EXHIBIT 4(f)
KARDATZKE MANAGEMENT, INC.
INTEGRATED MEDICAL RESOURCES, INC.
Note Purchase Agreement
This Note Purchase Agreement (this "Agreement") dated as of March 5, 1998,
is entered into between Kardatzke Management, Inc. or its designee (the
"Purchaser") and Integrated Medical Resources, Inc. (the "Company").
W I T N E S S E T H:
For and in consideration of the mutual promises and covenants contained
herein, the parties hereto agree as follows:
1. Purchase and Sale of Note.
Subject to and in accordance with the terms and conditions of this
Agreement, at the Closing (as defined in Section 2), the Company will sell to
the Purchaser, and Purchaser will purchase, a subordinated convertible note of
the Company (the "Note") for the purchase price of $1,600,000. The principal of
the Note and interest thereon shall be convertible into shares (the "Shares") of
the Company's common stock, $.001 par value per share (the "Common Stock"), in
accordance with the terms and provisions of the Note.
2. Closing.
(a) The closing of the sale and purchase of the Note under
this Agreement (the "Closing") shall take place on the date of this Agreement
(the "Closing Date") and shall be consummated by facsimile or mail in
accordance with arrangements reasonably acceptable to counsel for the Company
and counsel for the Purchaser.
(b) At the Closing:
(i) The Purchaser will furnish payment to the
Company of the purchase price for the Note by wire transfer or any other method
acceptable to the Purchaser and the Company, and the Company will execute and
deliver to the Purchaser the Note in substantially the form of Exhibit A hereto.
(ii) The Company will pay the Purchaser, by wire
transfer, up to an aggregate of $35,000 of its documented, out-of-pocket
expenses and legal fees and related expenses incurred in connection with its
investment determination review of the Company.
(iii) The Company and the Purchaser will execute and
deliver to each other counterparts of a consulting agreement in substantially
the form of Exhibit B hereto (the "Consulting Agreement").
(iv) The Company's counsel will execute and deliver
to the Purchaser a legal opinion substantially in the form of Exhibit C hereto.
(v) The Company's chief executive officer and
secretary will execute and deliver to the Purchaser certificates substantially
in the forms of the Exhibits D and E hereto, respectively.
(vi) The Company will deliver to the Purchaser a
certificate of the Kansas Secretary of State with respect to the Company, as of
a recent date, stating that the Company is validly existing as a corporation in
good standing in such state.
(vii) The Company will deliver Exhibit F hereto.
3. Representations of the Company. The Company hereby represents and
warrants to the Purchaser that:
(a) The Company is duly incorporated, validly existing and
in good standing under the laws of the State of Kansas.
(b) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement, the Note and the
Consulting Agreement.
(c) The execution, delivery and performance by the Company
of this Agreement, the Note and the Consulting Agreement have been duly
authorized by all necessary corporate action on the part of the Company;
provided, however, it is understood by the parties that the conversion of any
Notes or Securities of the Company for 20% or more of the outstanding shares
will require the approval of the Company's shareholders, which approval the
Company agrees to use its best efforts to obtain; and this Agreement, the Note
and the Consulting Agreement have been duly executed and delivered by the
Company.
(d) All corporate action on the part of the Company
necessary for, and all consents, approvals, authorizations of or filings with
any person or government authority required for, the authorization, execution,
delivery and performance by the Company of this Agreement, the Note and the
Consulting Agreement and the consummation of the transactions contemplated
herein and therein, and for the authorization, offer, issuance, sale and
delivery of the Note and the Shares issuable upon conversion of the Note,
has been taken or procured, as the case may be; provided, however, it is
understood by the parties that the conversion of any notes (including this Note)
or securities of the Company for 20% or more of the outstanding shares will
require the approval of the Company's shareholders, which approval the Company
agrees to use its best efforts to obtain. This Agreement, the Note and the
Consulting Agreement are the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by or
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subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally, and subject to
general principles of equity. The Shares issuable upon conversion of the Note
have been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Note, will be validly issued, fully paid and
nonassessable.
(e) The authorized capital stock of the Company consists
of 10,000,000 shares of Common Stock and 3,000,000 shares of Preferred
Stock, of which Preferred Stock there are authorized 1,081,080 shares
designated as Series A Preferred Stock, $.001 par value per share (the "Series A
Preferred Stock"), and 222,222 shares designated as Series B Preferred Stock,
$.001 par value per share (the "Series B Preferred" Stock). Immediately prior
to the Closing, 6,731,058 shares of Common Stock, and 0 shares of Series A
Preferred Stock, and 0 shares of Series B Preferred Stock will be issued and
outstanding.
Except as specified above, or in Exhibit G hereto, there
are no outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for the issuance
of any shares of its capital stock.
(f) Except as waived prior to the Closing, the Note and
the Consulting Agreement, and compliance herewith and therewith, and the offer,
issuance, sale and delivery of the Note and the Shares will not, result in any
violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, any provisions of federal or state law
to which the Company is subject, the Company's Articles of Incorporation, as
amended (subject to shareholder approval of an amendment to the Articles of
Incorporation to increase the amount of authorized shares), the Company's
By-Laws or any mortgage, indenture, agreement, instrument, judgment, decree,
order, rule or regulation or other restriction to which the Company is a party
or by which it is bound or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term.
(g) The Company has no outstanding indebtedness for
borrowed money except as set forth in Exhibit H hereto. The Company is not in
default with respect to any indebtedness for borrowed money.
(h) The Company has filed all tax returns and reports
required to be filed with the United States Internal Revenue Service, with the
State of Kansas, and with all other jurisdictions where such filing is required
by law. The Company has paid or, as and to the extent required by generally
accepted accounting principles, made adequate provisions for the payment of,
all taxes, interest, penalties, assessments or deficiencies shown to be due or
claimed to be due on or in respect of such tax returns and reports.
(i) Other than as set forth in Exhibit I hereto, there is
neither pending nor, to the Company's knowledge, threatened, any action, suit,
proceeding or claim, or outstanding orders, judgments, injunctions, awards or
decrees of any court, regulatory body or arbitration tribunal, to which the
Company is or may be named as a party or its property is or may be subject
and in which an unfavorable outcome, ruling or finding in any such matter or
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for all such matters taken as a whole might have a material adverse effect on
the financial condition or operations of the Company.
(j) The Company has a good and valid ownership interest
in all of its property and assets, free from all mortgages, pledges, liens,
security interests, conditional sale agreements, encumbrances or charges,
except as listed on Exhibit J hereto. The Company does not have any ownership
interest in real property. Except as listed on Exhibit I, the Company is not in
violation of any law, regulation or ordinance (including laws, regulations
or ordinances relating to building, zoning, environmental, city planning, land
use or similar matters) relating to its property or assets which violation
would have a material adverse effect on the financial condition or operations of
the Company.
(k) The Company has all franchises, permits, licenses and
other similar authority, and is duly qualified or licensed as a foreign
corporation in each jurisdiction in which is required to be so qualified or
licensed, necessary for the conduct of its business as conducted by it or
proposed to be conducted by it, the lack of which could materially and
adversely affect the financial condition or operations of the Company and
is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority. Each of the material patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, proprietary rights and processes owned or used by the Company (the
"Technology") is valid and in good standing and (taken as a whole) reasonably
adequate and sufficient to permit the Company to conduct its business as
conducted by it or proposed to be conducted by it without, to the Company's
knowledge, conflict with or infringement upon any valid rights of others
The Company is not aware of and has not received any notice of infringement upon
or conflict with the asserted rights of others.
(l) The Company is not in violation of any term of its
Certificate of Incorporation, as amended, or its By-Laws. Except as listed
on Exhibit I, the Company is not in violation of any term of any law, judgment,
decree, order, rule or regulation, mortgage, indenture, agreement, instrument
or other restriction to which the Company is subject and a violation of which
would have a material adverse effect on the financial condition or operations
of the Company.
(m) The Company does not maintain any employee pension
benefit plan as defined in Section 3(2)(A) of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
(n) The Company is not in violation of any applicable
federal, state or local statute, law or regulation, including any such
statutes, laws or regulations relating to the environment, which violations,
either singly or in the aggregate, would have a material adverse effect on the
Company's financial condition or results of operations, and reasonably believes
that no material expenditures are or will be required in order to comply with
any such statute, law or regulation.
(o) The Company is insured by reputable insurers its
assets that are of an insurable character against risks of liability (including
product liability), casualty and fire in
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adequate and customary amounts for similarly situated companies in similar
businesses. The Company carries no self-insurance risk for any employee health
or worker's compensation risk. Exhibit K hereto sets forth a true, complete and
correct list of the Company's insurance policies, including policy limits and
deductibles. The Company's insurance coverage is customary for well insured
corporations of similar size engaged in similar lines of business.
(p) To the Company's knowledge, none of its current
executive officers has been convicted of any crime constituting a felony.
(q) The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940.
(r) Assuming the accuracy of the representations and
warranties set forth in Section 4, the offer, sale and issuance of the Note and
the Shares hereunder do not require registration under the Securities Act of
1933 (the "Act"), registration or qualification under any applicable state
securities laws or qualification of an indenture under the Trust Indenture Act
of 1939.
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows:
(a) It is acquiring the Note and the Shares for
investment for its own account and not with a view to the resale, transfer or
other disposition thereof and any sale or disposition of the Note or the Shares
will be made only if the Note or the Shares are registered under the Act or the
sale or disposition is made in compliance with an exemption under the Act or
the rules thereunder and any applicable state securities laws. It understands
that the Note and the Shares have not been registered under the Act by reason of
specified exemptions from the registration provisions of the Act.
(b) (i) It acknowledges that the Note and the Shares
must be held indefinitely unless they are subsequently registered under the
Act or an exemption from such registration is available. It has been advised or
is aware of the provisions of Rules 144 and 144A promulgated under the Act,
which permit the resale of securities purchased in a private placement subject
to the satisfaction of certain conditions and that such Rules may not be
available for sale of the Note and the Shares.
(ii) It acknowledges that all certificates
representing the Note and the Shares will have endorsed thereon legends in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE
STATE SECURITIES LAWS. UNLESS THEY ARE SOLD PURSUANT
TO RULE 144A OR RULE 144 PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT,
THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN
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OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AGAINST SALE
CONTAINED IN A CERTAIN AGREEMENT BETWEEN AND AMONG
THE REGISTERED OWNER OF THIS CERTIFICATE AND CERTAIN
OTHER HOLDERS OF THE CORPORATION, AND A COPY OF SAID
AGREEMENT IS AVAILABLE FOR INSPECTION, WITHOUT
CHARGE, AT THE OFFICES OF THE CORPORATION.
Such legend shall be removed by the Company upon delivery to it of an opinion of
counsel to the Company (which opinion and counsel rendering same shall be
reasonably satisfactory to the Company) that a registration statement under the
Act is at the time effective with respect to the transfer of the legended
security or that such security may be transferred without such registration
statement being in effect and without the requirements of a legend on the
certificate in the hands of the transferee.
(c) It has had an opportunity to discuss the Company's
business, management and financial affairs with its management and has had the
opportunity to review the Company's facilities. It is not subscribing for the
Note and the Shares as a result of or subsequent to any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or any solicitation of
a subscription by a person not previously known to it in connection with
investments in securities generally.
(d) It has full power and authority to enter into and to
perform this Agreement in accordance with its terms. All action (corporate or
otherwise) on the part of the Purchaser necessary for the authorization,
execution, delivery and performance by the Purchaser of this Agreement and the
consummation of the transactions contemplated herein has been taken. This
Agreement is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally, and subject to
general principles of equity.
(e) It has been advised or is aware of the provisions of
Regulation D promulgated under the Act relating to the accreditation of
investors, and it is an "accredited investor" as defined in Regulation D.
5. Transfers.
(a) The Purchaser agrees that it shall give the Company
prior written notice of any proposed transfer of the Note or any of the Shares,
including the name and address of the proposed transferee. Prior to any such
proposed transfer,
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other than pursuant to a sale under a applicable registration statement under
the Act or a sale pursuant to Rule 144 promulgated under the Act, and as a
condition thereto, the Purchaser will deliver to the Company (i) an investment
covenant signed by the proposed transferee substantially as set forth in Section
4(b) hereof, (ii) an agreement by such transferee to the restrictive investment
legend set forth in Section 4(c)(ii) hereof on the certificate or certificates
representing the securities acquired by such transferee and (iii) an agreement
by the transferee to be subject to the provisions of this Agreement and the
provisions of the Agreement to the same extent as if such transferee were
originally a signatory to this Agreement and the Agreement. Any transfer of the
Note or of any of the Shares attempted contrary to the provisions of this
Agreement, or any levy of execution, attachment or other process attempted upon
the Note or any of the Shares, shall be null and void and without effect.
(b) In the event of any transfer of the Note by the
Purchaser in accordance with the provisions of this Agreement, for the purposes
of this Agreement, the subordinated convertible notes of the Company
representing portions of the principal amount originally represented by the
Note, shall be referred to herein individually as a "Note" and collectively as
the "Notes".
(c) In the event of the resale of any Note or of any of the
Shares pursuant to Rule 144A promulgated under the Act, the Company agrees to
comply with the information requirements of Rule 144A(d)(4) promulgated under
the Act.
6. Covenants of the Company. The Company hereby covenants and
agrees, that so long as any of the Notes remain outstanding:
(a) The Company shall deliver the following reports to all
persons who hold any of the Notes:
(i) As soon as practicable after the end of each
fiscal year of the Company, and in any event, within 135 days after the end of
each fiscal year, a consolidated balance sheet of the Company and its
subsidiaries (if any), as at the end of such fiscal year and consolidated
statements of income and cash flows of the Company and its subsidiaries (if any)
for such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by the report
thereon of independent certified public accountants of recognized national
standing and considered one of the "Big Six" accounting firms in the United
States, selected by the Company, which report shall state that (A) such
financial reports have been prepared in accordance with generally accepted
accounting principles and (B) the audit by such accountants in connection with
such financial statements has been made in accordance with generally accepted
auditing standards.
(ii) As soon as practicable after the end of each
month, using all commercially reasonable efforts to cause such delivery to occur
within 30 days after the end of such month, a consolidated balance sheet of the
Company and its subsidiaries (if any) as at the end of such month and
consolidated statements of income and cash flows of the Company and its
subsidiaries (if any) for such month, prepared
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in accordance with generally accepted accounting principles consistently
applied, except for footnote disclosure and subject to year-end audit
adjustments, and accompanied by a certificate of the Company's chief financial
officer to such effect.
(iii) As soon as available, using all commercially
reasonable efforts to cause such delivery to occur prior to December 31 of each
year, the annual operating plan of the Company for the succeeding calendar year
including appropriate projections and underlying assumptions.
(iv) With reasonable promptness, such other
information and data with respect to the Company as the Purchaser may from time
to time reasonably request.
(b) Without the affirmative vote or prior written approval
of the holders of a majority of the Notes and at least a majority of the members
of the Board of Directors of the Company, neither the Company nor its
subsidiaries (if any) shall, together or alone:
(i) incur, create, assume or permit to exist any
Indebtedness other than the Note except for (a) indebtedness in an amount not
exceeding $7,800,000, consisting of (1) $5 million under the existing working
capital line of credit and (2) $2.8 million of long term indebtedness (including
the current portion thereof); (b) unsecured trade credit incurred in the
ordinary course of business; and (c) capitalized lease obligations not to exceed
$1,000,000. Indebtedness means all items which, in accordance with GAAP, would
be included on the liability side of a balance sheet, excluding capital stock,
surplus, capital and earned surplus.
(ii) lease, purchase, sell or otherwise acquire or
dispose of any property or services having a value in excess of $200,000 in any
transaction or series of similar transactions;
(iii) assign, mortgage, pledge or otherwise
encumber any assets having a value of more than $200,000;
(iv) make any loan, extend any credit or forgive or
otherwise change the terms of any indebtedness, in excess of $200,000;
(v) make any material change in the character of
its business as presently conducted or as proposed to be conducted, or conduct
its business in a manner other than in the normal and ordinary course;
(vi) declare or pay any dividend in cash or in
property or make or authorize any other distribution directly or indirectly on
its Common Stock or any other capital stock now outstanding or hereafter issued;
(vii) directly or indirectly purchase, acquire,
redeem or retire any share of its outstanding capital stock or any securities
exercisable for, or convertible into, its capital stock; or
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(viii) enter into any transaction of merger,
consolidation or reorganization, or dissolve, wind up or liquidate, or convey,
sell, lease, exchange, transfer or otherwise dispose of in a transaction or
related series of transactions all or substantially all of the assets of the
Company.
(c) Without the affirmative vote or prior written approval
of the holders of a majority of the Notes and at least a majority of the
disinterested directors on the Board of Directors, neither the Company nor its
subsidiaries (if any) shall, together or alone, enter into any transaction with
any Affiliate of the Company on terms that are not as favorable as the Company
could obtain from an unaffiliated third party.
(d) The Company shall take all such actions (reasonably
within its control) so as to assure that each of its executive officers devote
substantially all of their respective business time and attention to the
Company's business.
7. Joint Covenants. The Company and the Holder agree that upon the
exercise of the option pursuant to Section 6.6(a) of the Convertible Note they
will execute an Employee Agreement mutually agreed upon by the parties and the
Board will appoint Dr. E. Stanley Kardatzke Chairman of the Board and Chief
Executive Officer of the Company.
8. Survival of Representations and Warranties. All agreements,
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby. All agreements, representations and warranties shall terminate upon
conversion of the Convertible Note.
9. Expenses. Other than as set forth in Section 2(b)(iii) hereto, each
party hereto shall pay its own costs and expenses in connection with this
Agreement and the closing of the transactions contemplated hereby.
10. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand,
recognized courier, mailed by first class certified or registered mail, return
receipt requested, postage prepaid, or delivered by telecopy to the Company or
the Purchaser, as the case may be, at the following respective addresses:
Kardatzke Management, Inc.
701 Destacada Avenue
Coral Gables, Florida 33156
Tel: (305) 663-9188
Fax: (305) 663-9180
Attention: Dr. E. Stanley Kardatzke
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Integrated Medical Resources, Inc.
11320 West 79th Street
Lenexa, Kansas 66214
Tel: (913) 962-7201
Fax: (913) 962-7719
Attention: Troy A. Burns, M.D.
Either party may change its address for purposes hereof by
notice to the other party in the manner provided above.
11. Brokers. Each of the Company and the Purchaser, with respect to
itself, (i) represents and warrants to the other that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement and
(ii) will indemnify and save the other harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finder's fees or
commissions, or consulting fees in connection with the transactions contemplated
by this Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
12. Entire Agreement. With respect to the subject matter hereof, this
Agreement, including the Exhibits hereto, embodies the entire agreement and
understanding between the Purchaser and the Company, and supersedes all prior
agreements and understandings relating to such subject matter.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Headings. The headings of the sections, subsections and paragraphs
of this Agreement have been added for convenience only and shall not be deemed
to be a part of this Agreement.
15. Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions of this Agreement, and, to the extent permitted by law,
any determination of invalidity or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
16. Amendments and Waivers. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally or in writing, except
that any term of this Agreement may be amended and the observance of any such
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of the
Company and the holders of Notes that represent in the aggregate at least a
majority of the total principal amount of the Notes then outstanding.
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17. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
18. Parties in Interest. The Company and the Purchaser agree that the
only persons with an interest in the transactions and agreements set forth
herein are the Company and the Purchaser, that no other person shall have any
rights under this Agreement and that no other person shall be the beneficiary of
any of the rights and obligations provided by this Agreement.
19. Definitions.
(a) As used in this Agreement, "Affiliate" shall mean,
with respect to any person, any other person controlling, controlled by or under
common control with such person. The term "control" as used in the immediately
preceding sentence means, with respect to a corporation, the right to exercise,
directly or indirectly, 50% or more of the voting rights attributable to the
shares of the controlled corporation, or with respect to any person other than a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person.
(b) As used in this Agreement , the term "person" means
any individual, partnership, corporation, limited liability company, trust,
unincorporated organization or other legal entity, or any government or any
agency or political subdivision thereof.
20. Waiver of Jury Trial, etc.. The Company and Purchaser hereby
knowingly, voluntarily and intentionally waive (a) any right to trial by jury
the Company and Purchaser may have in any action or proceeding, in law or in
equity, in connection with this Agreement or the transactions related hereto and
(b) any right to contest enforcement of provisions of the last sentence of
Section 20 hereof on the basis of forum non conveniens.
21. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Kansas
applicable to contracts made and to be performed in that State without giving
effect to any choice or conflict of law provision or rule (whether in the State
of Kansas or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Kansas. The parties hereto
consent to the jurisdiction of the State of Florida or state or federal courts
located therein for all disputes arising under this Agreement.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
"Company"
INTEGRATED MEDICAL RESOURCES, INC.
By /s/ Troy A. Burns, M.D.
----------------------------
Troy A. Burns, M.D.
Chief Executive Officer
"Purchaser"
KARDATZKE MANAGEMENT, INC.
By /s/ E. Stanley Kardatzke, M.D.
------------------------------------
E. Stanley Kardatzke, M.D.
Title: Chairman
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