<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)*
INTEGRATED MEDICAL RESOURCES, INC.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Title of Class of Securities)
45812A-10-0
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(CUSIP Number)
DR. E. STANLEY KARDATZKE, KARDATZKE MANAGEMENT, INC.
70 DESTACADA AVENUE, CORAL GABLES, FLORIDA 33156
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
MARCH 5, 1998
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 8
<PAGE> 2
- --------------------------------------------------------------------------------
CUSIP NO. 45812A 10 0 13 D Page 2 of 8 Pages
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
1
Kardatzke Management, Inc., a Florida corporation.
- --------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
2
(b) [x]
- --------------------------------------------------------------------------------
SEC USE ONLY
3
- --------------------------------------------------------------------------------
SOURCE OF FUNDS
4 OO
- --------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
5
[ ]
- --------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Florida
- --------------------------------------------------------------------------------
SOLE VOTING POWER
7
-0-
-------------------------------------------------
NUMBER OF SHARED VOTING POWER
SHARES
BENEFICIALLY 8 2,300,000 shares*
OWNED -------------------------------------------------
BY EACH SOLE DISPOSITIVE POWER
REPORTING
PERSON 9 -0-
WITH -------------------------------------------------
SHARED DISPOSITIVE POWER
10 2,300,000 shares*
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,300,000 shares*
- --------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
12
[ ]
N/A
- --------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 25.5%*
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14 CO
- --------------------------------------------------------------------------------
* See Item 5(a) of this Schedule 13D.
Page 2 of 8
<PAGE> 3
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CUSIP NO. 45812A 10 0 13 D Page 3 of 8 Pages
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
1
Dr. E. Stanley Kardatzke
- --------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
2
(b) [x]
- --------------------------------------------------------------------------------
SEC USE ONLY
3
- --------------------------------------------------------------------------------
SOURCE OF FUNDS
4 AF
- --------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
5
[ ]
- --------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States Citizen
- --------------------------------------------------------------------------------
SOLE VOTING POWER
7
-0-
-------------------------------------------------
NUMBER OF SHARED VOTING POWER
SHARES
BENEFICIALLY 8 2,300,000 shares*
OWNED -------------------------------------------------
BY EACH SOLE DISPOSITIVE POWER
REPORTING
PERSON 9 -0-
WITH -------------------------------------------------
SHARED DISPOSITIVE POWER
10 2,300,000 shares*
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,300,000 shares*
- --------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
12
[ ]
N/A
- --------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 25.5%*
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14 IN
- --------------------------------------------------------------------------------
* See Item 5(a) of this Schedule 13D.
Page 3 of 8 Pages
<PAGE> 4
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CUSIP NO. 45812A 10 0 13 D Page 4 of 8 Pages
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
1
Ms. Suzonne C. Kardatzke
- --------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
2
(b) [x]
- --------------------------------------------------------------------------------
SEC USE ONLY
3
- --------------------------------------------------------------------------------
SOURCE OF FUNDS
4 AF
- --------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
5
[ ]
- --------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States Citizen
- --------------------------------------------------------------------------------
SOLE VOTING POWER
7
-0-
-------------------------------------------------
NUMBER OF SHARED VOTING POWER
SHARES
BENEFICIALLY 8 2,300,000 shares*
OWNED -------------------------------------------------
BY EACH SOLE DISPOSITIVE POWER
REPORTING
PERSON 9 -0-
WITH -------------------------------------------------
SHARED DISPOSITIVE POWER
10 2,300,000 shares*
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,300,000 shares*
- --------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
12
[ ]
N/A
- --------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 25.5%*
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14 IN
- --------------------------------------------------------------------------------
* See Item 5(a) of this Schedule 13D.
Page 4 of 8 Pages
<PAGE> 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(FILED BY THE GROUP PURSUANT TO GENERAL INSTRUCTION C)
ITEM 1. SECURITY AND ISSUER
The equity securities to which this statement relates are the common stock, par
value $0.001 per share (the "Common Stock"), of Integrated Medical Resources,
Inc., a Kansas corporation ("IMR"). IMR's principal executive offices are
located at 11320 W. 79th Street, Lenexa, Kansas 66214.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed jointly by Kardatzke Management, Inc., a Florida
corporation ("KM"), Dr. E. Stanley Kardatzke and Ms. Suzonne C. Kardatzke, wife
of Dr. Kardatzke. KM is an investment and management company that transacts
business primarily in the healthcare industry. The address of KM's, Dr.
Kardatzke's and Ms. Kardatzke's principal business and principal office is 70
Destacada Avenue, Coral Gables, Florida 33156. Dr. Kardatzke is Chief Executive
Officer and Chairman of the Board of Directors of KM. Ms. Kardatzke is
President and a director of KM. Both Dr. Kardatzke and Ms. Kardatzke are
United States citizens. Although Dr. Kardatzke and Ms. Kardatzke may be deemed
to have beneficial ownership of the Common Stock that may be acquired by KM,
both disclaim beneficial ownership of such Common Stock within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended. During the
last five years, neither KM, Dr. Kardatzke nor Ms. Kardatzke has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which KM, Dr. Kardatzke or Ms. Kardatzke
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On March 5, 1998, KM and IMR entered into a Note Purchase Agreement (the "Note
Purchase Agreement") providing for the lending of $1,600,000 by KM to IMR (the
"Lending"). As consideration for the Lending, KM received a convertible note
(the "Note") in the principal sum of $1,600,000, together with interest on the
unpaid principal balance at the rate of 8.5% per annum, due September 1, 1998.
The Note may be converted by KM at any time prior to its maturity or early
payoff into the Common Stock at the conversion price of $2.15 or at a
conversion price based upon the average of the closing market price for the
Common Stock prior to such conversion, the calculation of such price being more
thoroughly set forth in the Note. The Note also grants to KM options to
purchase shares of the Common Stock (the "Options"). The terms of the Note
relating to the Options provide that KM may purchase up to a maximum of
2,300,000 shares of the Common Stock at prices which vary according (i) to the
number of shares currently held by KM and (ii) the time at which the options
are exercised. The expiration dates of the Options range from May 31, 1998 to
March 5, 2000. Portions of the Options become unavailable for exercise as the
Note is converted, such that in no event will KM
Page 5 of 8 Pages
<PAGE> 6
be the holder of more than 2,300,000 shares of the Common Stock of IMR as a
result of the Note.
The foregoing descriptions of the Note Purchase Agreement and the Note are
summaries and are qualified in their entirety by reference to such agreements
filed hereto as Exhibit 7.1 and Exhibit 7.2, respectively, both of which are
incorporated into this Item 3 by reference.
ITEM 4. PURPOSE OF TRANSACTION
The Note and the Options have been acquired as consideration for the Lending
pursuant to the Note Purchase Agreement described in Item 3 to this Schedule
13D. Such description is incorporated into this Item 4 by reference and is
qualified in its entirety by reference to the Note Purchase Agreement filed as
Exhibit 7.1 to this Schedule 13D and incorporated into this Item 4 by
reference.
The Note, the Options and the Common Stock issuable upon the conversion of the
Note and the exercise of the Options are being acquired by KM for investment
purposes. Except as contemplated by the Note Purchase Agreement, the terms of
the Note and as otherwise described in this Schedule 13D, neither KM, Dr.
Kardatzke nor Ms. Kardatzke has any current plans or proposals with respect to
(i) the acquisition or disposition of any securities of IMR, (ii) any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving IMR or any of its subsidiaries, (iii) any sale or
transfer of a material amount of assets of IMR or any of its subsidiaries, (iv)
any change in the present board of directors or management of IMR, including
any plans or proposals to change the number or term of directors or to fill any
existing vacancies on the board, (v) any material change in the present
capitalization or dividend policy of IMR, (vi) any other material change in
IMR's business or corporate structure, (vii) any changes in IMR's charter,
bylaws or instruments corresponding thereto or other actions which may impede
the acquisition of control of IMR by any person, (viii) causing a class of
securities of IMR to be delisted from a national securities exchange or to
cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association, (ix) any class of equity securities
of IMR becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934 or (x) any action similar to
any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
(a) AMOUNT OF SHARES OWNED
As of the date of this statement, KM may be deemed to
beneficially own an aggregate of 2,300,000 shares of the
Common Stock, all of which represent the right to acquire the
Common Stock as a result of the conversion of the Note and the
exercise of the stock options referred to in Item 3 above.
According to information contained in the Note Purchase
Agreement, KM may be deemed to beneficially own shares that
represent 25.5% of the outstanding Common Stock as of March 5,
1998. Dr. Kardatzke and Ms. Kardatzke, as joint shareholders
of 100% of the common stock of KM, may be deemed to have
indirect beneficial ownership of the Common Stock to the same
extent as KM referred to above.
Page 6 of 8 Pages
<PAGE> 7
The number of shares that KM may be deemed to beneficially own
(and as to Dr. Kardatzke and Ms. Kardatzke, jointly and
indirectly beneficially own) was computed by adding the number
of shares issuable upon conversion of the Note to the number
of shares issuable upon exercise of the Options granted by the
Note, taking into account those portions of the Options that
become unavailable for exercise upon the conversion of the
Note.
(b) NUMBER OF SHARES AS TO WHICH FILER HAS CONTROL
KM, Dr. Kardatzke and Ms. Kardatzke have shared power to vote
and dispose of shares of the Common Stock issuable upon the
conversion of the Note or upon the exercise of the Options
referred to in Item 3 above.
(c) Except as described in this Item 5, neither KM, Dr. Kardatzke
nor Ms. Kardatzke has effected any transactions with respect
to the Common Stock during the past 60 days.
(d) No other person is known to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of the Common Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF ISSUER
Not applicable.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
7.1 Note Purchase Agreement dated March 5, 1998, between
Integrated Medical Resources, Inc. and Kardatzke Management,
Inc.
7.2 Convertible Note dated March 5, 1998, between Integrated
Medical Resources, Inc. and Kardatzke Management, Inc.
Page 7 of 8 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 16, 1998 KARDATZKE MANAGEMENT, INC.
By: /s/ E. Stanley Kardatzke, M.D.
---------------------------------------
E. Stanley Kardatzke, M.D.
Chief Executive Officer
/s/ E. Stanley Kardatzke, M.D.
---------------------------------------
E. Stanley Kardatzke, M.D.
/s/ Ms. Suzonne C. Kardatzke
---------------------------------------
Ms. Suzonne C. Kardatzke
Page 8 of 8 Pages
<PAGE> 1
EXHIBIT 7.1
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.
<PAGE> 2
(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.
(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
2
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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 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.
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(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 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.
4
<PAGE> 5
(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 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
5
<PAGE> 6
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 resale 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 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
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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, 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.
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(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 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.
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(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
(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.
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<PAGE> 10
(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
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<PAGE> 12
of Notes that represent in the aggregate at least a majority of the total
principal amount of the Notes then outstanding.
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: Chief Executive Officer
---------------------------------------
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<PAGE> 1
EXHIBIT 7.2
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 _, 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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<PAGE> 3
(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
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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 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
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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 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 principal 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). If any fractional interest in a share
shall be deliverable upon the conversion of this Convertible Note (or portion
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<PAGE> 6
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:
(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
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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).
(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
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<PAGE> 8
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 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.
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<PAGE> 9
(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 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.
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
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<PAGE> 10
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.
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
10
<PAGE> 11
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).
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:
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<PAGE> 12
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 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,
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<PAGE> 13
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.
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.
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<PAGE> 14
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 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
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<PAGE> 15
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.
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
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<PAGE> 16
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 underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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<PAGE> 17
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
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<PAGE> 18
to a material adverse change in the 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
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<PAGE> 19
underwriting shall be withdrawn from such registration and which shall no
longer be registrable.
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
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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
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:
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<PAGE> 21
(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 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
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<PAGE> 22
(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 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> 23
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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ANNEX 1
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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):
$
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Please print name and Please insert Social Security or
address (including zip other Taxpayer Identification Number
code number)
1
