UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 5, 1998
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INTEGRATED MEDICAL RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Kansas 0-21427 48-1096410
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
11320 West 79th Street, Lenexa, Kansas 66214
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 962-7201
N/A
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(Former name or former address, if changed since last report.)
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ITEM 5: Other Events
On March 5, 1998, Integrated Medical Resources, Inc. (the "Company")
entered into a financing arrangement with Kardatzke Management, Inc. ("KMI"), as
evidenced in part by a Note Purchase Agreement ("Note Purchase Agreement") and
Convertible Note ("Note"). Pursuant to the terms of the Note Purchase Agreement,
KMI has loaned the Company $1,600,000 at an interest rate of 8.5%. All payments
of principal and interest under the Note are deferred until September 1, 1998.
The Note may be converted at the option of KMI into common stock of the Company
at the lower of $2.15 per share or the average market price for the 15 days
prior to conversion, at any time prior to maturity. If not converted or extended
prior to September 1, 1998, the Note shifts to an 18 month, fully amortizing
term loan and is no longer convertible.
In addition, KMI has agreed to provide management consulting services
to the Company to assist the Company in the areas of receivables collection,
third party reimbursement relationships and strategic planning. The management
consulting services end at the Company's option if the Note is converted or
shifts to a term loan. KMI will receive an option to purchase 300,000 shares of
common stock exercisable at $2.70 per share if certain performance criteria are
met prior to April 15, 1999.
As a part of the financing transaction, KMI also has four options to
purchase shares of common stock at increasing share prices and with staggered
exercise dates, which, when combined with the conversion of the Note, aggregate
2,300,000 shares. The exercise of each option is dependant on the exercise of
the earlier options and the exercise of the first option is dependent on the
conversion of the Note.
Also, upon the conversion of the Note and the investment of an
additional $1,000,000 through the exercise of the initial option to purchase
common stock, Dr. E. Stanley Kardatzke, a principle of KMI, will join the
Company in the capacity of Chief Executive Officer and Chairman of the Board of
Directors. In the event that Dr. Kardatzke assumes these positions, he will have
a three year employment contract with the Company and receive options to
purchase an aggregate of 600,000 shares of common stock at a purchase price of
$2.15 per share and vesting over four years.
The Company has a $1,400,000 loan outstanding from its two major
outside investors that is due May 1, 1998. These investors have agreed to
convert this loan at the same per share price as the conversion of the KMI loan
in the event that KMI converts its loan and exercises its first option to invest
an additional $1,000,000 in shares of common stock.
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ITEM 7: Exhibits
Exhibit Description
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4(f) Note Purchase Agreement by and between KMI and the
Company, dated as of March 5, 1998.
4(g) Convertible Note by the Company in favor of KMI, dated
March 5, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTEGRATED MEDICAL RESOURCES, INC.
(Registrant)
March 20, 1998 /s/ Beverly O. Elving
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Beverly O. Elving
Chief Financial Officer and Vice
President, Finance and
Administration
(Authorized Officer and Principal
Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
4(f) Note Purchase Agreement by and between KMI and the
Company, dated as of March 5, 1998.
4(g) Convertible Note by the Company in favor of KMI, dated
March 5, 1998.
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EXHIBIT 4(f)
KARDATZKE MANAGEMENT, INC.
INTEGRATED MEDICAL RESOURCES, INC.
Note Purchase Agreement
This Note Purchase Agreement (this "Agreement") dated as of March 5, 1998,
is entered into between Kardatzke Management, Inc. or its designee (the
"Purchaser") and Integrated Medical Resources, Inc. (the "Company").
W I T N E S S E T H:
For and in consideration of the mutual promises and covenants contained
herein, the parties hereto agree as follows:
1. Purchase and Sale of Note.
Subject to and in accordance with the terms and conditions of this
Agreement, at the Closing (as defined in Section 2), the Company will sell to
the Purchaser, and Purchaser will purchase, a subordinated convertible note of
the Company (the "Note") for the purchase price of $1,600,000. The principal of
the Note and interest thereon shall be convertible into shares (the "Shares") of
the Company's common stock, $.001 par value per share (the "Common Stock"), in
accordance with the terms and provisions of the Note.
2. Closing.
(a) The closing of the sale and purchase of the Note under
this Agreement (the "Closing") shall take place on the date of this Agreement
(the "Closing Date") and shall be consummated by facsimile or mail in
accordance with arrangements reasonably acceptable to counsel for the Company
and counsel for the Purchaser.
(b) At the Closing:
(i) The Purchaser will furnish payment to the
Company of the purchase price for the Note by wire transfer or any other method
acceptable to the Purchaser and the Company, and the Company will execute and
deliver to the Purchaser the Note in substantially the form of Exhibit A hereto.
(ii) The Company will pay the Purchaser, by wire
transfer, up to an aggregate of $35,000 of its documented, out-of-pocket
expenses and legal fees and related expenses incurred in connection with its
investment determination review of the Company.
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(iii) The Company and the Purchaser will execute and
deliver to each other counterparts of a consulting agreement in substantially
the form of Exhibit B hereto (the "Consulting Agreement").
(iv) The Company's counsel will execute and deliver
to the Purchaser a legal opinion substantially in the form of Exhibit C hereto.
(v) The Company's chief executive officer and
secretary will execute and deliver to the Purchaser certificates substantially
in the forms of the Exhibits D and E hereto, respectively.
(vi) The Company will deliver to the Purchaser a
certificate of the Kansas Secretary of State with respect to the Company, as of
a recent date, stating that the Company is validly existing as a corporation in
good standing in such state.
(vii) The Company will deliver Exhibit F hereto.
3. Representations of the Company. The Company hereby represents and
warrants to the Purchaser that:
(a) The Company is duly incorporated, validly existing and
in good standing under the laws of the State of Kansas.
(b) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement, the Note and the
Consulting Agreement.
(c) The execution, delivery and performance by the Company
of this Agreement, the Note and the Consulting Agreement have been duly
authorized by all necessary corporate action on the part of the Company;
provided, however, it is understood by the parties that the conversion of any
Notes or Securities of the Company for 20% or more of the outstanding shares
will require the approval of the Company's shareholders, which approval the
Company agrees to use its best efforts to obtain; and this Agreement, the Note
and the Consulting Agreement have been duly executed and delivered by the
Company.
(d) All corporate action on the part of the Company
necessary for, and all consents, approvals, authorizations of or filings with
any person or government authority required for, the authorization, execution,
delivery and performance by the Company of this Agreement, the Note and the
Consulting Agreement and the consummation of the transactions contemplated
herein and therein, and for the authorization, offer, issuance, sale and
delivery of the Note and the Shares issuable upon conversion of the Note,
has been taken or procured, as the case may be; provided, however, it is
understood by the parties that the conversion of any notes (including this Note)
or securities of the Company for 20% or more of the outstanding shares will
require the approval of the Company's shareholders, which approval the Company
agrees to use its best efforts to obtain. This Agreement, the Note and the
Consulting Agreement are the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by or
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subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally, and subject to
general principles of equity. The Shares issuable upon conversion of the Note
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Note, will be validly issued, fully paid and
nonassessable.
(e) The authorized capital stock of the Company consists
of 10,000,000 shares of Common Stock and 3,000,000 shares of Preferred
Stock, of which Preferred Stock there are authorized 1,081,080 shares
designated as Series A Preferred Stock, $.001 par value per share (the "Series A
Preferred Stock"), and 222,222 shares designated as Series B Preferred Stock,
$.001 par value per share (the "Series B Preferred" Stock). Immediately prior
to the Closing, 6,731,058 shares of Common Stock, and 0 shares of Series A
Preferred Stock, and 0 shares of Series B Preferred Stock will be issued and
outstanding.
Except as specified above, or in Exhibit G hereto, there
are no outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for the issuance
of any shares of its capital stock.
(f) Except as waived prior to the Closing, the Note and
the Consulting Agreement, and compliance herewith and therewith, and the offer,
issuance, sale and delivery of the Note and the Shares will not, result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, any provisions of federal or state law
to which the Company is subject, the Company's Articles of Incorporation, as
amended (subject to shareholder approval of an amendment to the Articles of
Incorporation to increase the amount of authorized shares), the Company's
By-Laws or any mortgage, indenture, agreement, instrument, judgment, decree,
order, rule or regulation or other restriction to which the Company is a party
or by which it is bound or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term.
(g) The Company has no outstanding indebtedness for
borrowed money except as set forth in Exhibit H hereto. The Company is not in
default with respect to any indebtedness for borrowed money.
(h) The Company has filed all tax returns and reports
required to be filed with the United States Internal Revenue Service, with the
State of Kansas, and with all other jurisdictions where such filing is required
by law. The Company has paid or, as and to the extent required by generally
accepted accounting principles, made adequate provisions for the payment of,
all taxes, interest, penalties, assessments or deficiencies shown to be due or
claimed to be due on or in respect of such tax returns and reports.
(i) Other than as set forth in Exhibit I hereto, there is
neither pending nor, to the Company's knowledge, threatened, any action, suit,
proceeding or claim, or outstanding orders, judgments, injunctions, awards or
decrees of any court, regulatory body or arbitration tribunal, to which the
Company is or may be named as a party or its property is or may be subject
and in which an unfavorable outcome, ruling or finding in any such matter or
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for all such matters taken as a whole might have a material adverse effect on
the financial condition or operations of the Company.
(j) The Company has a good and valid ownership interest
in all of its property and assets, free from all mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or charges,
except as listed on Exhibit J hereto. The Company does not have any ownership
interest in real property. Except as listed on Exhibit I, the Company is not in
violation of any law, regulation or ordinance (including laws, regulations
or ordinances relating to building, zoning, environmental, city planning, land
use or similar matters) relating to its property or assets which violation
would have a material adverse effect on the financial condition or operations of
the Company.
(k) The Company has all franchises, permits, licenses and
other similar authority, and is duly qualified or licensed as a foreign
corporation in each jurisdiction in which is required to be so qualified or
licensed, necessary for the conduct of its business as conducted by it or
proposed to be conducted by it, the lack of which could materially and
adversely affect the financial condition or operations of the Company and
is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority. Each of the material patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, proprietary rights and processes owned or used by the Company (the
"Technology") is valid and in good standing and (taken as a whole) reasonably
adequate and sufficient to permit the Company to conduct its business as
conducted by it or proposed to be conducted by it without, to the Company's
knowledge, conflict with or infringement upon any valid rights of others
The Company is not aware of and has not received any notice of infringement upon
or conflict with the asserted rights of others.
(l) The Company is not in violation of any term of its
Certificate of Incorporation, as amended, or its By-Laws. Except as listed
on Exhibit I, the Company is not in violation of any term of any law, judgment,
decree, order, rule or regulation, mortgage, indenture, agreement, instrument
or other restriction to which the Company is subject and a violation of which
would have a material adverse effect on the financial condition or operations
of the Company.
(m) The Company does not maintain any employee pension
benefit plan as defined in Section 3(2)(A) of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
(n) The Company is not in violation of any applicable
federal, state or local statute, law or regulation, including any such
statutes, laws or regulations relating to the environment, which violations,
either singly or in the aggregate, would have a material adverse effect on the
Company's financial condition or results of operations, and reasonably believes
that no material expenditures are or will be required in order to comply with
any such statute, law or regulation.
(o) The Company is insured by reputable insurers its
assets that are of an insurable character against risks of liability (including
product liability), casualty and fire in
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adequate and customary amounts for similarly situated companies in similar
businesses. The Company carries no self-insurance risk for any employee health
or worker's compensation risk. Exhibit K hereto sets forth a true, complete and
correct list of the Company's insurance policies, including policy limits and
deductibles. The Company's insurance coverage is customary for well insured
corporations of similar size engaged in similar lines of business.
(p) To the Company's knowledge, none of its current
executive officers has been convicted of any crime constituting a felony.
(q) The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940.
(r) Assuming the accuracy of the representations and
warranties set forth in Section 4, the offer, sale and issuance of the Note and
the Shares hereunder do not require registration under the Securities Act of
1933 (the "Act"), registration or qualification under any applicable state
securities laws or qualification of an indenture under the Trust Indenture Act
of 1939.
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows:
(a) It is acquiring the Note and the Shares for
investment for its own account and not with a view to the resale, transfer or
other disposition thereof and any sale or disposition of the Note or the Shares
will be made only if the Note or the Shares are registered under the Act or the
sale or disposition is made in compliance with an exemption under the Act or
the rules thereunder and any applicable state securities laws. It understands
that the Note and the Shares have not been registered under the Act by reason of
specified exemptions from the registration provisions of the Act.
(b) (i) It acknowledges that the Note and the Shares
must be held indefinitely unless they are subsequently registered under the
Act or an exemption from such registration is available. It has been advised or
is aware of the provisions of Rules 144 and 144A promulgated under the Act,
which permit the resale of securities purchased in a private placement subject
to the satisfaction of certain conditions and that such Rules may not be
available for sale of the Note and the Shares.
(ii) It acknowledges that all certificates
representing the Note and the Shares will have endorsed thereon legends in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE
STATE SECURITIES LAWS. UNLESS THEY ARE SOLD PURSUANT
TO RULE 144A OR RULE 144 PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT,
THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN
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OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AGAINST SALE
CONTAINED IN A CERTAIN AGREEMENT BETWEEN AND AMONG
THE REGISTERED OWNER OF THIS CERTIFICATE AND CERTAIN
OTHER HOLDERS OF THE CORPORATION, AND A COPY OF SAID
AGREEMENT IS AVAILABLE FOR INSPECTION, WITHOUT
CHARGE, AT THE OFFICES OF THE CORPORATION.
Such legend shall be removed by the Company upon delivery to it of an opinion of
counsel to the Company (which opinion and counsel rendering same shall be
reasonably satisfactory to the Company) that a registration statement under the
Act is at the time effective with respect to the transfer of the legended
security or that such security may be transferred without such registration
statement being in effect and without the requirements of a legend on the
certificate in the hands of the transferee.
(c) It has had an opportunity to discuss the Company's
business, management and financial affairs with its management and has had the
opportunity to review the Company's facilities. It is not subscribing for the
Note and the Shares as a result of or subsequent to any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or any solicitation of
a subscription by a person not previously known to it in connection with
investments in securities generally.
(d) It has full power and authority to enter into and to
perform this Agreement in accordance with its terms. All action (corporate or
otherwise) on the part of the Purchaser necessary for the authorization,
execution, delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated herein has been taken. This
Agreement is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally, and subject to
general principles of equity.
(e) It has been advised or is aware of the provisions of
Regulation D promulgated under the Act relating to the accreditation of
investors, and it is an "accredited investor" as defined in Regulation D.
5. Transfers.
(a) The Purchaser agrees that it shall give the Company
prior written notice of any proposed transfer of the Note or any of the Shares,
including the name and address of the proposed transferee. Prior to any such
proposed transfer,
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other than pursuant to a sale under a applicable registration statement under
the Act or a sale pursuant to Rule 144 promulgated under the Act, and as a
condition thereto, the Purchaser will deliver to the Company (i) an investment
covenant signed by the proposed transferee substantially as set forth in Section
4(b) hereof, (ii) an agreement by such transferee to the restrictive investment
legend set forth in Section 4(c)(ii) hereof on the certificate or certificates
representing the securities acquired by such transferee and (iii) an agreement
by the transferee to be subject to the provisions of this Agreement and the
provisions of the Agreement to the same extent as if such transferee were
originally a signatory to this Agreement and the Agreement. Any transfer of the
Note or of any of the Shares attempted contrary to the provisions of this
Agreement, or any levy of execution, attachment or other process attempted upon
the Note or any of the Shares, shall be null and void and without effect.
(b) In the event of any transfer of the Note by the
Purchaser in accordance with the provisions of this Agreement, for the purposes
of this Agreement, the subordinated convertible notes of the Company
representing portions of the principal amount originally represented by the
Note, shall be referred to herein individually as a "Note" and collectively as
the "Notes".
(c) In the event of the resale of any Note or of any of the
Shares pursuant to Rule 144A promulgated under the Act, the Company agrees to
comply with the information requirements of Rule 144A(d)(4) promulgated under
the Act.
6. Covenants of the Company. The Company hereby covenants and
agrees, that so long as any of the Notes remain outstanding:
(a) The Company shall deliver the following reports to all
persons who hold any of the Notes:
(i) As soon as practicable after the end of each
fiscal year of the Company, and in any event, within 135 days after the end of
each fiscal year, a consolidated balance sheet of the Company and its
subsidiaries (if any), as at the end of such fiscal year and consolidated
statements of income and cash flows of the Company and its subsidiaries (if any)
for such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by the report
thereon of independent certified public accountants of recognized national
standing and considered one of the "Big Six" accounting firms in the United
States, selected by the Company, which report shall state that (A) such
financial reports have been prepared in accordance with generally accepted
accounting principles and (B) the audit by such accountants in connection with
such financial statements has been made in accordance with generally accepted
auditing standards.
(ii) As soon as practicable after the end of each
month, using all commercially reasonable efforts to cause such delivery to occur
within 30 days after the end of such month, a consolidated balance sheet of the
Company and its subsidiaries (if any) as at the end of such month and
consolidated statements of income and cash flows of the Company and its
subsidiaries (if any) for such month, prepared
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in accordance with generally accepted accounting principles consistently
applied, except for footnote disclosure and subject to year-end audit
adjustments, and accompanied by a certificate of the Company's chief financial
officer to such effect.
(iii) As soon as available, using all commercially
reasonable efforts to cause such delivery to occur prior to December 31 of each
year, the annual operating plan of the Company for the succeeding calendar year
including appropriate projections and underlying assumptions.
(iv) With reasonable promptness, such other
information and data with respect to the Company as the Purchaser may from time
to time reasonably request.
(b) Without the affirmative vote or prior written approval
of the holders of a majority of the Notes and at least a majority of the members
of the Board of Directors of the Company, neither the Company nor its
subsidiaries (if any) shall, together or alone:
(i) incur, create, assume or permit to exist any
Indebtedness other than the Note except for (a) indebtedness in an amount not
exceeding $7,800,000, consisting of (1) $5 million under the existing working
capital line of credit and (2) $2.8 million of long term indebtedness (including
the current portion thereof); (b) unsecured trade credit incurred in the
ordinary course of business; and (c) capitalized lease obligations not to exceed
$1,000,000. Indebtedness means all items which, in accordance with GAAP, would
be included on the liability side of a balance sheet, excluding capital stock,
surplus, capital and earned surplus.
(ii) lease, purchase, sell or otherwise acquire or
dispose of any property or services having a value in excess of $200,000 in any
transaction or series of similar transactions;
(iii) assign, mortgage, pledge or otherwise
encumber any assets having a value of more than $200,000;
(iv) make any loan, extend any credit or forgive or
otherwise change the terms of any indebtedness, in excess of $200,000;
(v) make any material change in the character of
its business as presently conducted or as proposed to be conducted, or conduct
its business in a manner other than in the normal and ordinary course;
(vi) declare or pay any dividend in cash or in
property or make or authorize any other distribution directly or indirectly on
its Common Stock or any other capital stock now outstanding or hereafter issued;
(vii) directly or indirectly purchase, acquire,
redeem or retire any share of its outstanding capital stock or any securities
exercisable for, or convertible into, its capital stock; or
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(viii) enter into any transaction of merger,
consolidation or reorganization, or dissolve, wind up or liquidate, or convey,
sell, lease, exchange, transfer or otherwise dispose of in a transaction or
related series of transactions all or substantially all of the assets of the
Company.
(c) Without the affirmative vote or prior written approval
of the holders of a majority of the Notes and at least a majority of the
disinterested directors on the Board of Directors, neither the Company nor its
subsidiaries (if any) shall, together or alone, enter into any transaction with
any Affiliate of the Company on terms that are not as favorable as the Company
could obtain from an unaffiliated third party.
(d) The Company shall take all such actions (reasonably
within its control) so as to assure that each of its executive officers devote
substantially all of their respective business time and attention to the
Company's business.
7. Joint Covenants. The Company and the Holder agree that upon the
exercise of the option pursuant to Section 6.6(a) of the Convertible Note they
will execute an Employee Agreement mutually agreed upon by the parties and the
Board will appoint Dr. E. Stanley Kardatzke Chairman of the Board and Chief
Executive Officer of the Company.
8. Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby. All agreements, representations and warranties shall terminate upon
conversion of the Convertible Note.
9. Expenses. Other than as set forth in Section 2(b)(iii) hereto, each
party hereto shall pay its own costs and expenses in connection with this
Agreement and the closing of the transactions contemplated hereby.
10. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
recognized courier, mailed by first class certified or registered mail, return
receipt requested, postage prepaid, or delivered by telecopy to the Company or
the Purchaser, as the case may be, at the following respective addresses:
Kardatzke Management, Inc.
701 Destacada Avenue
Coral Gables, Florida 33156
Tel: (305) 663-9188
Fax: (305) 663-9180
Attention: Dr. E. Stanley Kardatzke
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Integrated Medical Resources, Inc.
11320 West 79th Street
Lenexa, Kansas 66214
Tel: (913) 962-7201
Fax: (913) 962-7719
Attention: Troy A. Burns, M.D.
Either party may change its address for purposes hereof by
notice to the other party in the manner provided above.
11. Brokers. Each of the Company and the Purchaser, with respect to
itself, (i) represents and warrants to the other that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement and
(ii) will indemnify and save the other harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finder's fees or
commissions, or consulting fees in connection with the transactions contemplated
by this Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
12. Entire Agreement. With respect to the subject matter hereof, this
Agreement, including the Exhibits hereto, embodies the entire agreement and
understanding between the Purchaser and the Company, and supersedes all prior
agreements and understandings relating to such subject matter.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Headings. The headings of the sections, subsections and paragraphs
of this Agreement have been added for convenience only and shall not be deemed
to be a part of this Agreement.
15. Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions of this Agreement, and, to the extent permitted by law,
any determination of invalidity or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
16. Amendments and Waivers. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally or in writing, except
that any term of this Agreement may be amended and the observance of any such
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of the
Company and the holders of Notes that represent in the aggregate at least a
majority of the total principal amount of the Notes then outstanding.
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17. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
18. Parties in Interest. The Company and the Purchaser agree that the
only persons with an interest in the transactions and agreements set forth
herein are the Company and the Purchaser, that no other person shall have any
rights under this Agreement and that no other person shall be the beneficiary of
any of the rights and obligations provided by this Agreement.
19. Definitions.
(a) As used in this Agreement, "Affiliate" shall mean,
with respect to any person, any other person controlling, controlled by or under
common control with such person. The term "control" as used in the immediately
preceding sentence means, with respect to a corporation, the right to exercise,
directly or indirectly, 50% or more of the voting rights attributable to the
shares of the controlled corporation, or with respect to any person other than a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person.
(b) As used in this Agreement , the term "person" means
any individual, partnership, corporation, limited liability company, trust,
unincorporated organization or other legal entity, or any government or any
agency or political subdivision thereof.
20. Waiver of Jury Trial, etc.. The Company and Purchaser hereby
knowingly, voluntarily and intentionally waive (a) any right to trial by jury
the Company and Purchaser may have in any action or proceeding, in law or in
equity, in connection with this Agreement or the transactions related hereto and
(b) any right to contest enforcement of provisions of the last sentence of
Section 20 hereof on the basis of forum non conveniens.
21. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Kansas
applicable to contracts made and to be performed in that State without giving
effect to any choice or conflict of law provision or rule (whether in the State
of Kansas or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Kansas. The parties hereto
consent to the jurisdiction of the State of Florida or state or federal courts
located therein for all disputes arising under this Agreement.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
"Company"
INTEGRATED MEDICAL RESOURCES, INC.
By /s/ Troy A. Burns, M.D.
----------------------------
Troy A. Burns, M.D.
Chief Executive Officer
"Purchaser"
KARDATZKE MANAGEMENT, INC.
By /s/ E. Stanley Kardatzke, M.D.
------------------------------------
E. Stanley Kardatzke, M.D.
Title: Chairman
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EXHIBIT 4(g)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS.
UNLESS THEY ARE SOLD PURSUANT TO RULE 144A OR RULE 144 PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT, THEY MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
CONVERTIBLE NOTE
$1,600,000.00 March 5, 1998
FOR VALUE RECEIVED, the undersigned, INTEGRATED MEDICAL RESOURCES,
INC., a Kansas corporation (the "Company"), hereby promises to pay to the order
of Kardatzke Management, Inc., a Florida corporation (the "Holder"), by wire
transfer, the principal sum of ONE MILLION SIX HUNDRED THOUSAND DOLLARS
($1,600,000.00) in lawful money of the United States of America, together with
interest on the unpaid principal balance from day-to-day remaining computed from
the last interest payment date until the Maturity Date (as that term is
hereinafter defined) at the rate of 8.5% per annum, at the Holder's principal
place of business located at 70 Destacada Dr., Coral Gable, Florida, or such
other address as the Holder shall notify the Company in writing.
This Convertible Note (this "Convertible Note") has been issued
pursuant to, and is a "Note" as referred to in that certain Note Purchase
Agreement dated as of March 5, 1998, between Kardatzke Management, Inc.
("Holder") and the Company (the "Note Purchase Agreement").
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1. (a) After July 15, 1998 the Convertible Note is prepayable by the
Company upon fifteen business days notice.
(b) For purpose of calculating interest accrued hereon, interest
on this Convertible Note shall be calculated on the basis of the actual days
elapsed over a 365-or 366-day year, as the case may be.
(c) All outstanding principal and all then accrued and unpaid
interest on this Convertible Note shall be due and payable on the Maturity Date.
2. For purposes hereof, the "Maturity Date" shall mean September 1,
1998. The Holder has the sole option to extend the term of the Convertible Note
for three successive 90-day periods until maturity. If the conversion right in
Section 6 is not exercised, the note shall become an 18-months term loan from
such date with equal monthly payments of principal and interest including
accrued interest.
3. Should the principal of, or any installment of the principal or
interest on, this Convertible Note become due and payable on any day other than
a business day, the Maturity Date thereof shall be extended to the next
succeeding business day and interest shall be payable with respect to such
extension. As used herein, the term "business day" shall mean any day except a
Saturday, a Sunday or a day on which banking institutions are legally authorized
to close in the City of Houston, Texas or in Lenexa, Kansas.
4. No waiver by the Holder of any of its rights or remedies hereunder
or under any other document evidencing or securing this Convertible Note or
otherwise shall be considered a waiver of any other subsequent right or remedy
of the Holder; no delay or omission in the exercise or enforcement by the Holder
of any rights or remedies shall ever be construed as a waiver of any right or
remedy of the Holder; and no exercise or enforcement of any such rights or
remedies shall ever be held to exhaust any right or remedy of the Holder.
5. If any one or more of the following events shall occur after the
date hereof for any reason whatsoever (whether such occurrence shall be
voluntary or involuntary or be effected by operations of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or other governmental body), it shall be deemed an "Event of
Default" hereunder:
(a) default by the Company in the due and punctual payment of the
principal, interest or both on this Convertible Note when and as the same of
each such obligation shall become due and payable, whether at the Maturity Date
or at a date fixed for prepayment or by acceleration 30 days after the receipt
of notice thereof from the Holder;
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(b) default by the Company in the due and punctual payment of the
principal, interest or both on any indebtedness for borrowed money (including
the current portion thereof), when and as the same of each such obligation shall
become due and payable, and the passage of any applicable cure period;
(c) 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 payor
withholding payment due to any actions of the Company taken prior to February 1,
1998 (a "Defined Default:);
(d) the Company's becoming insolvent or unable to meet its
obligations as they mature, making a general assignment for the benefit of
creditors, or consenting to the appointment of a trustee or a receiver, or
admitting in writing its inability to pay its debts as they mature;
(e) the appointment of a trustee or receiver for the Company or
for a substantial part of the properties of the Company without the consent
of the Company and such trustee or receiver not being discharged within 30 days;
(f) the institution of bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings by or against the Company and, if
instituted against it, the same being consented to by the Company or remaining
undismissed for a period of 30 days;
(g) the rendering of any final judgment against the Company for
the payment of money in an amount in excess of $500,000;
(h) any substantial part of the property of the Company being
sequestered or attached and not being returned to the possession of the Company
or released from such attachment within 30 days;
(i) upon the effective date of a merger, reorganization or sale of
substantially all of the assets of the Company in which the stockholders of the
Company immediately prior to such transaction own less than 50 percent (50%) of
the voting securities of the surviving or controlling entity immediately after
such transaction;
(j) an "Event of Default" occurs under any of the Senior Debt (as
defined in Section 11.1 below).
If any such Event of Default or any other default under or breach of
any other agreement (including, but not limited to, the Note Purchase Agreement
and that certain Consulting Agreement dated the date hereof between the Company
and Dr. E. Stanley Kardatzke) or instrument executed in connection herewith
shall occur and be continuing, the Holder may, at the Holder's option, declare
the entire unpaid balance of principal and unpaid interest on this Convertible
Note to be immediately due and payable, whereupon the maturity of the then
unpaid
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balance on this Convertible Note shall be accelerated and the principal and all
interest accrued thereon shall forthwith become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything contained herein or in this Convertible Note to the
contrary notwithstanding, and the Holder may exercise and shall have any and all
remedies accorded the Holder by law.
6. Conversion Rights and Option Rights.
6.1 As used herein:
(a) "Common Stock" means the common stock, $.001 par
value per share, of the Company.
(b) "Conversion Price" shall initially mean the lesser
of $2.15 or the average of the closing market price for the Common Stock for the
fifteen trading days prior to conversion and shall be subject to adjustment
pursuant to Sections 6.6 and 6.7 hereof.
6.2 Subject to and in compliance with provisions of this
Article 6, the holder of this Convertible Note may, at its option, by surrender
of this Convertible Note as hereinafter provided, convert all or any portion of
the outstanding principal amount of this Convertible Note and/or accrued and
unpaid interest hereon into such number of fully paid and nonassessable shares
of Common Stock determined by dividing the amount of principal hereof and/or
accrued and unpaid interest hereon to be so converted by the Conversion Price
then in effect. If the Holder chooses to exercise the option in Section 6.6(a)
below, shares to be issued upon conversion of this Convertible Note shall be
deemed to be a part of and not in addition to, the shares issued upon exercise
of such option.
6.3 Subject to the other provisions of this Convertible Note,
the option for conversion of this Convertible Note pursuant to Section 6.2
hereof may be exercised at any time during the period beginning on the date
hereof and ending upon the earlier of (i) the repayment or redemption in full of
the principal, together with any accrued but unpaid interest, of this
Convertible Note or (ii) the conversion of this Note to an 18-month term note as
set forth in Section 2 above; provided, however, that this Note may not be
converted until the Company has received the necessary Stockholder approval.
6.4 (a) The surrender of this Convertible Note for conversion
pursuant to Section 6.2 hereof shall be made by the holder hereof to the Company
at its office in Lenexa, Kansas, accompanied by written notice to the Company,
in the form of the Conversion Request attached as Annex 1 to this Convertible
Note (the "Conversion Request"), that such holder elects to convert all or a
portion of the principal and/or accrued and unpaid interest of this Convertible
Note in accordance with the provisions hereof. Upon surrender of this
Convertible Note for conversion, it shall be marked "cancelled" or
"paid-in-full". Any such notice of election to
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<PAGE>
convert shall constitute a contract between the holder of this Convertible Note
and the Company, whereby such holder shall be deemed to subscribe for the number
of shares of Common Stock which it shall be entitled to receive upon such
conversion, and in payment and satisfaction of such subscription, to surrender
this Convertible Note and to release the Company from all liability hereon in
respect of the principal and/or accrued and unpaid interest hereon being
converted, and including interest accruing after the date of the receipt of the
notice of conversion on the portion of the principal hereof being converted, and
whereby the Company shall be deemed to agree that the surrender of such
Convertible Note and the extinguishment of liability hereon shall constitute
full payment for the shares of Common Stock so subscribed for and to be issued
upon such conversion.
(b) Subject to the further provisions of this Section 6.4(b)
and subject to shareholders' approval, as soon as practicable after the
receipt of such Conversion Request and this Convertible Note, and in any event,
within ten business days thereafter, the Company shall issue and shall deliver
at said office to such holder (i) a certificate or certificates for the number
of full shares of Common Stock issuable upon the conversion of this Convertible
Note in accordance with the provisions hereof, (ii) a check or cash in respect
of any fraction of a share as provided in Section 6.5 hereof and (iii) in the
event of a partial conversion of this Convertible Note, a new Convertible Note
(in form substantially identical to this Convertible Note) for the unpaid
principa amount of this Convertible Note that was not converted. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the date on which the Company shall have received such Conversion
Request and this Convertible Note; conversion shall be at the Conversion Price
then in effect; any and all interest on the principal of this Convertible Note
to be converted pursuant to such Conversion Request shall cease to accrue
pursuant to this Convertible Note from the date of receipt of the Conversion
Request; and the holder of this Convertible Note shall be deemed to have become
on said date the holder of record of the shares of Common Stock issuable to such
holder upon such conversion; provided, however, that, in the event the holder of
this Convertible Note effects any such surrender of this Convertible Note on
any date when the securities transfer books of the Company shall be closed,
such holder shall not be deemed to be the record holder of such shares of Common
Stock for any purpose until the close of business on the next succeeding day on
which such securities transfer books shall be open.
6.5 The Company shall not be required to issue fractions of
shares upon conversion of this Convertible Note (or portion thereof). If any
fractional interest in a share shall be deliverable upon the conversion of this
Convertible Note (or portion thereof), the Company shall purchase such
fractional interest for an amount in cash equal to the Conversion Price then in
effect times the amount of such fractional interest.
6.6 Option Terms. The Holder will have the option to buy
shares of the Company's Common Stock as described below:
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(a) an option 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. This option expires upon the later of (x) conversion to
a term loan or prepayment of the Convertible Note, (y) conversion of the
Convertible Note under Section 6.1, or (z) May 31, 1998. Exercise of this
option is contingent upon conversion of this Convertible Note under Section
6.2 as part of the exercise price of this option (a).
(b) an option to purchase the number of shares that
equals 2,000,000 minus the number of shares issued pursuant to (a) above, times
.5, at $2.15 per share through May 31, 1998 (which date shall be extended for
the same number of days as the initial maturity of this Convertible Note
under Section 2) and thereafter at $2.70 per share. This option expires
upon the later of (i) conversion to a term loan or prepayment of the Convertible
Note, (ii) conversion of the Convertible Note under Section 6.2, or (iii)
December 31, 1998. The exercise of this option is contingent upon the option
under (a) above being exercised.
(c) an option to purchase the number of shares that
equals 2,000,000, minus the number of shares issued pursuant to (a) and (b)
above, at $3.15 per share through December 31, 1998, which option expires
upon the later of (i) conversion to a term loan or prepayment of the Convertible
Note, (ii) conversion of the Convertible Note under Section 6.2, or (iii)
December 31, 1999, or at $3.75, which option expires upon the later of (i)
conversion to a term loan or prepayment of the Convertible Note, (ii)
conversion of the Convertible Note under Section 6.2, or (iii) December 31,
2000. The exercise of this option is contingent upon the option under (b) above
being exercised.
(d) 300,000 shares at an exercise price of $2.15
per share, which expires on March 5, 2000. Exercise of this option is contingent
upon conversion of the Convertible Note under Section 6.2.
6.7 The Conversion Price then in effect of this Convertible
Note shall be subject to adjustment as follows:
(a) In case the Common Stock shall be split or
subdivided into a greater, or reverse split or combined into a lesser, number of
shares (whether with or without par value), the Conversion Price then in effect
shall be decreased or increased, as the case may be, to an amount which shall
bear the same relation to the Conversion Price in effect immediately prior to
such split or subdivision or reverse split or combination as the total number of
shares of Common Stock outstanding immediately prior thereto bears to the total
number of shares of Common Stock outstanding immediately after such split or
subdivision or reverse split or combination. A stock dividend shall be
considered a split or subdivision of shares for the purpose of this Section
6.7(a).
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(b) In case of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation of the Company with or the merger of the Company with or into any
other corporation or of the sale of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation, this Convertible Note
shall after such capital reorganization, reclassification of capital stock,
consolidation, merger or sale be convertible into that number of securities, or
amount or value of property, of the Company, or of the corporation resulting
from such consolidation or surviving such merger or to which such sale shall be
made, as the case may be, to which the holder of shares of Common Stock issuable
(at the time of such capital reorganization, reclassification of capital stock,
consolidation, merger or sale) upon conversion of this Convertible Note would
have been entitled upon such capital reorganization, reclassification of capital
stock, consolidation, merger or sale had this Convertible Note been converted
prior thereto; and in any such case, if necessary, the provisions set forth in
this Section 6 shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any securities or property thereafter deliverable on
the conversion of this Convertible Note. The provisions of this Section 6.7(b)
shall similarly apply to successive capital reorganizations, reclassification of
capital stock, consolidations, mergers or sales. The split or subdivision or
reverse split or combination of shares of Common Stock issuable upon conversion
of this Convertible Note into a greater or lesser number of shares of Common
Stock shall not be considered a consolidation, merger or sale for the purposes
of this Section 6.7(b).
(i) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of any shares so
owned or held shall be considered an issue or sale of Common Stock for
the purposes of this Section 6.7.
(ii) Stock Dividends. In case any additional shares of Common
Stock shall be issued as a dividend on Common Stock, the Conversion
Price shall be adjusted as provided in Section 6.7(a) hereof. In case
any additional shares of Common Stock shall be issued as a dividend on
any class of stock of the Company other than Common Stock, or in case
any obligations or stock convertible into or exchangeable for shares of
Common Stock (such convertible or exchangeable obligations or stock
being hereinafter called "Convertible Securities") shall be issued as a
dividend on any class of stock of the Company, such shares of Common
Stock or Convertible Securities shall be deemed to have been issued
without consideration on the day next succeeding the date for the
determination of stockholders entitled to such dividend.
(iii) Record Date. For purposes of this Section 6.7 in case
the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them (a) to receive a dividend or other
distribution payable in Equity Stock or any options or warrants
exercisable for shares of Common Stock or any securities convertible
into Common Stock, or (b) to subscribe for or purchase Equity Stock or
any options or warrants exercisable for shares of Common Stock or any
securities convertible into Common stock, then such
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<PAGE>
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making or such other distribution
or the date of the granting of such right or subscription or purchase,
as the case may be.
(iv) Current Market Price. The Current Market Price at any
date shall mean, in the event the Common Stock or the Equity Stock, as
the case may be, is publicly traded, the average of the daily closing
prices per shares of such equity security for 30 consecutive trading
days ending no more than 15 business days before such date (as adjusted
for any stock dividend, split, combination or reclassification that
took effect during such 30 trading day period). The closing price for
each day shall be the last reported sale price or, in case no such
reported sale takes place on such day, the average of the last closing
bid and asked prices in either case on the principal national
securities exchange on which such equity security is listed or admitted
to trading, or if not listed or admitted to trading on any national
securities exchange, the closing date price for such day reported by
NASDAQ, if such equity security is traded over-the-counter and quoted
in the National Market System, or if such equity security is so traded,
but not so quoted, the average of the closing reported bid and asked
prices of such equity security as reported by NASDAQ or any comparable
system or, if such equity security is not listed on NASDAQ or any
comparable system, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities
Dealers, Inc., selected in good faith from time to time by the Board of
Directors of the Company for that purpose. If such equity security is
not traded in such manner that the quotations referred to above are
available for the period required hereunder, Current Market Price per
shares of such equity security shall be deemed to be the fair value as
determined in good faith by the Board of Directors of the Company and
the Holder or, if the Board of Directors of the Company and the Holder
cannot agree, by an independent appraiser mutually selected by the
Board of Directors of the Company and the Holder.
(c) No Adjustment. Anything in this Section 6 to the
contrary notwithstanding, the Company shall not be required, except as
hereinafter in this Section 6.7(c) provided, to make any adjustment of the
Conversion Price then in effect in any case in which the amount by which such
Conversion Price would be reduced in accordance with the provisions of this
Section 6.7 would be less than $.05, but in such case any adjustment that would
otherwise be required then to be made will be carried forward and made at the
time of and together with the next subsequent adjustment which, together with
any and all adjustments so carried forward, shall amount to $.05 or more. In the
event of any subdivision or combination of shares of Common Stock said amount of
$.05 (as therefore decreased or increased by any previous subdivision or
combination) shall be proportionately decreased or increased.
(d) Notice of Holders. In the event the Company
shall propose to take any action of the types described in Section 6.7(b), the
Company shall give written notice to the
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Holder, which notice shall specify the record date, if any, with respect to any
such action and the date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Conversion Price then in effect and
the number, kind or class of shares or other securities or property which shall
be deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of this Convertible Note. In the case of any action that would
require the fixing of a record date, such notice shall be given at least ten
days prior to the date so fixed, and in case of all other action, such notice
shall be given at least ten days prior to the taking of such proposed action.
(e) Shares Free and Clear. All shares of Common
Stock issued in connection with the conversion provisions set forth herein shall
be, upon issuance by the Company, validly issued, fully paid and nonassessable
and free from all taxes, liens or charges with respect thereto created or
imposed by the Company.
(f) Common Stock Reserved. Upon appropriate
amendment to its Articles of Incorporation, the Company shall reserve and keep
available out of its authorized but unissued shares of Common Stock such number
of shares of Common Stock as shall from time to time be sufficient to effect
conversion of this Convertible Note.
6.8 Whenever the Conversion Price then in effect shall be
adjusted as required by the provisions of Section 6.7 hereof, the Company shall
forthwith mail a certificate setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment or
readjustment is based to the Holder at such Holder's address as it appears
herein or at the last address of which the Holder has given the Company written
notice, but failure to receive such notice, or any defects therein, or in the
mailing thereof, shall not affect such adjustment in such Conversion Price. The
Company shall, upon the written request at any time of the Holder, furnish or
cause to be furnished to such holder a like certificate setting forth (a) such
adjustments and readjustments, (b) the Conversion Price at that time in effect,
and (c) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of this
Convertible Note.
7. At any time after July 15, 1998, the Company may prepay, upon 15
business days' prior written notice to the Holder, its obligation pursuant to
this Convertible Note, in whole or in part, at any time by tendering to the
Holder 100% (expressed in percentages of the principal amount), together with
accrued but unpaid interest hereon.
The foregoing notwithstanding, it is acknowledged and agreed to by the
Company that, unless such rights have expired pursuant to Section 6.3 hereof,
the Holder may exercise its conversion rights pursuant to Section 6.7 hereof at
any time prior to the second business day immediately preceding the proposed
date of such prepayment, whether before or after receipt of such prepayment
notice from the Company.
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8. Notwithstanding anything contained in this Convertible Note to the
contrary, the Holder shall never be deemed to have contracted for or be entitled
to receive, collect or apply as interest on this Convertible Note any amount in
excess of the amount permitted and calculated at the Maximum Rate (defined
below), and in the event the Holder ever receives, collects or applies as
interest any amount in excess of the amount permitted and calculated at the
Maximum Rate, such amount which would be excessive interest shall be applied to
the reduction of the unpaid principal balance of this Convertible Note, and, if
the principal balance of this Convertible Note is paid in full, any remaining
excess shall forthwith be paid to the Company.
The term "Maximum Rate", as used herein, shall mean, with respect to
the Holder, the maximum nonusurious interest rate, if any, that at any time, or
from time to time, may be contracted for, taken, reserved, charged or received
on the indebtedness evidenced by this Convertible Note under the laws which are
presently in effect of the United States and the State of Kansas applicable to
such holder and such indebtedness or, to the extent permitted by applicable law,
under such applicable laws of the United States and the State of Kansas which
may hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
9. This Convertible Note is being executed and delivered, and is
intended to be performed in the State of Kansas. Except to the extent that the
laws of the United States may apply to the terms hereof, the substantive laws of
the State of Kansas shall govern the validity, construction, enforcement and
interpretation of this Convertible Note. Each of the Company and the Holder
hereto consent to the jurisdiction of the State of Kansas or state or federal
courts located therein for all disputes arising under this Convertible Note.
Each of the Company and the Holder hereby knowingly, voluntarily and
intentionally waive (a) any right to trial by jury the Company and or the Holder
may have in any action or proceeding, in law or in equity, in connection with
this Convertible Note or the transactions related hereto and (b) any right to
contest enforcement of provisions of the last sentence of the immediately
preceding paragraph of this Section 9 on the basis of forum non conveniens.
10. If this Convertible Note is placed in the hands of an attorney for
collection, and if it is collected through any legal proceedings at law or in
equity or in bankruptcy, receivership or other court proceedings, the Company
promises to pay all costs and expenses of collection, including, but not limited
to, court costs and the reasonable attorneys' fees of the holder hereof.
11. Whenever this Convertible Note requires or permits any consent,
approval, notice, request or demand from one party to another, the consent,
approval, notice, request or demand must be in writing to be effective and shall
be deemed to have been given when delivered by facsimile or reliable courier or
five days after being deposited in the United States mails registered or
certified, return receipt requested, addressed to the party to be notified at
the address set forth below (or at such other address as may have been
designated by written notice).
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11.1 (a) The Company for itself, its successors and assigns,
covenants and agrees, that (i) the payment of the principal of and interest on
this Convertible Note is hereby expressly subordinated, to the extent and in the
manner set forth in Section 11.2 hereof, in right of payment to the prior
payment in full of all Senior Debt (as defined in Section 11.1(b) hereof) of the
Company, and (ii) this Convertible Note is also subject to any further
restrictions herein for the protection of the holders of Senior Debt.
(b) As used herein, the term "Senior Debt" shall
mean the principal of and premium, if any, and interest on and any renewals,
extensions or refinancings (of no greater amounts than the original loan
amounts) of the following:
Senior Debt
Lender Loan Amount
- ------ -----------
DVI Financial Services $448,596
- -Term Note Payable
DVI Business Credit Corporation Up to $5,000,000
- -Revolving Credit Line Current outstanding
$3,085,954
11.2 (a) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization, arrangement,
readjustment, composition or other similar judicial proceedings in connection
therewith, relative to the Company, or its property, or in the event of any
proceedings for voluntary liquidation, dissolution or other winding-up of the
Company, whether or not involving insolvency or bankruptcy, or in the event of
any assignment by the Company for the benefit of creditors or in the event of
any other marshaling of the assets of the Company (collectively referred to as
an "Insolvency Event") then the holders of the Senior Debt shall be entitled to
receive payment in full of all principal, premium, interest, fees, penalties and
charges on all Senior Debt (including interest thereon accruing after the
commencement of any such proceedings) before the holder of this Convertible Note
is entitled to receive any payment on account of principal, interest or other
amounts due under this Convertible Note, and to that end the holders of the
Senior Debt shall be entitled to receive for application and payment thereof any
payment or distribution of any kind or charge, whether in cash or property or
securities, which may be payable or deliverable in any such proceedings in
respect of this Convertible Note (excluding securities provided for by a plan of
reorganization or readjustment that are equity securities or are subordinated in
right of payment to all indebtedness issued to the holders of Senior Debt in
such plan of reorganization or readjustment to the same extent as, or to a
greater extent than, this Convertible Note is subordinated to the Senior Debt as
provided herein).
(b) The rights between the Holder and the holders of
Senior Debt are subject to the terms of the Subordination and Standby Agreement
by and among DVI Business
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Credit Corporation, DVI Financial Services, Inc. (collectively "DVI") and
Kardatzke Management, Inc. relating to Integrated Medical Resources, Inc. (the
"Subordination and Standby Agreement"). Notwithstanding any other provision in
this Convertible Note to the contrary, in the event of a default under this
Convertible Note, Holder shall have the right to collect as much of this
Convertible Note as it is able by taking any action it sees fit to pursue its
first lien on the Excluded Collateral (as defined in the Subordination and
Standby Agreement) and apply the proceeds from any disposition of the Excluded
Collateral to this Convertible Note, without any obligation to deliver the
proceeds to DVI or otherwise subordinate enforcement of its lien. In any
proceeding involving the Company described in Section 11.2(a), any dividend
payment or distribution that would be made to Holder, based upon Holder's status
as a secured creditor holding a first security interest in the Excluded
Collateral, shall remain the property of Holder and shall not be subject to
turnover to, or retention by, DVI.
(c) If, notwithstanding the provisions of this
Section 11.2, any payment or distribution of any character shall be received by
the holder hereof in contravention of this Section 11.2 and while Senior Debt
shall be outstanding, such payment, distribution or security shall be held in
trust for the benefit of, and shall be immediately paid over or delivered or
transferred to, the holders of the Senior Debt as their interest may appear, or
their duly appointed agents, for application to the payment of all Senior Debt
then outstanding, until all of the Senior Debt shall have been paid in full.
(d) The provisions of this Section 11.2 shall
continue to be effective or be reinstated, as the case may be, if at any time
payment of Senior Debt is rescinded or must otherwise be returned by any holder
of such Senior Debt upon the insolvency, bankruptcy or reorganization of the
Company, as though such payment had not been made.
(e) The provisions of this Section 11 are intended
solely for the purpose of defining the relative rights of the holder of this
Convertible Note and of the holders of the Senior Debt, and nothing herein shall
be or is intended, as between the Company, its creditors other than the holders
of Senior Debt, and the holder of this Convertible Note, to impair or suspend in
any manner, whatsoever the obligation of the Company, which, notwithstanding any
other provision of this Section 11 to the contrary, is unconditional and
absolute, to pay to the holder of this Convertible Note the principal hereof as
and when the same shall become due, whether at maturity or otherwise, and
interest thereon in accordance with the terms hereof, or to affect the relative
rights of the holder of this Convertible Note and creditors of the Company other
than the holder or holders of the Senior Debt, nor shall anything herein,
notwithstanding any provisions of this Section 11 to the contrary, prevent the
holder hereof from exercising any and all remedies permitted by applicable law
upon default hereunder.
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12. Registration Rights.
(a) Registrable Stock. As used in this Section 12,
the term "Registrable Stock" shall mean all shares of Common Stock that may be
issued upon conversion of this Convertible Note (and all shares of Common Stock
that may thereafter be issued in respect of this Convertible Note) that are from
time to time outstanding.
References in this Convertible Note to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with respect
to the Registrable Stock set forth in this Section 12 shall supersede any
registration rights and obligations of the Company and the Holder existing prior
to the date hereof with respect to the Registrable Stock.
(b) Demand and Piggyback Registration Rights. The
Holder should have two demand registration rights and an unlimited amount of
piggyback rights as set forth in Section 13.
13. Request for Registration.
13.1 If the Company shall receive at any time or times after
March 31, 1998, (other than a registration statement relating either to the sale
of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or an SEC Rule 145 transaction), a written request from
any Holder or Holders of at least 40% of the Registrable Securities that the
Company file a registration statement under the Act covering the registration of
Registrable Securities, then the Company shall, within 20 days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of Section 13.3, use its diligent best efforts to effect as
soon as practicable the registration under the Act (including the execution of
an undertaking to file post-effective amendments, appropriate qualification
under applicable Blue Sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act and any other
applicable governmental requirements or regulations) of all Registrable
Securities which the Holders request to be registered within 20 days of the
receipt of such notice.
13.2 If the Holder or Holders initiating a registration
request hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 13.2
and the Company shall include such information in the written notice referred to
in Section 6.4(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless
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otherwise mutually agreed by the underwriter, a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. A Holder may
elect to include in such underwriting all or a part of the Registrable
Securities it holds. All Holders proposing to distribute their Registrable
Securities through such underwriting shall (together with the Company as
provided in Section 19) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 13.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the number of
Registrable Securities of the Company which each Holder has requested to be
included in such registration. If any Holder of Registrable Securities who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Initiating Holders. The
securities held by such person shall then be withdrawn from registration.
13.3 The Company shall not be obligated to effect any
registrations pursuant to this Section 13.3 after the Company has effected two
such registrations pursuant to this Section 13.3 and such registrations have
been declared or ordered effective by the SEC and have remained effective for
the period required in Section 15.1 below.
13.4 Termination of the Company's Obligations. The Company
shall have no obligations pursuant to Section 13 or 14 hereof with respect to
any request or requests made by any holder eight years after the date hereof,
nor shall the Company have any obligations as to any holder after the Company
has included Registrable Stock of such holder in two registrations pursuant to
Section 13 hereof, provided, however, that if such holder as requested that all
of its Registrable Stock be registered under such sections, but such holders
shall be prohibited from selling all of such stock by virtue of Section 14
hereof, then such holder's rights shall not be restricted by the provisions of
this 14 until such time as it has had an opportunity to sell all of its
Registrable Stock.
13.5 Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
13.5, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 180 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any 12-month period.
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<PAGE>
14. Company Registration. If (but without any obligation to do so) at
any time or from time to time the Company proposes to register (including for
this purpose a registration effected by the Company for its own account or for
shareholders other than the Holders) any of its Common Stock or other securities
under the Act (other than a registration relating either solely to the sale of
securities to participants in a Company stock option, stock purchase or similar
plan or solely to an SEC Rule 145 transaction, or a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give to each Holder
written notice thereof. Upon the written request of each Holder given within 20
days after the receipt of such notice given by the Company, the Company shall,
subject to the provisions of Section 19, cause to be included in such
registration (and any related qualification under Blue Sky laws or other
compliance thereunder), and in any underwriting involved therein, all of the
Registrable Securities that each such Holder has requested to be registered. The
written request made by any Holder as referred to in this Section 14 may specify
that all or a part of a Holder's Registrable Securities be included in the
Company's registration.
15. Obligations of the Company. Whenever required under this Section 15
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
15.1 Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its diligent best efforts to
cause such registration statement to become effective and keep such registration
statement effective for up to 120 days.
15.2 Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
15.3 Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
15.4 Use its diligent best efforts to register and qualify the
securities discovered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
15.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing
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underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
15.6 Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
15.7 Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 15.7, on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 15.7, if such
Registrable Securities are being sold through underwriters, (i) an opinion dated
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
16. Furnish Information. Each Holder of Registrable Securities holding
securities in any registration shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of such securities as shall be reasonably required to effect the
registration of such Holder's Registrable Securities.
17. Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 13, including
(without limitation) all registration, filing and qualification fees, printers
and accounting fees, fees and disbursement of counsel for the Company, Blue Sky
fees and expenses and the reasonable fees and disbursements of one counsel for
all the selling Holders (but excluding the compensation of regular employees of
the Company, other general overhead expenses of the Company or other expenses
for the preparation of financial statements or other data which shall be paid in
any event by the Company) shall be borne by the Company; provided, however, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 13(b) if the registration request is
subsequently withdrawn at the request of the Holders of at least 50% of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses pro rata on the basis of the number of their shares
requested to be included in the registration), provided further, however, that
such registration shall not be counted as a requested registration pursuant to
Section 12 hereof. Notwithstanding the foregoing, if the withdrawal of a request
for registration is due to a material adverse change in the
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condition, business or prospects of the Company from that known to the Holders
at the time of their request, then the Holders and the Company shall each be
required to pay one-half of such expenses.
18. Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to registrations pursuant
to Section 14 for each Holder (which right may be assigned as provided in
Section 21.4(l)), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for all the selling
Holders selected by them, but excluding underwriting discounts and commissions
relating to Registrable Securities.
19. Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 13.2 or Section 14 to include any of the
Holders' Registrable Securities in such underwriting unless the Holders accept
the terms of the underwriting (such to be in customary form) as agreed upon
between the Company and the underwriter selected by it. If the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten in connection with such offering, and (i) if such
registration is the first registered offering of the sale of the Company's
securities to the public, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten, and
(ii) if such registration is other than the first registered offering of the
sale of the Company's securities to the public, the underwriter may (subject to
the allocation priority set forth below) limit the number of Registrable
Securities to be included in the registration and underwriting to not less than
25% of the number of Registrable Securities included therein. The Company shall
advise all Holders of Registrable Securities requesting registration under
Section 13 or Section 14 promptly after such determination by the underwriter,
and the number of shares of Registrable Securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner: the securities of the Company (other than Registrable
Securities) held by officers and directors of the Company shall be excluded from
such registration and underwriting to the extent required by such limitation,
and if a limitation of the number of shares is still required, the number of
shares that may be included in the registration and underwriting shall be
allocated among all such other selling securityholders, including the Holders in
proportion, as nearly as practicable, to the respective number of Registrable
Securities which they had requested to be included in such registration at the
time of filing the registration statement. If any Holder of Registrable
Securities or any officer or director disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration and which shall
no longer be registrable.
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20. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 20.
21. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 13 or 14:
21.1 To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, each of its officers, directors and
partners, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"),
from and against any losses, claims, damages, expenses or liabilities to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"); (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or any other
documents prepared by the Company and incident thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, the
1934 Act or any state securities law; and the Company will pay as incurred to
each such Holder, officer, director, partner, underwriter or controlling person,
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, expense, liability or
action; provided, however, that the indemnity agreement contained in this
Section 21.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, expense or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, expense, liability or action to the extent that it arises out of
or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
21.2 To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and each of its
officers, directors and partners and any controlling person of any such
underwriter or other Holder, from and against any losses, claims, damages, or
liabilities to which any of the foregoing persons may become subject under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such
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<PAGE>
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 21.2, in connection with investigating or defending any
such loss, claim, damage, expense, liability or action; provided, however, that
the indemnity agreement contained in this Section 21.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, expense, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided further that in no
event shall any indemnity obligation under this Section 21.2 exceed the gross
proceeds from the offering received by such Holder.
21.3 Promptly after receipt by an indemnified party under this
Section 21.3 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 21.3, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if, and only if, seriously prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 21.3, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 21.3.
21.4 (a) Reports Under Securities Exchange Act of 1934. With a
view to making available to the holders of Registrable Stock the benefits of
Rule 144 promulgated under the 1933 Act and any other rule or regulation of the
Securities and Exchange Commission that may at any time permit a holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(1) file with the Securities and Exchange
Commission in a timely manner all reports and other
documents required of the Company under the 1933 Act
and the Securities Exchange Act of 1934 (the "1934
Act"); and
(2) furnish to any holder so long as such
holder owns any of the Registrable Stock forthwith
upon request a written statement by the Company that
it has complied with the reporting requirements of
Rule 144 (at any time after 90
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days after the effective date of said first
registration statement filed by the Company), and of
the 1933 Act and the 1934 Act (at any time after it
has become subject to such reporting requirements),
a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents
so filed by the Company as may be reasonably
requested in availing any holder of any rule or
regulation of the Securities and Exchange Commission
permitting the selling of any such securities
without registration.
(b) Lockup Agreement. In consideration for the
Company's agreeing to its obligations under this Sections 13 and 14, the holder
of Registrable Stock agrees in connection with any registration of the Company's
securities that, upon the request of the Company or the underwriters managing
any underwritten offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of or otherwise dispose
of any Registrable Stock (other than those included in the registration) without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 90 days) from the effective date of
such registration as the Company or the underwriters may specify; provided,
however, that all holders of 5% or more of the Company's securities and all
directors and officers shall be subject to the restrictions set forth in this
Section 21.4(b).
(c) Certain Limitations in Connection with Future
Grants of Registration Rights. From and after the date hereof, the Company shall
not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(1) includes the equivalent of Section
21.4(b) hereof as a term;
(2) includes a provision that in the case of
a public offering involving an underwritten
registered offering under Section 14 hereof, protects
the holders of Registrable Stock if marketing factors
require a limitation on the number of securities to
be included in the underwriting by maintaining the
same priority as to participation in a registration
as is provided to such holders under Section 19
hereof; and
(3) does not grant to such holder or
prospective holder registration rights more favorable
than those granted to the holders of Registrable
Stock under this Convertible Note.
(d) Transfer of Registration Rights. The
registration rights of Kardatzke Management, Inc., the initial holder of this
Convertible Note, under this Section 21 may be transferred to any transferee who
acquires at least 20% of the then outstanding shares of Registrable Stock;
provided, however, that, in either of such cases, as the case may be, the
Company is given written notice by the Holder at the time of such transfer
stating the name and
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address of the transferee and identifying the securities with respect to which
the rights under this Convertible Note are being assigned.
22. (a) The address for the Company for all purposes
contained in this Convertible Note and for all the notices hereunder shall be:
11320 W. 79th Street, Lenexa, Kansas 66214, Attention: Troy Burns, M.D.
(b) The address of the Holder for all purposes
contained in this Convertible Note and for all notices hereunder shall be: 70
Destacada Avenue, Coral Gables, Florida 33156.
(c) Each of the Company and the Holder may change
its address for purposes hereof by providing notice to the other in the manner
described in Section 11 hereof.
23. Neither this Convertible Note nor any term hereof may be changed,
waived, discharged or terminated orally or in writing, provided that any term of
this Convertible Note may be amended or the observance of such term may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Company and
holders of Notes (as defined in the Note Purchase Agreement) that represent in
the aggregate at least a majority of the total principal amount of all of the
Notes then outstanding.
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<PAGE>
Executed as of the day and year first above written.
INTEGRATED MEDICAL RESOURCES, INC.
By: /s/ Troy Burns, M.D.
--------------------------
Troy Burns, M.D.
Chief Executive Officer
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<PAGE>
Annex 1
-------
CONVERSION REQUEST
TO: INTEGRATED MEDICAL RESOURCES, INC.
The undersigned holder of this Convertible Note hereby irrevocably
exercises the option to convert this Convertible Note, or portion hereof below
designated, into shares of Common Stock in accordance with the terms of this
Convertible Note, and directs that the securities issuable and deliverable upon
the conversion, together with any check in payment for fractional amounts, and
any Convertible Note representing any unconverted amount hereof, be issued and
delivered to the holder hereof at the address specified below.
Dated:____________
Signature (for conversion use only)
Amount to be converted (if less than all):
$____________
_________________________________
_________________________________
_________________________________ _________________________________
Please print name and Please insert Social Security or
address (including zip other Taxpayer Identification Number
code number)
<PAGE>
