Exhibit 1
CONVERSION AGREEMENT
AN AGREEMENT made the day of , 1996 by and between the Preferred
Stockholder (hereinafter "Holder") whose name is subscribed below and whose
name, address and shareholdings are identified on Appendix I attached hereto,
and InMedica Development Corporation, a Utah corporation, with its principal
place of business at 00 Xxxxx 000 Xxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx,
(hereinafter, "InMedica" or the "Company").
RECITALS
Whereas the Preferred Stock of the Company by its terms is presently
convertible to common stock of the Company at the conversion rate of six shares
of common stock per one share of Preferred Stock; and
Whereas the Company desires to afford the Holder the opportunity to
consider and give notice of conversion as required by the Articles of
Incorporation of the Company if the Holder desires to do so; and
Whereas the undersigned Holder is knowledgeable regarding the business, and
affairs of the Company, has had opportunity to ask and receive answers to
questions regarding the Company, and has reviewed or had opportunity to review
disclosure documents regarding the Company and now considers himself to be fully
informed and in possession of every material fact he deems necessary in order to
consider the exercise of his conversion rights with respect to the Preferred
Stock;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the parties agree as follows:
1. Notice and Exchange. Holder hereby gives notice of conversion of
his Preferred shares to common stock of the Company on the basis of six common
shares per each Preferred share presently outstanding. Holder will deliver a
signed copy of this agreement and his Preferred Stock Certificate endorsed in
blank to the Company.
2. Issuance of Shares. Upon receipt by the Company of this signed
Agreement and the Preferred Stock certificate of the Holder, the Company will
issue to Holder six restricted common shares, $.001 par value, of the Company
for each preferred share presently outstanding in the preferred shareholder's
name.
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3. Effective Date and Dividends. Holder and the Company agree that the
exchange transaction contemplated by this Agreement, shall be effective as of
November 1, 1996, upon the acceptance by the Company of the Holders' Agreement,
notwithstanding the actual date of delivery of the stock certificate
representing the Shares. The parties further agree that the Company shall pay
dividends on the preferred stock to Holder only through the third quarter of
1996.
4. Conditions. The consummation of the exchange transaction
contemplated by this Agreement is expressly conditioned upon the satisfaction or
waiver of the following conditions precedent and subsequent:
4.1 The full and due execution and delivery of this Agreement by
Holder and the Company;
4.2 The execution and delivery by Holder of the Questionnaire attached to this
Agreement as Exhibit "F" and made a part hereof;
4.3 The continued accuracy and validity of the representations and warranties of
Holder set forth in Section 5 and elsewhere in this Agreement;
4.4 The approval of this Agreement by InMedica;
5. Representations and Warranties of Holder. Holder hereby agrees,
represents and, to the extent the context shall require, warrants to the Company
as set forth below and agrees that such agreements, representations and
warranties shall expressly survive the consummation of the exchange transaction
contemplated hereby and shall be unaffected by any investigation made by any
party at any time;
5.1 Holder understands that the Preferred Stock is being exchanged and the
Shares are being issued without registration under the Federal Securities Act of
1933, as amended (the "Federal Act"), in reliance upon an exemption or
exemptions available under the Federal Act, including those available under
Section 3(a)(9) and/or Section 4(2) and/or Regulation D thereof. Holder further
understands that the Preferred Stock is being exchanged and the Shares are being
issued pursuant to an exemption from the registration provisions of the
applicable state laws and understands that the availability of the exemption or
exemptions from registration and qualification under the Federal Act and the
state laws depend in part upon the accuracy of certain of the representations,
declarations and warranties contained herein, and those which are made in the
Questionnaire attached as Exhibit "F" hereto, executed by Holder with the intent
that the same may be relied upon by the Company in determining Holder's
suitability as
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an investor in the Company. Holder further acknowledges that this transaction
has not been and will not be reviewed by the Securities and Exchange Commission
nor by the securities administrator of any state.
5.2 Holder is a resident and domiciliary, not a temporary or transient resident,
of the State shown as part of Holder's address in Holder's Questionnaire.
5.3 Holder is acquiring the Shares to be issued for investment and not with a
view to the public resale or distribution thereof. The undersigned has no
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else the Shares or any portion
thereof or interest therein, and the undersigned has no present plans to enter
into such contract, undertaking, agreement or arrangement.
5.4 Holder acknowledges that the certificate evidencing the Shares, and any and
all replacements thereof, shall bear and be subject to legends in substantially
the following form affecting the transferability of the Shares and that the
Company will place appropriate stop transfer orders with its transfer agent:
"The shares of stock evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and have been issued in reliance
upon one or more exemptions from the requirements for such registration
including an exemption for non-public offerings. Accordingly, the sale,
transfer, pledge, hypothecation or other disposition of the shares evidenced
hereby or any portion thereof or interest therein may not be accomplished in the
absence of an effective registration statement under that act, or an opinion of
counsel satisfactory in form and substance to the Company to the effect that
such a registration is not required."
5.5 Holder further understands and agrees that if he desires to make any
transfer of the Shares, the Company is in a position to impede such transfer
through prior stop orders placed with its transfer agent or otherwise and that
the Company will promptly remove such impediments placed by it only when:
(i) The Company has received a satisfactory opinion of counsel to the effect
that the proposed transfer does not require registration or qualification
pursuant to the Federal Act or the state laws by reason of an exemption provided
thereunder and a representation and agreement of the proposed transferee in form
and substance satisfactory to the Company, and the Company shall have advised
Holder that such opinion, representation and agreement are satisfactory to the
Company; or
(ii) The Company has received a satisfactory opinion of counsel to the effect
that the proposed transfer complies with the provisions
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of Rule 144 under the Federal Act and the Company shall have advised the Holder
that such counsel and such opinion are satisfactory to the Company; or
(iii) A Registration statement covering the proposed transfer has been filed
with the Securities and Exchange Commission and has been declared effective.
5.6 Holder agrees that, in any event, Holder will not attempt to dispose of the
Shares or any portion or interest therein, unless and until the Company has
determined to its satisfaction that the proposed disposition does not violate
the registration or qualification requirements of the Federal Act or applicable
state laws.
5.7 Holder understands that the Company has no obligation or intention to
register or qualify the Shares in order to permit sales thereof in accordance
with the registration or qualification provisions of the Federal Act or the
applicable state laws.
5.8 Holder hereby agrees to indemnify the Company and its officers, directors,
agents and attorneys and to hold the Company and such persons harmless from any
liability, costs or expenses (including reasonable attorneys' fees) arising as a
result of the sale or distribution of the Shares or any portion thereof or
interest therein by him in violation of the Federal Act or applicable state
laws.
5.9 Holder agrees to indemnify the Company and its officers and directors,
agents and attorneys and to hold the Company and such persons harmless from and
against any and all loss, damage, liabilities, costs or expenses (including
reasonable attorneys' fees) to which they may be put or which they may have
incurred by reason of or in connection with any misrepresentation made by
Holder, for any breach of any of Holder's warranties or Holder's failure to
fulfill any of Holder's covenants or agreements under this Agreement.
5.10 Holder hereby confirms that all statements in the Holder's Questionnaire
attached as Exhibit "F" hereto were and remain true and correct and undertakes
to immediately notify the Company of any material changes occurring thereto
prior to consummation of this exchange transaction.
5.11 Holder acknowledges that Holder and/or Holder's professional advisor have
had the opportunity to ask questions of, and receive answers from the Company,
and has/have had access to all information concerning the terms and conditions
of this exchange and the financial and operating condition of the Company and to
obtain additional information to verify the accuracy of such information.
Further, Holder has reviewed the disclosure materials included herewith,
including the financial statements contained
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therein and is familiar with their contents and further
acknowledges that Holder has had the opportunity and access to
obtain further information from the Company regarding such
financial, business and management information. Disclosure
materials attached hereto are as follows:
Form 10-KSB for the Year Ended 12/31/95 ..........Exhibit A
Articles of Incorporation of InMedica Development
Corporation, including Series "A" Preferred Stock
Amendment........................................Exhibit B
Bylaws of InMedica Development Corporation........Exhibit C
Additional Material Information...................Exhibit D
Risk Factors......................................Exhibit E
Questionnaire.....................................Exhibit F
Form 10-QSB for the Quarter Ended 6/30/96.........Exhibit G
Form 8-K dated September 20, 1996.................Exhibit H
5.12 Holder understands that, as indicated above, the Shares to be issued will
be restricted securities and, as such, and in addition to the other restrictions
described above, the Shares may be subsequently transferred only in accordance
with the provisions of Rule 144 under the Federal Act which requires, among
other things, that the Shares be held for not less than two years, known as the
"holding period", including the tacking of any prior holding period permitted by
Rule 144.
5.13 Holder understands that by its terms, this exchange is made at the option
of the Holder, and the Holder, is free to accept or reject this Conversion
Agreement.
5.14 The number of shares of the Preferred Stock held by Holder as of the date
shown, is accurate and represents the full number of shares of the Preferred
Stock held by the Holder and that all dividends owning on the Preferred Stock
have been paid in full and Holder waives and forever relinquishes any dividends
on the Preferred Stock accruing following the third quarter of 1996 and
thereafter.
5.15 Holder understands that Xxxxx X. Xxxxx, the Company's Chief Executive
Officer, purchased from Xxxxx X. Xxxxxxxx, then CEO of the Company, 1,000,000
shares of the Company's common stock for $100,000 ($.10 per share) during April,
1995 and that other transactions or exchanges in the securities of the Company
have occurred in which the common stock of the Company was valued at
substantially less than the arbitrary $.75 per share conversion ratio utilized
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in this transaction (see Exhibit A, Form 10-KSB for the year ended December 31,
1995, "Preferred Stock," "Debentures" and "Price Range for Common Stock").
5.16 Holder acknowledges that the Company makes no representations or assurances
as to the federal or state income tax implications, either to the Holder or the
Company, of this Exchange Agreement. The Company has offered no opinion or
advice in this respect and Holder acknowledges that the Company and its
management have urged Holder to consult with his professional advisors with
respect to any such tax implications.
5.17 Holder acknowledges that no representations or assurances have been given
to Holder by the Company or anyone acting in its behalf as to the continued
operations of the Company or the financial or other success thereof and Holder
recognizes that the Shares represent a speculative investment and involve risk
factors including, but not limited to, those set forth in the Exhibits hereto
including the risk of loss of Holder's entire investment in the Company.
5.18 Holder has not assigned or transferred the Preferred Stock or any interest
therein and the exchange thereof by Holder under this Agreement, to the
knowledge of Holder, will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance on, the Preferred Stock or the
Shares pursuant to any agreement, contract or other instrument to which the
Holder or the Preferred Stock is or may be bound.
5.19 Holder acknowledges that the conversion ratio for the Exchange of the
Preferred Stock for the Shares has been arbitrarily determined by the Company
and bears no relationship to book value, present or future tangible or
intangible assets of the Company or earnings of the Company or any usual
investment criteria.
6. Loss of Priority. Holder acknowledges that under the terms of the
Preferred Stock, conversion is at the option of the Preferred Stockholder. If
the Holder does not convert and execute this Exchange Agreement, then the
Preferred Stock will continue to pay or accrue dividends at the rate of 8% per
annum and the Preferred Stock would have a preference in any liquidation of the
Company over the common stockholders. If the Holder exchanges the Holder's
Preferred Stock, the Holder forever relinquishes any priority the Holder would
have had as compared to the common shareholders in a liquidation of the Company.
7. Further Assurances. Each party shall, at any time and from time to time,
at the other's request, execute, acknowledge and deliver any instrument that may
be necessary or proper to carry out the provisions of this Agreement.
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8. Time of the Essence. Time shall be of the essence in satisfying the
terms and conditions of this Agreement.
9. Attorneys' Fees. In the event a dispute arises with respect to this
Agreement, and such dispute is not resolved prior to final judicial
determination, the party prevailing in such dispute shall be entitled to recover
all expenses, including, without limitation, reasonable attorneys' fees and
expenses.
10. Complete Agreement of the Parties. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties with
respect to the subject matter hereof and contains all of the covenants and
agreements between the parties with respect to such subject matter in any manner
whatsoever. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone herein, and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may be
changed or amended only by an amendment in writing signed by all of the parties
or their respective successors in interest.
11. Assignment. This Agreement and the rights and obligations of Holder
hereunder are personal to Holder and may not be transferred or assigned without
the prior written consent of the Company.
12. Binding. Subject to the provisions of Section 11 hereof, this Agreement
shall be binding upon and inure to the benefit of the successors in interest,
assigns and personal representatives of the respective parties.
13. Number and Gender. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders and the
word "person" shall include corporation, firm, partnership or other form of
association.
14. Failure to Object Not a Waiver. The failure of either party to this
Agreement to object to, or to take affirmative action with respect to, any
conduct of the other which is in violation of the terms of this Agreement, shall
not be construed as a waiver of the violation or breach or of any future
violation, breach or wrongful conduct.
15. Unenforceable Terms. Any provision hereof prohibited by law or
unenforceable under any applicable law of any jurisdiction shall as to such
jurisdiction be ineffective without affecting any other provision of this
Agreement. To the full extent, however, that the provisions of such applicable
law may be waived, they are hereby waived to the end that this Agreement be
deemed to be a valid and binding enforceable agreement in accordance with its
terms
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16. Miscellaneous Provisions. The various headings and numbers herein and
the groupings of provisions of this Agreement into separate articles and
paragraphs are for the purpose of convenience only and shall not be considered a
part hereof. The language in all parts of this Agreement shall in all cases be
construed in accordance to its fair meaning as if prepared by all parties to the
Agreement and not strictly for or against any of the parties.
EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN
INMEDICA DEVELOPMENT CORPORATION
(Holder Signature)
(Print Name) By Xxxxx X. Xxxxx, President
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