EXHIBIT 4(j)
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SUBSCRIPTION AGREEMENT
INTEGRATED MEDICAL RESOURCES, INC.
THE SECURITIES WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION AGREEMENT (AS IT MAY
BE AMENDED FROM TIME TO TIME, THE "AGREEMENT') HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER THE
APPLICABLE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED AND SOLD IN RELIANCE
ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THESE LAWS BY VIRTUE OF
INTEGRATED MEDICAL RESOURCES, INC.'S INTENDED COMPLIANCE WITH SECTIONS 3(b),
4(2) AND 4(6) OF THE SECURITIES ACT, THE PROVISIONS OF REGULATION D UNDER SUCH
ACT AND SIMILAR EXEMPTIONS UNDER STATE LAW. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION ("SEC"),
ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The undersigned purchaser (hereafter, the "Purchaser") hereby offers to
purchase certain Series A Convertible Preferred Stock, $0.001 par value per
share (referred to herein as a "Share" or collectively as "Shares"), and
Warrants of Integrated Medical Resources, Inc. (the "Company"), a publicly-held
corporation formed under the laws of the State of Kansas. This offer to purchase
may, for any reason whatsoever, be revoked by the Purchaser or rejected by the
Company prior to acceptance of this offer by the Company.
Section 1.1 PURCHASE AND SALE OF SHARES AND WARRANTS. Upon the following
terms and conditions, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, the following:
(a) the number of Shares indicated on the signature page to this Agreement,
which Shares shall have the rights, designations and preferences set forth in
Exhibit A, attached hereto and incorporated herein by reference; and
(b) Warrants for the purchase of Twenty Thousand (20,000) shares of the
Company's Common Stock, $0.001 par value per share (the "Common Stock"), which
shall be represented in the form of a single Warrant, as shown in Exhibit B,
attached hereto and incorporated herein by reference.
Section 1.2 PURCHASE PRICE. The purchase price for the Shares shall be One
Thousand Dollars ($1,000) per Share and $0.0001 per Warrant ($2.00 in the
aggregate for the Warrants) (collectively, the "Purchase Price").
Section 1.3 CLOSINGS.
(a) The initial closing of the purchase and sale of the Shares and Warrants
(the "Initial Closing"), shall take place at the law offices of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ -- ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, counsel for the Company (the "Escrow Agent"), at 10:00 a.m., local time,
on the later of the following: (i) the date on which the last to be fulfilled or
waived of the conditions set forth in Section 4.1 and 4.2 hereof shall be
fulfilled or waived in accordance herewith; or (ii) such other time and place
and/or on such other date as the Purchaser and the Company may agree. The date
on which the Initial Closing occurs is referred to herein as the "Initial
Closing Date."
(b) On or before August 1, 1998, Purchaser may, at its sole option upon
notice to the Company, purchase up to an additional 3,000 Shares (the "Optional
Shares") at the Purchase Price. The closing of the purchase and sale of the
Optional Shares (the "Optional Closing"), shall take place at the offices of the
Escrow Agent, on the later of the following: (i) the date on which the last to
be fulfilled or waived of the conditions set forth in Section 4.1 and 4.2
hereof, except Section 4.2(e) hereof, and applicable to the Optional Closing
shall be fulfilled or waived in accordance herewith; or (ii) such other time and
place and/or on such other date as the Purchaser and the Company may agree. A
date on which the closing of the purchase and sale of Optional Shares occurs is
referred to herein as an "Optional Closing Date" which, together with the
Initial Closing Date, is referred to as a "Closing Date" .
(c) On each Closing Date, the Company shall, through the Escrow Agent,
deliver to the Purchaser a certificate representing the Shares registered in the
name of the Purchaser or deposit such Shares into account(s) designated by the
Purchaser. The Purchaser shall on each Closing Date deliver to the Company the
Purchase Price for all the Shares
purchased on such Closing Date by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in writing by
the Company. In addition, each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this Agreement
at or prior to the Closing Date.
Section 1.4 COVENANT TO REGISTER.
(a) For purposes of this Section, the following definitions shall apply:
(i) The terms "register," "registered," and "registration" refer to
a registration under the Securities Act, effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement, document or amendment thereto.
(ii) The term "Registrable Securities" means the shares of the
Company's Common Stock issuable upon conversion of shares of the Shares or upon
conversion of any other stock issued in payment of dividends on the Shares or
otherwise issuable pursuant to this Agreement or the provisions of Exhibit A
hereto, shares of the Company's Common Stock issuable upon exercise of the
Warrants, and any securities of the Company or securities of any successor
corporation issued as, or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
Shares.
(iii) The term "holder of Registrable Securities" means the
Purchaser and any permitted assignee of registration rights pursuant to Section
1.4(h).
(b) (i) No later than sixty (60) days after the Closing Date, the Company
shall file with the SEC a registration statement on Form S-3 covering at least
200% of the number of Registrable Securities which would then be issuable upon
conversion of the Shares at the conversion price then in effect, and shall use
its best efforts to cause such registration statement to become effective on or
before one hundred eighty (180) days after the date such registration statement
is filed (the "Primary Registration"). If such Primary Registration is not
declared effective by the end of such period or does not include all Registrable
Securities, or the Company is not in compliance with its obligations under
Subsection (d) of this Section 1.4, a holder of Registrable Securities shall
have the right to require by notice in writing that the Company register all or
any part of the Registrable Securities held by such holder (a "Demand
Registration") and the Company shall thereupon effect such registration in
accordance herewith (which may include adding such shares to an existing shelf
registration). The parties agree that if the holder of Registrable Securities
demands registration of less than all of the Registrable Securities, the
Company, at its option, may nevertheless file a registration statement covering
all of the Registrable Securities. If the Primary Registration statement or a
Demand Registration statement is declared effective with respect to all
Registrable Securities and the Company is in compliance with its obligations
under Subsection (d) of this Section 1.4, the Demand Registration rights granted
pursuant to this Subsection (b)(i) shall cease. If such Primary Registration
statement is not declared effective with respect to all Registrable Securities
or if the Company is not in compliance with such obligations, the Demand
Registration rights described herein shall remain in effect.
(ii) The Company shall not be obligated to effect a Demand
Registration under Subsection (b)(i) above: (A) if all of the Registrable
Securities held by the holder of Registrable Securities which are demanded to be
covered by the Demand Registration are, at the time of such demand, included in
an effective registration statement and the Company is in compliance with its
obligations under Subsection (d) of this Section 1.4; (B) if all of the
Registrable Securities may be sold under Rule 144(k) of the Securities Act and
the Company's transfer agent has accepted an instruction from the Company to
such effect; or (C) at any time after two (2) years from the Closing Date.
(iii) Subject to Subsection (iv)(B) hereof, the Company may suspend
the effectiveness of any such registration effected pursuant to this Subsection
(b): (A) in the event and for such period of time as, such a suspension is
required by the rules and regulations of the Securities and Exchange Commission
("SEC"); or (B) for a period not exceeding forty five (45) days in the aggregate
if there exists at the time material non-public information relating to the
Company which, in the reasonable opinion of the Company, should not be disclosed
publicly. The Company will use its best efforts to cause such suspension to
terminate at the earliest possible date.
(iv) (A) If the Company is advised by the SEC that a registration
statement filed hereunder is subject to a "no-review" and such registration
statement is not declared effective within five (5) business days thereafter (an
"Acceleration Date") or, irrespective of the SEC review, a registration
statement is not declared effective by the one hundred eighty first (181st) day
after the filing date (the "Target Date"), the Company shall pay Purchaser as
liquidated damages an amount equal to two percent (2%) of the total Purchase
Price of the Shares for each thirty (30) day period following the earlier of the
Acceleration Date or Target Date, as applicable, until such time as the
registration statement
is declared effective; provided, however, that such damages shall not be payable
if the failure to meet the Acceleration Date or Target Date, as applicable, is
due to the failure of Purchaser to provide the Company with information to be
included in the registration statement after Purchaser has received a written
request therefor. The payment set forth above shall be pro-rated daily as to any
period of less than thirty (30) days. Such payment shall be made to the
Purchaser by cashier's check or wire transfer in immediately available funds to
such account as shall be designated in writing by the Purchaser. The foregoing
amount shall be paid irrespective of the amount of Registrable Securities then
held by Purchaser.
(B) If, following effectiveness of a registration, either the
effectiveness of the registration statement is suspended or a current prospectus
meeting the requirements of Section 10 of the Securities Act is not available
for delivery by the Purchaser for any reason (either referred to herein as a
"suspension"), the Company shall thereupon pay to Purchaser as liquidated
damages an amount equal to two percent (2%) of the Purchase Price of the Shares
for each thirty (30) day period of the suspension. The payment set forth above
shall be pro-rated daily as to periods of less than thirty (30) days. Such
payment shall be made to the Purchaser by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in writing by
the Purchaser, and shall be paid irrespective of the amount of Registrable
Securities held by Purchaser on or after the date following the suspension.
Notwithstanding the foregoing, the Company may, at any time, suspend the
effectiveness of a registration statement for a period not to exceed forty five
(45) days in the aggregate, in order to complete bona-fide acquisitions,
dispositions, mergers or consolidations without paying the forgoing damages.
(C) Any amount payable pursuant to the foregoing provisions of
this Subsection (iv) shall be delivered on or before the fifth (5th) day
following the end of the calendar month in which such payment obligation arose.
The "Purchase Price" of Registrable Securities shall be (i) if derived from
conversion or substitution of Shares, the Purchase Price of the Shares, and (II)
if received in satisfaction of a Company obligation, the dollar amount of such
obligation.
(D) This Subsection (b) is in addition to the provisions of
Section 7.2(a) hereof.
(c) If the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Purchaser)
any of its stock or other securities under the Securities Act in connection with
a public offering of such securities (other than a registration on Form ▇-▇,
▇▇▇▇ ▇-▇ or other limited purpose form) and all Registrable Securities and any
shares of Common Stock issued pursuant to Section 3.4 hereof have not
theretofore been included in a registration statement under Subsection (b) of
this Section 1.4 which remains effective, the Company shall, at such time,
promptly give all holders of Registrable Securities written notice of such
registration. Upon the written request of any holder of Registrable Securities
given within twenty (20) days after receipt of such notice by the holder of
Registrable Securities, the Company shall use its best efforts to cause to be
registered under the Securities Act all Registrable Securities that such holder
of Registrable Securities requests to be registered. However, the Company shall
have no obligation under this Subsection (c) if (i) the Registrable Securities
may be sold without registration under Rule 144(k) and the Company's transfer
agent has accepted an instruction from the Company to such effect, (ii) the
Registration Statement is filed more than two (2) years after the Closing Date,
or (iii) to the extent that, with respect to any underwritten offering initiated
by the Company later than one calendar year following the Closing, the managing
underwriter of such offering reasonably notifies such holder(s) in writing of
its determination that the Registrable Securities or a portion thereof shall be
excluded therefrom.
(d) Whenever required under this Section 1.4 to effect the registration of
any Registrable Securities including, without limitation, the Primary
Registration, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable best efforts cause
such registration to become effective as provided in Section 1.4(b)(i), and keep
such registration statement effective for so long as any holder of Registrable
Securities desires to dispose of the securities covered by such registration
statement; provided, however, that in no event shall the Company be required to
keep the Registration Statement effective for a period greater than two (2)
years from the Closing Date;
(ii) Respond to comments made by the SEC with respect to a
registration statement filed pursuant to this Agreement promptly, but no later
than thirty (30) days after the date of the comment letter, and 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 Securities Act with respect to
the disposition of all securities covered by such registration statement
(provided, that the Company may not amend the registration statement for the
purpose of registering securities of selling shareholders other than holders of
Shares) and
immediately notify the holders of the Shares of the filing and effectiveness of
such Registration Statement and any amendments or supplements;
(iii) Furnish to each holder of Registrable Securities such numbers
of copies of a current prospectus, including a preliminary prospectus,
conforming with the requirements of the Securities Act, copies of the
registration statement any amendment or supplement to any thereof and any
documents incorporated by reference therein and such other documents, all free
of charge, as such holder of Registrable Securities may reasonably require in
order to facilitate the disposition of Registrable Securities owned by such
holder of Registrable Securities;
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the holder of
Registrable Securities;
(v) Notify each holder of Registrable Securities immediately 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
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus;
(vi) Furnish, at the request of any holder of Registrable
Securities in connection with any underwritten public offering, (A) an opinion
of counsel of the Company, dated the effective date of the registration
statement, in form and substance reasonably satisfactory to the holder and its
counsel and covering, without limitation, such matters as the due authorization
and issuance of the securities being registered and certain matters pertaining
to compliance with securities laws by the Company in connection with the
registration thereof and/or (B) a "comfort" letter or letters of the Company's
independent public accountants provided at the Company's expense in form and
substance reasonably satisfactory to the holder and its counsel;
(vii) Use its best efforts to list the Registrable Securities
covered by such registration statement with any national market or securities
exchange on which the Registrable Securities are then listed;
(viii) Make available for inspection by the holder of Registrable
Securities, upon request, all SEC Documents (as defined below) filed subsequent
to the Closing and require the Company's officers, directors and employees to
supply all information reasonably requested by any holder of Registrable
Securities in connection with such registration statement; and
(ix) Furnish to each holder of Registrable Securities prompt notice
of the commencement of any stop-order proceedings under the Securities Act,
together with copies of all documents in connection therewith, and use its best
efforts to obtain withdrawal of any such stop order as soon as possible.
(e) Upon request of the Company, each holder of Registrable Securities will
furnish to the Company in connection with any registration under this Section
such information regarding itself, the Registrable Securities and other
securities of the Company held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
the Registrable Securities held by such holder of Registrable Securities. The
intended method of disposition (Plan of Distribution) of such securities as so
provided by Purchaser shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
the prior written consent of the Purchaser.
(f) (i) The Company shall indemnify, defend and hold harmless each holder
of Registrable Securities which are included in a registration statement
pursuant to the provisions of Subsections (b) or (c) hereof and each of its
officers, directors, employees, agents, partners or controlling persons (within
the meaning of the Securities Act) (each, an "indemnified party") from and
against, and shall reimburse such indemnified party with respect to, any and all
claims, suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which such indemnified party may become subject
under the Securities Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company shall not be liable in any such
case to the extent that any such Liability arises out of or is based upon an
untrue statement or omission so made in strict conformity with information
furnished by any indemnified party in writing specifically for use in a
registration statement.
(ii) In the event of any registration under the Securities Act of
Registrable Securities pursuant to Subsections (b) or (c), each holder of such
Registrable Securities hereby severally agrees to indemnity, defend and hold
harmless the Company, and its officers, directors, employees, agents, partners,
or controlling persons (within the meaning of the Securities Act) (each, an
"indemnified party") from and against, and shall reimburse such indemnified
party with respect to, any and all Liabilities to which such indemnified party
may become subject under the Securities Act or otherwise, arising from or
relating to (A) any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or (B) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that (X) such holders will be liable in
any such case to the extent and only to the extent, that any such Liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, prospectus
or amendment or supplement thereto in reliance upon and in conformity with
written information furnished by such holder specifically for use in the
preparation thereof and (Y) the indemnification obligation of any holder shall
not exceed the purchase price of the Shares.
(iii) Promptly after receipt by any indemnified party of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against another party (the "indemnifying party")
hereunder, notify such party in writing thereof, but the omission so to notify
such ied party under this section if and to the extent an indemnifying party is
materially prejudiced by such omission. In case any such action shall be brought
against any indemnified party and such indemnified party shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to the
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to the indemnified party
under this section for any legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that if the defendants in any such action include both parties and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to them which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of one such separate counsel
and other reasonable expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
(g) (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to Subsections (b) or (c), all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
shall be borne by the Company; provided, however, that any security holders
participating in such registration shall bear their pro-rata share of the
underwriting discounts and commissions, if any, incurred by them in connection
with such registration.
(ii) The fees, costs and expenses of registration to be borne by
the Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes. Except as otherwise provided herein, fees and disbursements of counsel
and accountants for the selling security holders and discounts and commissions,
if any, payable in connection with any such sales shall be borne by the
respective selling security holders.
(h) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section l.4 may be assigned by Purchaser
to a transferee or assignee. Within a reasonable time after such transfer, the
Purchaser shall notify the Company of the name and address of such transferee or
assignee, and the securities with respect to which such registration rights are
being assigned. Such assignment shall be effective only if, immediately
following such transfer, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act. Any transferee
asserting registration rights hereunder shall be bound by the applicable
provisions of this Agreement.
(i) Subject to the terms of any existing registration rights granted by the
Company, the Company shall not agree to allow the holders of any securities of
the Company to include any of their securities in any registration statement
filed by the Company pursuant to Subsection (b) unless such inclusion will not
reduce the amount of the Registrable Securities included therein. Any reduction
shall be prorated among holders of securities exercising registration rights.
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
makes the following representations and warranties to the Company.
(a) ACCREDITED INVESTOR. The Purchaser is an "accredited investor" under
the definition set forth in Rule 501(a) of Regulation D, promulgated under the
Securities Act and a qualified purchaser under the National Securities Markets
Improvement Act of 1996.
(b) SPECULATIVE INVESTMENT. The Purchaser is aware that an investment in
the Shares is highly speculative and subject to substantial risks. The Purchaser
is capable of bearing the high degree of economic risk and the burden of this
venture, including, but not limited to, the possibility of complete loss of the
Purchaser's investment in the Shares and underlying Common Stock which make
liquidation of this investment impossible for the indefinite future.
(c) DISPOSITION. The Purchaser understands that (i) except as provided for
in Section 1.4, the Shares, Warrants and underlying Common Stock of the Company
(the "Securities"), have not been and are not being registered under the
Securities Act or any applicable state securities laws, and may not be
transferred unless (A) subsequently registered thereunder, or (B) the Securities
may be sold or transferred pursuant to an exemption from securities registration
under the Securities Act and any applicable state securities laws or (C) sold
pursuant to Rule 144, promulgated under the Securities Act (or any successor
Rule), or (ii) any sale of such Securities made in reliance on Rule 144 may be
made only in accordance with the terms of such Rule and further, if such Rule is
not applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with another exemption under the Securities Act or the rules of the
SEC thereunder. Notwithstanding any provision to the contrary contained herein,
a holder may pledge such Securities as collateral for a revolving credit note
pursuant to a loan and security agreement with a lending institution.
(d) PRIVATELY OFFERED. The offer to acquire the Shares and Warrants was
directly communicated to the Purchaser in such manner that the Purchaser was
able to ask questions of and receive answers concerning the terms and conditions
of this transaction. At no time was the Purchaser presented with or solicited by
or through any leaflet, public promotional meeting, television advertisement, or
any other form of general advertising.
(e) PURCHASE FOR INVESTMENT. The Securities are being acquired solely for
the Purchaser's own account, for investment, and are not being purchased with
view to the resale, distribution, subdivision or fractionalization thereof
without proper registration with applicable securities administrators
(f) ACCESS TO INFORMATION. Purchaser or Purchaser's professional advisor
has been granted the opportunity to ask questions of and receive answers from
representatives of the Company, its officers, directors, employees and agents
concerning the terms and conditions of the offering of Shares and Warrants, the
Company, its business and prospects, and to obtain any additional information
which Purchaser or Purchaser's professional advisor deems necessary to verify
the accuracy and completeness of the information received.
(g) RELIANCE ON OWN ADVISORS. Purchaser has relied on the advice of, or has
consulted with, Purchaser's own tax, investment, legal or other advisors and has
not relied on the Company or any of it affiliates, officers, directors,
attorneys, accountants or any affiliates of any thereof and each other person,
if any, who controls any thereof, within the meaning of Section 15 of the
Securities Act for any tax or legal advice (other than reliance on information
in the SEC Documents). The foregoing, however, does not limit or modify
Purchaser's right to rely upon representations and warranties of the Company in
Section 2.2 of this Agreement and any representations of any placement agent.
(h) CAPABILITY TO EVALUATE. Purchaser has such knowledge and experience in
financial and business matters so as to enable such Purchaser to utilize the
information made available to it in connection with the offer of Shares and
Warrants in order to evaluate the merits and risks of the prospective
investment, which are substantial, including without limitation those set forth
in the SEC Documents (as defined herein).
(i) DISCLOSURE DOCUMENTS. Purchaser, in making Purchaser's investment
decision to subscribe for the Shares and Warrants hereunder, represents that
Purchaser has received and had an opportunity to review and ask questions of the
Company concerning the SEC Documents.
(j) AUTHORITY. Purchaser has full power and authority to execute and
deliver this Agreement and each other document included herein for which a
signature is required in such capacity and on behalf of the subscribing
individual, partnership, trust, estate, corporation or other entity for whom or
which Purchaser is executing this Agreement.
Section 2.2 REPRESENTATIONS AND WARRANTIES of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Kansas
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company and each of its subsidiaries, if
any, is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary other than those in
which the failure so to qualify would not have a Material Adverse Effect.
"Material Adverse Effect", for purposes of this Agreement, means any adverse
effect on the business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used and which is
material to such entity and other entities controlled by such entity taken as a
whole. (b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Shares and Registrable Securities in accordance with the terms hereof,
(ii) the execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, (iv) this Agreement constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application) and (v) prior to the Closing
Date, any necessary amendment to the Company's Articles of Incorporation
authorizing Company to issue all of the Shares and Registerable Securities, in
accordance with Exhibit A, will have been filed with the Kansas Secretary of
State and will be in full force and effect, enforceable against the Company in
accordance with the terms of such amended Articles of Incorporation.
(c) AUTHORIZED CAPITAL; RIGHTS OR COMMITMENTS TO STOCK. The authorized
capital stock of the Company consists of 25,000,000 shares of Common Stock and
3,000,000 shares of Preferred Stock; there are 10,027,028 shares of Common Stock
and no shares of Preferred Stock issued and outstanding; and, upon issuance of
the Shares in accordance with the terms hereof, there will be 10,027,028 shares
of Common Stock and 2,000 shares of Series A Preferred Stock issued and
outstanding.
All of the outstanding shares of the Company's Common Stock have been
validly issued and are fully paid and non-assessable. Except as set forth in
Exhibit C hereto, no shares of Common Stock are entitled to registration rights
or preemptive rights, and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of
capital stock of the Company or options, warrants, scrip, rights to subscribe
to, or commitments to purchase or acquire, any shares, or securities or rights
convertible into shares, of capital stock of the Company. Exhibit C shall
specifically indicate registration rights associated with any such securities
and whether the Company is required to register such securities or capital stock
underlying such securities within one (1) year after the Closing Date.
(d) ISSUANCE OF SHARES. The issuance of the Shares has been duly
authorized and, when paid for and issued in accordance with the terms hereof,
the Shares shall be validly issued, fully paid and non-assessable and entitled
to the rights and preferences set forth in Exhibit A hereto. The Registrable
Securities will be duly authorized and reserved for issuance and, upon
conversion, will be validly issued, fully paid and non-assessable and the
holders shall be entitled to all rights and preferences accorded to a holder of
Common Stock.
(e) NO CONFLICTS. The Company has furnished or made available to the
Purchaser true and correct copies of the Company's Articles of Incorporation as
in effect on the date hereof (the "Articles"), and the Company's By-Laws,
as in effect on the date hereof (the "By-Laws"). The execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) result in a
violation of the Company's Articles or By-Laws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any federal, state, local or foreign law, rule, regulation,
order, judgment or decree (including Federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or assets of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect); provided that, for purposes of such
representation as to Federal, state, local or foreign law, rule or regulation,
no representation is made herein with respect to any of the same applicable
solely to the Purchaser and not to the Company. Except as set forth in the SEC
Documents, the business of the Company is not being conducted in violation of
any law, ordinance or regulations of any governmental entity, except for
violations which either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under Federal, state or
local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing (other than any filing
establishing a class or series of stock with the Kansas Secretary of State) or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Shares in accordance with the terms hereof (other than any SEC, NASD, NASDAQ
or state securities filings which may be required to be made by the Company
subsequent to the Closing, and any registration statement which may be filed
pursuant hereto); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the Company has filed on a timely
basis all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in
addition to one or more registration statements and amendments thereto
heretofore filed by the Company with the SEC under the Securities Act (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company directly or through its agent has
delivered to the Purchaser true and complete copies of the SEC Documents except
for the exhibits and incorporated documents. The Company has not provided to the
Purchaser any information which, according to applicable law, rule or
regulation, is required to have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act as the case may be and the rules and regulations of the SEC promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents have contained
any untrue statement of a material fact or have omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since the date through which the most
recent quarterly report of the Company on Form 10-QSB has been prepared and
filed with the SEC, a copy of which is included in the SEC Documents, no
Material Adverse Effect has occurred or exists with respect to the Company or
any of its subsidiaries.
(h) NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries have
no material liabilities or obligations not disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company's or any of its
subsidiaries' respective businesses since the date of the most recently filed
SEC Documents which, individually or in the aggregate, do not or would not have
a Material Adverse Effect on the Company or any of its subsidiaries.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or any of its subsidiaries or
their respective businesses, properties, prospects, operations or financial
condition which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.
(j) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, or, to the best of its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in connection with the offer
or sale of the Shares.
(k) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any of the Company's securities or
solicited any offers to buy any of such securities, under circumstances that
would require registration of the Shares under the Securities Act.
Section 3.1 SECURITIES COMPLIANCE. The Company shall notify the SEC, NASD
and NASDAQ, in accordance with their respective requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Shares, and the Common
Stock issuable upon conversion thereof, to the Purchaser.
Section 3.2 REGISTRATION AND LISTING. Until at least two (2) years after
all Shares have been converted into Registrable Securities, the Company will
cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under such Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement and will
not take any action or file any document (whether or not permitted by the
Securities Act or the Exchange Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Acts, except as permitted herein. Until at least two (2)
years after all Shares have been converted into Common Stock, the Company will
take all action within its power to continue the listing or trading of its
Common Stock on the NASDAQ National Market (or other principal market) and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and NASDAQ. The covenants set
forth in this Section 3.2 shall not be deemed to prohibit a merger, sale of all
assets or other corporate reorganization if the entity surviving or succeeding
to the Company is bound by this Agreement with respect to its securities issued
in exchange for or in replacement of the Shares or Common Stock or the
consideration received for or in replacement of the Shares or Common Stock is
cash.
Section 3.3 RIGHT OF FIRST REFUSAL. If at any time during the period
beginning on the Closing Date and ending ninety (90) days immediately following
the effective date of the Primary Registration, the Company proposes to issue
Common Stock or securities convertible into or exercisable for Common Stock or
other convertible securities, pursuant to an offering exempt from registration
under the Act, the Company shall provide to Purchaser reasonable advance notice
of such intention. The Purchaser shall have the right to purchase or refuse to
purchase all or any part of such securities proposed to be issued in such
offering, and shall have at least seventy two (72) hours after receipt of such
notice to agree upon the terms of the proposed issuance and give the Company
written notice of its intention to purchase or refuse to purchase.
Section 3.4 MOST-FAVORED-NATION CLAUSE. If the Company issues Common Stock
or securities convertible into or exercisable for Common Stock or other
convertible securities, at a time when any of the Shares remain outstanding, at
an effective price per share of Common Stock which is lower than the conversion
price of the Shares at that time, then the Company shall, within five (5)
business days, deliver to each holder upon conversion an additional number of
shares of Common Stock necessary to reduce the effective conversion price to
such lower issue price. This Section shall not be applicable to issuances of
Common Stock pursuant to (a) any business combination, acquisition transaction,
stock or asset purchase undertaken by the Company (b) any shareholder-approved
option plan or (c) any options, warrants or other securities outstanding as of
the date hereof.
Section 3.5 NON-PUBLIC INFORMATION. The Company shall in no event disclose
material, non-public information to the Purchaser, advisors to or
representatives of the Purchaser unless prior to disclosure of such information
the Company marks such information as "Non-Public Information - Confidential"
and provides the Purchaser, such advisors and representatives with a reasonable
opportunity to accept or refuse to accept such non-public information for
review. Nothing herein shall require the Company to disclose non-public
information to the Purchaser or its advisors or representatives, and the Company
represents that it does not disseminate material, non-public information to any
purchasers who purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Purchaser and, if
any, underwriters,
of any event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of the Company
specifically or generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in the
registration statement, would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing herein shall be construed to mean that such
persons or entities other than the Purchaser (without the written consent of the
Purchaser prior to disclosure of such information) may not obtain material,
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the registration statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the registration statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
Section 3.6 DUE DILIGENCE. The Company shall make available for inspection
and review by the Purchaser, advisors to and representatives of the Purchaser
(who may or may not be affiliated with the Purchaser), any underwriter
participating in any disposition of Registrable Securities on behalf of the
Purchaser, any registration statement filed hereunder, or any amendment or
supplement thereto, or any filing made to any state securities administrator,
NASDAQ or NASD Regulation, Inc., all financial and other records, all SEC
Documents and the other filings with the SEC, and all other corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such information reasonably requested by the Purchaser, or any such advisor,
representative, or underwriter in connection with such registration statement
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), through the two years after the
effective date of a registration statement filed hereunder, for the purpose of
enabling the Purchaser and such advisors, representatives and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company to confirm the accuracy of the disclosures
made in a registration statement filed hereunder.
Section 3.7 USE OF PROCEEDS. Approximately fifty percent (50%) of the
proceeds from the sale of the Shares shall be used by the Company to acquire
impotency clinics and related businesses and fifty percent (50%) for the
Company's working capital.
Section 4.1 CONDITIONS Precedent to the Obligation of the Company to Sell
the Shares and Warrants. The obligation hereunder of the Company to issue and/or
sell the Shares and Warrants to the Purchaser is subject to the satisfaction, at
or before the Closing, of each of the conditions set forth below. These
conditions may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser shall be true and correct as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a particular date).
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Purchaser at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(d) LEGAL ACTION. No legal action, suit or proceeding shall be pending or
threatened which seeks to restrain or prohibit the transactions contemplated by
this Agreement.
(e) EXECUTION. The Purchaser shall have executed this Agreement, and
delivered such Agreement to the Company.
(f) PURCHASE PRICE. The Purchaser shall have delivered the Purchase Price
in accordance with Section 1.2 above.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
PURCHASE THE SHARES. The obligation hereunder of the Purchaser to acquire and
pay for the Shares is subject to the satisfaction, at or before the Closing, of
each of the conditions set forth below. These conditions may be waived by the
Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company pursuant to this Agreement at or prior to the Closing, unless any
such agreement or condition is waived by the Purchaser in writing at or prior to
Closing.
(c) TRADING AND LISTING. From the date hereof to the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC or a
national securities exchange (currently the NASDAQ National Market) (except for
any suspension of trading of limited duration agreed to between the Company and
the principal exchange on which the Common Stock is traded solely to permit
dissemination of material information regarding the Company), and the Company
shall not, after the date hereof, have received any notice from the NASDAQ Stock
Market, Inc. that its Common Stock may be subject to delisting.
(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL, ETC. The Purchaser shall have received before or at
the Closing an opinion of counsel to the Company (covering, without limitation,
such of the matters set forth in Section 2.2(a) through (e) and excluding
certain portions thereof, as reasonably agreed by Purchaser), as are in form and
substance reasonably satisfactory to the Purchaser and its counsel, and such
other certificates and documents as the Purchaser or its counsel shall
reasonably require incident to the Closing.
(f) EXECUTION. The Company shall have executed this Agreement, and
delivered such Agreement to the Purchaser.
Section 5.1 LEGEND ON STOCK. Each certificate representing the Shares and,
if necessary, the Registrable Securities, shall be stamped or otherwise
imprinted with a legend substantially in the following form:
THESE SECURITIES [AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
CONVERSION HEREOF] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 , AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD
OR OFFERED FOR SALE UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF COUNSEL, REGISTRATION UNDER SUCH ACT OR APPLICABLE STATE
SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH SUCH SALE OR OFFER,
AND SUCH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY.
Each such certificate shall bear no other legend not agreed to in advance
by Purchaser. The Company agrees to reissue certificates representing the Shares
or, if applicable, the Registrable Securities, without the legend set forth
above at such time as (a) the holder thereof is permitted to dispose of such
Shares (or securities issued upon conversion thereof) pursuant to Rule 144(k)
under the Securities Act, (b) the securities are sold to a purchaser or
purchasers who (in the opinion of counsel to such holders, in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such securities publicly without registration under the Securities Act, or (c)
such securities are registered under the Securities Act and are sold pursuant to
such registration statement.
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
at any time prior to the Closing by the mutual written consent of the Company
and the Purchaser.
Section 6.2 OTHER TERMINATION. This Agreement may be terminated by action
of the respective Board of Directors or other governing body of the Purchaser or
the Company at any time if the Closing shall not have been consummated by the
fifth (5th) business day following the date of this Agreement, provided that the
party seeking to terminate the Agreement is not in breach of the Agreement.
Section 6.3 AUTOMATIC TERMINATION. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the seventh (7th) business day following the date of this
Agreement, provided, however, that any such termination shall not terminate the
liability of any party which is then in breach of the Agreement.
Section 7.1 FEES AND EXPENSES. Except as otherwise set forth in Section 1.4
hereof with respect to the registration of Registrable Securities, the Company
shall pay the fees, commissions and expenses of its advisers, brokers, finders,
counsel, accountants and other experts, if any, and all other expenses
associated therewith. The Company shall, on the Closing Date, reimburse
ProFutures Special Equities Fund, L.P. up to $7,500 for fees and expenses of its
counsel in connection with the preparation, negotiation and coordination of this
Agreement. The Company shall pay all stamp and other taxes and duties levied in
connection with the issuance of the Shares and Common Stock pursuant hereto.
Section 7.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(a) The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
(b) The Company and the Purchaser each (i) hereby irrevocably submits to
the jurisdiction of the United States District Court and other courts of the
United States sitting in the State of Texas for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. The Company and the
Purchaser each consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
paragraph shall affect or limit any right to serve process in any other manner
permitted by law.
Section 7.3 ENTIRE AGREEMENT: AMENDMENT. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 7.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second (2nd) business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
to the Company: Dr. E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CEO
Integrated Medical Resources, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
to the Purchaser: At the address set forth at the foot of this Agreement
or as specified in writing by Purchaser.
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days' written notice of such changed address to the other
party hereto.
Section 7.5 WAIVERS. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
Section 7.6 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 7.7 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the present state
of incorporation of the Company without regard to such state's principles of
conflict of laws.
Section 7.8 SURVIVAL. The representations and warranties of the Company and
the Purchaser contained in herein and the agreements and covenants set forth in
Sections 1.1 through 1.4, 3.2 through 3.7, and 7.1 through 7.16 shall survive
the last Closing for a period of two (2) years.
Section 7.9 PUBLICITY. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Purchaser without
its consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section 7.10 NASDAQ. The term "NASDAQ" or "NASDAQ National Market" herein
refers to the principal market on which the Common Stock of the Company is
traded. If the Common Stock is listed on a securities exchange, or if another
market becomes the principal market on which the Common Stock is traded or
through which price quotations for the Common Stock are reported, the term
"NASDAQ" or "NASDAQ National Market" shall be deemed to refer to such exchange
or other principal market.
Section 7.11 ACCEPTANCE. Execution and delivery of this Agreement shall
constitute an offer to purchase the Shares, which offer, unless previously
revoked by the Purchaser, may be accepted or rejected by the Company, in its
sole discretion for any cause or for no cause and without liability to the
Purchaser. The Company shall indicate acceptance of this Agreement by signing as
indicated on the signature page hereof.
Section 7.12 BINDING AGREEMENT. Upon acceptance of this Agreement by the
Company, the Purchaser agrees that he may not cancel, terminate or revoke any
agreement of the Purchaser made hereunder, and that this Agreement shall survive
the death or disability of the Purchaser and shall be binding upon heirs,
successors, assigns, executors, administrators, guardians, conservators or
personal representatives of the Purchaser.
Section 7.13 INCORPORATION BY REFERENCE. All information set forth on the
signature page is incorporated as integral terms of this Agreement.
Section 7.14 COUNTERPARTS. This Agreement may be signed in multiple
counterparts, which counterparts shall constitute one and the same original
instrument. Section 7.15 Severability. If any portion of this Agreement shall be
held illegal, unenforceable, void or voidable by any court, each of the
remaining terms hereof shall nevertheless remain in full force and effect as a
separate contract.
Section 7.16 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
[This space has been left blank intentionally. The signature page follows.]
IN WITNESS WHEREOF, the Purchaser has executed this Agreement on the date set
forth below.
For the purchase price of $1,000 per Share and $0.0001 per Warrant, the
Purchaser tenders herewith the full purchase price of:
$ 2,000,002.00
--------------
Number of Shares: 2,000
The exact name(s) (Including correct, legible spelling) and the information
under which title to the Shares will be taken is as follows (Please print or
type):
PROFUTURES SPECIAL EQUITIES FUND, L.P.
c/o ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ProFutures Fund Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ -- ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Social Security or IRS Employer Identification Number(s):
▇▇-▇▇▇▇▇▇▇
Signature of Purchaser: Dated: July 15, 1998
PROFUTURES SPECIAL EQUITIES FUND, L.P.
By: ProFutures Fund Management, Inc., a General Partner
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Accepted by:
INTEGRATED MEDICAL RESOURCES, INC., a Kansas corporation
By:/s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------
(Signature)
Name: E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
Title:Chairman and Chief Executive Officer
EXHIBIT A
TO SUBSCRIPTION AGREEMENT
INTEGRATED MEDICAL RESOURCES, INC.
RESOLUTIONS ESTABLISHING RIGHTS AND PREFERENCES
FOR SERIES A CONVERTIBLE PREFERRED STOCK
RESOLVED, that there shall be a series of shares of the Corporation
designated "Series A Convertible Preferred Stock"; that the number of shares of
such series shall be five thousand (5,000), that the Corporation issue such
shares, and that the rights and preferences of such series (the "5% Preferred")
and the limitations or restrictions thereon, shall be as set forth herein.
The following terms and conditions shall be adopted and incorporated by
reference into the foregoing resolutions as if fully set forth therein:
1. DIVIDENDS.
(a) The holders of the 5% Preferred shall be entitled to receive out of any
assets legally available therefor cumulative dividends at the rate of $50 per
share per annum, accrued daily and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, in preference and priority
to any payment of any dividend on the Common Stock or any other class or series
of stock of the Corporation. Such dividends shall accrue on any given share from
the day of original issuance of such share and shall accrue from day to day
whether or not earned or declared. If at any time dividends on the outstanding
5% Preferred at the rate set forth above shall not have been paid or declared
and set apart for payment with respect to all preceding periods, the amount of
the deficiency shall be fully paid or declared and set apart for payment, but
without interest, before any distribution, whether by way of dividend or
otherwise, shall be declared or paid upon or set apart for the shares of any
other class or series of stock of the Corporation.
(b) Any dividend payable on a dividend payment date may be paid, at the
option of the Corporation, either (i) in cash or (ii) in shares of 5% Preferred,
valued at $1,000 per share, if the Common Stock issuable upon conversion of such
shares has been registered for resale under the Securities Act of 1933, as
amended (the "Act"), and the registration statement including a current
prospectus with respect thereto remains in effect at the date of delivery of
such shares, and if the Corporation shall have given written notice of its
intention to pay such dividend in stock to all holders of the 5% Preferred at
least twenty (20) business days before the payment date for such dividend.
2. LIQUIDATION PREFERENCE; REDEMPTION.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the 5% Preferred
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of any other class or series of shares,
the amount of $1,000 per share plus any accrued but unpaid dividends (the
"Liquidation Preference").
(b) The Corporation may, at its option, cause all or part of the
outstanding shares of the 5% Preferred to be redeemed at the following rates:
(i) $1,150 per share of 5% Preferred if redeemed on or before the one hundred
fiftieth (150th) day after the date of issuance; (ii) $1,175 per share of 5%
Preferred if redeemed between the one hundred fifty first (151st) day after the
date of issuance and on or before the one hundred eightieth (180th) day after
the date of issuance; and (iii) $1,200 per share of 5% Preferred if redeemed on
or after the one hundred eighty first (181st) day after the date of issuance,
plus all accrued but unpaid dividends (such amounts are referred to herein as
the "Redemption Price"); provided the Corporation has given notice of its
intention to redeem to the holders of the 5% Preferred at least five (5) days
prior to the redemption date. Promptly after the end of such period, the
Corporation shall pay such holders by cashier's check or wire transfer in
immediately available funds such amount and the holders shall thereupon
surrender the certificate or certificates representing the 5% Preferred to be
redeemed, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, or at such other place designated by the Corporation.
(c) If any conversion of 5% Preferred, when aggregated with all prior
conversions, will cause the Corporation to issue a number of shares of Common
Stock which exceeds twenty percent (20%) of the shares of Common Stock then
issued and outstanding, the Corporation shall redeem such number of shares of 5%
Preferred as is necessary to limit such issuance of Common Stock to twenty
percent (20%) of the number of shares of Common Stock then issued and
outstanding, unless the Corporation has previously obtained stockholder approval
to issue in excess of twenty percent
(20%) of the shares of Common Stock then issued and outstanding and is otherwise
in compliance with NASDAQ's corporate governance rules. If a redemption will
occur pursuant to the foregoing, the Corporation shall pay such holders by
cashier's check or wire transfer in immediately available funds the applicable
Redemption Price, as set forth in Section 2(b) hereof. Promptly thereafter, the
holders shall surrender the certificate or certificates representing the 5%
Preferred, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, or at such other place designated by the Corporation.
3. 5% PREFERRED - FORCED CONVERSION.
(a) The Corporation may, at its option, cause all outstanding shares of the
5% Preferred to be converted into Common Stock at any time beginning on July 1,
2000, on at least twenty (20) days' advance notice, at a conversion price
determined as set forth in Section 4 hereof (the "Conversion Price") as of the
date specified in such notice (the "Conversion Date") and otherwise on the terms
set forth in Section 4 hereof; provided, that the Corporation may not exercise
such right of conversion unless the Closing Price (last trade price) of the
Common Stock as reported by NASDAQ for the twenty (20) consecutive trading days
prior to the date the Conversion Notice is mailed has not on any day been less
than one hundred forty percent (140%) of the last trade price of the
Corporation's Common Stock on the day of Closing (subject to adjustment for
stock dividends, stock splits and reverse stock splits).
(b) At least twenty (20) days prior to the Conversion Date, written notice
(the "Conversion Notice") shall be mailed, first class postage prepaid, by the
Corporation to each holder of record of the 5% Preferred, at the address last
shown on the records of the Corporation for such holder, notifying such holder
of the conversion which is to be effected, specifying the Conversion Date and
calling upon each such holder to surrender to the Corporation, in the manner and
at the place designated, a certificate or certificates representing the number
of shares of 5% Preferred held by such holder. Subject to the provisions of the
following subsection (c), on or after the Conversion Date, each holder of 5%
Preferred shall surrender to the Corporation the certificate or certificates
representing the shares of 5% Preferred owned by such holder as of the
Conversion Date, in the manner and at the place designated in the Conversion
Notice, and thereupon the shares issuable upon such conversion shall be
delivered as provided in Section 4(b) hereof.
(c) On the second anniversary of the issuance of the 5% Preferred, all then
outstanding shares of 5% Preferred shall be automatically converted into Common
Stock at the Conversion Price and otherwise pursuant to the applicable
provisions set forth in Section 4 hereof.
4. 5% PREFERRED - OPTIONAL CONVERSION. The holders of the 5% Preferred
shall have optional conversion rights as follows:
(a) RIGHT TO CONVERT. Shares of 5% Preferred shall become convertible, at
the option of the holder thereof, into such number of fully paid and
non-assessable shares of Common Stock as is determined by dividing (A) the
Liquidation Preference of the 5% Preferred determined pursuant to Section 2
hereof on the date the notice of conversion is given, by (B) the Conversion
Price determined as hereinafter provided in effect on the applicable conversion
date. (b) Mechanics of Conversion. To convert shares of 5% Preferred into shares
of Common Stock, the holder shall give written notice to the Corporation (which
notice may be given by facsimile transmission) that such holder elects to
convert the shares and shall state therein the date of the conversion, the
number of shares to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
Promptly thereafter, the holder shall surrender the certificate or certificates
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such other place
designated by the Corporation; provided, that the holder shall not be required
to deliver the certificates representing such shares if the holder is waiting to
receive all or part of such certificates from the Corporation. The Corporation
shall, immediately upon receipt of such notice, issue and deliver to or upon the
order of such holder, against delivery of the certificates representing the
shares which have been converted, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled and such
certificate or certificates shall not bear any restrictive legend; provided (A)
the Common Stock evidenced thereby are sold pursuant to an effective
registration statement under the Act, (B) the holder provides the Corporation
with an opinion of counsel reasonably acceptable to the Corporation to the
effect that a public sale of such shares may be made without registration under
the Act, or (C) such holder provides the Corporation with reasonable assurance
that such shares can be sold free of any limitations imposed by Rule 144,
promulgated under the Act. The Corporation shall cause such issuance and
delivery to be effected within five (5) business days and shall transmit the
certificates by messenger or overnight delivery service to reach the address
designated by such holder within five (5) business days after the receipt of
such notice. The notice of conversion may be given by a holder at any time
during the day up to 5:00 p.m., Lenexa, Kansas time, and such conversion shall
be deemed to have been made immediately prior to the close of business on the
date such notice of conversion is given (a
"conversion date"). The person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock at the close of
business on such date.
(c) CONVERSION, REDEMPTION AND DELIVERY REQUIRED. The Corporation
acknowledges and understands that a delay in the issuance of the Common Stock
upon conversion or pursuant to a redemption according to the provisions hereof,
could result in economic loss to the holders of the 5% Preferred. As
compensation to any holder when the Corporation has failed with respect to such
holder to comply with the Corporation's obligations hereunder, and not as a
penalty, the Corporation shall pay to such holder liquidated damages of $500 per
day for the first thirty (30) day period after the date on which the Common
Stock should have been issued by the Corporation (i.e., the end of the five (5)
business day period described in Subsection (b)), or shares of 5% Preferred
redeemed by the Corporation, as applicable; plus $1,000 per day for each
subsequent thirty (30) day period thereafter. Such amounts shall be paid to the
holder at the end of each month in which such amounts have accrued. Payment
shall be made immediately by cashier's check or wire transfer in immediately
available funds to such account as shall be designated in writing by the holder.
Each holder shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of hereof and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which a holder
may be entitled by law or equity.
(d) DETERMINATION OF CONVERSION PRICE.
(i) The Conversion Price per share for purposes of hereof shall be
equal to the lower of: (A) Four Dollars ($4.00); or (B) the "Applicable
Percentage" multiplied by the average of the closing bid prices per share of the
Common Stock as reported by NASDAQ during the five (5) consecutive trading days
preceding the conversion date (but not including such date). The Applicable
Percentage shall be: (i) eighty five percent (85%) if the conversion date is on
or before the one hundred fiftieth (150th) day after the date of issuance; (ii)
eighty two and one half percent (82.5%) if the conversion date is between the
one hundred fifty first (151st) day after the date of issuance and on or before
the one hundred eightieth (180th) day after the date of issuance; and (iii)
eighty percent (80%) if the conversion date is on or after the one hundred
eighty first (181st) day after the date of issuance.
(ii) The "closing bid price" of the Common Stock on a trading day shall
be the closing bid price of the Common Stock on the NASDAQ National Market or
any other principal securities price quotation system or market on which prices
of the Common Stock are reported. The term "trading day" means a day on which
trading is reported on the principal quotation system or market on which prices
of the Common Stock are reported.
(e) DISTRIBUTIONS. If the Corporation shall at any time or from time to
time make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation or any of its subsidiaries other than additional
shares of Common Stock, then in each such event provision shall be made so that
the holders of 5% Preferred shall receive, upon the conversion thereof, the
securities of the Corporation which they would have received had they been the
owners on the date of such event of the number of shares of Common Stock
issuable to them upon conversion.
(f) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of any adjustment
or readjustment of the Conversion Price, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause the independent public accountants regularly employed to audit
the financial statements of the Corporation to verify such computation and
prepare and furnish to each holder of 5% Preferred a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of 5% Preferred, furnish or cause to be
furnished to such holder a like certificate prepared by the Corporation setting
forth (i) such adjustments and readjustments, and (ii) the number of other
securities and the amount, if any, of other property which at the time would be
received upon the conversion of 5% Preferred with respect to each share of
Common Stock received upon such conversion.
(g) NOTICE OF RECORD DATE. In the event of any taking by the Corporation of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any security or right convertible
into or entitling the holder thereof to receive additional shares of Common
Stock, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any
other right, the Corporation shall mail to each holder of 5% Preferred at least
ten (10) days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such dividend,
distribution, security or right.
(h) ISSUE TAXES. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of 5% Preferred pursuant hereto; provided, however, that the Corporation
shall not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the 5% Preferred, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the 5% Preferred, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the 5% Preferred, the Corporation will take
such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain any requisite shareholder approval.
(j) FRACTIONAL SHARES. No fractional shares shall be issued upon the
conversion of any share or shares of 5% Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
5% Preferred by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the Corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors of the
Corporation or an authorized Committee thereof).
(k) NOTICES. Any notice required by the provisions of this Section to be
given to the holders of shares of 5% Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation.
(l) REORGANIZATION OR MERGER. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person (other than a sale or transfer to a wholly-owned subsidiary of the
Corporation), then, as part of such reorganization, consolidation, merger or
sale, provision shall be made so that each share of 5% Preferred shall
thereafter be convertible into the number of shares of stock or other securities
or property (including cash) to which a holder of the number of shares of Common
Stock deliverable upon conversion of such share of 5% Preferred would have been
entitled upon the record date of (or date of, if no record date is fixed) such
event and, in any case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of the 5%
Preferred, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any shares
of stock or the securities or property (including cash) thereafter deliverable
upon the conversion of the shares of 5% Preferred.
5. RE-ISSUANCE OF CERTIFICATES. In the event of a conversion (or, if
applicable, redemption) of 5% Preferred in which less than all of the shares of
5% Preferred of a particular certificate are converted or redeemed, as the case
may be, the Corporation shall promptly without delay cause to be issued and
delivered to the holder of such certificate, a certificate representing the
remaining shares of 5% Preferred which have not been so converted or redeemed.
6. OTHER PROVISIONS. For all purposes of this Resolution, the term "date of
issuance" and the terms "Closing" or "Closing Date" shall mean the day on which
shares of the 5% Preferred are first issued by the Corporation. Any provision
herein which conflicts with or violates any applicable usury law shall be deemed
modified to the extent necessary to avoid such conflict or violation. The term
"NASDAQ" herein refers to the principal market on which the Common Stock of the
Corporation is traded. If the Common Stock is listed on a securities exchange,
or if another market becomes the principal market on which the Common Stock is
traded or through which price quotations for the Common Stock are reported, the
term "NASDAQ" shall be deemed to refer to such exchange or other principal
market.
7. RESTRICTIONS AND LIMITATIONS. The Corporation shall not undertake the
following actions without the consent of the holders of a majority of the 5%
Preferred: (i) modify its Articles of Incorporation or Bylaws so as to amend or
change any of the rights, preferences, or privileges of the 5% Preferred, (ii)
authorize or issue any other preferred equity security senior to or on a parity
with the 5% Preferred, as to dividends, liquidation preferences, conversion
rights, redemption rights or other rights, preferences or privileges for a
period of one hundred twenty (120) days after Closing, as applicable or (iii)
purchase or otherwise acquire for value any Common Stock or other equity
security of the Corporation either junior or senior to or on a parity with the
5% Preferred while there exists any arrearage in the payment of cumulative
dividends hereunder other than redemptions of stock from terminating employees
pursuant to contractual rights in favor of the Corporation, subject to the
rights of the Series A Shares as set forth in the Series A Certificate.
8. VOTING RIGHTS. Except as provided herein or as provided for by law, the
5% Preferred shall have no voting rights. -------------
9. ATTORNEYS' FEES. Any holder of 5% Preferred shall be entitled to recover
from the Corporation the reasonable attorneys' fees and expenses incurred by
such holder in connection with enforcement (including the reasonable costs of
investigation) by such holder of any obligation of the Corporation hereunder.
10. NO ADVERSE ACTIONS. The Corporation shall not in any manner, whether by
amendment of the Articles of Incorporation (including, without limitation, any
vote establishing a class or series of stock), merger, reorganization,
re-capitalization, consolidation, sales of assets, sale of stock, tender offer,
dissolution or otherwise, take any action, or permit any action to be taken,
solely or primarily for the purpose of increasing the value of any class of
stock of the Corporation if the effect of such action is to reduce the value or
security of the 5% Preferred.