Business Credit Corporation. KMI and DVI Financial
Services, Inc. ("DVI") also entered into a Purchase Option Agreement dated as of
March 5, 1998, whereby KMI obtained an option to purchase all, but not less than
all, of the then outstanding balance due under the Term Loan and Security
Agreement between the Company and DVI, dated as of October 23, 1997.
IVP/Frazier Loans and Warrants. The Company has outstanding a
$1,400,000 loan from IVP and Frazier which is due May 1, 1998 (the "IVP/Frazier
Loan"). Upon the closing of the Next Financing (as defined below), the
outstanding principal balance of this loan shall be automatically converted into
the securities issued in the Next Financing at the purchase price paid for the
securities by the investors in the Next Financing. In addition, the Company
issued a stock purchase warrant to IVP and Frazier in connection with the
IVP/Frazier Loan. The number of shares of Common Stock issuable upon exercise of
the stock purchase warrant is generally equal to forty percent (40%) of the
principal amount of IVP/Frazier Loan divided by the lesser of $3.125 or the per
share purchase price of Common Stock in the Company's next equity financing that
results in gross proceeds to the Company of at least $3,000,000, excluding
securities issued upon conversion of the IVP/Frazier Loan (the "Next
Financing").
In connection with the Transaction, IVP and Frazier agreed to amend
certain provisions of the IVP/Frazier Loan (the "Stockholder Loan Amendment").
Pursuant to this amendment (a) if the KMI Note is not converted as of May 1,
1998, the maturity date of the IVP/Frazier Loan will be extended to a date no
later than November 1, 1998, (b) an equity investment of $2,600,000 will meet
the definition of the Next Financing, and (c) the IVP/Frazier Loan will be
converted at the lower of (i) $2.15 per share; (ii) the average market price per
share of the Company's Common Stock for the 15 days preceding the closing of the
Next Financing; or (iii) the price per share at which such securities are
actually issued in the Next Financing. Pursuant to the Stockholder Loan
Amendment, IVP and Frazier have agreed that, if requested by the Company and
KMI, IVP and Frazier will loan the Company an additional $600,000 and such loans
shall be on the same terms as the KMI Note. This additional loan from IVP and
Frazier shall also be convertible to Common Stock of the Company and IVP and
Frazier will receive options to purchase Common Stock equivalent to those issued
to KMI in connection with the KMI Note, in the proportion that their loan amount
bears to the KMI Note amount.
General Information. The Bylaws of the National Association of
Securities Dealers, Inc. (the "NASD") require the Company to obtain stockholder
approval for issuances of common stock constituting more than 20% of the
outstanding common stock at a price below market value. The Transaction may have
such a result. It is a condition to the conversion of the KMI Note and exercise
of the unexercised portions of the related options that such stockholder
approval be obtained. Consequently, ratification and approval of the Transaction
by
9
<PAGE>
the affirmative vote of the holders of a majority of the Common Stock of the
Company represented at the Annual Meeting and entitled to vote is being sought.
The NASD requires approval for the issuance of equity securities to
directors and executive officers of the Company. Approval of the Transaction
will also constitute approval of the issuance of options to Dr. Kardatzke under
the Employment Agreement.
The Amended and Restated Articles of Incorporation and Bylaws of the
Company do not provide the current stockholders with pre-emptive rights in
connection with issuances of the Company's capital stock.
The proceeds of the Transaction will be used for general corporate
purposes. There can be no assurance that the Company will be successful in its
efforts to utilize the proceeds from the Transaction in a manner that
contributes to the profitable growth of the Company's business or that the
proceeds will not be used in such a way as to dilute the per share earnings or
equity of the Company after giving effect to the issuance of shares of Common
Stock pursuant to the Transaction. The Board of Directors believes that the
failure to obtain additional working capital could adversely affect its
operations. It is particularly important for the Company to be in a stronger
working capital position to enable it to execute its operational and development
plans.
Effect on Outstanding Common Stock
The issuance of Common Stock pursuant to the Transaction will have no
effect on the rights or privileges of existing holders of Common Stock except
that the economic interests and voting rights of each stockholder will be
reduced as a result of such issuance.
Required Vote and Board Recommendation
The Board of Directors has evaluated the financial, legal, market,
operational and management considerations bearing on the Transaction. Based on
this evaluation, the Board of Directors believes that the Transaction is in the
best interests of the Company and its stockholders both in the immediate future
and in the long term. The Board of Directors weighed a variety of factors in
reaching this decision, the most important of which were the immediate and
potential future benefits to the Company of the Transaction which the Board of
Directors believes will contribute to the future success of the Company. In
particular, the Transaction will satisfy the Company's immediate need for
capital to meet its operating cash flow obligations and will provide the Company
with a source of capital with which to operate and expand its business.
The Board of Directors proposes the general ratification and approval
of the Transaction as required by the NASD Bylaws. In addition to the
requirement in the NASD Bylaws that the Company obtain stockholder approval for
issuances of common stock constituting more than 20% of the outstanding common
stock at a price below market value, the NASD Bylaws also require a company to
obtain stockholder approval when the issuance of common stock would result in a
"change of control." Although the Company does not believe that the transaction
constitutes a "change of control" under the NASD Bylaws, approval of the
Transaction by the Company's stockholders will effectively satisfy the NASD
requirements. The Board of Directors of the Company believes that the
ratification and approval of the Transaction is in the best interests of the
Company and its stockholders and recommends a vote "FOR"
10
<PAGE>
approval. The affirmative vote of the holders of a majority of the Common Stock
of the Company represented at the Annual Meeting and entitled to vote is
required for approval.
A vote FOR Proposal 2 constitutes a vote approving and ratifying the
terms and conditions of the KMI Note (including its several options to purchase
Common Stock), the Employment Agreement (including its related options to
purchase Common Stock), the Consulting Agreement (including its related option
to purchase Common Stock), the DCM Option Agreement and the Stockholders
Agreement, the DVI Amendment, the IVP/Frazier Loan and the Stockholder Loan
Amendment.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION
Summary
At the Annual Meeting, the Company's stockholders will consider and
take action upon management's proposal to increase the authorized capital stock
of the Company from an aggregate of 13,000,000 shares, consisting of 10,000,000
shares of Common Stock and 3,000,000 shares of Preferred Stock, to an aggregate
of 28,000,000 shares, consisting of 25,000,000 shares of Common Stock and
3,000,000 shares of Preferred Stock. The increase in authorized capital stock
would be effected by an amendment to the Company's Amended and Restated Articles
of Incorporation in the form set forth on Exhibit A to this Proxy Statement.
The Board of Directors has unanimously approved the Amendment and
recommends approval of the Amendment by the stockholders. If the Amendment is
approved by the stockholders of the Company at the Annual Meeting, the Amendment
will be effected unless there is a subsequent determination by the Board of
Directors that the Amendment is not in the best interests of the Company and its
stockholders. Although management and the Board of Directors believe that as of
the date of the Proxy Statement the Amendment is advisable, the Amendment may be
abandoned by the Board of Directors at any time before, during or after the
meeting and prior to filing the proposed Amendment with the Kansas Secretary of
State.
Principal Purposes of the Amendment
The Board of Directors believes an increase in the authorized Common
Stock is in the best interests of the Company and its stockholders so that the
Transaction may be consummated and additional shares be available for, among
other purposes, stock dividends, stock option and other employee benefit plans,
prospective issuance in public or private offerings for cash and other proper
business purposes. After the issuances of Common Stock pursuant to the
Transaction, the Company will not have enough authorized Common Stock to cover
the exercise of stock options and will not have enough Common Stock available to
raise capital for the Company in the future.
The Amendment will also remove the Series A and Series B Preferred
Stock from the Company's Amended and Restated Articles of Incorporation. The
Company has no preferred stock outstanding and the Amendment will simplify the
Company's capital structure.
Although the purpose of seeking an increase in the number of authorized
shares of Common Stock is not intended for anti-takeover purposes, Securities
and Exchange Commission rules require disclosure
11
<PAGE>
of charter and bylaw provisions that could have an anti-takeover effect.
Provisions that currently exist under the Company's Amended and Restated
Articles of Incorporation include the following: (i) a classified Board of
Directors with staggered terms, (ii) Board of Directors authority to issue one
or more series of Preferred Stock up to a maximum of 3,000,000 shares, (iii)
special meetings of the stockholders may only be called by the Chief Executive
Officer, the President or any director, and (iv) directors can be removed only
for cause.
Required Vote and Board Recommendation
The approval of the Amendment requires the affirmative vote of a
majority of the outstanding shares of the Company's Common Stock. The Board of
Directors recommends a vote "FOR" approval of the Amendment.
12
<PAGE>
CERTAIN BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth information as of April 29, 1998
concerning the shares of Common Stock beneficially owned by (i) each person
known by the Company to be the beneficial owner of 5% or more of the Company's
outstanding Common Stock, (ii) each of the Directors of the Company, (iii)
certain executive officers of the Company and (iv) all Directors and executive
officers of the Company as a group.
Unless otherwise indicated, the named beneficial owner has sole voting and
investment power over the shares listed.
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name of Beneficial Owner (1) of Beneficial Common Stock
---------------------------- ------------- ------------
Ownership
<S> <C> <C>
---------
Troy A. Burns, M.D. and Catherine P. Burns (2)(3) 1,393,275 20.0%
Institutional Venture Partners VI (4) 1,054,054 15.1
Frazier Healthcare II, L.P. (5) 873,843 13.0
T. Scott Jenkins (2) 59,064 *
Samuel D. Colella (6) 1,057,387 15.2
Alan D. Frazier (7) 883,176 12.7
Bruce A. Hazuka (2)(8) 8,333 *
John K. Tillotson, M.D. (2)(6) 13,333 *
James R. Kahl (9) -0- *
Dwayne R. Sigler (10) -0- *
All directors and executive officers
as a group (11 persons) (2)(11) 3,449,968 49.5%
* Less than 1%
</TABLE>
(1) The business address for each officer of the Company is 11320 West 79th
Street, Lenexa, Kansas 66214.
(2) Includes certain shares subject to options exercisable within 60 days of
April 29, 1998: 7275 shares for Dr. Burns; 7064 shares for Mr. Jenkins;
8,333 shares for Mr. Hazuka; 13,333 shares for Dr. Tillotson; 3,333
shares for Mr. Colella; 3,333 shares for Mr. Frazier and 77,071 shares
for all executive officers and directors as a group.
(3) Includes 985,967 shares owned by the Troy A. Burns Revocable Trust, Troy
A. Burns, Trustee and 400,000 shares owned by the Catherine P. Burns
Revocable Trust, Catherine P. Burns, Trustee. Catherine Burns is the
spouse of Dr. Burns. Dr. Burns disclaims beneficial ownership of the
shares held by the Catherine P. Burns Revocable Trust except to the
extent of his pecuniary interest therein.
13
<PAGE>
(4) Includes shares owned by Institutional Venture Management VI ("IVM"), the
general partner of Institutional Venture Partners VI ("IVP"), and IVP
Founders Fund I, L.P. ("FFI"), the general partner of which is IVM. Mr.
Colella is a general partner of IVM. The business address for IVP, IVM
and FFI is 3000 Sand Hill Road, Building 2, Suite 290, Menlo Park,
California 94025. IVP also has an option to convert outstanding amounts
under a loan to the Company into 373,093 shares of Common Stock of the
Company. (5) The business address for Frazier Healthcare II, L.P. is Two
Union Square, Suite 2110, Seattle, Washington 98101. Frazier Healthcare
II, L.P. also has an option to convert outstanding amounts under a loan
to the Company into 279,070 shares of Common Stock of the Company. (6)
The business address for Mr. Colella and Dr. Tillotson is 3000 Sand Hill
Road, Building 2, Suite 290, Menlo Park, California 94025. Includes
1,054,054 shares of Common Stock beneficially owned by IVP, which Mr.
Colella may be deemed to beneficially own by virtue of his interest as a
general partner of IVM. Mr. Colella disclaims beneficial ownership of
such shares except to the extent of his partnership interest. (7) The
business address for Mr. Frazier is Two Union Square, Suite 2110,
Seattle, Washington 98101. Includes 873,843 shares of Common Stock held
by Frazier Healthcare II, L.P. ("FH II"), which Mr. Frazier may be deemed
to beneficially own. Mr. Frazier is the sole stockholder of Frazier &
Company, Inc., which is the managing member of Frazier Management, LLC,
which is the managing member of FHM II, LLC, the general partner of FH
II. Mr. Frazier disclaims beneficial ownership of such shares except to
the extent of his stockholder interest.
(8) The business address for Mr. Hazuka is 1125 Lindero Canyon Road #A8-245,
Westlake Village, California 91362.
(9) The business address for Mr. Kahl is 8717 West 110th St., Corporate Woods
Building 14, Overland Park, Kansas 66210.
(10) The business address for Mr. Sigler is 300 Sixth Avenue, Pittsburgh,
Pennsylvania 15222.
(11) Includes shares as to which certain officers and directors disclaim
beneficial ownership. See Notes 3, 6 and 7.
EXECUTIVE COMPENSATION
Employment Contracts
The Company has entered into employment agreements with Dr. Burns and Mr.
Jenkins. These agreements have initial terms of three years and automatically
renew for successive one-year terms unless either party gives timely notice of
non-renewal. The agreements provide for initial annual base salaries of $157,000
for Dr. Burns and $147,000 for Mr. Jenkins. In the event the Company terminates
the employee without cause, as defined in the agreements, the employee's salary
and health benefits will be continued for six months and all outstanding options
will immediately become exercisable. If, within six months following a change in
control of the Company, as defined in the agreements, the Company terminates the
employee without cause or the employee leaves the Company for reason, as defined
in the agreement, the severance period is extended to one year, the outstanding
options become immediately exercisable, and the employee can require the Company
to purchase up to 10% of the employee's share holdings in the Company or
resulting entity at fair value, as defined in the agreements. On December 3,
1997, Dr. Burns and Mr. Jenkins agreed to a salary reduction of 20% for the
period of January 1998 through April 1998. In consideration for this salary
reduction, Dr. Burns received an option to purchase 10,149 shares of Common
Stock at $2.0625 per share and Mr.
14
<PAGE>
Jenkins received an option to purchase 10,453 shares of Common Stock at $1.875
per share. These options will vest 50% on May 1, 1998 and 50% on December 1,
1998.
The Company has also entered into an employment agreement with Mr. Raup.
This agreement has an initial term of two years and automatically renew for
successive one-year terms unless either party gives timely notice of
non-renewal. The agreement provides for an initial annual base salary of
$135,000 and for additional options and bonuses. In the event the Company
terminates Mr. Raup without cause, as defined in the agreement, or the agreement
is not renewed for a successive one-year period, Mr. Raup's salary and health
benefits will be continued for six months and all outstanding options will
immediately become exercisable. If, within six months following a change in
control of the Company, as defined in the agreement, the Company terminates Mr.
Raup without cause or Mr. Raup leaves the Company for any reason, Mr. Raup's
salary and health benefits will be continued for six months and all outstanding
options will immediately become exercisable. On December 3, 1997, Mr. Raup
agreed to a salary reduction of 20% for the period of January 1998 through April
1998. In consideration for this salary reduction, Mr. Raup received an option to
purchase 9,600 shares of Common Stock at $1.875. This option will vest 50% on
May 1, 1998 and 50% on December 1, 1998.
Compensation Summary
The table below sets forth information concerning the annual and
long-term compensation paid to the Chief Executive Officer and the other most
highly paid executive officer whose compensation exceeded $100,000 during the
last fiscal year (the "Named Executive Officers").
15
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Number of
Securities
Other Underlying
Annual Options All Other
Name and Principal Salary Bonus Compensation Granted Compensation
Position Year ($) ($) ($) (#) ($)
- ---------------------------- ---- ----------------- ------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Troy A. Burns, M.D. 1997 $157,000 -- -- -- 1,600(1)
Chief Executive Officer 1996 $157,000 -- -- 2,250 1,345(1)
and Chief Medical 1995 $120,000 -- -- -- 1,200(1)
Officer
T. Scott Jenkins 1997 $147,000 -- -- -- --
President and 1996 $147,000 -- -- 1,900 --
Chief Operating Officer 1995 $96,000 -- -- -- --
Beverly O. Elving 1997 $115,208 -- -- -- --
Chief Financial Officer 1996 $27,500 -- -- 30,000 --
and VP, Finance and
Administration
William C. Raup 1997 $135,000 -- -- -- --
Vice President, Call 1996 $42,188 -- -- 50,000 --
Center Operations
</TABLE>
(1) Consists of premiums paid by the Company for disability insurance
The table below sets forth certain information with respect to the number
and value of options held by the Named Executive Officers at the end of 1997:
16
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In 1997
And 1997 Year-End Option Values
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at
December 31, 1997 December 31, 1997
(#) ($)
Shares
Acquired
Name on Value
Exercise Realized
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------- ----------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Troy A. Burns, -- -- 37 2213 -- --
M.D.
T. Scott Jenkins -- -- 37 1863 -- --
Beverly O. -- -- 7,500 22,500 -- --
Elving
William E. Raup -- -- 12,500 37,500 -- --
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Agreements and Transactions with Dr. Burns and Mr. Jenkins
The Company has entered into Services Agreements, facility subleases and
equipment leases with the medical professional corporations operating as
Diagnostic Centers for Men (the "Centers"), most of which are controlled by Dr.
Burns. The aggregate fees received by the Company pursuant to the Services
Agreements during 1996 were approximately $5.5 million and were approximately
$13.1 million during 1997. In connection with the opening of new Centers, the
Centers execute promissory notes in favor of the Company, normally in the amount
of $90,000, which are secured by accounts, inventory and equipment. In addition,
Dr. Burns has granted to the Company a noncancelable option to designate another
qualified person to acquire at any time for a nominal amount his ownership
interest in any of the professional corporations, now existing or established in
the future, that operate any Center. Dr. Burns has personally guaranteed several
equipment leases of the Company. In addition, during 1997, Dr. Burns leased
office space to a Center and received lease payments in the amount of $27,300.
17
<PAGE>
IVP/Frazier Loan
As described above, the Company has outstanding the IVP/Frazier Loan in
the amount of $1,400,000 and has issued a stock purchase warrant to IVP and
Frazier.
Purchase of Preferred Stock
Series B Preferred Stock. On March 29, 1996, the Company entered into an
agreement in which the Company sold 222,222 shares of Series B Preferred Stock
to Frazier Healthcare II, L.P. for $1.0 million. The shares were later converted
to shares of Common Stock. Alan D. Frazier, a Director of the Company, is
affiliated with Frazier Healthcare II, L.P.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Except for a late filing of a Form 3 by Mr. James R. Kahl, a Director of
the Company, to the Company's knowledge, all Section 16(a) filing requirements
applicable to its Directors, executive officers and ten percent holders were
satisfied during the fiscal year ended December 31, 1997.
PRINCIPAL ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit Committee, has
selected the firm of Ernst & Young LLP as independent auditors to examine the
financial statements of the Company and its subsidiaries for the fiscal year
1998. Representatives of Ernst & Young LLP, the Company's principal accountants
for the current year and since April of the most recently completed fiscal year
are expected to be present at the Annual Meeting, will have an opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
Any eligible stockholder of the Company wishing to have a proposal
considered for inclusion in the Company's proxy solicitation materials for its
1999 Annual Meeting of Stockholders must set forth such a proposal in writing
and file it with the Secretary of the Company on or before January 1, 1999. The
Board of Directors will review new proposals received from eligible stockholders
by that date and will determine whether such proposals will be included in its
proxy solicitation materials for the 1999 Annual Meeting of Stockholders. Any
stockholder desiring to submit a proposal should consult applicable regulations
of the Securities and Exchange Commission.
18
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, and the Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1997, June 30, 1997, and September 30, 1997, each of
which has been filed with the Commission, are incorporated by reference in this
Proxy Statement except as superseded or modified herein. All documents filed by
the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Proxy Statement and before the Annual
Meeting will be deemed to be incorporated by reference and to be a part hereof
from the date of filing such documents. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
that also is incorporated or deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
Statements contained in this Proxy Statement as to the contents of any
contract or other document that is included as (or as part of) an Exhibit to
this Proxy Statement are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document included as an
Exhibit to this Proxy Statement, each such statement being qualified in all
respects by such reference.
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON THE WRITTEN OR ORAL
REQUEST OF ANY PERSON TO WHOM THIS PROXY STATEMENT IS DELIVERED, INCLUDING ANY
BENEFICIAL OWNER OF COMMON STOCK, A COPY OF ANY AND ALL OF THE DOCUMENTS
(EXCLUDING CERTAIN EXHIBITS) RELATING TO THE COMPANY THAT HAVE BEEN OR WILL BE
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT VIA FIRST CLASS MAIL. SUCH
REQUESTS FOR THE DOCUMENTS SHOULD BE DIRECTED TO CORPORATE SECRETARY, INTEGRATED
MEDICAL RESOURCES, INC., 11320 WEST 79TH STREET, LENEXA, KANSAS 66214, (913)
962-7201.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
matters to be presented at the Annual Meeting. However, if any other matters
shall properly come before the meeting, it is the intention of the persons named
in the enclosed proxy card to vote in accordance with their best judgment.
The Board of Directors encourages each stockholder to attend the Annual
Meeting. Whether or not you plan to attend, you are urged to complete, sign and
return the enclosed proxy card in the accompanying envelope. A prompt response
will greatly facilitate arrangements for the meeting, and your cooperation will
be appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors,
TROY A. BURNS, M.D.
Chairman of the Board, Chief Medical Officer
and Chief Executive Officer
19
Lenexa, Kansas
May ____, 1998
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED MEDICAL RESOURCES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /_/
The Board of Directors recommends a vote FOR election of all
nominees and the other proposals set forth below.
<S> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS -- THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
FOR WITHHOLD AGAINST VOTED IN THE MANNER DIRECTED HEREIN BY THE
Nominees: Dwayne Sigler /_/ /_/ /_/ UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
Samuel D. Colella /_/ /_/ /_/ MADE, THIS PROXY WILL BE VOTED "FOR" EACH OF
T. Scott Jenkins /_/ /_/ /_/ THE NOMINEES FOR DIRECTOR LISTED.
2. RATIFICATION AND APPROVAL OF THE TRANSACTION
WITH KARDATZKE MANAGEMENT, INC. Dated: ______________________________, 1998
FOR WITHHOLD AGAINST
/_/ /_/ /_/
Signature(s)_____________________________________
3. AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE _____________________________________
COMPANY TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF THE COMPANY'S
COMMON STOCK.
FOR WITHHOLD AGAINST
/_/ /_/ /_/
Please sign above exactly as name appears.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate name
by President or other authorized officer. If a
partnership, please sign in partnership name by
an authorized person.
5. UPON SUCH OTHER MATTERS AS PROPERLY COME BEFORE THE ANNUAL MEETING AND
ANY ADJOURNMENTS THEREOF. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING, AND ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
FOR WITHHOLD AGAINST
/_/ /_/ /_/
</TABLE>
EXHIBIT A
AMENDMENT TO THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF THE COMPANY
RESOLVED, that Article IV of the Amended and Restated Articles of
Incorporation of the Company, as filed with the Kansas Secretary of State on
September 20, 1996, be deleted in its entirety and replaced with the following
language:
"The authorized capital stock of the Company consists of Twenty-Five
Million (25,000,000) shares of common stock (the "Common Stock"), $.001 par
value per share, and Three Million (3,000,000) shares of Preferred Stock (the
"Preferred Stock"), $.001 par value per share. The Board of Directors shall have
the authority to issue Preferred Stock of any series, and to determine, in the
duly adopted resolution or resolutions providing for the issue of such stock,
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of such Preferred Stock to the full extent now or
hereafter permitted by the Kansas General Corporation Code."
