<PAGE>
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13009
MEDICAL RESOURCES MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-4607643
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
932 GRAND CENTRAL AVENUE GLENDALE, CALIFORNIA 91201
(Address of principal executive offices) (Zip Code)
(818) 240-8250
(Registrant's telephone number, including area code)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the Registrant's classes of
common equity, as of the latest practicable date: As of March 13, 1998 there
were 7,385,927 shares outstanding of the Registrant's common stock, $0.001
par value.
Transitional Small Business Disclosure Format:
Yes [ X ] No [ ]
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets -- January 31, 1998 (unaudited)
and October 31, 1997 3
Consolidated Statements of Income -- Three Months
Ended January 31, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows -- Three Months Ended
Ended January 31, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS January 31, October 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 45,723 $ 64,356
Accounts receivable, less allowance of $75,000 at January 31, 1998
and $72,000 at October 31, 1997 2,055,059 1,829,695
Inventories 667,687 583,149
Prepaid expenses 144,556 94,378
Income tax receivable 55,113 55,113
----------- -----------
Total current assets 2,968,138 2,626,691
Property and equipment:
Rental equipment 16,702,772 16,216,245
Transportation equipment 867,492 847,492
Office furniture and equipment 317,152 311,657
Leasehold improvements 89,074 86,074
----------- -----------
17,976,490 17,461,468
Less accumulated depreciation 7,013,555 6,670,474
----------- -----------
Net property and equipment 10,962,935 10,790,994
Other assets:
Goodwill, net of accumulated amortization of $15,914 at January 31, 1998
and $9,178 at October 31, 1997 388,247 394,983
Covenants not to compete, net of accumulated amortization of $41,278
at January 31, 1998 and $23,111 at October 31, 1997 93,722 106,889
Customer list, net of accumulated amortization of $13,636
at January 31, 1998 and $9,722 at October 31, 1997 186,364 190,278
Deposits and other assets 205,718 175,563
----------- -----------
Total other assets 874,051 867,713
----------- -----------
Total assets $14,805,124 $14,285,398
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,308,277 $ 882,966
Accrued expenses 505,868 564,300
Notes payable 106,055 56,457
Current portion of long-term debt 532,705 527,771
Current portion of obligations under capital leases 1,534,428 1,495,611
----------- -----------
Total current liabilities 3,987,333 3,527,105
Long-term debt, net of current portion 1,967,398 2,090,695
Obligations under capital leases, net of current portion 4,795,203 4,728,500
Deferred income taxes 976,036 948,496
Shareholders' equity:
Common stock, $.001 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 7,385,927 at January 31, 1998 and
and 7,345,927 at October 31, 1997 7,386 7,346
Additional paid-in capital 1,683,326 1,639,366
Retained earnings 1,388,442 1,343,890
----------- -----------
Total shareholders' equity 3,079,154 2,990,602
----------- -----------
Total liabilities and shareholders' equity $14,805,124 $14,285,398
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
---------- ----------
<S> <C> <C>
Revenue $2,865,131 $1,537,511
Cost of revenue 1,210,567 640,912
Depreciation expense 336,490 224,274
---------- ----------
Gross profit 1,318,074 672,325
Selling expenses 477,565 257,903
General and administrative expenses 514,823 303,797
---------- ----------
Operating income 325,686 110,625
Interest expense 253,594 75,248
---------- ----------
Income before income taxes 72,092 35,377
Provision for income taxes 27,540 8,103
---------- ----------
Net income $ 44,552 $ 27,274
---------- ----------
---------- ----------
Net income per common share $ 0.006 $ 0.004
---------- ----------
---------- ----------
Weighted average common shares 7,380,275 6,164,328
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 44,552 $ 27,274
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 372,523 229,849
Deferred income taxes 27,540 11,453
Changes in operating assets and liabilities:
Accounts receivable (181,793) (186,469)
Inventories (24,760) (73,226)
Prepaid expenses (50,178) 2,974
Income tax receivable - (46,350)
Accounts payable 408,207 35,445
Accrued expenses (71,597) 20,884
---------- ----------
Net cash provided by operating activities 524,494 21,834
INVESTING ACTIVITIES
Purchases of property and equipment (15,607) (359,888)
Payments for non-compete agreements (5,625) -
(Increase) decrease in deposits and other assets (30,155) 1,869
---------- ----------
Net cash used for investing activities (51,387) (358,019)
FINANCING ACTIVITIES
Issuance of common stock - 180,041
Borrowings on long-term debt - 382,427
Borrowings on notes payable 22,901 -
Principal payments on long-term debt (118,363) (89,255)
Payments on notes payable (25,536) -
Principal payments on capital lease obligations (370,742) (112,548)
---------- ----------
Net cash provided by (used for) financing activities (491,740) 360,665
---------- ----------
Net increase (decrease) in cash (18,633) 24,480
Cash and cash equivalents at beginning of period 64,356 12,482
---------- ----------
Cash and cash equivalents at end of period $ 45,723 $ 36,962
---------- ----------
---------- ----------
Supplemental information:
Cash paid during the period for:
Interest $ 277,853 $ 75,248
---------- ----------
---------- ----------
Taxes $ - $ 43,000
---------- ----------
---------- ----------
Capital lease obligations entered into for equipment $ 418,976 $ 118,534
---------- ----------
---------- ----------
Common stock issued for acquired companies $ 44,000 $ -
---------- ----------
---------- ----------
Common stock issued in exchange for forgiveness of debt $ - $ 108,000
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
MEDICAL RESOURCES MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
January 31, 1998
1. BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three months ended January 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending October 31, 1998. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
October 31, 1997.
The Company acquired Pulse Medical Products, Inc. (Pulse) on March 31, 1997.
The acquisition was completed through the exchange of 325,000 shares of
common stock for all of the issued and outstanding common stock of Pulse.
This transaction has been accounted for as a purchase. Accordingly, the
accompanying unaudited consolidated financial statements include the results
of operations of Pulse commencing April 1, 1997.
The Company acquired Laser Medical, Inc. (Laser Med) on June 30, 1997. This
acquisition was completed through the exchange of 190,000 shares of common
stock for all of the issued and outstanding common stock of Laser Med. This
transaction has been accounted for as a purchase. Accordingly, the
accompanying unaudited consolidated financial statements include the results
of operations of Laser Med commencing July 1, 1997.
The Company also acquired Med Surg Specialties, Inc. (Med Surg) on June 30,
1997. This acquisition was completed through the exchange of 214,667 shares
of common stock for all of the issued and outstanding common stock of Med
Surg. This transaction has been accounted for as a purchase. Accordingly,
the accompanying unaudited consolidated financial statements include the
results of operations for Med Surg commencing July 1, 1997.
The Company acquired Texas Oxygen and Medical Equipment Co. (Tomec) effective
November 1, 1997. The acquisition was completed through the exchange of
40,000 shares of common stock for all of the issued and outstanding common
stock of Tomec. This transaction has been accounted for as a purchase.
Accordingly, the accompanying unaudited consolidated financial statements
include the results of operations of Tomec commencing November 1, 1997.
2. SHAREHOLDERS' EQUITY
There were no qualified stock options for the purchase of shares of common
stock granted during the three months ended January 31, 1998.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained in Management's Discussion and Analysis,
particularly in the final paragraph of "Liquidity and Capital Resources," and
elsewhere in this Report on Form 10-QSB are forward-looking statements.
These statements discuss, among other things, expected growth, future
revenues and future performance. The forward-looking statements are subject
to risks and uncertainties, including the following: (a) changes in levels
of competition from current competitors and potential new competition;
(b) loss of a significant customer; and (c) changes in availability or terms
of working capital financing from vendors and lending institutions. The
foregoing should not be construed as an exhaustive list of all factors that
could cause actual results to differ materially from those expressed in
forward-looking statements made by the registrant. Actual results may
materially differ from anticipated results described in these statements.
The following discussion and analysis should be read together with the
financial statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items included in the
Statements of Income:
<TABLE>
<CAPTION>
Three Months Ended
January 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Net revenues . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of revenues . . . . . . . . . . . . . . 42.3 41.7
Depreciation expense . . . . . . . . . . . . 11.7 14.6
------ ------
Gross profit . . . . . . . . . . . . . . . . 46.0 43.7
Selling expenses . . . . . . . . . . . . . . 16.6 16.8
General and administrative expenses. . . . . 18.0 19.7
------ ------
Operating income . . . . . . . . . . . . . . 11.4 7.2
Interest expense . . . . . . . . . . . . . . 8.9 4.9
------ ------
Income before income taxes . . . . . . . . . 2.5 2.3
Provision for income taxes . . . . . . . . . 0.9 0.5
------ ------
Net income . . . . . . . . . . . . . . . . . 1.6% 1.8%
------ ------
------ ------
</TABLE>
QUARTER ENDED JANUARY 31, 1998 COMPARED TO QUARTER ENDED JANUARY 31, 1997
Net revenues for the quarter ended January 31, 1998 were $2,865,000,
compared to $1,537,000 during the first quarter of the prior fiscal year, an
increase of $1,328,000, or 86.4%. The increase in net revenues is
principally the result of (i) additional revenues in the amount of $538,000
due to the acquisition of Pulse, (ii) additional revenues in the amount of
$171,000 due to the acquisition of Laser Med, (iii) additional revenues of
approximately $120,000 due to the acquisition of Med Surg, (iv) additional
revenues of $80,000 due to the acquisition of Tomec, and (v) an increase in
revenues of Physiologic Reps, Inc. (PRI), the largest wholly owned subsidiary
of the Company, in the amount of $419,000, primarily as a result of (a) an
increase in medical equipment rental revenues of $320,000 due to PRI's
increased investment in medical rental equipment at the end of fiscal 1997
and (b) an increase in revenues for mobile laser/surgical services of
approximately $99,000.
Cost of revenues for the quarter ended January 31, 1998 was $1,211,000,
an increase of $570,000, or 88.9%, over cost of revenues for the comparable
period of the prior fiscal year. The increase in cost of revenues is
primarily attributable to (i) cost of revenues in the amount of $270,000 due
to the acquisition of Pulse, (ii) cost of revenues in the amount of $69,000
due to the acquisition of Laser Med, (iii) cost of revenues of approximately
$70,000 due to the acquisition of Med Surg, (iv) cost of revenues of $60,000
due to the acquisition of Tomec, and (v) an increase in cost of revenues of
PRI in the amount of $101,000, due mostly to (a) an increase in costs for
mobile laser/surgical services and (b) higher wages paid to technicians
during the first quarter of fiscal 1998.
7
<PAGE>
Depreciation expense for the quarter ended January 31, 1998 was $336,000
compared to $224,000 for the first quarter of the prior fiscal year, an
increase of $112,000, or 50.0%. The increase in depreciation expense is
principally the result of (i) depreciation expense in the amount of $54,000
due to the acquisition of Pulse, (ii) depreciation expense in the amount of
$31,000 due to the acquisition of Laser Med, (iii) depreciation expense of
$26,000 due to the acquisition of Med Surg, and (iv) depreciation expense of
$1,000 due to the acquisition of Tomec. PRI experienced no net increase in
depreciation expense in the quarter ended January 31, 1998 in spite of the
addition of equipment in the quarter, due principally to a lengthening of the
estimated useful lives of certain equipment commencing in the latter part of
fiscal 1997.
Gross profit for the quarter ended January 31, 1998 was $1,318,000, an
increase of $646,000, or 96.1%, over gross profit for the comparable period
of the prior fiscal year. As a percentage of net revenues, gross profit
increased from 43.7% in the first quarter of fiscal 1997 to 46.0% in the
quarter ended January 31, 1998. The increase in gross profit is primarily
attributable to (i) an increase in gross profit of $214,000 due to the
acquisition of Pulse, (ii) an increase in gross profit of $71,000 due to the
acquisition of Laser Med, (iii) an increase in gross profit of $24,000 due to
the acquisition of Med Surg, (iv) an increase in gross profit of $19,000 due
to the acquisition of Tomec, and (v) an increase in the gross profit of PRI
in the amount of $ 318,000, due almost entirely to the increase in medical
rental revenues described previously.
Selling expenses for the quarter ended January 31, 1998 were $477,000,
compared to $258,000 for the comparable period of the prior year, an increase
of $219,000, or 84.9%. As a percentage of net revenues, selling expenses
decreased from 16.8% in the quarter ended January 31, 1997 to 16.6% in the
first quarter of the current fiscal year. The increase in selling expense is
primarily the result of (i) additional selling expenses in the amount of
$45,000 due to the acquisition of Pulse, (ii) additional selling expenses of
$24,000 due to the acquisition of Laser Med, (iii) additional selling
expenses in the amount of approximately $5,000 due to the acquisition of Med
Surg, (iv) additional selling expenses of $2,000 due to the acquisition of
Tomec, and (v) an increase in selling expenses of PRI in the amount of
$143,000 as a result of (a) the addition of sales personnel and (b) an
increase in commissions relating to the overall increase in revenues from
medical equipment rentals and mobile laser/surgical services.
General and administrative expenses increased to $515,000 in the quarter
ended January 31, 1998 from $304,000 in the quarter ended January 31, 1997,
an increase of $211,000, or 69.4%. As a percentage of net revenues, such
expenses decreased from 19.7% in the first quarter of the prior fiscal year
to 18.0% in the quarter ended January 31, 1998. The increase in general and
administrative expense is primarily the result of (i) additional general and
administrative expenses in the amount of $55,000 due to the acquisition of
Pulse, (ii) additional general and administrative expenses of $8,000 due to
the acquisition of Laser Med, (iii) additional general and administrative
expenses in the amount of $6,000 due to the acquisition of Tomec, (iv) an
increase in general and administrative expenses of PRI in the amount of
$112,000 due primarily to the addition of administrative personnel, and (v) a
$30,000 increase in general and administrative expenses of the parent
company, MRM, principally due to an increase in amortization of goodwill and
non-compete agreements.
Interest expense for the quarter ended January 31, 1998 was $254,000,
compared to $75,000 in the first quarter of the prior fiscal year, an
increase of $179,000, or 238.7%. The increase in interest expense is the
result of (i) additional interest expense in the amount of $98,000 due to
the acquisition of Pulse, (ii) additional interest expense of $22,000 due to
the acquisition of Laser Med, (iii) additional interest expense in the amount
of $16,000 due to the acquisition of Med Surg, (iv) additional interest
expense of $2,000 due to the acquisition of Tomec, and (v) an increase in
interest expense of PRI in the amount of $41,000, principally due to an
increase in capital lease obligations of PRI relating to medical rental
equipment acquired.
Income before income taxes was $72,000 for the quarter ended January 31,
1998, compared to $35,000 for the quarter ended January 31, 1997, an increase
of $37,000, or 105.7%. Income before income taxes, as a percentage of
revenues, increased slightly to 2.5% in the quarter ended January 31, 1998
from 2.3% in the quarter ended January 31, 1997 as a result of all of the
aforementioned factors.
8
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from the funding of its
working capital needs, principally accounts receivable, as well as its
capital expenditure needs. The Company's primary sources for working capital
are cash flow from operations and borrowings under debt facilities.
During the three months ended January 31, 1998, net cash provided by
operating activities was $524,000, which resulted primarily from (i) net
income of $45,000, (ii) depreciation and amortization expense of $372,000,
(iii) an increase in long-term deferred income tax liabilities of $27,000,
and (iv) a net decrease of approximately $80,000 in working capital items.
Net cash used for investing activities during the three months ended
January 31, 1998 was $51,000, which was principally attributable to
(i) property additions of $15,000, (ii) payments for non-compete agreements of
$6,000 and (iii) an increase of $30,000 in deposits and other assets.
During the three months ended January 31, 1998, the Company's cash used
by financing activities totaled $492,000, consisting of (i) principal
payments on long-term debt of $118,000, (ii) principal payments on notes
payable of $26,000 and (iii) principal payments on capital lease obligations
of $371,000, offset in part by $23,000 of borrowings on notes payable.
COMMITMENTS
The Company had no material commitments for capital expenditures at
January 31, 1998. However, although it has no present commitments or
agreements to make such capital expenditures, during the next 12 months the
Company expects to make substantial capital expenditures, in accordance with
its historical practice. The mobile laser/surgical services and medical
equipment rental businesses are capital intensive. The Company believes that
funds generated from operations, together with funds available from credit
facilities and capital lease facilities that the Company expects to obtain
during the coming 12-month period, will be sufficient to finance its working
capital and capital expenditure requirements for the next 12 months.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
COMMON STOCK
As of January 31, 1998, the Company had 7,385,927 shares of common stock
issued and outstanding. The holders of shares of common stock are entitled
to dividends when and as declared by the Board of Directors from funds
legally available therefore, and, upon liquidation are entitled to share, pro
rata, in any distribution to holders of common stock. There are no
pre-emptive, conversion or redemption privileges, nor sinking fund provisions
with respect to the common stock. All of the outstanding shares of common
stock are duly authorized, validly issued, fully paid and non-assessable.
1. On November 14, 1997, the Company issued 40,000 shares of common stock to
the former shareholders of Tomec in exchange for all of the issued and
outstanding common stock of Tomec. This transaction was accounted for as a
purchase and, accordingly, the results of operations of Tomec have been
included in the statement of income since November 1, 1997, which was the
effective date of the acquisition.
In each sale of securities described in the preceding paragraphs of this
Item 2, each purchaser agreed that the securities acquired will be held for
investment purposes, that the representative certificates may bear
restrictive legends indicating that the securities may not be freely
transferred and that the records of the Company may contain appropriate stop
transfer orders. The Company had reasonable grounds to believe that each
purchaser was capable of evaluating the merits and risks of his investment,
was able to bear the economic risks of his investment and acquired the
securities for investment purposes only. Accordingly, the Company believes
that the foregoing transactions were exempt from the registration provisions
of the Securities Act of 1933 pursuant to the exemption under Section 4(2) of
that Act, and the Rules and Regulations promulgated thereunder and under
Section 3(b) of that Act, by reason of such transactions being by an issuer
and not involving a public offering.
10
<PAGE>
STOCK OPTIONS
STOCK INCENTIVE PLAN
In September 1996, the Company adopted the 1996 Stock Incentive Plan
(Plan) to allow officers and employees and certain non-employees to receive
options to purchase common stock and to receive grants of common stock
subject to certain restrictions. Under the Plan, regular salaried employees,
including directors, who are full time employees, may be granted options
exercisable at not less than 100 percent of the fair market value at the date
of grant. The exercise price of any option granted to an optionee who owns
stock possessing more than ten percent of the voting power of all classes of
stock of the Company must be 110 percent of the fair market value of the
common stock on the date of grant, and the duration may not exceed five
years. Options generally become exercisable at a rate of one-third percent
of the shares subject to option on each of the first, second and third
anniversary dates of the grant. The duration of options may not exceed ten
years. A maximum number of 1,500,000 shares of common stock may be issued
pursuant to the Plan. As of January 31, 1998, there were 839,000 qualified
options granted and outstanding.
OTHER STOCK OPTIONS
In conjunction with the August 19, 1996 reorganization between Medical
Resources Management, Inc. (MRM) and Physiologic Reps, Inc. (PRI), in
exchange for options previously granted to purchase shares of PRI, two
officers received 81,804 non-qualified options to purchase MRM common stock
at an exercise price of $.50 per share. Additionally, on June 30, 1997, the
Company granted non-qualified stock options to certain officers to purchase
an aggregate of 315,000 shares of common stock at an exercise price of
$1.50 per share, which price was at fair market value at the time of grant.
On June 30, 1997, the Company also issued non-qualified stock options to Robert
Stuckelman, a non-employee Director of MRM, to purchase 10,000 shares of
common stock at an exercise price of $1.50 per share. These non-qualified
options generally have the same restrictions, except for vesting provisions,
as options granted under the 1996 Stock Incentive Plan. As of January 31,
1998, there were 406,804 non-qualified options granted and outstanding.
The following table summarizes stock option activity during the quarter
ended January 31, 1998 and the fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
Three months ended January 31, 1998 Year ended October 31, 1997
----------------------------------- ---------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------------------------------- ---------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period 1,246,304 $1.44 424,804 $1.31
Granted $1.50 874,000 $1.50
Exercised - - - -
Forfeited or cancelled (500) $1.50 (52,500) $1.50
----------------------------------- ---------------------------
Outstanding at end of period 1,245,804 $1.44 1,246,304 $1.44
----------------------------------- ---------------------------
----------------------------------- ---------------------------
Options exercisable at period-end 504,104 $1.34 149,856 $1.14
----------------------------------- ---------------------------
----------------------------------- ---------------------------
</TABLE>
11
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit
Number Exhibit Description
6.15 Plan and Agreement of Reorganization between the Registrant and
Texas Oxygen and Medical Equipment Co. dated November 14, 1997.
(b) REPORTS ON FORM 8-K
None.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDICAL RESOURCES MANAGEMENT, INC.
Date March 17, 1998
By /s/ Allen H. Bonnifield
---------------------------------------
Allen H. Bonnifield, President and CEO
13
<PAGE>
PLAN AND AGREEMENT OF REORGANIZATION
BETWEEN
TEXAS OXYGEN MEDICAL EQUIPMENT CO.
AND
MEDICAL RESOURCES MANAGEMENT, INC.
RELATING TO THE EXCHANGE OF COMMON STOCK OF
TEXAS OXYGEN MEDICAL EQUIPMENT CO.
FOR
COMMON STOCK OF MEDICAL RESOURCES MANAGEMENT, INC.
DATED NOVEMBER 14, 1997
<PAGE>
PLAN AND AGREEMENT
OF REORGANIZATION
This PLAN AND AGREEMENT OF REORGANIZATION (the "Agreement") is entered
into on this 14th day of November, 1997, by and between MEDICAL RESOURCES
MANAGEMENT, INC., a Nevada corporation ("MRM") and TEXAS OXYGEN MEDICAL
EQUIPMENT CO., a Texas corporation ("TOMEC"), and those persons listed in
EXHIBIT A hereto, being all of the shareholders of TOMEC who own individually
at least five percent (5%) of the outstanding stock of TOMEC and together
hold over 50% of the outstanding stock of TOMEC as of the date this Agreement
is executed.
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is intended to be a "tax
free" exchange as contemplated by the provisions of Sections 351 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. MRM will
acquire up to 100% of TOMEC's issued and outstanding common stock ($1.00 par
value per share), and all warrants and options outstanding (the "TOMEC Stock"
or the "TOMEC Shares"), in exchange for 40,000 shares of MRM's common stock
($.001 par value per share) (the "Exchange Stock") (collectively, the
"Exchange Transaction"). The Exchange Transaction will result in TOMEC
becoming a wholly owned subsidiary of MRM.
AGREEMENT
SECTION 1
TRANSFER OF TOMEC SHARES
1.1 All shareholders of TOMEC (the "Shareholders" or the "TOMEC
Shareholders") as of the date of Closing, as such term is defined in Section 3
herein (the "Closing" or the "Closing Date"), shall transfer, assign, convey
and deliver to MRM at the Closing Date certificates representing 100% of the
TOMEC shares then issued and outstanding, or such lesser percentage as shall
be acceptable to MRM, but in no event less than 95% of the TOMEC Shares. The
transfer of the TOMEC Shares shall be made free and clear of all liens,
mortgages, pledges, encumbrances or charges, whether disclosed or
undisclosed, except as the TOMEC Shareholders and MRM shall have otherwise
agreed in writing.
1
<PAGE>
SECTION 2
ISSUANCE OF EXCHANGE STOCK AND ADDITIONAL
STOCK TO TOMEC SHAREHOLDERS
2.1 As consideration for the transfer, assignment, conveyance and
delivery of the TOMEC Stock hereunder, MRM shall, at the Closing, issue to
the TOMEC Shareholders, pro rata in accordance with each Shareholder's
percentage ownership of TOMEC immediately prior to the Closing, certificates
for 40,000 shares of Exchange Stock. The parties intend that the Exchange
Stock being issued will be used to acquire all issued and outstanding TOMEC
Shares. To the extent that less than 100% of the TOMEC Stock is acquired,
the number of shares of Exchange Stock issuable to those TOMEC Shareholders
who have elected to participate in the exchange described in this Agreement
(the "Exchange") shall increase proportionately.
2.2 Additional shares of MRM common stock (the "Additional Stock")
shall be issued to the TOMEC Shareholders pro rata in accordance with each
Shareholder's percentage ownership of TOMEC immediately prior to the Closing.
The amount of Additional Stock will be based upon the following formula:
(i) one share of MRM Common Stock for each $3.00 of earnings before interest,
taxes, depreciation and amortization ("EBITDA") realized by TOMEC during the
year ending October 31, 1998 ("Year 1"), and (ii) one share of MRM Common
Stock for each $4.00 of EBITDA realized by TOMEC during the year ending
October 31, 1999 ("Year 2"). (Example: If TOMEC's EBITDA for Year 1 is
$150,000, MRM will issue and deliver 50,000 shares of Additional Stock, and
if TOMEC's EBITDA for Year 2 is $240,000, MRM will issue and deliver another
60,000 shares of Additional Stock).
2.3 The issuance of the Exchange Stock and Additional Stock shall be
made free and clear of all liens, mortgages, pledges, encumbrances or
charges, whether disclosed or undisclosed, except as the TOMEC Shareholders
and MRM shall have otherwise agree in writing. As provided herein, and
immediately prior to the Closing, MRM shall have issued and outstanding:
(i) not more than 7,500,000 shares of common stock; (ii) not more than
3,000,000 options and warrants outstanding; and (iii) shall not have any shares
of preferred stock issued and outstanding. All options and warrants provide
for the purchase of one share of common stock for each option or warrant.
2.4 None of the Exchange Stock or Additional Stock issued or to be
issued to the TOMEC Shareholders, nor any of the TOMEC Stock transferred to
MRM hereunder shall, at the time of Closing, be registered under federal
securities laws but, rather, shall be issued pursuant to an exemption
therefrom and be considered "restricted stock" within the meaning of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"). All of
such shares shall bear a legend worded substantially as follows:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 (the "Act") and are 'restricted securities' as
that term is defined in Rule 144 under
2
<PAGE>
the Act. The shares may not be offered for sale, sold or otherwise
transferred except pursuant to an exemption from registration under the
Act, the availability of which is to be established to the satisfaction of
the Company."
The respective transfer agents of MRM and TOMEC shall annotate their records
to reflect the restrictions on transfer embodied in the legend set forth
above. There shall be no requirement that MRM register the Exchange Stock or
Additional Stock under the Act, nor shall TOMEC or the Shareholders be
required to register any TOMEC Shares under the Act.
SECTION 3
CLOSING
3.1 CLOSING OF TRANSACTION. Subject to the fulfillment or waiver of
the conditions precedent set forth in Section 10 hereof, the Closing shall
take place on the Closing Date at the offices of Medical Resources
Management, Inc., 932 Grand Central Avenue, Glendale, California at 10:00 a.m.,
local time, or at such other time on the Closing Date as TOMEC and MRM shall
mutually agree in writing.
3.2 CLOSING DATE. The Closing Date of the Exchange shall take place
on a date chosen by mutual agreement of TOMEC and MRM within sixty (60) days
from the date of this Agreement, or such later date upon which TOMEC and MRM
may mutually agree in writing, or as extended pursuant to subsection 11.1(b)
herein.
3.3 DELIVERIES BY TOMEC AT CLOSING. TOMEC shall deliver or cause to
be delivered to MRM at the Closing:
(a) certificates representing all shares, or an amount of shares
acceptable to MRM, of the TOMEC Stock as described in
Section 1, each endorsed in blank by the registered owner;
(b) an agreement from each Shareholder surrendering his or her
shares agreeing to a restriction on the transfer of the
Exchange Stock as described in Section 2 hereof;
(c) a copy of a consent by TOMEC's Board of Directors authorizing
TOMEC to take the necessary steps toward closing the
transaction described by this Agreement in the form set forth
in EXHIBIT B;
(d) a copy of a Certificate of Good Standing for TOMEC issued not
more than thirty (30) days prior to the Closing Date by the
Texas Secretary of State;
3
<PAGE>
(e) an opinion of William R. Brown, PC, counsel to TOMEC, dated
the Closing Date, in a form deemed acceptable by MRM and its
counsel;
(f) Articles of Incorporation and Bylaws of TOMEC certified as of
the Closing Date by the President and Secretary of TOMEC;
(g) all of TOMEC's corporate records;
(h) executed bank forms for TOMEC bank accounts reflecting a
change in management and signatories to said bank accounts;
(i) such other documents, instruments or certificates as shall be
reasonably requested by MRM or its counsel.
3.4 DELIVERIES BY MRM AT CLOSING. MRM shall deliver or cause to be
delivered to TOMEC at the Closing:
(a) a copy of a consent of MRM's Board of Directors authorizing
MRM to take the necessary steps toward closing the transaction
described by this Agreement in the form set forth in EXHIBIT C;
(b) a copy of a Certificate of Good Standing for MRM issued not
more than thirty (30) days prior to the Closing by the
Secretary of State of Nevada;
(c) stock certificate(s) or a computer listing from MRM's
transfer agent representing the Exchange Stock to be newly
issued by MRM under this Agreement, which certificates shall
be in the names of the appropriate TOMEC Shareholders, each
in the appropriate denomination as described in Section 2;
(d) an opinion of William B. Barnett, Esq., special counsel to
MRM, dated the Closing Date, in a form deemed acceptable to
TOMEC and its counsel;
(e) Articles of Incorporation and Bylaws of MRM certified as of
the Closing Date by the President and Secretary of MRM;
(f) such other documents, instruments or certificates as shall
be reasonably requested by TOMEC or its counsel.
3.5 FILINGS, COOPERATION.
(a) Prior to the Closing, the parties shall proceed with due
diligence and in good faith to make such filings and take
such other actions as may be necessary to satisfy the
conditions precedent set forth in Section 10 below.
4
<PAGE>
(b) On and after the Closing Date, MRM, TOMEC and the
Shareholders set forth in EXHIBIT A shall, on request and
without further consideration, cooperate with one another by
furnishing or using their best efforts to cause others to
furnish any additional information and/or executing and
delivering or using their best efforts to cause others to
execute and deliver any additional documents and/or
instruments, and doing or using their best efforts to cause
others to do any and all such other things as may be
reasonably required by the parties or their counsel to
consummate or otherwise implement the transactions
contemplated by this Agreement.
SECTION 4
REPRESENTATIONS AND WARRANTIES BY
TOMEC AND CERTAIN SHAREHOLDERS
4.1 Subject to the schedules of exceptions attached hereto and
incorporated herein by this reference (which schedules shall be acceptable to
MRM), TOMEC and those Shareholders listed on EXHIBIT A represent and warrant to
MRM as follows:
(a) ORGANIZATION AND GOOD STANDING OF TOMEC. TOMEC is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and has full
corporate power and authority to own or lease its properties
and to carry on its business as now being conducted and as
proposed to be conducted. The Articles of Incorporation of
TOMEC and all Amendments thereto as presently in effect,
certified by the Secretary of State of Texas, and the Bylaws
of TOMEC as presently in effect, certified by the President
and Secretary of TOMEC, have been delivered to MRM and are
complete and correct, and since the date of such delivery,
there has been no amendment, modification or other change
thereto.
(b) CAPITALIZATION. TOMEC's authorized capital stock is 1,000
shares of $1.00 par value common stock (defined herein as
"TOMEC Common Stock"), of which 1,000 shares are issued and
outstanding prior to the Closing Date, and held of record by
two (2) persons, who are currently residents of one of the
following jurisdictions: Texas. All of such outstanding
shares are validly issued, fully paid and non-assessable.
All securities issued by TOMEC as of the date of this
Agreement have been issued in compliance with all applicable
state and federal laws. Except as set forth in SCHEDULE 4.1(b),
no other equity securities or debt obligations of TOMEC are
authorized, issued or outstanding.
5
<PAGE>
(c) SUBSIDIARIES. TOMEC has no subsidiaries and no other
investments, directly or indirectly, or other financial
interest in any other corporation or business organization,
joint venture or partnership of any kind whatsoever.
(d) FINANCIAL STATEMENTS. TOMEC will deliver to MRM, prior to
the Closing, a copy of TOMEC's unaudited financial
statements through September 30, 1997 (the "TOMEC Financial
Statements"), which will be substantially true and complete.
The TOMEC Financial Statements will be signed by the
President and Secretary of TOMEC certifying that, to the
best of their knowledge, such financial statements are true
and complete. Other than changes in the usual and ordinary
conduct of the business, since September 30, 1997 there have
been, and at the Closing Date there will be, no material
adverse changes in such financial statements.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. TOMEC has no
liabilities which are not adequately reflected or reserved
against in the TOMEC Financial Statements or otherwise
reflected in this Agreement, and TOMEC shall not have as of
the Closing Date any liabilities (secured or unsecured and
whether accrued, absolute, direct, indirect or otherwise)
which were incurred after September 30, 1997, and would be,
individually or in the aggregate, materially adverse to the
results of operations or financial condition of TOMEC as of
the Closing Date.
(f) LITIGATION. Except as disclosed in SCHEDULE 4.1(f), there
are no outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory body, or
arbitration tribunal against TOMEC or its properties. Except
as disclosed in SCHEDULE 4.1(f), there are no actions, suits
or proceedings pending, or, to the knowledge of TOMEC,
threatened against or affecting TOMEC, any of its officers
or directors relating to their positions as such, or any of
its properties, at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality,
foreign or domestic, in connection with the business,
operations or affairs of TOMEC, which might result in any
material adverse change in the operations or financial
condition of TOMEC, or which might prevent or materially
impede the consummation of the transactions under this
Agreement.
(g) COMPLIANCE WITH LAWS. To the best of its knowledge, the
operations and affairs of TOMEC do not violate any law,
ordinance, rule or regulation currently in effect, or any
order, writ, injunction or decree of any court or
governmental agency, the violation of which would
substantially and adversely affect the business, financial
condition or operations of TOMEC.
6
<PAGE>
(h) ABSENCE OF CERTAIN CHANGES. Except as set forth in
SCHEDULE 4.1(h), or otherwise disclosed in writing to MRM,
since September 30, 1997: (i) TOMEC has not entered into any
material transaction; (ii) there has been no change in the
condition (financial or otherwise), business, property,
prospects, assets or liabilities of TOMEC as shown in the
TOMEC Financial Statements, other than changes that both
individually and in the aggregate do not have a consequence
that is materially adverse to such condition, business,
property, prospects, assets or liabilities; (iii) there has
been no damage to, destruction of or loss of any of the
properties or assets of TOMEC (whether or not covered by
insurance) materially and adversely affecting the condition
(financial or otherwise), business, property, prospects,
assets or liabilities of TOMEC; (iv) TOMEC has not declared
or paid any dividend, made any distribution on its capital
stock, redeemed, purchased or otherwise acquired any of its
capital stock, granted any options to purchase shares of its
stock, or issued any shares of its capital stock; (v) there
has been no material adverse change, except in the ordinary
course of business, in the contingent obligations of TOMEC by
way of guaranty, endorsement, indemnity, warranty or
otherwise; (vi) there have been no loans made by TOMEC to its
employees, officers or directors; (vii) there has been no
waiver or compromise by TOMEC of a valuable right or of a
material debt owed to it; (viii) there has been no
extraordinary increase in the compensation of any of TOMEC's
employees; (ix) there has been no agreement of commitment by
TOMEC to do or perform any of the acts described in this
Section 4.1(h); and (x) there has been no other event or
conditions of any character which might reasonably be expected
either to result in a material and adverse change in the
condition (financial or otherwise), business, property,
prospects, assets or liabilities of TOMEC, or to materially
impair the ability of TOMEC to conduct the business now being
conducted.
(i) EMPLOYEES. Except as disclosed in SCHEDULE 4.1(i), there
are no collective bargaining, bonus, profit sharing,
compensation or other plans, agreements or arrangements
between TOMEC and any of its employees, officers or
directors, and there are no employment, consulting,
severance or indemnification arrangements, agreements or
understandings between TOMEC (on the one hand), and any
current or former employees, officers or directors (on the
other hand).
(j) ASSETS. All of the assets reflected on the TOMEC Financial
Statements or acquired and held as of the Closing Date will
be owned by TOMEC on the Closing Date. Except as set forth
in SCHEDULE 4.1(j), TOMEC owns outright and has good and
marketable title, or holds valid and enforceable leases, to
all of such assets. None of TOMEC's equipment used by TOMEC
in connection with its business has any material
7
<PAGE>
defects, and all such equipment is, in all material
respects, in good operating condition and repair, and is
adequate for the uses to which it is being put. None of
TOMEC's equipment is in need of maintenance or repairs,
except for ordinary, routine maintenance and repair.
Furthermore, TOMEC represents that, except to the extent
disclosed in SCHEDULE 4.1(j) to this Agreement or reserved
against on its balance sheet as of September 30, 1997, it is
not aware of any accounts or contracts receivable existing
that, in its judgment, would be uncollectible.
(k) TAX MATTERS. TOMEC represents that, except as set forth in
SCHEDULE 4.1(k), all federal, foreign, state and local tax
returns, reports and information statements required to be
filed by or with respect to the activities of TOMEC have
been timely filed. Since September 30, 1997, TOMEC has not
incurred any liability with respect to any federal, foreign,
state or local taxes except in the ordinary and regular
course of business. Such returns, reports and information
statements are true and correct in all material respects
insofar as they relate to the activities of TOMEC. On the
date of this Agreement, TOMEC is not delinquent in the
payment of any such tax or assessment, and no deficiencies
for any amount of such tax have been proposed or assessed.
Any tax sharing agreement among or between TOMEC and any
affiliate thereof shall be terminated as of the Closing Date.
(l) CONTRACTS. Set forth on SCHEDULE 4.1(l) hereto is a true
and complete list of all material contracts, agreements or
commitments to which TOMEC is a party or is bound. All such
material contracts, agreements and commitments are valid and
biding on TOMEC in accordance with their terms.
(m) INSURANCE. Set forth on SCHEDULE 4.1(m) hereto is a list of
insurance policies currently maintained by TOMEC in full
force and effect which provide for coverages which are usual
and customary in its business as to amount and scope, and
are adequate to protect TOMEC against any reasonably
foreseeable risk of loss.
(n) OPERATING AUTHORITIES. To the best of its knowledge, TOMEC
has all material operating authorities, governmental
certificates, and licenses, permits, authorizations and
approvals (the "Permits" or, individually, "Permit")
required to conduct its business as presently conducted.
Such Permits are set forth on SCHEDULE 4.1(n). Since
TOMEC's inception (i) there has not been any notice or
adverse development regarding such Permits; (ii) such
Permits are in full force and effect; (iii) no material
violations are or have been recorded in respect of any
Permit; and (iv) no proceeding is pending or threatened to
revoke or limit any Permit.
8
<PAGE>
(o) CONTINUATION OF KEY MANAGEMENT. To the best of its
knowledge, TOMEC's key management personnel intend to
continue their employment with TOMEC after the Closing. For
purposes of this subsection 4.1(o), "key management
personnel" shall include Bruce Grizzle and Jane Grizzle.
(p) BOOKS AND RECORDS. The books and records of TOMEC are
complete and correct, are maintained in accordance with good
business practice, and accurately reflect, in all material
respects, all of the transactions described therein, and
there have been no material transactions involving TOMEC
which properly should have been set forth therein and which
have not been accurately so set forth.
(q) AUTHORITY TO EXECUTE AGREEMENT. The Board of Directors of
TOMEC, pursuant to the power and authority legally vested in
it, has duly authorized the execution and delivery by TOMEC
of this Agreement, and has duly authorized each of the
transactions hereby contemplated. TOMEC has the power and
authority to execute and deliver this Agreement, to
consummate the transactions hereby contemplated, and to take
all other actions required to be taken by it pursuant to the
provisions hereof. TOMEC has taken all actions required by
law, its Articles of Incorporation, as amended, its Bylaws,
as amended, or otherwise, to authorize the execution and
delivery of this Agreement. This Agreement is valid and
binding upon TOMEC and those TOMEC Shareholders listed in
EXHIBIT A hereto in accordance with its terms. Neither the
execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will
constitute a violation or breach of the Articles of
Incorporation, as amended, or the Bylaws, as amended, of
TOMEC, or of any agreement, stipulation, order, writ,
injunction, decree, law, rule or regulation applicable to
TOMEC.
(r) FINDER'S FEES. TOMEC is not, and on the Closing Date will
not be, liable or obligated to pay any finder's, agent's or
broker's fee arising out of or in connection with this
Agreement or the transactions contemplated by this Agreement.
4.2 DISCLOSURE. At the date of this Agreement, TOMEC and those TOMEC
Shareholders listed in EXHIBIT A have, and at the Closing Date they will
have, disclosed all events, conditions and facts materially affecting the
business and prospects of TOMEC which are within the personal knowledge of
TOMEC or such Shareholders. TOMEC and such Shareholders have not now, and
will not have at the Closing Date, withheld knowledge of any such events,
conditions or facts which they know, or have reasonable grounds to know, may
materially affect TOMEC's business or prospects. To the best knowledge of
TOMEC and such Shareholders, neither this Agreement, nor any
9
<PAGE>
certificate, exhibit, schedule or other written document or statement,
furnished to MRM by TOMEC and/or by such Shareholders in connection with the
transactions contemplated by this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to be stated in order to make the statements
contained herein or therein not misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES BY MRM
5.1 Subject to the schedules of exceptions, attached hereto and
incorporated herein by this reference (which schedules shall be acceptable to
TOMEC), MRM represents and warrants to TOMEC and those Shareholders listed in
EXHIBIT A as follows:
(a) ORGANIZATION AND GOOD STANDING OF MRM. MRM is a corporation
duly organized, validly existing and in good standing under
the laws of the State of Nevada, and has full corporate
power and authority to own or lease its properties and to
carry on its business as now being conducted and as proposed
to be conducted. MRM is qualified to conduct business as a
foreign corporation in no other jurisdiction, and the
failure to so qualify in any other jurisdiction does not
materially adversely affect the ability of MRM to carry on
its business as most recently conducted. The Articles of
Incorporation of MRM, and all amendments thereto, as
presently in effect, certified by the Secretary of State of
Nevada, and the Bylaws of MRM as presently in effect,
certified by the President and Secretary of MRM, have been
delivered to TOMEC and are complete and correct, and since
the date of such delivery, there has been no amendment,
modification or other change thereto.
(b) CAPITALIZATION. MRM's authorized capital stock consists of
100,000,000 shares of $.001 par value common stock (defined
herein as "MRM Common Stock"), approximately 7,500,000
shares of which will be issued and outstanding prior to the
Closing Date. All authorized and/or outstanding options and
warrants are set forth on SCHEDULE 5.1(b). The shares of MRM
Common Stock are free and clear of all liens, charges,
claims, pledges, restrictions and encumbrances whatsoever of
any kind or nature that would inhibit, prevent or otherwise
interfere with the transactions contemplated hereby. All of
the outstanding shares of MRM Common Stock are validly
issued, fully paid and non-assessable, and there are no
voting trust agreements or other contracts, agreements, or
arrangements restricting or affecting voting or dividend
rights or
10
<PAGE>
transferability with respect to the outstanding shares of MRM
Common Stock.
(c) ISSUANCE OF EXCHANGE STOCK AND ADDITIONAL STOCK. All of the
MRM Common Stock to be issued to or transferred to TOMEC
Shareholders pursuant to this Agreement, when issued,
transferred and delivered as provided herein, will be duly
authorized, validly issued, fully paid and non-assessable,
and will be free and clear of all liens, charges, claims,
pledges, restrictions and encumbrances whatsoever of any
kind or nature, except those restrictions imposed by state
or federal corporate and securities regulations.
(d) APPROVAL OF THE TRANSACTION. MRM will use its best efforts
to forthwith obtain any approval of the transactions set
forth in this Agreement relating to its outstanding shares
if required by the General Corporation Law of California.
(e) VIOLATIONS, CONFLICTS. Neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by MRM with any of the
provisions hereof will: (i) violate or conflict with, or
result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under, any of the terms,
conditions or provisions of the Articles of Incorporation or
Bylaws of MRM, or any note, bond, mortgage, indenture, deed
of trust, license, agreement or other instrument to which
MRM is a party, or by which it or its properties or assets
may be bound or affected; or (ii) violate any order, writ,
injunction, decree, statute, rule, permit or regulations
applicable to MRM or to any of its properties or assets.
(f) FINANCIAL STATEMENTS. MRM will deliver to TOMEC, prior to
the Closing, a copy of MRM's unaudited consolidated
financial statements through July 31,1997 (the "MRM
Financial Statements"), which will be true and complete, and
which have been prepared in accordance with generally
accepted accounting principles. Other than changes in the
usual and ordinary conduct of the business, since July 31,
1997 there have been, and at the Closing Date there will be,
no material adverse changes in such financial statements.
(g) ABSENCE OF UNDISCLOSED LIABILITIES. MRM has no liabilities
which are not adequately reflected or reserved against in
the MRM Financial Statements or otherwise reflected in this
Agreement, and MRM shall not have as of the Closing Date any
liabilities (secured or unsecured and whether accrued,
absolute, direct, indirect or otherwise) which were incurred
after July 31, 1997, and would be, individually or in the
11
<PAGE>
aggregate, materially adverse to the results of operations
or financial condition of MRM as of the Closing Date.
(h) LITIGATION. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or
regulatory body, or arbitration tribunal against MRM or its
properties. There are no actions, suits or proceedings
pending, or, to the knowledge of TOMEC, threatened against
or affecting MRM, any of its officers or directors relating
to their positions as such, or any of its properties, at law
or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau,
agency or instrumentality, foreign or domestic, in
connection with the business, operations or affairs of MRM
which might result in any material adverse change in the
operations or financial condition of MRM, or which might
prevent or materially impede the consummation of the
transactions under this Agreement.
(i) COMPLIANCE WITH LAWS. To the best of its knowledge, the
operations and affairs of MRM do not violate any law,
ordinance, rule or regulation currently in effect, or any
order, writ, injunction or decree of any court or governmental
agency, the violation of which would substantially and
adversely affect the business, financial condition or
operations of MRM.
(j) TAX MATTERS. MRM represents that, except as set forth in
SCHEDULE 5.1(j), all federal, foreign, state and local tax
returns, reports and information statements required to be
filed by or with respect to the activities of MRM have been
timely filed. Since July 31, 1997, MRM has not incurred any
liability with respect to any federal, foreign, state or
local taxes except in the ordinary and regular course of
business. Such returns, reports and information statements
are true and correct in all material respects insofar as
they relate to the activities of MRM. On the date of this
Agreement, MRM is not delinquent in the payment of any such
tax or assessment, and no deficiencies for any amount of
such tax have been proposed or assessed. Any tax sharing
agreement among or between MRM and any affiliate thereof
shall be terminated as of the Closing Date.
(k) BOOKS AND RECORDS. The books and records of MRM are
complete and correct, are maintained in accordance with good
business practice, and accurately reflect, in all material
respects, all of the transactions described therein, and
there have been no material transactions involving MRM which
properly should have been set forth therein and which have
not been accurately so set forth.
12
<PAGE>
(l) AUTHORITY TO EXECUTE AGREEMENT. The Board of Directors of
MRM, pursuant to the power and authority legally vested in
it, has duly authorized the execution and delivery by MRM of
this Agreement and the Exchange Stock, and has duly
authorized each of the transactions hereby contemplated.
MRM has the power and authority to execute and deliver this
Agreement, to consummate the transactions hereby
contemplated, and to take all other actions required to be
taken by it pursuant to the provisions hereof. MRM has
taken all actions required by law, its Articles of
Incorporation, as amended, it Bylaws, as amended, or
otherwise, to authorize the execution and delivery of this
Agreement and the Exchange Stock, pursuant to the provisions
hereof. This Agreement is valid and binding upon TOMEC in
accordance with its terms. Neither the execution and
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will constitute a
violation or breach of the Articles of Incorporation, as
amended, or the Bylaws, as amended, of MRM, or of any
agreement, stipulation, order, writ, injunction, decree,
law, rule or regulation applicable to MRM.
(m) FINDER'S FEES. MRM is not, and on the Closing Date will not
be, liable or obligated to pay any finder's, agent's or
broker's fee arising out of or in connection with this
Agreement or the transactions contemplated by this Agreement.
5.2 DISCLOSURE. At the date of this Agreement, MRM has, and at the
Closing Date it will have, disclosed all events, conditions and facts
materially affecting the business and prospects of MRM. MRM has not now, and
will not have at the Closing Date, withheld knowledge of any such events,
conditions or facts which it knows, or has reasonable grounds to know, may
materially affect MRM's business or prospects. Neither this Agreement, nor
any certificate, exhibit, schedule or other written document or statement,
furnished to TOMEC or the TOMEC Shareholders by MRM in connection with the
transactions contemplated by this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to be stated in order to make the statements
contained herein or therein not misleading.
SECTION 6
ACCESS AND INFORMATION
6.1 AS TO TOMEC. Subject to the protections provided by subsection
8.4 herein, TOMEC shall give to MRM and to MRM's counsel, accountants and
other representatives full access during normal business hours throughout the
period prior to the Closing to all of TOMEC's properties, books, contracts,
commitments and records, including information concerning products and
customer base, and patents held by, or assigned to, TOMEC, and shall furnish
to MRM during such period all such information concerning TOMEC's affairs as
MRM may reasonably request.
13
<PAGE>
6.2 AS TO MRM. Subject to the protections provided by subsection 8.4
herein, MRM shall give to TOMEC, the TOMEC Shareholders and to TOMEC's
counsel, accountants and other representatives full access during normal
business hours throughout the period prior to the Closing to all of MRM's
financial statements and personnel, and shall furnish to TOMEC and the TOMEC
Shareholders during such period all such information concerning MRM's affairs
as TOMEC and the TOMEC Shareholders may reasonably request.
SECTION 7
COVENANTS OF TOMEC AND TOMEC SHAREHOLDERS
7.1 NO SOLICITATION. TOMEC and the TOMEC Shareholders listed on
EXHIBIT A, to the extent within each Shareholder's control, will use their
best efforts to cause TOMEC's officers, employees, agents and representatives
not, directly or indirectly, to solicit, encourage, or initiate any
discussions with, or negotiate or otherwise deal with, or provide any
information to, any person or entity other than MRM and its officers,
employees and agents, concerning any merger, sale of substantial assets, or
similar transaction involving TOMEC, or any sale of any of its capital stock
or of the capital stock held by such Shareholders in excess of 10% of such
Shareholder's current stock holdings, except as otherwise disclosed in this
Agreement. TOMEC will notify MRM immediately upon receipt of an inquiry,
offer, or proposal relating to any of the foregoing. None of the foregoing
shall prohibit providing information to others in a manner in keeping with
the ordinary conduct of TOMEC's business, or providing information to
government authorities.
7.2 CONDUCT OF BUSINESS PENDING THE TRANSACTION. TOMEC and the TOMEC
Shareholders listed on EXHIBIT A, to the extent within each Shareholder's
control, covenant and agree with MRM that, prior to the consummation of the
transaction called for by this Agreement, and the Closing, or the termination
of this Agreement pursuant to its terms, unless MRM shall otherwise consent
in writing, and except as otherwise contemplated by this Agreement, they will
each comply with all of the following:
(a) TOMEC's business shall be conducted only in the ordinary and
usual course. TOMEC shall use reasonable efforts to keep
intact its business organization and good will, keep
available the services of its respective officers and
employees, and maintain good relations with suppliers,
creditors, employees, customers and others having business
or financial relationships with TOMEC, and TOMEC shall
immediately notify MRM of any event or occurrence which is
material to, and not in the ordinary and usual course of,
the business of TOMEC.
14
<PAGE>
(b) TOMEC shall not (i) amend its Articles of Incorporation or
Bylaws, or (ii) split, combine, or reclassify any of its
outstanding securities, or (iii) declare, set aside, or pay
any dividend or other distribution on, or make or agree or
commit to make any exchange for or redemption of any such
securities payable in cash, stock or property.
(c) TOMEC shall not (i) issue or agree to issue any additional
shares of, or rights of any kind to acquire any shares of,
its capital stock of any class, or (ii) enter into any
contract, agreement, commitment, or arrangement with respect
to any of the foregoing, except as set forth in this
Agreement.
(d) TOMEC shall not create, incur, or assume any long-term or
short-term indebtedness for money borrowed, or make any
capital expenditures or commitment for capital expenditures,
except in the ordinary course of business and consistent
with past practice.
(e) TOMEC shall not (i) adopt, enter into, or amend any bonus,
profit sharing, compensation, stock option, warrant,
pension, retirement, deferred compensation, employment,
severance, termination or other employee benefit plan,
agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director or employee, or (ii) agree
to any material (in relation to historical compensation)
increase in the compensation payable or to become payable
to, or any increase in the contractual term of employment
of, any officer, director or employee, except, with respect
to employees who are not officers or directors, in the
ordinary course of business in accordance with past
practices, or with the written approval of MRM.
(f) TOMEC shall not sell, lease, mortgage, encumber or otherwise
dispose of, or grant an interest in, any of its assets or
properties, except for: (i) sales, encumbrances and other
dispositions or grants in the ordinary course of business
and consistent with past practice; (ii) liens for taxes not
yet due; (iii) liens or encumbrances that are not material
in amount or effect and that do not impair the use of the
property; or (iv) as specifically provided for or permitted
in this Agreement.
(g) Neither TOMEC nor any of its subsidiaries shall enter into
any agreement, commitment, or understanding, whether in
writing or otherwise, with respect to any of the matters
referred to in subparagraphs (a) through (f) above.
15
<PAGE>
(h) TOMEC will continue to properly and promptly file when due
all federal, state, local, foreign and other tax returns,
reports and declarations required to be filed by it, and
will pay, or make full and adequate provision for the
payment of, all taxes and governmental charges due from or
payable by TOMEC.
(i) TOMEC will comply with all laws and regulations applicable
to it and to its operations.
(j) TOMEC will maintain in full force and effect insurance
coverage of a type and in such amounts as are customary in
its business, but not less than that set forth in
SCHEDULE 4.1(m).
SECTION 8
ADDITIONAL COVENANTS OF THE PARTIES
8.1 COOPERATION. Both TOMEC and MRM will cooperate with each other
and with their respective counsel, accountants and agents in carrying out the
transaction contemplated by this Agreement, and in delivering all documents
and instruments deemed reasonably necessary or useful by the other party.
8.2 EXPENSES. Each of the parties hereto shall pay all of its
respective costs and expenses (including attorneys' and accountants' fees,
costs and expenses) incurred in connection with this Agreement and the
consummation of the transactions contemplated herein.
8.3 PUBLICITY. Prior to the Closing, any written news releases or
public disclosure by either party pertaining to this Agreement shall be
submitted to the other party for its review and approval prior to such
release or disclosure, provided, however, that (a) such approval shall not be
unreasonably withheld, and (b) such review and approval shall not be required
of disclosures required to comply, in the judgment of counsel, with federal
or state securities or corporate laws or policies.
8.4 CONFIDENTIALITY. While each party is obligated to provide access
to and furnish information in accordance with Sections 4 and 5 herein, it is
understood and agreed that such disclosure and information subsequently
obtained as a result of such disclosures are proprietary and confidential in
nature. Each party agrees to hold such information in confidence and not to
reveal any such information to any person who is not a party to this
Agreement, or an officer, director or key employee of MRM or TOMEC, and not
to use the information obtained for any purpose other than assisting in its
due diligence inquiry precedent to the Closing. Upon request of any party
hereto, a confidentiality agreement, acceptable to the disclosing party, will
be executed by any person selected to receive such proprietary information,
prior to receipt of such information.
16
<PAGE>
SECTION 9
SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS
9.1 The representations, warranties and covenants of TOMEC, and of
those Shareholders listed on EXHIBIT A contained herein, shall survive the
execution and delivery of this Agreement, the Closing and the consummation of
the transactions called for by this Agreement. The representations,
warranties and covenants of MRM contained herein shall survive the execution
and delivery of this Agreement, the Closing and the consummation of the
transactions called for by this Agreement.
SECTION 10
CONDITIONS PRECENDENT TO OBLIGATIONS OF THE PARTIES
10.1 The obligations of MRM, TOMEC and the TOMEC Shareholders listed
on EXHIBIT A under this Agreement shall be subject to the fulfillment, on or
prior to the Closing, of all conditions elsewhere herein set forth,
including, but not limited to, receipt by the appropriate party of all
deliveries required by Sections 4 and 5 herein, and the fulfillment, prior to
Closing, of each of the following conditions:
(a) All representations and warranties made in this Agreement by
MRM, TOMEC and the TOMEC Shareholders listed on EXHIBIT A
shall be true and correct in all material respects on and as
of the Closing Date with the same effect as if such
representations and warranties had been made on and as of
the Closing Date.
(b) MRM, TOMEC and the TOMEC Shareholders listed on EXHIBIT A
shall have performed or complied with all covenants,
agreements and conditions contained in this Agreement on
their part required to be performed or complied with at or
prior to the Closing.
(c) All material authorizations, consents or approvals of any
and all governmental regulatory authorities necessary in
connection with the consummation of the transactions
contemplated by this Agreement shall have been obtained and
be in full force and effect.
(d) The Closing shall not violate any permit or order, decree or
judgment of any court or governmental body having competent
jurisdiction, and there shall not have been instituted any
legal or administrative action or proceeding to enjoin the
transaction contemplated hereby or seeking damages from any
party with respect thereto.
17
<PAGE>
(e) Each TOMEC Shareholder acquiring Exchange Stock will be
required, at the Closing, to submit an agreement confirming
that all of the Exchange Stock received will be acquired for
investment and not with a view to, or for sale in connection
with, any distribution thereof, and agreeing not to transfer
any of the Exchange Stock for a period of one year from the
date of the Closing, except to those persons approved by
legal counsel to MRM as falling within the exemption from
registration under the Securities Act of 1933 and any
applicable state securities laws, which transfers do not
constitute a public distribution of securities, and in which
the transferees execute an investment letter in forma and
substance satisfactory to counsel for MRM. Each TOMEC
Shareholder acquiring Exchange Stock will be required to
transfer to MRM at the Closing his or her respective TOMEC
Shares, free and clear of all liens, mortgages, pledges,
encumbrances or charges, whether disclosed or undisclosed.
(f) All schedules prepared by TOMEC shall be current or updated
as necessary as of the Closing Date.
(g) Each party shall have received favorable opinions from the
other party's counsel on such matters in connection with the
transactions contemplated by this Agreement as are
reasonable.
(h) Each party shall have satisfied itself that since the date
of this Agreement the business of the other party has been
conducted in the ordinary course. In addition, each party
shall have satisfied itself that no withdrawals of cash or
other assets have been made and no indebtedness has been
incurred since the date of this Agreement, except in the
ordinary course of business or with respect to services
rendered or expenses incurred in connection with the Closing
of this Agreement, unless said withdrawals or indebtedness
were either authorized by the terms of this Agreement or
subsequently consented to in writing by the parties hereto.
(i) Each party covenants that, to the best of its knowledge, it
has complied in all material respects with all applicable
laws, orders and regulations of federal, state, municipal
and/or other governments and/or any instrumentality thereof,
foreign or domestic, applicable to their assets, to the
business conducted by them and to the transactions
contemplated by this Agreement.
(j) MRM shall have provided to TOMEC through July 31, 1997
unaudited financial statements prepared in accordance with
generally accepted accounting principles.
18
<PAGE>
(k) TOMEC shall have provided to MRM unaudited financial
statements of TOMEC as of September 30, 1997 and for the
periods then ended prepared in accordance with generally
accepted accounting principles.
(l) Each party hereto shall have granted to the other party
(acting through its management personnel, counsel,
accountants or other representatives designated by it) full
opportunity to examine its books and records, properties,
plant and equipment, proprietary rights and other
instruments, rights and papers of all kinds in accordance
with Sections 4 and 5 hereof, and each party shall be
satisfied to proceed with the transactions contemplated by
this Agreement upon completion of such examination and
investigation.
(m) If TOMEC Shareholders who in the aggregate own more than
five percent (5%) of the TOMEC Shares dissent from the
proposed Exchange Transaction, or are unable or for any
reason refuse to transfer any of all of their TOMEC Shares
to MRM in accordance with Section 1 of this Agreement, then
MRM, at its sole option, may terminate this Agreement.
(n) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated
by the exhibits and schedules attached hereto, shall be
legal and binding under applicable statutory and case law of
the State of California, including, but not limited to,
California securities laws and all other applicable state
securities laws, including securities laws of the State of
Texas.
(o) MRM and TOMEC shall agree to indemnify each other against
any liability to any broker or finder to which that party
may become obligated.
(p) The Exchange Transaction shall be approved by the Boards of
Directors of both TOMEC and MRM. Furthermore, the Exchange
Transaction shall be approved by the shareholders of TOMEC
and MRM, if deemed necessary of appropriate by counsel for
the same, within forty-five (45) days following execution of
this Agreement. If such a shareholder meeting is deemed
necessary, the management of TOMEC and MRM agree to
recommend approval of the Exchange Transaction to their
respective shareholders and to solicit proxies in support of
the same.
(q) MRM and TOMEC and their respective legal counsel shall have
received copies of all certificates, opinions and other
documents and instruments as each party or its legal counsel
may reasonably request pursuant to this Agreement or
otherwise in connection with the consummation of the
transactions contemplated hereby, and all such certificates,
opinions and other documents and instruments received by
19
<PAGE>
each party shall be reasonably satisfactory, in form and
substance, to each party and to its legal counsel.
(r) Both TOMEC and MRM shall have the right to waive any or all
of the conditions precedent to its obligations hereunder not
otherwise legally required; provided, however, that no
waiver by a party of any conditions precedent to its
obligations hereunder shall constitute a waiver by such
party of any other condition.
SECTION 11
TERMINATION, AMENDMENT, WAIVER
11.1 This Agreement may be terminated at any time prior to the Closing,
and the contemplated transactions abandoned, without liability to either party
hereto, except with respect to the obligations of MRM, TOMEC and the TOMEC
Shareholders under Section 8.4 hereof:
(a) By mutual agreement of MRM and TOMEC.
(b) If the Closing (as defined in Section 3) shall not have
taken place on or prior to November 30, 1997, this Agreement
can be terminated upon written notice given by MRM or TOMEC,
provided that such party giving notice is not in material
default.
(c) By MRM, if in its reasonable belief there has been a
material misrepresentation or breach of warranty on the part
of any Shareholder in the representations and warranties set
forth in the Agreement.
(d) By TOMEC or by a majority (as measured by their equity
interest) of those TOMEC Shareholders listed on EXHIBIT A
if, in the reasonable belief of TOMEC or of any such
Shareholders, there has been a material misrepresentation or
breach or warranty on the part of MRM in the representations
and warranties set forth in this Agreement.
(e) By MRM if, in its opinion or that of its counsel, the
Exchange does not qualify for exemption from registration
under applicable federal or state securities laws, or
qualification, if obtainable, cannot be accomplished (in
MRM's opinion or that of its counsel) without unreasonable
expense or effort.
(f) By MRM if, in its opinion or that of its counsel, the
Exchange cannot be consummated under California or other
relevant state corporate law or, if consummation is
possible, that it cannot be accomplished (in MRM's opinion
or that of its counsel) without unreasonable expense or
effort.
20
<PAGE>
(g) By MRM or by a majority (as measured by their equity interest)
of the TOMEC Shareholders listed on EXHIBIT A if either party
shall determine in its sole discretion that the Exchange has
become inadvisable or impracticable by reason of the
institution or threat by state, local or federal governmental
authorities, or by any other person, of material litigation or
proceedings against any party [it being understood and agreed
that a written request by a governmental authority for
information with respect to the Exchange Transaction, which
information could be used in connection with such litigation
or proceedings, may be deemed to be a threat of material
litigation or proceedings regardless of whether such request
is received before or after the signing of this Agreement].
(h) By MRM if the business or assets or financial condition of
TOMEC, taken as a whole, have been materially and adversely
affected, whether by the institution of litigation or be
reason of changes or developments, or in operations in the
ordinary course of business, or otherwise; or, by a majority
(as measured by their equity interest) of those TOMEC
Shareholders listed on EXHIBIT A if the business or assets
or financial condition of MRM, taken as a whole, have been
materially and adversely affected, whether by the
institution of litigation or by reason of changes or
developments, or in operations in the ordinary course of
business, or otherwise.
(i) By MRM if holders of more than five percent (5%) of the
TOMEC Shares fail to tender their Shares at the Closing of
the Exchange Transaction.
(j) By MRM if, in its sole discretion, it appears that the
combined entity will not be auditable.
(k) By TOMEC if MRM fails to perform material conditions as set
forth in Section 10 herein.
(l) By TOMEC if examination of MRM's books and records pursuant
to Section 5 herein uncovers a material deficiency.
(m) By MRM if TOMEC fails to perform material conditions as set
forth in Section 10 herein.
(n) By MRM if examination of TOMEC's books and records pursuant
to Section 4 herein uncovers a material deficiency.
21
<PAGE>
SECTION 12
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules attached hereto) contains the entire agreement between the parties
hereto with respect to the transactions contemplated hereby, and supersedes
all negotiations, representations, warranties, commitments, offers,
contracts, and writings prior to the date hereof. No waiver and no
modification or amendment of any provision of this Agreement shall be
effective unless specifically made in writing and duly signed by the parties
to be bound thereby.
12.2 BINDING AGREEMENT.
(a) This Agreement shall become binding upon the parties hereto
when, but only when, it shall have been signed on behalf of
all parties hereto.
(b) Subject to the condition stated in subsection (a) of this
Section 12.2, this Agreement shall be binding upon, and
inure to the benefit of, the respective parties hereto and
their legal representatives, successors and assigns. This
Agreement, in all of its particulars, shall be enforceable
by the means set forth in subsection 12.9 for the recovery
of damages or by way of specific performance, and the terms
and conditions of this Agreement shall remain in full force
and effect subsequent to the Closing and shall not be deemed
to be merged into any documents conveyed and delivered at
the time of Closing.
(c) In the event that subsection 12.9 hereof is found to be
unenforceable as to any party for any reason, or is not
invoked by any party, and any person is required to initiate
any action at law or in equity for the enforcement of this
Agreement, the prevailing party in such litigation shall be
entitled to recover from the party determined to be in
default all of its reasonable costs incurred in said
litigation, including attorneys' fees.
12.3 SHAREHOLDERS OWNING AT LEAST 5% OF TOMEC STOCK. The TOMEC
Shareholders owning at least five percent (5%) of the issued and outstanding
common stock of TOMEC (see EXHIBIT A hereto) are only executing this
Agreement with respect to sections 3.4, 4, 7, 8.4, 9, 10, 11.1 (d and g), 12.2,
12.3, 12.4, 12.8 and 12.9.
12.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument.
22
<PAGE>
12.5 SEVERABILITY. If any provision(s) hereof shall be held invalid
or unenforceable by any court of competent jurisdiction or as a result of
future legislative action, such holding or action shall be strictly construed
and shall not affect the validity or effect of any other provision hereof.
12.6 ASSIGNABILITY. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto; provided,
however, that neither this Agreement nor any right hereunder shall be
assignable by TOMEC or MRM without prior written consent of the other party
hereto.
12.7 CAPTIONS. The captions of the various sections of this Agreement
have been inserted only for convenience of reference, and shall not be deemed
to modify, explain, enlarge or restrict any of the provisions of this
Agreement.
12.8 GOVERNING LAW. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of
California.
12.9 DISPUTE RESOLUTION. In the event of a dispute between the
parties hereto involving a claim of breach of representation or warranty
hereunder, or to enforce a covenant herein (either or both of which are
referred to hereafter as a "Claim"), if it is the desire of any party for
quick resolution, the rights and obligations of the parties hereto arising
under the terms of this Agreement with respect to such Claims and/or
resolutions of such disputes will be by the means of the judgment of an
independent third party ("Rent-a-Judge") who has been selected and hired
through the mutual agreement of the parties hereto. The utilization of this
subsection 12.9, if invoked by any party hereto, shall be the exclusive
remedy for resolving a Claim regardless of whether legal action has or has
not been otherwise instituted. If legal action has been instituted by any
party, and this subsection 12.9 is invoked in a timely manner, any such legal
action shall be void ab initio and immediately withdrawn.
(a) In the event of a Claim by any party, any party may make a
written request upon the other parties for a Rent-a-Judge.
A request by any party for the employment of a Rent-a-Judge
to resolve the Claim shall be binding on all other parties
to this Agreement in accordance with the terms hereof.
(b) The parties may agree upon one Rent-a-Judge, but in the
event that they cannot so agree, there shall be three
Rent-a-Judges selected, one named in writing by each of the
parties hereto (MRM and TOMEC) within twenty (20) days after
the initial demand for employment of a Rent-a-Judge, and a
third chosen by the two so appointed. Should either party
refuse or neglect to join in the appointment of the
Rent-a-Judge, or to furnish the Rent-a-Judge(s) with any
papers or information demanded, the Rent-a-Judge(s) are
empowered by all parties to this Agreement to proceed
ex parte.
23
<PAGE>
(c) Claim resolution proceedings shall take place in the City or
County of Los Angeles, State of California, and the hearing
before the Rent-a-Judge(s) of the matter to be arbitrated
shall be at the time and place within said city or county as
is selected by the Rent-a-Judge(s). The Rent-a-Judge(s)
shall select such time and place promptly after appointment
and shall give written notice thereof to each party at least
thirty (30) days prior to the date so fixed. At the
hearing, any relevant evidence may be presented by either
party, and the formal rules of evidence applicable to
judicial proceedings shall not govern. Evidence may be
admitted or excluded in the sole discretion of the
Rent-a-Judge(s). Said Rent-a-Judge(s) shall hear and
determine the matter and shall execute and acknowledge their
award in writing, and cause a copy thereof to be delivered
to each of the parties.
(d) If there is only one Rent-a-Judge, his or her decision shall
be binding and conclusive on the parties. If there are
three (3) Rent-a-Judges, the decision of any two (2) shall
be binding and conclusive on the parties.
(e) If three Rent-a-Judges are selected under the foregoing
procedure, but two (2) of the three (3) fail to reach an
agreement in the determination of the matter in question,
the matter shall be decided by three (3) new Rent-a-Judges
who shall be appointed and shall proceed in the same manner
as set forth in this section, and the process shall be
repeated until a decision is finally reached by two (2) of
the three (3) Rent-a-Judges selected.
(f) The costs of such Claim resolution shall be borne by the
parties equally and each party shall pay its own attorneys'
fees, provided, however, that in the event either party
challenges or in any way seeks to have the decision or award
of the Rent-a-Judge(s) vacated, corrected or modified, if
the challenge is denied or the original decision or award is
affirmed, the challenging party shall pay the costs and
fees, including reasonable attorneys' fees, of the
non-challenging party, both for the challenge and for the
original Claim resolution process.
24
<PAGE>
12.10 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and delivered in person or sent by
certified mail, postage prepaid and properly addressed as follows:
TO TOMEC:
Bruce Grizzle, President
Texas Oxygen Medical Equipment Co.
106 Sentry Street
Mansfield, TX 76063
WITH A COPY TO:
William R. Brown, PC
Attorney at Law
1292 B. Highway 157 N
Mansfield, Texas 76063
TO MRM:
Allen H. Bonnifield, President
Medical Resources Management, Inc.
932 Grand Central Avenue
Glendale, California 91201
WITH A COPY TO:
William B. Barnett, Esq.
15233 Ventura Blvd., Suite 1110
Sherman Oaks, California 91403
Any party may from time to time change its address for the purpose of
notices to that party by a similar notice specifying a new address, but no
such change shall be deemed to have been given until it is actually received
by the other party hereto.
All notices and other communications required or permitted under this
Agreement which are addressed as provided in this section 12.10, if delivered
personally, shall be effective upon delivery; and, if delivered by mail,
shall be effective three (3) days following deposit in the United States
mail, postage prepaid.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MEDICAL RESOURCES MANAGEMENT, INC.
a Nevada corporation
By: /s/ Allen H. Bonnifield
-------------------------------
Allen H. Bonnifield, President
TEXAS OXYGEN MEDICAL EQUIPMENT CO.
A Texas corporation
By: /s/ Bruce Grizzle
-------------------------------
Bruce Grizzle, President
FIVE PERCENT SHAREHOLDERS OF TEXAS OXYGEN MEDICAL EQUIPMENT CO.
/s/ Bruce Grizzle
- -----------------------------------
Bruce Grizzle
/s/ Jane Grizzle
- -----------------------------------
Jane Grizzle
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 45,723
<SECURITIES> 0
<RECEIVABLES> 2,130,059
<ALLOWANCES> 75,000
<INVENTORY> 667,687
<CURRENT-ASSETS> 2,968,138
<PP&E> 17,976,490
<DEPRECIATION> 7,013,555
<TOTAL-ASSETS> 14,805,124
<CURRENT-LIABILITIES> 3,987,333
<BONDS> 6,762,601
0
0
<COMMON> 7,386
<OTHER-SE> 3,071,768
<TOTAL-LIABILITY-AND-EQUITY> 14,805,124
<SALES> 2,865,131
<TOTAL-REVENUES> 2,865,131
<CGS> 1,547,057
<TOTAL-COSTS> 1,547,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253,594
<INCOME-PRETAX> 72,092
<INCOME-TAX> 27,540
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,552
<EPS-PRIMARY> 0.006
<EPS-DILUTED> 0
</TABLE>
