AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
MEDICAL RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 7389 13-3584552
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
155 STATE STREET
HACKENSACK, NEW JERSEY 07601
(201) 488-6230
(Address including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------
ROBERT J. ADAMSON
CO-PRESIDENT AND PRINCIPAL ACCOUNTING OFFICER
2701 N. ROCKY POINT DRIVE, SUITE 650
TAMPA, FLORIDA 33607
(813) 281-0202
(Name, address, including zip code, and telephone number including
area code, of agent for service)
Copies of communications to:
STEPHEN M. DAVIS, ESQ. PETER S. TWOMBLY, ESQ.
WERBEL MCMILLIN & CARNELUTTI MCCARTER & ENGLISH
A PROFESSIONAL CORPORATION FOUR GATEWAY CENTER
711 FIFTH AVENUE 100 MULBERRY STREET
NEW YORK, NEW YORK 10022 NEWARK, NEW JERSEY 07102
(212) 832-8300 (201) 622-4444
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and
concurrent with the merger of NMR of America, Inc. with and into a wholly-owned
subsidiary of Registrant pursuant to the Agreement and Plan of Merger, dated as
of May 20, 1996, attached as Appendix A to the Joint Proxy Statement/Prospectus
forming a part of this Registration Statement.
------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
=====================================================================================================
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) FEE (1)(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value ....... 5,643,673 shares $6.75 $38,094,793 $13,137
=====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended
(the "Act").
(2) A total of $6,694 has previously been paid on July 12, 1996 by the
Registrant to the Securities and Exchange Commission pursuant to Section
14(g) of the Securities Exchange Act of 1934 in connection with the filing
of preliminary proxy materials, the definitive forms of which are included
in this Registration Statement, and the total registration fee hereunder is
reduced by such $6,694 pursuant to Rule 457(b) under the Act.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
MEDICAL RESOURCES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM AND CAPTION LOCATION IN PROSPECTUS
- ------------------------- ----------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus .............. Facing Page, Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus ....................................... Inside Front Cover Page of Prospectus;
Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information ............................... Summary of Joint Proxy Statement/Prospectus;
Risk Factors Regarding MRI and NMR
4. Terms of the Transaction ............................ Summary of Joint Proxy Statement/Prospectus;
The Merger; Terms of the Merger; Introduction;
Description of MRI Capital Stock; Comparison of
Rights of Stockholders of MRI and NMR
5. Pro Forma Financial Information ..................... Summary of Joint Proxy Statement/Prospectus;
MRI and NMR Unaudited Pro Forma Combined
Financial Statements
6. Material Contracts with the Company
Being Acquired ...................................... Summary of Joint Proxy Statement/Prospectus;
Introduction; The Merger; Terms of the Merger
7. Additional Information Required For Reoffering
and Parties Deemed to be Underwriters ............... Not Applicable
8. Interests of Named Experts and Counsel .............. Information Concerning Medical Resources, Inc.
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ...... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants ........ Not Applicable
11. Incorporation of Certain Information by Reference .. Not Applicable
12. Information With Respect to S-2 or S-3 Registrants.. Incorporation of Certain Documents by
Reference; Summary of Joint Proxy
Statement/Prospectus; Recent Developments;
Information Concerning Medical Resources,
Inc.; Government Regulation of MRI and
NMR; MRI and NMR Unaudited Pro Forma
Combined Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM AND CAPTION LOCATION IN PROSPECTUS
- ------------------------- ----------------------
<S> <C>
13. Incorporation of Certain Information by Reference.. Incorporation of Certain Documents by
Reference
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants ................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Registrants ....... Not Applicable
16. Information With Respect to S-2 or S-3 Registrants. Incorporation of Certain Documents by
Reference; Summary of Joint Proxy
Statement/Prospectus; Information Concerning
NMR of America, Inc.; Government
Regulation of MRI and NMR; MRI and NMR
Unaudited Pro Forma Combined Financial
Statements
17. Information With Respect to Companies
Other Than S-2 or S-3 Registrants ................. Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited ............................... Summary of Joint Proxy Statement/Prospectus;
Introduction; Voting and Proxies; The Merger;
Information Concerning Medical Resources,
Inc.; Information Concerning NMR of
America; Inc.; Amendment to MRI's
Certificate of Incorporation; Election of
Directors of NMR
19. Information if Proxies, Consents or Authorizations
are not to be Solicited, or in the Exchange Offer.. Not Applicable
</TABLE>
<PAGE>
[LOGO]MEDICAL RESOURCES INC.
August 1, 1996
Dear Stockholders:
A Special Meeting of Stockholders of Medical Resources, Inc. ("MRI") will
be held at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New
York, New York 10019, on August 30, 1996 at 10:00 a.m., New York City Time.
At the Special Meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger dated May 20, 1996 (the "Merger Agreement"),
providing for the merger (the "Merger") of NMR of America, Inc. ("NMR") into a
wholly-owned subsidiary of MRI, pursuant to which NMR will become a wholly-owned
subsidiary of MRI, and each outstanding share of NMR Common Stock will
automatically be converted into 0.6875 of a share of MRI Common Stock and each
outstanding warrant, option, convertible debenture and other right to acquire
shares of NMR Common Stock will automatically be deemed exercisable or
convertible into shares of MRI Common Stock at a ratio of 0.6875 of a share of
MRI Common Stock for each share of NMR Common Stock which otherwise would have
been issuable had such warrants, options, debentures or other rights been
exercised in full immediately prior to the Merger.
Pursuant to the terms of the Merger Agreement, MRI will be required to
issue shares of MRI Common Stock. Approval of such issuance by a majority of the
shares of MRI Common Stock present in person or represented by proxy and
entitled to vote at the Special Meeting is required by the rules of the National
Association of Securities Dealers, Inc., because shares of MRI Common Stock are
traded on the Nasdaq National Market and the number of shares proposed to be
issued in the Merger will exceed 20% of the issued and outstanding shares of MRI
Common Stock. The Merger is subject to the satisfaction of a number of
conditions, including, among others, approval of the Merger Agreement by the
requisite vote of MRI's and NMR's stockholders and the effectiveness of a
registration statement filed under the Securities Act of 1933, as amended,
relating to the shares of MRI Common Stock to be issued in the Merger.
After careful consideration, the Board of Directors of MRI has unanimously
approved the Merger Agreement and recommends that you vote FOR the proposal
relating thereto.
At the Special Meeting, you will also be asked to vote on an amendment to
MRI's Certificate of Incorporation which will increase the number of authorized
shares of MRI Common Stock from 20,000,000 to 50,000,000. Such amendment will
only be given effect if the Merger Agreement is approved and the Merger is
consummated. After careful consideration, the Board of Directors of MRI has
unanimously approved the amendment to the MRI Certificate of Incorporation and
recommends that you vote FOR the proposal relating thereto.
In the material accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Joint Proxy Statement/Prospectus relating to the
actions to be taken by MRI stockholders at the Special Meeting and a proxy card.
The Joint Proxy Statement/Prospectus more fully describes the proposed Merger
and other matters to be considered at the Special Meeting and includes certain
information concerning MRI and NMR. MRI's 1995 Annual Report to Stockholders and
its Quarterly Report on Form 10-Q for the three month period ended March 31,
1996 provide additional information concerning MRI and have also been included
herewith. In addition, NMR's 1996 Annual Report to Stockholders (which includes
NMR's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996),
which provides additional information concerning NMR is also enclosed herewith.
All stockholders are cordially invited to attend the Special Meeting in
person. However, to assure your representation at the Special Meeting, you are
urged to complete, sign and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope enclosed for that purpose. Any
stockholder attending the Special Meeting may revoke his or her proxy and vote
in person even if he or she has returned a proxy card. It is important that your
shares be represented and voted at the Special Meeting.
Sincerely,
/s/GARY N. SIEGLER
GARY N. SIEGLER
Chairman
<PAGE>
[LOGO]
NMR of America, Inc.
August 1, 1996
Dear Stockholders:
The Annual Meeting of Stockholders of NMR of America, Inc. ("NMR") will be
held at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New York,
New York 10019, on August 30, 1996 at 10:00 a.m., New York City time.
At the Annual Meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger dated May 20, 1996 (the "Merger Agreement"),
providing for the merger (the "Merger") of NMR into a wholly-owned subsidiary of
Medical Resources, Inc. ("MRI"), pursuant to which NMR will become a
wholly-owned subsidiary of MRI, and each outstanding share of NMR Common Stock
will automatically be converted into 0.6875 of a share of MRI Common Stock and
each outstanding NMR warrant, option, convertible debenture and other right to
acquire shares of NMR Common Stock will automatically be deemed exercisable or
convertible into shares of MRI Common Stock at a ratio of 0.6875 of a share of
MRI Common Stock for each share of NMR Common Stock which otherwise would have
been issuable had such warrants, options, debentures or other rights been
exercised in full immediately prior to the Merger.
After careful consideration, the Board of Directors of NMR has unanimously
approved the Merger Agreement and recommends that you vote FOR the proposal
relating thereto.
To account for the possibility that the Merger Agreement will not be
approved (either by the stockholders of NMR or the stockholders of MRI) or that
the Merger will not be consummated for any other reason, you will also be asked
to vote on the election of five (5) directors of NMR to hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. The vote on this matter will only be given effect if the Merger
Agreement is not approved or the Merger is not otherwise consummated.
In the material accompanying this letter, you will find a Notice of Annual
Meeting of Stockholders, a Joint Proxy Statement/Prospectus relating to the
actions to be taken by NMR stockholders at the Annual Meeting and a proxy card.
The Joint Proxy Statement/Prospectus more fully describes the proposed Merger
and other matters to be considered at the Annual Meeting and includes certain
information concerning NMR and MRI. Also enclosed is NMR's 1996 Annual Report to
Stockholders (which includes NMR's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1996). MRI's 1995 Annual Report to Stockholders and
Quarterly Report on Form 10-Q for the three month period ended March 31, 1996
provide additional information concerning MRI and have also been included
herewith.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to complete, sign and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may revoke his or her proxy and vote in
person even if he or she has returned a proxy card. It is important that your
shares be represented and voted at the Annual Meeting.
Sincerely,
/s/JOSEPH G. DASTI
JOSEPH G. DASTI
President and Chief Executive
Officer
<PAGE>
MEDICAL RESOURCES, INC.
------------------
NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 30, 1996
------------------
NOTICE IS HEREBY GIVEN that a Special Meeting ("Special Meeting") of
Stockholders of Medical Resources, Inc., a Delaware corporation ("MRI"), will be
held at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New York,
New York 10019, on August 30, 1996, at 10:00 a.m., New York City Time, to
consider and act upon the following matters:
1. ITEM NO. 1 IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS.
Approval of an Agreement and Plan of Merger dated May 20, 1996 (the "Merger
Agreement"), providing for the merger (the "Merger") of NMR of America,
Inc. ("NMR") into a wholly-owned subsidiary of MRI, pursuant to which each
outstanding share of the Common Stock, par value $0.01 per share, of NMR
("NMR Common Stock"), would automatically be converted into 0.6875 of a
share of Common Stock, par value $0.01 per share, of MRI ("MRI Common
Stock"), and each outstanding warrant, option, convertible debenture and
other right to acquire shares of NMR Common Stock would automatically be
deemed exercisable or convertible into shares of MRI Common Stock at a
ratio of 0.6875 of a share of MRI Common Stock for each share of NMR Common
Stock which otherwise would have been issuable had such warrants, options,
debentures or other rights been exercised or converted in full immediately
prior to the Merger. Approval of the Merger Agreement will also constitute
approval of the issuance by MRI of up to approximately 5,643,673 shares of
MRI Common Stock in exchange for the NMR Common Stock.
2. ITEM NO. 2 IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS.
Approval of an amendment to MRI's Certificate of Incorporation which will
increase the number of authorized shares of MRI Common Stock from
20,000,000 to 50,000,000. Such amendment will only be given effect if the
Merger Agreement is approved and the Merger is consummated.
3. Transaction of such other business as may properly come before the
Special Meeting or any adjournments thereof.
Stockholders of record as of the close of business on July 29, 1996 are
entitled to notice of, and to vote at, the Special Meeting.
By order of the Board of Directors
/s/STEPHEN M. DAVIS
STEPHEN M. DAVIS
Secretary
Dated: August 1, 1996
<PAGE>
NMR OF AMERICA, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 30, 1996
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Annual Meeting") of
the Stockholders of NMR of America, Inc., a Delaware corporation ("NMR"), will
be held at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New
York, New York 10019, on August 30, 1996 at 10:00 a.m., New York City Time, to
consider and act upon the following matters:
1. ITEM NO. 1 IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS.
Approval of an Agreement and Plan of Merger dated May 20, 1996 (the "Merger
Agreement"), providing for the merger (the "Merger") of NMR into a
wholly-owned subsidiary of Medical Resources, Inc. ("MRI"), pursuant to
which NMR would become a wholly-owned subsidiary of MRI and each
outstanding share of Common Stock, par value $0.01 per share, of NMR ("NMR
Common Stock"), would automatically be converted into 0.6875 of a share of
Common Stock, par value $0.01 per share, of MRI ("MRI Common Stock"), and
each outstanding warrant, option, convertible debenture and other right to
acquire NMR Common Stock would automatically be deemed exercisable or
convertible into shares of MRI Common Stock at a ratio of 0.6875 of a share
of MRI Common Stock for each share of NMR Common Stock which otherwise
would have been issuable had such warrants, options, debentures or other
rights been exercised or converted in full immediately prior to the Merger.
2. ITEM NO. 3 IN THE ATTACHED JOINT PROXY STATEMENT/PROSPECTUS. To
account for the possibility that the Merger Agreement will not be approved
(either by the stockholders of NMR or the stockholders of MRI) or that the
Merger will not be consummated for any other reason, stockholders will also
consider and act upon the election of five (5) directors of NMR to hold
office until the next annual meeting of stockholders and until their
successors are duly elected and qualified.
3. Transaction of such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Stockholders of record as of the close of business on July 29, 1996 are
entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors
/s/JOHN P. O'MALLEY III
JOHN P. O'MALLEY III
Secretary
Dated: August 1, 1996
<PAGE>
MEDICAL RESOURCES, INC. NMR OF AMERICA, INC.
PROXY STATEMENT/PROSPECTUS PROXY STATEMENT
MEDICAL RESOURCES, INC.
UP TO 5,643,673 SHARES OF MRI COMMON STOCK
TO BE ISSUED IN CONNECTION WITH
A MERGER TRANSACTION WITH
NMR OF AMERICA, INC.
------------------
JOINT PROXY STATEMENT/PROSPECTUS
This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") is being furnished to stockholders of Medical Resources,
Inc., a Delaware corporation ("MRI"), and stockholders of NMR of America, Inc.,
a Delaware corporation ("NMR"), in connection with a Special Meeting of
Stockholders of MRI and the Annual Meeting of Stockholders of NMR, to be held
for the purpose of considering and voting on an Agreement and Plan of Merger,
dated May 20, 1996 (the "Merger Agreement"), providing for the merger (the
"Merger") of NMR into a wholly-owned subsidiary of MRI, pursuant to which (i)
stockholders of NMR would receive shares of Common Stock, par value $0.01 per
share, of MRI ("MRI Common Stock") based on a ratio (the "Exchange Ratio") of
0.6875 of a share of MRI Common Stock for each outstanding share of the Common
Stock, par value $0.01 per share, of NMR ("NMR Common Stock"), and (ii) each
outstanding NMR warrant, option, convertible debenture and other right to
acquire shares of NMR Common Stock ("NMR Derivative Securities") would
automatically be deemed exercisable or convertible into shares of MRI Common
Stock at a ratio of 0.6875 of a share of MRI Common Stock for each share of NMR
Common Stock which otherwise would have been issuable had such NMR Derivative
Security been exercised or converted in full immediately prior to the Merger.
See "Terms of the Merger." The Exchange Ratio was determined as a result of
negotiations conducted between MRI and NMR, and was supported by fairness
opinions furnished to MRI's Board of Directors and a committee of independent
directors of NMR (the "NMR Special Committee"). See "The Merger--Background of
the Merger; Negotiations; Fairness Opinions." In the event the Merger is
consummated, following the Merger the stockholders of NMR will hold
approximately 38.9% of the issued and outstanding shares of MRI Common Stock
(assuming the exercise of all outstanding NMR Derivative Securities prior to the
consummation of the Merger).
This Joint Proxy Statement/Prospectus also constitutes a Prospectus of MRI
under the Securities Act of 1933, as amended (the "Securities Act"), for the
issuance of, pursuant to the terms of the Merger Agreement, MRI Common Stock to
all holders of NMR Common Stock. This Joint Proxy Statement/Prospectus covers
only shares of MRI Common Stock issuable pursuant to the Merger to holders of
NMR Common Stock as of the date on which the Merger is consummated (the
"Effective Time") and does not cover the shares of MRI Common Stock which are
issued following consummation of the Merger to holders of NMR Derivative
Securities exercised following the Merger. The issuance by MRI of such shares of
MRI Common Stock upon exercise of any NMR Derivative Securities following
consummation of the Merger, and the subsequent resale thereof by the holders,
must be covered either by a separate registration statement or an applicable
exemption from the registration requirements under the Securities Act. MRI
intends to file a separate registration statement or registration statements
covering such shares promptly after the Effective Time.
On July 29, 1996, the closing sales price per share on the Nasdaq National
Market for MRI Common Stockwas $7.38.
<PAGE>
SEE "RISK FACTORS REGARDING MRI AND NMR" FOR A DISCUSSION OF CERTAIN
MATERIAL RISK FACTORS RELEVANT TO THE BUSINESSES AND OPERATIONS OF MRI AND NMR
THAT SHOULD BE CONSIDERED BY THE STOCKHOLDERS OF MRI AND NMR. SEE "THE
MERGER--BACKGROUND OF THE MERGER; NEGOTIATIONS; FAIRNESS OPINIONS; TERMS OF THE
MERGER; AND INTEREST OF CERTAIN PERSONS IN THE MERGER" FOR A DISCUSSION OF
CERTAIN CONFLICTS OF INTEREST WHICH MAY BE DEEMED TO EXIST IN CONNECTION WITH
THE MERGER AGREEMENT.
THE SHARES OF MRI COMMON STOCK ISSUABLE IN CONNECTION WITH THE MERGER HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The date of this Joint Proxy Statement/Prospectus is August 1, 1996. This
Joint Proxy Statement/Prospectus is being mailed to stockholders of MRI and NMR
on or about August 1, 1996.
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MRI OR ANY OF ITS SUBSIDIARIES OR NMR OR ANY OF ITS SUBSIDIARIES. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL ANY SECURITIES
OTHER THAN THE MRI COMMON STOCK COVERED BY THIS JOINT PROXY STATEMENT/
PROSPECTUS OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER.
<PAGE>
AVAILABLE INFORMATION
MRI and NMR are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission ("SEC"). Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549 and at certain of the SEC's Regional Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048; 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 5670 Wilshire Blvd., Los Angeles, California
90036. Copies of such material can be obtained from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
MRI has filed with the SEC a Registration Statement on Form S-4 pursuant to
the Securities Act with respect to the MRI Common Stock offered by the
Prospectus comprising this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is hereby made to the
Registration Statement and to the exhibits listed therein, which can be
inspected at the public reference facilities of the SEC referenced above, and
copies of which can be obtained from the SEC at prescribed rates as indicated
above. Statements contained in this Joint Proxy Statement/Prospectus or in any
document incorporated in this Joint Proxy Statement/Prospectus by reference as
to the contents of any contract or other document referred to herein or therein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such document incorporated herein, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated herein by
reference:
1. MRI's Annual Report on Form 10-K for the year ended December 31,
1995.
2. MRI's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.
3. MRI's Current Reports on Form 8-K dated January 9, 1996, April
30, 1996 and May 20, 1996.
4. MRI's Current Reports on Form 8-K/A dated January 29, 1996, March
19, 1996 and July 19, 1996.
5. NMR's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1996.
Copies of (i) MRI's 1995 Annual Report to Stockholders, (ii) MRI's Quarterly
Report on Form 10-Q for the three month period ended March 31, 1996 and (iii)
NMR's 1996 Annual Report to Stockholders (which includes NMR's Annual Report on
Form 10-KSB for the fiscal year ended March 31, 1996) are being provided to
MRI's stockholders and NMR's stockholders herewith.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. MRI AND NMR WILL PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF MRI COMMON
STOCK OR NMR COMMON STOCK, RESPECTIVELY, TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON,
A COPY OF ANY OR ALL OF THE DOCUMENTS THAT HAVE BEEN INCORPORATED BY REFERENCE
IN THIS JOINT PROXY STATEMENT/PROSPECTUS (NOT INCLUDING EXHIBITS TO THE
INFORMATION THAT IS INCORPORATED BY REFERENCE INTO THIS JOINT PROXY
STATEMENT/PROSPECTUS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION THAT THIS JOINT PROXY STATEMENT/PROSPECTUS
INCORPORATES). SUCH REQUESTS SHOULD BE DIRECTED IN THE CASE OF DOCUMENTS
RELATING TO MRI OR ANY OF ITS SUBSIDIARIES, TO MEDICAL RESOURCES, INC., 2701 N.
ROCKY POINT DRIVE, SUITE 650, TAMPA, FLORIDA 33607 ATTENTION: EXECUTIVE
ASSISTANT, TELEPHONE: (813) 281-0202, AND IN THE CASE OF DOCUMENTS RELATING TO
NMR OR ANY OF ITS SUBSIDIARIES, TO SECRETARY, NMR OF AMERICA, INC., 430 MOUNTAIN
AVENUE, MURRAY HILL, NEW JERSEY 07974-2732, TELEPHONE: (908) 665-9400. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST
23, 1996.
3
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS
MEDICAL RESOURCES, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 30, 1996
NMR OF AMERICA, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 30, 1996
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 3
SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS ............................... 6
RISK FACTORS REGARDING MRI AND NMR ........................................ 16
RECENT DEVELOPMENTS ....................................................... 21
INTRODUCTION .............................................................. 22
VOTING AND PROXIES ........................................................ 23
I. THE MERGER (ITEM NO. 1--FOR MRI STOCKHOLDERS AND NMR STOCKHOLDERS) .... 25
Background of the Merger; Negotiations; Fairness Opinions ............. 25
MRI's Reasons for the Merger .......................................... 27
Fairness Opinion of Dillon Read ....................................... 28
NMR's Reasons for the Merger .......................................... 31
Fairness Opinion of Cowen ............................................. 32
TERMS OF THE MERGER ....................................................... 38
General ............................................................... 38
Conversion of Shares; Treatment of Options, Warrants, Convertible
Debentures and Other Rights; Fractional Shares ...................... 38
Exchange of Certificates .............................................. 39
Representations, Warranties and Covenants ............................. 40
Conditions Precedent to Consummation of the Merger .................... 40
Non-Competition and Consulting Agreements ............................. 41
Termination and Amendment ............................................. 42
Expenses of the Merger ................................................ 42
Fees .................................................................. 43
No Solicitation Provision and Fee Payable ............................. 43
Interest of Certain Persons in the Merger ............................. 43
Certain Federal Income Tax Consequences of the Merger ................. 43
Accounting Treatment .................................................. 45
Restrictions on Resale of MRI Common Stock by Former NMR Stockholders . 46
Appraisal Rights ...................................................... 46
DESCRIPTION OF MRI CAPITAL STOCK .......................................... 46
COMPARISON OF RIGHTS OF STOCKHOLDERS OF MRI AND NMR ....................... 47
INFORMATION CONCERNING MEDICAL RESOURCES, INC ............................. 49
Management of MRI ..................................................... 49
Directors and Executive Officers ...................................... 50
Board of Directors and Committees ..................................... 50
Compensation of Executive Officers .................................... 51
4
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TABLE OF CONTENTS--(CONTINUED)
PAGE
----
Employment Agreements ................................................. 51
Stock Option Plans .................................................... 51
Options Granted in Last Fiscal Year ................................... 52
Option Values ......................................................... 53
Certain Relationships and Related Party Transactions .................. 53
Ownership of MRI Common Stock ......................................... 54
INFORMATION CONCERNING NMR OF AMERICA, INC ................................ 55
Directors ............................................................. 55
Executive Officers .................................................... 56
Board of Directors' Meetings and Committees ........................... 56
Director Compensation ................................................. 57
Executive Compensation ................................................ 57
Indemnification of Officers and Directors ............................. 59
Employment Agreements ................................................. 59
Director and Officer Securities Reports ............................... 60
Certain Transactions .................................................. 60
Principal and Other Stockholders of NMR ............................... 60
GOVERNMENT REGULATION OF MRI AND NMR ...................................... 62
MRI AND NMR UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS ............. 65
II. AMENDMENT TO MRI'S CERTIFICATE OF INCORPORATION
(ITEM NO. 2--FOR MRI STOCKHOLDERS ONLY) .............................. 76
III. ELECTION OF DIRECTORS OF NMR
(ITEM NO. 3--FOR NMR STOCKHOLDERS ONLY) .............................. 77
INDEPENDENT ACCOUNTANTS ................................................... 77
OTHER MATTERS ............................................................. 77
LEGAL OPINIONS ............................................................ 77
EXPERTS ................................................................... 78
Appendices:
A. Agreement and Plan of Merger (excluding Exhibits and Schedules)
B. Opinion of Dillon, Read & Co. Inc.
C. Opinion of Cowen & Company
D. Proposed Amendment to MRI's Certificate of Incorporation
5
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SUMMARY OF JOINT PROXY STATEMENT/PROSPECTUS
The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus. This summary does not contain a
complete statement of all material features of the matters to be voted upon and
is qualified in its entirety by reference to the more detailed information and
financial statements appearing elsewhere in this Joint Proxy
Statement/Prospectus and the documents incorporated by reference herein,
including the appendices to this Joint Proxy Statement/Prospectus.
THE COMPANIES
Medical Resources, Inc. and MRI Sub, Inc. MRI, a Delaware corporation,
specializes in the operation and acquisition of diagnostic imaging centers and
the management of the associated physicians' practices. MRI operates and manages
free standing, outpatient diagnostic imaging centers, and provides diagnostic
imaging network management services to managed care providers. MRI provides
diagnostic imaging services through nineteen outpatient centers, of which it
owns all or a majority of the equity. The centers are located in New Jersey, New
York and Florida. MRI's centers service referring physicians and managed care
organizations by providing diagnostic imaging procedures to patients in a
comfortable, service-oriented environment located outside of an institutional
setting. At each of its centers, MRI provides management, administrative,
marketing and technical services, as well as equipment and facilities, to
physicians who interpret scans performed on patients referred by local
physicians. Medical services are provided by interpreting physicians, generally
board-certified radiologists, with whom MRI typically enters into long-term
contracts. All of MRI's centers provide magnetic resonance imaging, which
accounts for a majority of their revenues, with most also providing some or all
of the following services: computerized tomography, ultrasound, nuclear
medicine, general radiology and fluoroscopy and mammography.
MRI also provides through its wholly-owned subsidiary, StarMed Staffing,
Inc. (hereinafter referred to as "StarMed"), temporary staffing of registered
nurses and other professional medical personnel to acute care and sub-acute care
facilities nationwide. StarMed offers services through two divisions: Travel
Nursing and Per Diem. Travel nursing describes a temporary staffing arrangement
under which a hospital contracts with StarMed to provide specialist nursing and
allied health staff for short periods (usually ranging from 8 to 26 weeks).
Temporary staff provided to the client are relocated from their place of
residence to the hospital location for the period of the assignment. MRI's per
diem staffing segment provides healthcare professionals for daily services to
both acute and sub-acute care facilities nationwide.
MRI Sub, Inc. ("Subsidiary"), a Delaware corporation, is a wholly-owned
subsidiary of MRI formed solely for the purpose of effecting the Merger.
MRI and Subsidiary have their principal executive offices at 155 State
Street, Hackensack, New Jersey 07601 (telephone: (201) 488-6230) and 2701 N.
Rocky Point Drive, Suite 650, Tampa, Florida 33607 (telephone: (813) 281-0202).
NMR of America, Inc. NMR, a Delaware corporation, is engaged, directly and
through limited partnerships, in the business of installing, managing and
maintaining magnetic resonance imaging systems and other imaging systems used
for diagnostic purposes on an outpatient basis at eighteen imaging centers
located in the states of Florida, Illinois, Maryland, New Jersey and
Pennsylvania. Eleven of NMR's centers were developed by NMR and seven centers
were acquired by NMR from previous owners. At the eleven centers developed by
NMR, NMR has entered into agreements with an affiliated physician engaging in
business as professional associations ("Professional Associations") pursuant to
which NMR maintains and operates imaging systems in offices operated by the
Professional Associations. NMR purchases or leases the systems, supervises their
installation and staffs the facility with technical, clerical and marketing
personnel while the Professional Associations contract for radiological services
with local physicians and sublease each facility. At the seven centers which NMR
acquired, subsidiaries of NMR have entered into agreements directly with
unaffiliated professional corporations to provide radiological services and NMR
is responsible for all other aspects of the operation of the centers.
The principal executive offices of NMR are located at 430 Mountain Avenue,
Murray Hill, New Jersey 07974 (telephone: (908) 665-9400).
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THE MEETINGS
The Special Meeting of Stockholders of MRI (the "MRI Meeting") will be held
at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New York, New
York 10019, on August 30, 1996 at 10:00 a.m., New York City Time. The Annual
Meeting of Stockholders of NMR (the "NMR Meeting") will be held at The Sheraton
New York Hotel, 811 7th Avenue (at 52nd Street), New York, New York 10019, on
August 30, 1996 at 10:00 a.m., New York City Time.
MRI has fixed the close of business on July 29, 1996 as the record date for
determining holders of MRI Common Stock entitled to notice of and to vote at the
MRI Meeting. NMR has fixed the close of business on July 29, 1996 as the record
date for determining holders of NMR Common Stock entitled to notice of and to
vote at the NMR Meeting. See "Voting and Proxies."
PURPOSES OF THE MEETINGS
The purpose of the MRI Meeting is to consider and vote upon proposals (i) to
approve the Merger Agreement (a conformed copy of which is attached as Appendix
A to this Joint Proxy Statement/Prospectus), pursuant to which NMR will be
merged with and into Subsidiary, resulting in NMR becoming a wholly-owned
subsidiary of MRI and to issue shares of MRI Common Stock in connection
therewith (ITEM No. 1) and (ii) to approve an amendment to MRI's Certificate of
Incorporation which will increase the number of authorized shares of MRI Common
Stock from 20,000,000 to 50,000,000 (ITEM No. 2). THE VOTE WITH RESPECT TO ITEM
NO. 2--RELATING TO MRI ONLY--WILL ONLY BE GIVEN EFFECT IF THE MERGER AGREEMENT
IS APPROVED AND THE MERGER IS CONSUMMATED.
Pursuant to the terms of the Merger Agreement, MRI will be required to issue
shares of MRI Common Stock. Approval of such issuance by the stockholders of MRI
is required by the rules of the National Association of Securities Dealers,
Inc., because shares of MRI Common Stock are traded on the Nasdaq National
Market and the number of shares proposed to be issued in the Merger will exceed
20% of the issued and outstanding shares of MRI Common Stock.
The purpose of the NMR Meeting is to consider and vote upon proposals (i) to
approve the Merger Agreement (ITEM No. 1) and, alternatively, (ii) to account
for the possibility that the Merger Agreement will not be approved (by either
the stockholders of NMR or the stockholders of MRI) or that the proposed Merger
will not be consummated for any other reason, to elect five (5) directors of NMR
to hold office until the next annual meeting of stockholders and their
successors are duly elected and qualified (ITEM No. 3). THE VOTE WITH RESPECT TO
ITEM NO. 3--RELATING TO NMR ONLY--WILL ONLY BE GIVEN EFFECT IF THE MERGER
AGREEMENT IS NOT APPROVED OR THE MERGER IS NOT OTHERWISE CONSUMMATED.
VOTES REQUIRED
MRI. The affirmative vote of a majority of the shares of MRI Common Stock
present in person or represented by proxy and entitled to vote at the MRI
Meeting is required to approve the Merger Agreement and issuance of the MRI
Common Stock pursuant to the Merger (ITEM No. 1). As of the date hereof,
directors and executive officers of MRI beneficially own approximately 32.2% of
the outstanding shares of MRI Common Stock (excluding shares issuable upon
exercise of outstanding MRI options and warrants or conversion of convertible
debentures held by such persons). Such directors and executive officers of MRI
intend to vote all shares of MRI Common Stock beneficially owned by them in
favor of approval of the Merger Agreement. See "Information Concerning Medical
Resources, Inc.--Ownership of MRI Common Stock."
With respect to ITEM No. 2, the affirmative vote of the holders of a
majority of the outstanding shares of MRI Common Stock is required to approve
the amendment to MRI's Certificate of Incorporation (ITEM No. 2).
NMR. The affirmative vote of the holders of a majority of the outstanding
shares of NMR Common Stock is required to approve the Merger Agreement (ITEM No.
1). As of the date hereof, directors and executive officers of NMR beneficially
own approximately 5.2% of the outstanding shares of NMR Common Stock (excluding
shares issuable upon exercise of NMR Derivative Securities held by such
persons). Such directors and executive officers of NMR intend to vote all shares
of NMR Common Stock beneficially owned by them in favor of approval of the
Merger Agreement. See "Information Concerning NMR of America, Inc.--Principal
and Other Stockholders of NMR."
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7
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With respect to ITEM No. 3, which will only be given effect if the Merger
Agreement is not approved (by either the stockholders of NMR or the stockholders
of MRI) or if the Merger is not otherwise consummated, the directors of NMR will
be elected by a plurality of the votes cast by stockholders of NMR present at
the NMR Meeting in person or represented by proxy. See "Voting and Proxies."
The remainder of this summary of the Joint Proxy Statement/Prospectus
summarizes certain information concerning the Merger and sets forth certain
selected financial information with respect to MRI and NMR.
RECOMMENDATIONS OF BOARD OF DIRECTORS
The Board of Directors of MRI has unanimously approved the Merger Agreement,
and has adopted resolutions recommending that the stockholders of MRI vote FOR
approval of the Merger Agreement. The Board of Directors of NMR has unanimously
approved the Merger Agreement, and has adopted resolutions recommending that the
stockholders of NMR vote FOR approval of the Merger Agreement.
The respective directors of MRI and NMR believe that the Merger is in the
best interests of the stockholders of MRI and NMR, respectively. The actions and
recommendations of the Boards of Directors of MRI and NMR in connection with the
Merger are based upon a number of factors discussed in this Joint Proxy
Statement/Prospectus. See "The Merger--Background of the Merger; Negotiations;
Fairness Opinions" and "The Merger--MRI's Reasons for the Merger; NMR's Reasons
for the Merger." In approving the Merger Agreement, certain members of the Board
of Directors of NMR and MRI may be deemed to have certain conflicts of interest.
See "Terms of the Merger--Interest of Certain Persons in the Merger."
The Board of Directors of MRI has also unanimously approved a proposal to
amend MRI's Certificate of Incorporation in order to increase the number of
authorized shares of MRI Common Stock from 20,000,000 to 50,000,000 (ITEM No.
2), and recommends a vote FOR approval of this proposal.
In the event the Merger Agreement is not approved by the stockholders of
NMR, or the Merger is not otherwise consummated, the Board of Directors of NMR
has also unanimously nominated for election as directors of NMR the five
nominees listed in ITEM No. 3.
INTEREST OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the MRI and NMR Boards of Directors
with respect to the Merger Agreement, stockholders should be aware that certain
members of NMR management have certain interests in the Merger that are in
addition to the interests of stockholders of NMR generally. Such executives of
NMR will be entitled to certain payments upon consummation of the Merger
pursuant to termination agreements and non-competition and consulting agreements
which have heretofore been executed and are conditioned upon consummation of the
Merger. See "Terms of the Merger--Non-Competition and Consulting Agreements." An
affiliate of the Chairman of the Board of Directors of MRI which has provided
and will continue to provide significant financial advice to MRI in connection
with the Merger will receive a financial advisory fee in the event that the
Merger is consummated. See "Terms of the Merger--Interest of Certain Persons in
the Merger."
FAIRNESS OPINIONS
Dillon, Read & Co. Inc. ("Dillon Read") has rendered its written opinion to
the Board of Directors of MRI to the effect that the consideration (referred to
in the Merger Agreement and herein as the Exchange Ratio) to be paid by MRI in
the Merger is fair to MRI from a financial point of view. A copy of such opinion
is attached as Appendix B to this Joint Proxy Statement/Prospectus. On June 13,
1996, Cowen & Company ("Cowen") rendered its written opinion to the NMR Special
Committee to the effect that, as of such date, the proposed Exchange Ratio was
fair, from a financial point of view, to the holders of the outstanding shares
of NMR Common Stock. A copy of such opinion is attached as Appendix C to this
Joint Proxy Statement/Prospectus. See "The Merger--Fairness Opinion of Dillon
Read; Fairness Opinion of Cowen."
RISK FACTORS
In connection with the proposed Merger, holders of shares of MRI Common
Stock and NMR Common Stock should consider certain risk factors relevant to the
businesses and operations of MRI and NMR. Such risk factors
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8
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include, but are not limited to, (i) the liquidity needs and significant
long-term indebtedness of MRI and NMR, (ii) recent losses, (iii) certain
reimbursement and collection risks relating to the healthcare industry, (iv)
extensive government regulation (including the effects of possible federal and
state healthcare cost containment legislation), (v) extensive industry
competition, (vi) the possibility of technological change and equipment
obsolescence, (vii) reliance on referring physicians, and (viii) the absence of
cash dividends paid by either MRI or NMR. See "Risk Factors Regarding MRI and
NMR."
PRINCIPAL TERMS OF THE MERGER
The Merger Agreement, a conformed copy of which (without exhibits and
schedules) is attached hereto as Appendix A, provides that, upon consummation of
the Merger, NMR will be merged with and into Subsidiary, NMR's corporate
existence will terminate, and Subsidiary, the surviving corporation, will be a
wholly-owned subsidiary of MRI. Upon consummation of the Merger, holders of
shares of NMR Common Stock, will receive shares of MRI Common Stock based on the
Exchange Ratio of 0.6875 of a share of MRI Common Stock for each issued and
outstanding share of NMR Common Stock. The Exchange Ratio was determined as a
result of negotiations conducted between MRI's Board of Directors and the NMR
Special Committee and the respective managements of MRI and NMR, and was
addressed in the written financial fairness opinions of Dillon Read and Cowen.
See "Terms of the Merger--Conversion of Shares; Treatment of Options, Warrants,
Convertible Debentures and Other Rights; Fractional Shares" and "The
Merger--Background of the Merger; Negotiations; Fairness Opinions."
The Merger Agreement provides that each outstanding NMR Derivative Security
will remain outstanding and will be exercisable for or convertible into that
number of shares of MRI Common Stock the holder thereof would have received in
the Merger had such holder exercised or converted such NMR Derivative Security
in full immediately prior to the Effective Time, and that the exercise price
thereof shall be appropriately adjusted. See "Terms of the Merger--Conversion of
Shares; Treatment of Options, Warrants, Convertible Debentures and Other Rights;
Fractional Shares."
The Merger Agreement provides that consummation of the Merger is subject to
certain terms and conditions, including the approval of the Merger Agreement by
the stockholders of MRI and NMR. The Merger Agreement also provides that
consummation of the Merger is conditioned upon MRI, NMR and Subsidiary obtaining
all necessary consents and approvals to the consummation of the Merger. See
"Terms of the Merger--Conditions Precedent to Consummation of the Merger." Other
than in connection with this Joint Proxy Statement/Prospectus and the
registration of the MRI Common Stock, no Federal or state regulatory
requirements must be complied with or approval must be obtained in connection
with the Merger other than such as has already been obtained.
The Merger Agreement provides that the obligations of MRI and NMR are
subject to the performance in all material respects, unless otherwise waived, of
their respective covenants and agreements set forth in the Merger Agreement and
the continued truth in all material respects of their respective representations
and warranties set forth in the Merger Agreement. There are no agreements or
undertakings in the Merger Agreement on the part of either MRI or NMR to
indemnify the other following consummation of the Merger in the event any
representation or warranty made by either party to the other in the Merger
Agreement was not accurate at the time made.
Mr. Joseph G. Dasti, Chairman of the Board of Directors and President and
Chief Executive Officer of NMR, and Mr. John P. O'Malley III, Executive Vice
President-Finance, Chief Financial Officer and Secretary of NMR, have entered
into respective non-competition and consulting agreements with MRI, the
effectiveness of which are conditioned upon the consummation of the Merger. See
"Terms of the Merger--Non-Competition and Consulting Agreements; Interest of
Certain Persons in the Merger."
The Merger Agreement may be terminated by the mutual written consent of the
Boards of Directors of MRI and NMR at any time prior to the Effective Time of
the Merger and by either party (i) if the Merger Agreement is not approved by
the stockholders of MRI at the MRI Meeting or by the stockholders of NMR at the
NMR Meeting, (ii) if the Effective Time has not occurred on or before December
31, 1996 through no fault of the terminating party, (iii) if the Merger is
enjoined or prohibited by a court or governmental agency, or (iv) in certain
other circumstances. See "Terms of the Merger--Termination and Amendment." Under
certain circumstances, if either MRI or NMR breaches certain representations,
warranties or covenants, it would be required to pay to the other party a fee in
the amount of $2,000,000. If the stockholders of either NMR or MRI do not
approve the Merger, the party whose
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stockholders do not approve the Merger will be required to pay to the other
$1,000,000. See "Terms of the Merger--Expenses of the Merger; Fees; No
Solicitation Provision and Fee Payable."
The Merger Agreement provides that, as soon as practicable following the
fulfillment of all conditions to the Merger, including the approval of the
Merger Agreement by the stockholders of MRI and by the stockholders of NMR, a
Certificate of Merger will be filed with the Delaware Secretary of State. The
Merger will become effective upon filing the Certificate of Merger with the
Delaware Secretary of State. The current executive officers and directors of MRI
are expected to continue as executive officers and directors of MRI following
the Merger.
DESCRIPTION OF SECURITIES TO BE ISSUED
The rights of the holders of MRI Common Stock are set forth in MRI's
Certificate of Incorporation and Bylaws, and in the Delaware General
Corporation Law ("DGCL"). See "Description of MRI Capital Stock."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
As a condition to the consummation of the Merger, NMR is to receive, at the
closing under the Merger Agreement, an opinion of McCarter & English, counsel to
NMR, to the effect that no gain or loss for U.S. Federal income tax purposes
will be recognized by stockholders of NMR with respect to their receipt of
shares of MRI Common Stock in exchange for their shares of NMR Common Stock
(other than with respect to cash received in lieu of fractional shares of MRI
Common Stock). NMR stockholders who receive cash in lieu of fractional shares
may be subject to U.S. Federal income tax. NMR STOCKHOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISERS REGARDING THE TAX CONSEQUENCES OF THE MERGER WITH RESPECT
TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY OF VARIOUS
STATE AND LOCAL TAX LAWS, AND THE TAX LAWS OF ANY FOREIGN JURISDICTIONS. See
"Terms of the Merger--Certain Federal Income Tax Consequences of the Merger."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for under the purchase
method, as such term is used under generally accepted accounting principles, for
accounting and financial reporting purposes. See "Terms of the
Merger--Accounting Treatment."
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
I. SELECTED HISTORICAL FINANCIAL DATA
A. MRI
The following selected historical financial data of MRI is derived from
MRI's consolidated financial statements for the periods indicated. MRI's
consolidated financial statements as of December 31, 1995 and 1994 and for the
years then ended have been audited by Ernst & Young LLP, MRI's independent
certified public accountants. MRI's consolidated financial statements as of
December 31, 1993 and for the year then ended, after restatement for the 1994
pooling of interests, have been audited, as to combination only, by Ernst &
Young LLP. MRI's consolidated financial statements as of December 31, 1993 and
for the year then ended, prior to restatement for the 1994 pooling of interests
and not presented separately herein, were audited by Price Waterhouse LLP,
independent accountants. Such consolidated financial statements and notes
thereto have been incorporated herein by reference. The selected balance sheet
data at March 31, 1996 and 1995 and the income statement data for the
three-month periods ended March 31, 1996 and 1995 have been derived from MRI's
unaudited consolidated financial statements and include, in the opinion of
management, all adjustments, consisting only of normal recurring accruals,
necessary for a fair statement of such data. Operating results for the
three-month period ended March 31, 1996 are not necessarily an indication of the
results to be expected for the entire fiscal year ended December 31, 1996.
B. NMR
The following selected historical financial data of NMR, insofar as it
relates to each of the fiscal years ended March 31, 1992-1996, has been derived
from NMR's financial statements which have been audited by Coopers & Lybrand
L.L.P., independent accountants. NMR's consolidated balance sheets at March 31,
1996 and 1995, respectively, and its related statements of income and of cash
flows for the three years ended March 31, 1996 and notes thereto have been
incorporated herein by reference.
II. SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
MRI and NMR
The following selected unaudited pro forma combined financial data as of
March 31, 1996 and for the three months ended March 31, 1996 and the fiscal year
ended December 31, 1995 have been derived from the unaudited pro forma combined
financial information. See "MRI and NMR Unaudited Pro Forma Combined Financial
Statements." Such unaudited pro forma combined financial data reflects the pro
forma effects of the Merger on MRI's historical cost balance sheet as of March
31, 1996 and statement of operations for the periods presented.
For additional information with respect to the following selected unaudited
pro forma combined financial data, see "MRI and NMR Unaudited Pro Forma Combined
Financial Statements."
The following selected unaudited pro forma combined financial data should be
read in conjunction with the unaudited historical and pro forma combined
financial information and related notes thereto. See "MRI and NMR Unaudited Pro
Forma Combined Financial Statements."
The following selected unaudited historical and pro forma financial
information should also be read in conjunction with the financial statements and
notes thereto of MRI and NMR incorporated by reference herein. Such pro forma
information is not necessarily indicative of the results that would have
occurred had the Merger been effected on the dates indicated or the results
which may be obtained in the future.
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<TABLE>
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I. SELECTED HISTORICAL FINANCIAL DATA
A. MEDICAL RESOURCES, INC. AND SUBSIDIARIES SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SUPPLEMENTAL DATA)
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ------------------
1995 1994 1993 1992 1991 1996 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net service revenues(1) ............ $51,994 $45,179 $45,241 $41,143 $39,622 $18,098 $12,140
======= ======= ======= ======= ======= ======= =======
Income (loss) from continuing
operations before
extraordinary item ............... 4,143 (1,093) (2,055) 610 (1,078) 1,298 769
======= ======= ======= ======= ======= ======= =======
Income (loss) from continuing
operations before
extraordinary items per
common share ..................... $0.53 ($0.15) ($0.32) $0.11 ($0.22) $0.16 $0.11
======= ======= ======= ======= ======= ======= =======
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ------------------
1995 1994 1993 1992 1991 1996 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA(2):
Historical income (loss) from
continuing operations before
income taxes and
extraordinary item ............... $ 5,802 ($611) ($1,991) $ 877 ($1,020) $ 1,736 $ 1,189
Provision (benefit) for income
taxes ............................ 1,659 660 (427) 655 58 438 420
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations before
extraordinary item ............... 4,143 (1,271) (1,564) 222 (1,078) 1,298 769
======= ======= ======= ======= ======= ======= =======
Income (loss) from continuing
operations before
extraordinary items per
common share ..................... $0.53 ($0.19) ($0.24) $0.04 ($0.22) $0.16 $0.11
======= ======= ======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ------------------
1995 1994 1993 1992 1991 1996 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .................... $10,738 $ 5,834 $ 3,365 $ 5,077 $ 1,058 $17,283 $ 6,497
Total assets ....................... 44,136 40,372 40,881 33,993 29,431 57,535 40,216
Long-term debt and capital
lease obligations (excluding
current portion) ................. 15,507 13,415 19,034 12,765 20,115 23,334 12,932
Total stockholders' equity ......... 16,966 11,872 10,602 12,245 5,980 19,687 13,233
SUPPLEMENTAL DATA:
Number of consolidated
MR centers at end of period ...... 11 8 8 7 6 15 8
Average number of MR
procedures per day at
consolidated MR centers .......... 152 124 106 90 64 186 141
(Footnotes on next page)
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</TABLE>
12
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(Footnotes from previous page)
(1) Reflects the consolidation of (i) the West Orange center and (ii) the San
Bernardino center as of August 1991. Net service revenues include equity in
earnings and management fees associated with the Georgetown center which
was sold during January 1992.
(2) Pro forma data reflects the pro forma provision for income taxes assuming
MRI operated as a C-corporation as opposed to a partnership from January 1,
1991 through September 3, 1992, and the pro forma provision for income
taxes assuming StarMed Staffing, Inc. (formerly StarMed Staffing, L.P.)
operated as a C-corporation as opposed to a limited partnership from
September 4, 1992 through August 3, 1994.
<TABLE>
B. NMR OF AMERICA, INC. AND SUBSIDIARIES SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
-------------------------------------------------------------
1996(1) 1995(2)(3) 1994(4) 1993(5) 1992(6)
------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue ...................................... $23,834 $17,988 $15,597 $14,830 $15,175
Operating expenses ........................... (19,135) (14,894) (12,379) (13,835) (11,414)
Other expenses ............................... (1,555) (1,162) (693) (607) 30
Minority interest ............................ (411) (528) (1,049) (982) (1,766)
Income taxes ................................. (956) 1,030 (108) -- (669)
Income (loss) before extraordinary item ...... $ 1,777 $ 2,434 $ 1,368 ($ 594) $ 1,356
======= ======= ======= ======== =======
Fully diluted per share data:
Income (loss) before extraordinary item .... $0.30 $0.47 $0.29 $0.12) $0.36
AS OF MARCH 31,
-------------------------------------------------------------
1996(1) 1995(2)(3) 1994(4) 1993(5) 1992(6)
------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total assets ................................. $47,074 $35,329 $28,973 $24,651 $27,201
======= ======= ======= ======= =======
Obligations under capital leases,
less current installments .................. $ 1,152 $ 482 $ 768 $ 595 --
======= ======= ======= =======
Convertible subordinated debentures .......... $ 1,976 $ 2,056 $ 2,126 $ 2,084 $ 2,125
======= ======= ======= ======= =======
Notes and mortgage payable,
less current installments .................. $11,029 $10,451 $ 8,684 $ 5,931 $ 6,770
======= ======= ======= ======= =======
Shareholders equity .......................... $20,989 $14,030 $10,902 $ 9,059 $10,749
======= ======= ======= ======= =======
</TABLE>
- ------------
(1) Includes the operations of NMR's acquired centers in Florida (four) and
Chicago, Illinois (one) as of September 15, 1995 and January 1, 1996, the
effective dates of such acquisitions.
(2) Includes non-recurring adjustments to (i) write-down the carrying value of
certain fixed assets ($560,000) and (ii) recognize NMR's net deferred tax
asset totalling $1,099,000.
(3) Includes the operations of NMR's acquired centers in Libertyville and Des
Plaines, Illinois as of January 1, 1995, the effective date of such
acquisitions.
(4) Reflects the impact of the acquisition of additional limited partner
interests in seven of NMR's MRI facilities as of the effective date of
January 1, 1994, and includes the results of operations of NMR's acquired
Oak Lawn Imaging Center as of January 21, 1994, the date of such
acquisition.
(5) Includes the operations of OPEN MRI of Chicago and Airlite Imaging Center
of Elgin, Illinois from their June 13, 1992 and May 15, 1992, opening
dates, respectively.
(6) Includes the operations of the Colonnade Imaging Center from its November
21, 1991 opening date.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
II. MEDICAL RESOURCES, INC. AND NMR OF AMERICA, INC.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(1)
FISCAL YEAR THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
----------- ------------
STATEMENT OF OPERATIONS DATA:
Net service revenues ................................ $74,306 $24,672
Income from continuing operations ................... 5,851 2,007
Income from continuing operations per common share .. $ 0.49 $ 0.16
MARCH 31,
1996
------------
BALANCE SHEET DATA:
Working capital ..................................... $ 22,954
Total assets ........................................ 123,720
Long-term debt and capital lease obligations
(excluding current portion) ....................... 37,491
Total stockholders' equity .......................... 57,735
- ------------
(1) MRI's fiscal year-end is December 31 and NMR's fiscal year-end is March 31.
Accordingly, the selected unaudited pro forma combined financial data for
the fiscal year ended December 31, 1995 includes the operating results of
NMR for the year ended March 31, 1996.
DIVIDENDS
No cash dividends have been paid on either MRI Common Stock or NMR Common
Stock since the organization of each respective company. MRI has no present
plans to pay cash dividends to its stockholders and, for the foreseeable future,
intends to retain all of its earnings, if any, for use in its business. The
declaration of any future dividends by MRI is within the discretion of its Board
of Directors and will be dependent on the earnings, financial condition and
capital requirements of MRI, as well as any other factors deemed relevant by its
Board of Directors.
MARKET PRICE DATA
MRI Common Stock is traded on the Nasdaq National Market under the symbol
"MRII" and NMR Common Stock is traded on the Nasdaq National Market under the
symbol "NMRR". The following table sets forth, for the calendar quarters
indicated, the range of high and low sale prices for shares of MRI Common Stock
and NMR Common Stock.
MRI NMR
---------------- ---------------
HIGH LOW HIGH LOW
------ ----- ----- -----
1996
Third Quarter (through July 29, 1996) .. $ 9.25 $6.50 $5.69 $4.13
Second Quarter ......................... 10.25 6.00 5.75 3.13
First Quarter .......................... 6.38 4.63 3.75 3.00
1995
Fourth Quarter ......................... 8.00 4.50 4.25 3.25
Third Quarter .......................... 6.50 3.50 5.13 4.00
Second Quarter ......................... 3.75 3.13 5.50 4.13
First Quarter .......................... 4.00 2.88 5.25 3.88
1994
Fourth Quarter ......................... 4.25 1.63 5.13 3.38
Third Quarter .......................... 2.50 1.69 4.50 3.00
Second Quarter ......................... 3.00 1.75 4.38 2.50
First Quarter .......................... 2.75 1.94 3.38 2.25
- -------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
The following table sets forth the closing prices per share of MRI Common
Stock and NMR Common Stock as reported on the Nasdaq National Market on May 6,
1996, the business day preceding public announcement that MRI and NMR were
engaged in discussions pertaining to a possible business combination, on May 17,
1996, the business day preceding public announcement of the execution of the
Merger Agreement, and on July 29, 1996, and the equivalent per share prices (as
explained below) of NMR Common Shares on such dates.
EQUIVALENT
MRI COMMON NMR COMMON PER SHARE
STOCK STOCK PRICE
---------- ---------- ---------
May 6, 1996 ........ $ 9.00 $ 4.38 $ 6.19
May 17, 1996 ....... 9.00 4.52 6.19
July 29, 1996 ...... 7.38 4.63 5.07
The equivalent per share price of a share of NMR Common Stock represents the
closing price of a share of MRI Common Stock on such date multiplied by the
Exchange Ratio.
NMR and MRI stockholders are urged to obtain current quotations for the
market prices of MRI Common Stock.
As of May 17, 1996, there were 85 and 727 record holders of MRI Common Stock
and NMR Common Stock, respectively. As of July 29, 1996, there were 110 and 677
record holders of MRI Common Stock and NMR Common Stock, respectively.
COMPARATIVE PER SHARE INFORMATION
The following table sets forth (1) the historical net income per common
share from continuing operations and the historical book value per common share
of MRI Common Stock; (2) the historical net income per common share from
continuing operations and the historical book value per common share of NMR
Common Stock; (3) the unaudited pro forma combined income from continuing
operations per common share and the unaudited pro forma combined book value per
common share after giving effect to the proposed Merger using the purchase
method of accounting for the Merger; and (4) the unaudited NMR equivalent pro
forma combined net income from continuing operations per common share and the
unaudited NMR equivalent pro forma combined book value per common share based on
the Exchange Ratio of 0.6875 of a share of MRI Common Stock for each share of
NMR Common Stock. The information presented in the table should be read in
conjunction with the separate historical consolidated financial statements of
MRI and NMR and the notes thereto incorporated by reference or appearing
elsewhere herein, as applicable. Also, see "MRI and NMR Unaudited Pro Forma
Combined Financial Statements" appearing elsewhere herein.
The unaudited pro forma combined financial information is not necessarily
indicative of the net income (loss) per share from continuing operations or book
value per common share that would have been achieved had the Merger been
consummated as of the beginning of the periods presented and should not be
construed as representative of such amounts for any future dates or periods.
PRO FORMA NMR
COMBINED EQUIVALENT
MRI PRO FORMA
AND COMBINED
MRI NMR NMR MRI AND NMR
--- --- -------- -----------
HISTORICAL
------------
Net Income from Continuing
Operations per common share:
Fiscal Year ended December 31, 1995* .. $0.53 $0.30 $0.49 $0.34
Three Months ended March 31, 1996 ..... $0.16 $0.10 $0.16 $0.11
Book Value per common share
as of March 31, 1996 ................ $2.34 $3.35 $4.54 $3.12
- ------------
* MRI's fiscal year-end is December 31, while NMR's fiscal year-end is March 31.
Accordingly, the combined pro forma income from continuing operations per
common share for the fiscal year ended December 31, 1995 includes operating
results of NMR for the year ended March 31, 1996.
- --------------------------------------------------------------------------------
15
<PAGE>
RISK FACTORS REGARDING MRI AND NMR
In addition to the other information contained or?incorporated by reference
in this Joint Proxy Statement/Prospectus, holders of shares of MRI Common Stock
and NMR Common Stock should carefully consider the factors set forth below which
relate to MRI and NMR (collectively, the "Companies") before voting with respect
to the Merger.
CAPITAL NEEDS. MRI's required capital expenditures and planned operating
expenses are anticipated to be financed by a combination of operating cash flow,
funds available through working capital and third party credit facilities. There
may be circumstances, however, such as additional acquisitions, that could
accelerate MRI's use of cash. If this occurs, MRI may incur, from time to time,
additional indebtedness and attempt to issue, in public or private transactions,
equity and debt securities. There can be no assurance that MRI will have access
to additional financing on satisfactory terms and the inability to obtain
additional capital would have a material adverse effect on MRI's ability to
expand its business.
RECENT LOSSES. Both MRI and NMR were profitable during their last fiscal
year. Although MRI realized net income of approximately $1,690,000 for the year
ended December 31, 1995, it incurred net losses of $1,994,000 for the fiscal
year ended December 31, 1994 and $2,797,000 for the fiscal year ended December
31, 1993. Moreover, the Companies obtain a substantial portion of their business
from patients who are members or enrollees of various managed care health plans,
and it is anticipated that this portion of the Companies' business will increase
in the future. Due to the ability of these third-party payers to obtain
substantial discounts from healthcare providers such as MRI and NMR, the
continued growth in both the size and number of managed care entities will
increase price competition and may have a negative impact on the revenues,
operating margins and profitability of companies operating in the diagnostic
imaging industry. In addition, in recent years, many of the public companies
operating in the diagnostic imaging business have reported substantial operating
losses. There can be no assurance that the Companies will operate profitably in
the future.
SIGNIFICANT LONG-TERM DEBT, INCLUDING CAPITALIZED LEASE OBLIGATIONS. Both
MRI and NMR have significant outstanding debt comprised principally of
capitalized lease obligations relating to equipment at their centers. At March
31, 1996, MRI's long-term debt, excluding current maturities, was approximately
$23,334,000, of which capitalized lease indebtedness was approximately
$7,841,000. NMR's long-term debt, excluding current maturities, was $14,156,854
at March 31, 1996, of which capitalized lease and loan indebtedness was
$1,152,455. MRI and NMR have financed the acquisition of substantially all of
the diagnostic imaging equipment used at their centers (typically with terms
ranging from five to seven years) from lenders and lessors, with the equipment
and other assets serving as collateral for the loans. Substantially all of the
Companies' assets have been pledged as collateral for their respective
obligations. In MRI's case, generally, the center leasing the equipment and the
subsidiary which operates the center are the only obligors under each such
lease. NMR has guaranteed certain obligations of its subsidiaries. At March 31,
1996, the ratios of total liabilities to stockholders' equity of MRI and NMR
were 1.92 to 1.00 and 1.24:1.00, respectively. At March 31, 1996, after giving
effect to the Merger on a pro-forma combined basis, the ratio of MRI's total
liabilities to stockholders' equity would have been 1.14 to 1.00. A default
under an equipment lease of MRI or NMR could materially adversely affect the
operations of the applicable center and, consequently, the results of operations
of MRI or NMR.
In addition, following the Merger, MRI may incur additional indebtedness for
future expansion and equipment replacements and upgrades. MRI is subject to the
risks associated with such indebtedness, including the risk that its cash flow
may not be adequate to make required payments on indebtedness. A decrease in
reimbursements for diagnostic imaging services or in equipment utilization
arising from, among other things, cancellation or non-renewal of provider
contracts, equipment malfunctions, the inability to effect prompt and timely
repairs to equipment or a reduction in demand for MRI's equipment or services
could materially and adversely effect MRI's ability to service its indebtedness
following the Merger. In addition, the high ratio of indebtedness to
stockholders' equity to which MRI will be subject following the Merger, may
restrict or impair MRI's ability to make additional acquisitions or exploit
future business opportunities. See "MRI and NMR Unaudited Pro Forma Combined
Financial Statements"; "Risk Factors Regarding MRI and NMR--Capital Needs;
Limitations and Delays in Reimbursement; Acquisition and Development Strategy."
LIMITATIONS AND DELAYS IN REIMBURSEMENT. Third-party payors, including
Medicare, Medicaid, managed care/HMO providers and certain commercial payors
have taken extensive steps to contain or reduce the costs of health
16
<PAGE>
care. In certain areas, the payors are subject to regulations which limit the
amount of payments. Current discussions within the federal government regarding
national health care reform are emphasizing containment of health care costs. In
addition, certain managed care organizations have negotiated capitated payment
arrangements for imaging services. Under capitation, diagnostic imaging service
providers are compensated using a fixed rate per member of the managed care
organization regardless of the total cost of rendering diagnostic services to
the members. Services provided under these contracts are expected to become an
increasingly significant part of the Companies' business. Although patients are
ultimately responsible for payment for services rendered, substantially all of
the Companies' imaging centers' revenues are derived from third-party payors.
Successful reduction of reimbursement amounts and rates, changes in services
covered, delays or denials of reimbursement claims, negotiated or discounted
pricing and other similar measures could materially adversely affect the
Companies' respective imaging centers' revenues, profitability and cash flow.
The Companies' managements believe that reimbursement rates will continue to
decline due to factors such as the expansion of managed care providers and
continued national healthcare reform efforts. The Companies enter into
contractual arrangements with managed care organizations which, due to the size
of their membership, are able to command reduced rates for services. These
agreements may increase the number of procedures performed due to the additional
referrals from these managed care arrangements. However, there can be no
assurance that the increased volume of procedures associated with these
contractual arrangements will offset the reduced revenue resulting from the
reduction in reimbursement rate per procedure.
In addition, during 1995 approximately 21.8% and 2.0%, respectively, of
MRI's and NMR's total revenues from third-party payors were derived through
physicians providing imaging services to patients involved in personal injury
claims. Receivables relating to personal injury claims require more extensive
documentation than other procedures. In addition, those individuals with
obligations to the Companies in excess of insurance coverage or who do not have
insurance coverage tend to delay payment until the legal action is resolved,
which may result in significant collection delays. Due to the greater complexity
in processing, as well as increased information requirements from third-party
payors, receivables relating to personal injury claims typically require a
longer period of time to collect compared to other receivables and, in the
experience of MRI, incur a higher bad debt expense.
RESTRICTIONS IMPOSED BY GOVERNMENT REGULATION. The health care industry is
highly regulated. The ownership, operation and acquisition of outpatient
diagnostic centers are subject to various federal and state laws, regulations
and approvals concerning such matters as physician referrals, licensing of
facilities and personnel, and Certificates of Need for certain types of health
care facilities and major medical equipment. Among other penalties, violations
of these laws can result in the shutdown of a company's facilities and loss of
Medicare and Medicaid reimbursement. The Federal Anti-Kickback law prohibits the
offer, payment, solicitation or receipt of any form of remuneration in return
for referring Medicare or Medicaid patients or purchasing, leasing, ordering or
arranging for any item or service that is covered by Medicare or Medicaid. The
law provides several penalties for engaging in prohibited acts, including
criminal sanctions and exclusion from the Medicare and Medicaid programs.
Although the Companies do not believe that they are operating in violation of
this law, the scope of the law remains somewhat unclear and there is no
assurance that the Companies would prevail in their positions. In addition, in
1991 and subsequently, the Office of the Inspector General of the Department of
Health and Human Services promulgated "safe harbor" regulations specifying
activities that will be protected from criminal and civil investigation and
prosecution under the Federal Anti-Kickback law. Although the Companies believe
their operations generally qualify for protection under these regulations, the
regulations have thus far been relatively untested in practice, and there is no
assurance that the Companies will prevail in their positions. The Office of the
Inspector General has stated that failure to satisfy the conditions of an
applicable "safe harbor" does not necessarily indicate that the arrangement in
question violates the Federal Anti-Kickback law, but means that the arrangement
is not among those that the "safe harbor" regulations protect from criminal and
civil investigation and prosecution under that law. The finding of a violation
must still be determined based upon the precise language of the Federal
Anti-Kickback law.
The Federal Budget Omnibus Reconciliation Act of 1989 contains provisions
that, unless an exception applies, restrict physicians from making referrals to
clinical laboratory facilities for services to be rendered to Medicare patients
in which the physicians have an ownership interest or with which they have a
compensation arrangement (the so-called "Stark I Legislation"). The Federal
Omnibus Budget Reconciliation Act of 1993 added provisions to these restrictions
on Medicare payment for physician referrals which, effective January 1, 1995,
greatly broadened the services which are subject to this referral and payment
ban (the so-called "Stark II Legislation"). Specifically with
17
<PAGE>
regard to the Companies' operations, the Stark II Legislation adds the referral
restriction to radiology or other diagnostic services. The Stark II Legislation
also extends these prohibitions to referrals of Medicaid patients. Both the
Stark I and the Stark II Legislation provide exceptions for certain types of
employment and contractual relationships. The Companies believe that they are in
compliance with the Stark II legislation but there is no assurance that their
position will not be challenged.
The State of Florida also enacted in 1992 an anti-kickback statute
substantially similar in scope to the Federal Anti-Kickback law. Although the
Companies do not believe that they are operating in violation of this law, as
with its federal counterpart, the scope of the Florida law remains unclear and
there is no assurance that the Companies would prevail in their positions.
The States of Florida, Illinois, New Jersey, New York and Pennsylvania have
enacted laws that restrict or prohibit physicians from referring patients to
health care facilities in which such physicians have a financial interest.
Although the Companies do not believe that these laws will have a material
adverse effect on their operations in these states, there is no assurance that
these laws will not be interpreted or applied in such a way as to create such a
material adverse effect, or that these states, or other states in which the
Companies do business, will not adopt similar or more restrictive laws or
regulations that could have such a material adverse effect.
Certain states where MRI and NMR have imaging centers have enacted
certificate of need laws to facilitate healthcare planning by placing
limitations on the purchase of major medical equipment and other capital
expenditures. These statutes, together with their implementing regulations,
could limit MRI's and NMR's ability to acquire new imaging equipment or expand
or replace its existing equipment, and no assurances can be given that the
required regulatory approvals for any future acquisitions, expansions or
replacements will be granted to MRI or NMR.
The Companies continually monitor regulatory initiatives at the federal and
state levels. New laws or regulations, changes in current laws or regulations or
changes in interpretations of current laws or regulations could have a material
adverse effect on the Companies. In addition, the cost of complying with the
foregoing could materially adversely affect the Companies' financial condition.
See "Government Regulation of MRI and NMR."
POTENTIAL ADVERSE EFFECTS OF NATIONAL HEALTHCARE REFORM. Many aspects of the
medical industry in the United States are presently subject to extensive Federal
and state governmental regulation, including reimbursement rates and policies
imposed by Medicare and other third-party reimbursement programs from which MRI
and NMR receive a substantial portion of their revenue. Although healthcare
reform, if enacted following the Merger, may have the beneficial effect of
increasing the number of persons who will have access to services provided by
MRI and NMR, such reform may also reduce the fees that may be charged for such
services. In particular, there is a possibility that a significant portion of
healthcare services will be rendered and administered through a system which
could force price concessions from service providers such as MRI and NMR.
Moreover, healthcare reform could cause greater analysis of each patient's need
for diagnostic testing, with the aim of eliminating unnecessary tests and
reducing the volume and cost of medical care. Depending on the nature and extent
of any new laws and/or regulations, or possible changes in the interpretation of
existing laws and/or regulations, the foregoing may have a material adverse
effect on MRI's and NMR's revenues, operating margins and profitability.
INTEGRATION OF ACQUIRED BUSINESS; MANAGEMENT OF GROWTH. The integration of
MRI's and NMR's respective operations following the Merger will require the
dedication of management resources which will temporarily detract from attention
to the day-to-day business of the combined company. The combination of the two
Companies will also require integration of the Companies' sales and marketing
efforts. The process of combining the two organizations may cause an
interruption of, or a loss of momentum in, the activities of either or both of
the Companies' businesses, which could have an adverse effect on the revenues
and operating results of the combined company, at least in the near term. There
can be no assurance that the combined entity will be able to retain its key
technical and management personnel or that the combined entity will realize any
of the other anticipated benefits of the Merger. In addition, the combined
company's ability to manage its growth effectively will require it to continue
to improve its operational, financial and information management systems and
controls, and to attract, retain, motivate and manage employees effectively. The
failure of the combined company to manage growth in its business effectively
would have a material adverse effect on its results of operations.
COMPETITION. The outpatient diagnostic imaging industry is highly
competitive. Competition focuses primarily on attracting physician referrals,
including referrals through relationships with managed care organizations, at
the local market level. The Companies believe that principal competitors in each
of their markets are
18
<PAGE>
hospitals and independent or management-company-owned imaging centers, some of
which are owned with physician investors. Some of these competitors have greater
financial and other resources than MRI and NMR. Principal competitive factors
include quality and timeliness of test results, ability to develop and maintain
relationships with referring physicians, type and quality of equipment, facility
location, convenience of scheduling and availability of patient appointment
times, and the quality and convenience of facilities. Competition for physician
referrals can also be affected by the ownership or affiliation of competing
centers or hospitals, with certain of the Companies$ competitors having
historically derived a significant portion of their revenues from referrals by
physicians who are also investors and have a financial interest in, or are
otherwise affiliated with, the competing center or hospital. In addition,
managed care has affected the availability of referrals by approving only a
certain number of centers in a given geographic region.
The healthcare temporary staffing business is also very competitive. StarMed
competes for clients' business with other providers of travel nurse temporary
staffing and with other staffing companies that provide per diem staffing
services. StarMed also competes for the limited number of available qualified
staff. Within the travel nurse segment of the temporary staffing industry,
StarMed competes with several companies which are larger and may possess greater
financial and other resources.
DEPENDENCE ON REFERRING PHYSICIANS. At each of the Companies' imaging
centers, certain physicians, in private practice or affiliated with managed care
organizations, refer a significant percentage of such centers' patients. A
significant reduction by any such physician in the number of patients referred
to that center could materially adversely affect such center, and consequently,
following the Merger, the combined company's operating results.
ACQUISITION AND DEVELOPMENT STRATEGY. MRI's current growth strategy focuses
primarily on acquiring existing imaging centers and healthcare temporary
staffing businesses and integrating them into its operations. With respect to
such acquisitions, there can be no assurance that suitable acquisition
candidates can be found, that acquisitions can be negotiated on acceptable
terms, that necessary financing can be obtained or that the operations of the
acquired businesses can be effectively or profitably integrated into MRI's
existing operations. Competition for suitable acquisition candidates is expected
to be intense and, in addition to local hospital and physician groups, to
include regional and national diagnostic imaging service companies and other
medical services companies, many of which have greater financial resources than
the Companies. MRI may also pursue the development of new centers. New centers
may incur significant operating losses, during their development stages, and
could materially adversely affect MRI's operating results and financial
condition. In addition, there can be no assurance that qualified executives who
may be required to manage such acquired operations can be successfully retained
or employed by MRI.
TECHNOLOGICAL OBSOLESCENCE. There have been rapid technological advancements
made in the software and, to a lesser extent, hardware in the diagnostic imaging
industry. Although the Companies believe that their equipment can generally be
upgraded as necessary, the development of new technologies or refinements of
existing technologies might make existing equipment technologically or
economically obsolete. If such obsolescence were to occur, the Companies might
be compelled to purchase new equipment, which could have a material adverse
effect on their earnings and cash flow. In addition, certain of the Companies'
centers compete against local centers which contain more advanced imaging
equipment or provide additional modalities.
LIABILITY CLAIMS AND INSURANCE. Although MRI and NMR provide technical
services and are not engaged in the practice of medicine, the diagnostic imaging
and temporary staffing businesses entail the risk of professional liability
claims. The Companies' exposure to such liability is reduced for their imaging
centers because interpreting physicians are required to carry their own medical
malpractice insurance. Similarly, MRI's nursing personnel perform services in
accordance with treatments prescribed by third-party physicians or under
hospital supervision. Nevertheless, the Companies maintain general liability
insurance and professional liability insurance for their diagnostic imaging
businesses and MRI carries general liability insurance and professional
liability insurance for its temporary staffing business in amounts deemed
adequate by the managements of the respective Companies. However, there can be
no assurance that potential claims will not exceed the coverage limits or that,
in the future, such insurance will be available.
ANTICIPATED LOSSES FROM CERTAIN CENTERS. In November 1991 and May 1992, NMR
commenced operations of centers in Bel Air, Maryland and Elgin, Illinois,
respectively. To date, these centers have generated significant losses. For the
year ended March 31, 1996, NMR incurred net losses amounting to approximately
$359,313 and $135,584, respectively, relating to the operations of the Bel Air,
Maryland and Elgin, Illinois centers. In addition to
19
<PAGE>
NMR's initial capital contributions, NMR has made and continues to advance
working capital to fund the operations of these centers and cannot determine if
or when these centers will become profitable, or if or when these advances will
be repaid. As of March 31, 1996, the amount of working capital advances,
including accrued but unpaid interest thereon, made to each of the Bel Air,
Maryland and Elgin, Illinois centers by NMR amounted to approximately $2,933,731
and $1,862,998, respectively. If the Merger is consummated, MRI presently
expects that it will close these centers due to anticipated future operating
losses at such centers. MRI expects to incur a loss of approximately $1.6
million as a result of the closing of such centers, although there can be no
assurance of the timing of such closures or that the actual loss will not exceed
such amount.
POTENTIAL ADVERSE EFFECT OF RESTRICTIONS ON UNLICENSED PRACTICE OF MEDICINE.
Diagnostic imaging centers are subject to laws prohibiting the practice of
medicine by non-physicians and the rebate or division of fees between physicians
and non-physicians. Professional radiology services are performed at MRI's and
NMR's centers by licensed physicians under contract with a medical professional
corporation, while MRI and NMR provide the imaging equipment and technical
employees. Although the Companies believe they are in compliance with relevant
existing laws, there can be no assurance that state authorities or others may
not challenge this structure as involving MRI or NMR in the unlawful practice of
medicine.
DEPENDENCE ON QUALIFIED INTERPRETING PHYSICIANS. MRI's and NMR's strategy of
maintaining the high quality of their services is dependent upon their ability
to obtain and maintain arrangements with qualified interpreting physicians at
each of their centers. Following the Merger, no assurance can be given that the
Companies' contractual arrangements with interpreting physician groups at each
of the Companies' centers can be maintained on terms advantageous to the
Companies. No assurance can be given that the interpreting physicians with whom
MRI or NMR have contracts will perform satisfactorily or continue to practice in
the markets served by their imaging centers. In addition, with respect to the
development of new centers, there can be no assurance that arrangements can be
entered into with interpreting physicians on acceptable terms or that such
physicians will be successful in such centers. The Companies' success is
significantly dependent on the ability of these physicians to attract patient
referrals, thereby enabling the Companies' centers to operate profitably. The
inability of these physicians to attract sufficient referrals could have a
material adverse effect on the Companies' financial condition and operating
results.
POTENTIAL CONFLICT OF INTEREST RESULTING FROM FIDUCIARY AND CONTRACTUAL
DUTIES OWED BY THE COMPANIES TO LIMITED PARTNERSHIPS. As managing general
partners in certain limited partnerships which own and operate diagnostic
imaging systems, the Companies or their wholly-owned subsidiaries are subject to
certain fiduciary and contractual duties owing to the other partners in these
limited partnerships, the breach of which would expose NMR, MRI or such
subsidiary to the risk of litigation and significant financial liabilities.
Generally, as general partner, each of the Companies or their respective
subsidiary owe fiduciary duties of care and loyalty to the other partners in
these partnerships. The interests of the Companies and their respective
stockholders may not always coincide with the interests of the Companies'
partners in such partnerships, and the Companies' fiduciary duties may prevent
the Companies from taking certain actions with respect to these partnerships
which, while beneficial to the Companies, would be detrimental to other
partners. The duty of loyalty may also prevent the Companies from taking
advantage of business opportunities which may be available to one of their
respective partnerships.
The Companies' contractual duties include obligations to obtain partners'
consents to perform various acts, such as obtaining financing for upgrades and
equipment replacements and sales of significant partnership assets. Accordingly,
the other partners in such centers may prevent the partnerships from taking
certain actions which the Companies may deem beneficial to them and their
stockholders.
INFLUENCE BY AFFILIATES OF SIEGLER, COLLERY & CO. As of July 1, 1996,
affiliates of Siegler, Collery & Co., a New?York-based investment firm,
beneficially owned approximately 33.0% of the issued and outstanding shares of
MRI Common Stock (excluding shares issuable pursuant to options, warrants or
other rights to purchase shares of MRI Common Stock). Gary N. Siegler and Peter
M. Collery, Chairman of the Board and a former director of MRI, respectively,
control each of these affiliates. As a result of such ownership, Messrs. Siegler
and Collery have the ability to influence MRI's policies, the election of
directors and the authorization of certain transactions that require stockholder
approval. Immediately following the Merger, Messrs. Siegler and Collery, through
such affiliates, will own approximately 22.2% of the issued and outstanding
shares of MRI Common Stock.
SHARES AVAILABLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT OF OUTSTANDING
DERIVATIVE SECURITIES. Following the Merger, there will be approximately
9,316,794 shares of MRI Common Stock held by members of the
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public that are able to trade without restriction (assuming no exercise or
conversion of outstanding NMR Derivative Securities or outstanding options,
warrants or convertible securities of MRI ("MRI Derivative Securities") prior to
the Effective Time). In addition, following the Merger, an additional 1,305,156
shares of MRI Common Stock will be issuable upon exercise or conversion of NMR
Derivative Securities and 2,819,625 shares of MRI Common Stock will be issuable
upon exercise or conversion of presently outstanding MRI Derivative Securities,
of which 2,699,625 shares have been registered by MRI for resale under the
Securities Act. In connection with the Merger, MRI has agreed to register for
resale the shares of MRI Common Stock issuable upon exercise of the NMR
Derivative Securities. Upon such registration, these shares not held by
affiliates of NMR will become freely tradeable and transferable without
restriction. The exercise or conversion of a substantial amount of these
securities could adversely affect the market price of MRI Common Stock due to
the large number of shares issuable upon exercise or conversion of such
securities. In addition, so long as such securities remain outstanding, the
market price of MRI Common Stock and the terms under which MRI might obtain
additional equity capital may be materially and adversely affected. Any sales of
substantial amounts of MRI Common Stock in the open market could have a material
adverse effect on the market price of the MRI Common Stock. No prediction can be
made as to the effect, if any, that the issuance of shares of MRI Common Stock
in the Merger or sales of shares of MRI Common Stock or the availability of such
shares for future sale will have on the market prices prevailing from time to
time. The possibility that substantial amounts of MRI Common Stock may be sold
in the public market may adversely affect prevailing market prices and,
therefore, could impair MRI's ability to raise capital through the sale of
equity securities. See "Description of MRI Capital Stock--Shares Eligible for
Future Sale."
MRI has also granted to holders of 958,571 shares of MRI Common Stock
certain rights to have the resale of such shares registered under the Securities
Act. In the event these registration rights are exercised, these shares would
become freely tradable and transferable without restriction. Exercise of any
such registration rights will require MRI to incur the expense of registering
such securities and may hinder efforts by MRI to arrange future financing and
have a material adverse effect on the market price of MRI Common Stock.
ABSENCE OF DIVIDENDS. MRI has no present plans to pay cash dividends to its
stockholders and, for the foreseeable future, intends to retain all of its
earnings, if any, for use in its business. The declaration of any future
dividends by MRI is within the discretion of its Board of Directors and will be
dependent on the earnings, financial condition and capital requirements of MRI,
as well as any other factors deemed relevant by its Board of Directors.
POSSIBLE ADVERSE EFFECTS OF PREFERRED STOCK ISSUANCES. MRI's Certificate of
Incorporation authorizes the issuance of 100,000 shares of preferred stock with
such rights, preferences and privileges as may be determined by the Board of
Directors of MRI. Accordingly, the Board of Directors has the power, without
prior stockholder approval, to issue series of preferred stock with such
dividend rights, redemption provisions, liquidation preferences, voting rights,
conversion privileges and other characteristics as the MRI Board may deem
appropriate. The issuance of the preferred stock could have a material adverse
effect on the rights of holders of MRI Common Stock. In addition, the preferred
stock could be issued to discourage, delay or prevent an attempted takeover of
MRI, and could enhance the ability of directors of MRI to retain their
positions. See "Description of MRI Capital Stock--Preferred Stock."
VOLATILITY OF STOCK PRICE. MRI Common Stock trades on the Nasdaq National
Market. The market price of the MRI Common Stock has been and may continue to be
volatile. Recently, the stock market in general and the shares of healthcare or
diagnostic imaging services companies in particular have experienced significant
price fluctuations. These broad market and industry fluctuations may adversely
affect the market price of MRI Common Stock. Factors such as quarterly
fluctuations in results of operations and general conditions in the healthcare
industry may have a significant impact on the market price of MRI Common Stock.
There can be no assurance as to the effect of the consummation or failure to
consummate the Merger on the market price of MRI Common Stock.
RECENT DEVELOPMENTS
During fiscal 1996, MRI has consummated six acquisitions, four in the
diagnostic imaging business and two in the medical staffing business. MRI
consummated the acquisition of four diagnostic imaging centers located in New
York City in January 1996, three centers located in Florida in April 1996, one
center located in Florida in May 1996 and one center in New York in July 1996.
In addition, in January 1996, MRI consummated the acquisition of NurseCare Plus,
Inc., a California corporation based in San Diego, California, which provides
supplemental healthcare staffing services for clients, including hospitals,
clinics and home health agencies in Southern California, and in June 1996, MRI
consummated the acquisition of the assets of We Care-Allied Health Care
Services, a Florida general partnership, which provides supplemental healthcare
staffing services.
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MEDICAL RESOURCES, INC.
NMR OF AMERICA, INC.
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JOINT PROXY STATEMENT/PROSPECTUS
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INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Medical Resources, Inc., a Delaware corporation ("MRI"), in connection with the
solicitation by the Board of Directors of MRI of proxies to be voted at a
Special Meeting of Stockholders of MRI (the "MRI Meeting"). This Joint Proxy
Statement/Prospectus is also being furnished to stockholders of NMR of America,
Inc., a Delaware corporation ("NMR"), in connection with the solicitation by the
Board of Directors of NMR of proxies to be voted at the Annual Meeting of
Stockholders of NMR (the "NMR Meeting").
MRI, MRI Sub, Inc., a Delaware corporation which is a wholly-owned
subsidiary of MRI ("Subsidiary"), and NMR, have entered into an Agreement and
Plan of Merger dated May 20, 1996 (the "Merger Agreement"). A conformed copy of
the Merger Agreement (without the exhibits or schedules thereto) is attached to
this Joint Proxy Statement/Prospectus as Appendix A. Under the terms of the
Merger Agreement, NMR will become a wholly-owned subsidiary of MRI through the
merger of NMR into Subsidiary (the "Merger"), and each outstanding share of
Common Stock, par value $0.01 per share, of NMR ("NMR Common Stock") will
automatically convert into 0.6875 of a share of Common Stock, par value $0.01
per share, of MRI ("MRI Common Stock") and each outstanding warrant, option,
convertible debenture and other right exercisable for or convertible into shares
of NMR Common Stock ("NMR Derivative Securities") outstanding immediately prior
to the Merger will automatically be deemed exercisable or convertible, as the
case may be, into shares of MRI Common Stock at a ratio of 0.6875 of a share of
MRI Common Stock for each share of NMR Common Stock which otherwise would have
been issuable upon the exercise of such NMR Derivative Security had such NMR
Derivative Security been exercised or converted in full immediately prior to the
Merger (collectively, the "Exchange Ratio").
The purpose of the MRI Meeting is to consider and vote upon proposals (i) to
approve the Merger Agreement and the issuance of shares of MRI Common Stock in
connection therewith (ITEM No. 1), and (ii) to approve an amendment to MRI's
Certificate of Incorporation which will increase the number of authorized shares
of MRI Common Stock from 20,000,000 to 50,000,000 (ITEM No. 2). Pursuant to the
terms of the Merger Agreement, MRI will be required to issue approximately
4,338,517 shares of MRI Common Stock (assuming none of the NMR Derivative
Securities are exercised or converted prior to the Merger). Approval of such
issuance by the stockholders of MRI is required by the rules of the National
Association of Securities Dealers, Inc., because shares of MRI Common Stock are
traded on the Nasdaq National Market and the number of shares proposed to be
issued in the Merger will exceed 20% of the pre-Merger issued and outstanding
shares of MRI Common Stock. THE VOTE WITH RESPECT TO ITEM NO. 2 -- RELATING TO
MRI ONLY -- WILL ONLY BE GIVEN EFFECT IF THE MERGER AGREEMENT IS APPROVED AND
THE MERGER IS CONSUMMATED.
The purpose of the NMR Meeting is to consider and vote upon proposals (i) to
approve the Merger Agreement (ITEM No. 1), and, alternatively, (ii) to account
for the possibility that the Merger Agreement will not be approved by either the
stockholders of NMR or the stockholders of MRI, or that the Merger will not be
consummated for any other reason, to elect five (5) directors to the NMR Board
of Directors (ITEM No. 3). THE VOTE REGARDING ITEM NO. 3 -- RELATING TO NMR ONLY
- -- WILL ONLY BE GIVEN EFFECT IF THE MERGER AGREEMENT IS NOT APPROVED OR THE
MERGER IS NOT OTHERWISE CONSUMMATED.
This Joint Proxy Statement/Prospectus is being mailed or given to
stockholders of MRI and NMR on or about August 1, 1996. The information set
forth in this Joint Proxy Statement/Prospectus concerning MRI and Subsidiary has
been furnished by MRI and the information concerning NMR has been furnished by
NMR.
MRI has filed a registration statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") registering
the shares of MRI Common Stock to be issued to stockholders of
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NMR upon consummation of the Merger. This Joint Proxy Statement/Prospectus
constitutes the prospectus of MRI included as part of the Registration
Statement. The principal executive offices of MRI and Subsidiary are located at
155 State Street, Hackensack, New Jersey 07601 (telephone: (201) 488-6230) and
2701 N. Rocky Point Drive, Suite 650, Tampa, Florida 33607 (telephone: (813)
281-0202). The principal executive offices of NMR are located at 430 Mountain
Avenue, Murray Hill, New Jersey 07940 (telephone: (908) 665-9400).
VOTING AND PROXIES
DATE, TIME AND PLACE OF MEETINGS
The MRI Meeting will be held on August 30, 1996 at 10:00 a.m., New York City
Time, at The Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New York,
New York 10019. The NMR Meeting will be held on August 30, 1996 at 10:00 a.m.,
New York City Time, at The Sheraton New York Hotel, 811 7th Avenue (at 52nd
Street), New York, New York 10019.
RECORD DATE AND OUTSTANDING SHARES
MRI
Holders of record of MRI Common Stock at the close of business on July 29,
1996 (the "MRI Record Date") are entitled to notice of and to vote at the MRI
Meeting. As of the MRI Record Date, 8,866,489 shares of MRI Common Stock were
issued and outstanding. Each share of MRI Common Stock entitles the holder
thereof to one vote. See "Information Concerning Medical Resources, Inc. --
Ownership of MRI Common Stock."
NMR
Holders of record of NMR Common Stock at the close of business on July 29,
1996 (the "NMR Record Date") are entitled to notice of and to vote at the NMR
Meeting. As of the NMR Record Date, 6,310,571 shares of NMR Common Stock were
issued and outstanding. Each share of NMR Common Stock entitles the holder
thereof to one vote. See "Information Concerning NMR of America, Inc. --
Principal and Other Stockholders of NMR."
PROXIES AND VOTES REQUIRED
MRI
The affirmative vote of a majority of the shares of MRI Common Stock present
in person or represented by proxy and entitled to vote at the NMR Meeting is
required to approve the Merger Agreement and issuance of the MRI Common Stock in
connection therewith (ITEM No. 1). As of the date hereof, directors and
executive officers of MRI beneficially own approximately 32.2% of the
outstanding shares of MRI Common Stock (excluding shares issuable upon exercise
of MRI Derivative Securities). Such directors and executive officers of MRI
intend to vote all shares of MRI Common Stock beneficially owned by them in
favor of approval of the Merger Agreement. See "Information Concerning Medical
Resources, Inc. -- Ownership of MRI Common Stock."
With respect to ITEM No. 2, the affirmative vote of the holders of a
majority of the outstanding shares of MRI Common Stock is required to approve
the amendment to MRI's Certificate of Incorporation (ITEM No. 2). However, such
amendment will only be given effect if the Merger Agreement is approved and the
Merger is consummated.
If no indication to the contrary is provided on a proxy in connection with
the MRI Meeting, the shares subject to the proxy will be voted in favor of the
Merger Agreement (ITEM No. 1) and in favor of the amendment to MRI's Certificate
of Incorporation (ITEM No. 2).
If a signed proxy card is returned by an MRI stockholder and expressly
reflects an abstention upon any proposal, or if a signed proxy card is returned
by a broker with no indication of how shares are to be voted (a "broker
non-vote"), the shares of MRI Common Stock evidenced thereby will be counted
towards the quorum necessary to convene the MRI Meeting.
With respect to the vote on the approval of the Merger Agreement and the
issuance of shares of MRI Common Stock pursuant thereto (ITEM No. 1),
abstentions will have the same effect as votes against the approval of the
Merger
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Agreement. Broker non-votes, however, will not be treated as votes cast for any
purpose and will have no effect on the outcome of the vote on ITEM No. 1. With
respect to approval of the amendment to MRI's Certificate of Incorporation (ITEM
No. 2), broker non-votes and abstentions will have the same effect as a vote
against the approval of such proposal.
NMR
The affirmative vote of the holders of a majority of the outstanding shares
of NMR Common Stock is required to approve the Merger Agreement (ITEM No. 1). As
of the date hereof, directors and executive officers of NMR beneficially own
approximately 5.2% of the outstanding shares of NMR Common Stock (excluding
shares issuable upon exercise of NMR Derivative Securities). Such directors and
executive officers of NMR intend to vote all shares of NMR Common Stock
beneficially owned by them in favor of approval of the Merger Agreement. See
"Information Concerning NMR of America, Inc. -- Principal and Other Stockholders
of NMR."
With respect to ITEM No. 3, directors will be elected by a plurality of the
votes cast by stockholders of NMR present at the NMR Meeting in person or
represented by proxy. ITEM No. 3 will only be given effect if the Merger
Agreement is not approved by the stockholders of NMR or the stockholders of MRI,
or if the Merger is not otherwise consummated.
If no indication to the contrary is provided on a proxy in connection with
the NMR Meeting, the shares subject to the proxy will be voted in favor of the
Merger Agreement (ITEM No. 1) and the election of the five (5) directors
nominated for election (ITEM No. 3).
Abstentions and broker non-votes, if any are submitted in connection with
the NMR Meeting, will be counted towards the quorum necessary to convene the NMR
Meeting. With respect to the vote on the approval of the Merger Agreement (ITEM
No. 1), abstentions and broker non-votes will have the same effect as votes
against the approval of the Merger Agreement. With respect to the election of
directors (ITEM No. 3), votes may be cast in favor of or withheld from the
nominees for director. Votes that are withheld will be excluded from the vote
and will have no effect.
At each of the Meetings, shares represented by properly executed proxies
will be voted in the discretion of the persons named in the relevant proxy in
connection with any other business not specified above that may properly come
before each of such Meetings. A holder of MRI Common Stock or of NMR Common
Stock who has given a proxy may revoke it at any time before it is voted at a
Meeting by delivering to the Secretary of the relevant company a written notice
stating that the proxy is revoked, by delivering to such Secretary a duly
executed proxy bearing a later date or by voting in person at the respective
Meeting, unless the proxy states that it is irrevocable and the grant of the
proxy is coupled with an interest sufficient under applicable law to support an
irrevocable power.
SOLICITATION OF PROXIES
MRI will pay the costs of solicitation of proxies in connection with the MRI
Meeting. In addition to solicitation by mail, directors, officers and regular
employees of MRI may solicit proxies by telephone, telegram, fax or personal
contact. MRI has no current intention to retain a proxy solicitation firm to
assist it in the solicitation of proxies. However, MRI may elect at a later date
to retain such a firm, at an estimated cost of approximately $15,000. Such firm
will not receive any incremental compensation based on the number or percentage
of votes cast in favor of any of the matters to be voted upon. Brokers,
nominees, fiduciaries and other custodians will be instructed to forward
soliciting material to the beneficial owners of shares held of record by them,
and such custodians will be reimbursed for their expenses.
NMR will bear the costs of solicitation of proxies in connection with the
NMR Meeting. In addition to solicitation by mail, directors, officers and
regular employees of NMR may solicit proxies by telephone, telegram, fax or
personal contact. NMR has no current intention to retain a proxy solicitation
firm to assist it in the solicitation of proxies. However, NMR may elect at a
later date to retain such a firm, at an estimated cost of approximately $20,000.
Such firm will not receive any incremental compensation based on the number or
percentage of votes cast in favor of any of the matters to be voted upon.
Brokers, nominees, fiduciaries and other custodians will be instructed to
forward soliciting material to the beneficial owners of shares held of record by
them, and such custodians will be reimbursed for their expenses.
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THE MERGER (ITEM NO.1)
BACKGROUND OF THE MERGER; NEGOTIATIONS; FAIRNESS OPINIONS
For several years prior to the commencement of discussions between the
parties leading to the Merger Agreement, the respective managements of MRI and
NMR had been exploring various acquisition opportunities to expand MRI's and
NMR's respective networks of diagnostic imaging centers in order to complement
their existing multiple center provider networks or to enter new markets.
Management of MRI and NMR believed such expansion would enable their respective
companies to compete more effectively and efficiently in the current healthcare
environment by leveraging existing overhead and offering greater geographical
coverage to managed care and other entities which desired to use the respective
company's services for their members or enrollees. As part of this expansion
effort, from mid-1993 through early 1996, MRI acquired seven imaging centers in
Florida, four in New York and one in New Jersey, and NMR acquired four imaging
centers in Florida and three in Illinois.
In addition, management of NMR and former and present management of MRI have
engaged in preliminary discussions with each other during the past several years
to explore possible business combinations from time to time. These preliminary
discussions terminated for various reasons, including the inability of the
companies to agree on financial valuations of each company, the structure of the
business combination and corporate governance issues pertaining to the combined
companies.
On March 1, 1996, William D. Farrell, Co-President of MRI, and John P.
O'Malley III, Chief Financial Officer of NMR, met at NMR's offices in Murray
Hill, New Jersey, to generally explore the possibility of a business combination
between the two companies. At that time, there was no determination on the part
of either company to pursue a business combination; however, the respective
boards of directors of each company had previously authorized each company's
management to continue discussions.
On April 26, 1996, Gary N. Siegler, Chairman of the Board of Directors of
MRI telephoned Joseph G. Dasti, Chairman of the Board of Directors, President
and Chief Executive Officer of NMR to further explore the possibility of a
business combination between the two companies. From April 29, 1996 through May
2, 1996, Messrs. Siegler, O'Malley and Dasti held a series of telephone
conversations which focused primarily on the structure of a possible transaction
and the ratio of shares of MRI Common Stock required to be issued to NMR
stockholders in the transaction.
As a result of these discussions, MRI and NMR entered into a confidentiality
agreement as of May 1, 1996 pursuant to which each party agreed to keep
confidential certain proprietary information received from the other party and,
on May 2, 1996, MRI submitted to NMR an outline of the basic terms of the
Merger, including the Exchange Ratio of 0.6875 of a share of MRI Common Stock
for each outstanding share of NMR Common Stock.
Commencing on May 6, 1996, representatives of MRI, including Mr. Siegler,
Mr. Farrell, Mr. Robert J. Adamson, Co-President of MRI, Mr. Neil H. Koffler, a
Director of MRI and a representative of 712 Advisory Services, Inc., a financial
advisor of MRI, and MRI's legal advisors held a series of telephone
conversations and meetings with Messrs. Dasti and O'Malley and NMR's legal
advisors to discuss the terms of the Merger proposal and to negotiate potential
documentation.
As a result of each company's concern about the possibility of rumors
relating to the discussions between the two companies, the parties issued
separate press releases prior to the opening of the Nasdaq National Market on
May 7, 1996, which disclosed that preliminary discussions concerning a possible
business combination between the two companies had occurred. Both press releases
indicated that any transaction between the two parties would be subject to
several conditions, including the negotiation, execution and delivery of
definitive documentation.
The Board of Directors of MRI met on May 7, 1996 to discuss the preliminary
terms of the Merger and authorized management to continue negotiations toward an
acceptable definitive agreement. In addition to its presentation at the May 7,
1996 Board of Directors meeting, MRI management regularly apprised the Board as
to the developments in their negotiations with NMR management.
The Board of Directors of NMR met on May 8, 1996 to discuss the terms of
MRI's preliminary proposal. At the outset of this meeting, NMR's Chairman of the
Board, Joseph G. Dasti, recognized that his participation as a board member in
considering the Merger could create a potential conflict of interest since MRI's
merger proposal included, as a condition, termination of Mr. Dasti's existing
employment agreement with NMR in exchange for a lump sum cash
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payment and the engagement of Mr. Dasti as a consultant to MRI if the Merger
were consummated. Accordingly, NMR's Board of Directors, based on its
determination that it would be in the best interests of NMR and its stockholders
to designate a committee of NMR's directors who were not employed by NMR to
consider the Merger, appointed a special committee ("NMR Special Committee") of
directors consisting of Joseph Zappala, Dr. David L. Bloom, John A. Faraone and
Donald W. Arthur to review, analyze and direct negotiations of the terms of the
Merger, with the assistance of NMR's legal advisors, Chief Financial Officer and
staff.
Following its appointment, the NMR Special Committee met at length on May 8
to discuss MRI's merger proposal and to review and analyze various financial and
other data relating to both companies. At the conclusion of its meeting, the NMR
Special Committee authorized management, with the advice of counsel, to proceed
with the negotiation of draft merger documentation, and determined to re-convene
for further deliberations. The NMR Special Committee also resolved, in
accordance with the terms of the proposed merger, to condition the transaction
on the Committee's prior receipt of the opinion of an independent financial
advisor that the Exchange Ratio was fair, from a financial point of view, to
NMR's stockholders.
Over the following ten-day period, the NMR Special Committee met at length
on numerous occasions and regularly communicated, through Mr. Joseph Zappala who
acted as chairman of the Committee, with NMR's Chief Financial Officer and legal
counsel who continued to negotiate documentation and advise Mr. Zappala, on
behalf of the Committee, of the status of negotiations.
On May 20, 1996, MRI and NMR announced that the Merger Agreement had been
approved and, on that day, had been executed by both parties. On May 24, 1996,
the MRI Board of Directors retained Dillon Read to advise the MRI Board of
Directors and MRI on the fairness to MRI, from a financial point of view, of the
Exchange Ratio. On May 29, 1996, the NMR Special Committee retained Cowen to
similarly advise the NMR Special Committee and NMR on the fairness, from a
financial point of view, to NMR's stockholders of the terms of the Merger
negotiated by NMR.
Under the Merger Agreement, MRI and NMR were each granted a four-week period
to conduct a due diligence investigation of the other company during which
period either party could terminate the Merger Agreement without liability if
its due diligence findings were unsatisfactory. Accordingly, during the
four-week period following the May 20, 1996 approval and execution of the Merger
Agreement by MRI and NMR, each company engaged in its due diligence
investigation of the other company. Each company's due diligence investigation
was performed by its respective management with the assistance of accounting and
operations staff and legal advisors and, in the case of MRI, an industry
consultant, its accounting advisors and representatives of 712 Advisory
Services, Inc., MRI's financial advisor.
At the same time that MRI and NMR conducted their due diligence
investigations, Cowen, the financial advisor to the NMR Special Committee, and
Dillon Read, the financial advisor to MRI's Board of Directors, also conducted
their due diligence and other analyses of each company. On June 13, 1996, Cowen
completed its work and delivered its written opinion to the NMR Special
Committee to the effect that, as of such date, the proposed Exchange Ratio was
fair from a financial point of view to the holders of the outstanding shares of
NMR Common Stock. On June 14, 1996, Dillon Read delivered its opinion
(subsequently confirmed in writing) to MRI's Board of Directors that the
Exchange Ratio was fair from a financial point of view to MRI.
The Board of Directors of MRI and NMR had each determined to approve and
execute the Merger Agreement prior to receipt of a fairness opinion from their
respective financial advisors since MRI's Board and the NMR Special Committee
each believed that the preliminary analysis of the transaction and due diligence
conducted by each company's management supported their conclusion to execute the
Merger Agreement and proceed into the four-week due diligence period. In
addition, since the Merger Agreement permitted each company to terminate,
without liability, the Merger Agreement prior to June 19, 1996 based on an
unsatisfactory due diligence investigations, MRI's Board and the NMR Special
Committee each believed that their respective companies would be protected
against any negative findings during the due diligence period.
MRI's Board and the NMR Special Committee sought fairness opinions as a
means of confirming their respective conclusions with respect to the fairness
from a financial point of view of the Exchange Ratio. In addition, the Merger
Agreement requires the receipt of fairness opinions as a condition to each
party's obligation to close the Merger, thereby giving each company the right to
terminate the Merger Agreement in the event its financial advisor determined
that the Exchange Ratio was not fair from a financial point of view to such
company.
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On June 19, 1996, following conclusion of the due diligence review period,
the NMR Special Committee met to consider any outstanding issues resulting from
management's investigation of MRI. Management reported that it had
satisfactorily completed its review, with the assistance of counsel and its
accounting and operations staff, and advised that it had not discovered any
reason, from a due diligence perspective, to terminate the transaction. Based on
this report, the NMR Special Committee recommended to the full Board of NMR that
NMR proceed with the Merger. This recommendation was unanimously accepted by
NMR's Board of Directors.
On June 13, 1996, June 18, 1996 and June 19, 1996, the MRI Board of
Directors held telephonic Board meetings in order to discuss and evaluate the
findings from MRI's due diligence review of NMR. Management and counsel reported
that they had satisfactorily completed their review of NMR and had not
discovered any reason, from a due diligence perspective, to terminate the
transaction. Based on this review, the MRI Board of Directors determined to
proceed with the Merger.
MRI'S REASONS FOR THE MERGER
The Board of Directors of MRI has unanimously approved the Merger, and
believes that the Merger is in the best interests of MRI and its stockholders
due to the complementary nature of the businesses to be combined as a result of
the Merger. The Board of Directors of MRI views the Merger as a further step
towards fulfillment of one aspect of MRI's strategic development plan, which is
based upon leveraging MRI's existing overhead through expansion of MRI's network
of centers into states with entities possessing a multi-center presence in
desirable geographical markets. The Board of Directors of MRI views expansion of
MRI's operations into Maryland, Illinois and Pennsylvania to be a natural
extension of its current operations which may provide substantial opportunities
for additional growth through consolidation in the future. In addition, the
Board of Directors believes that NMR's current New Jersey and Florida operations
complement the presence of MRI's existing centers in those states. Also, MRI's
Board believes that the increased size and financial strength of MRI as a result
of the Merger will enhance its competitive abilities and enable it to take
greater advantage of acquisition opportunities in the diagnostic imaging
industry.
In the course of its deliberations, MRI's Board of Directors reviewed and
considered the results of extensive due diligence, as well as information and
documentation relating to the Merger with MRI's management, which consulted with
its legal and accounting advisors. In connection with its review of the proposed
Merger, MRI's Board of Directors reviewed in detail the following factors which
it considered material in reaching its conclusion to approve the Merger:
1. Information provided by NMR concerning the financial condition,
results of operations and business of NMR, both on a historical and
prospective basis, together with current industry, economic and market
conditions applicable to NMR's business. The historical financial
information provided by NMR included historical audited balance sheets,
income statements and statements of cash flows for the year ended March 31,
1995 and unaudited financial information for the year ended March 31, 1996.
Such financial information indicated that most of NMR's diagnostic imaging
centers had been profitable on a historical basis. MRI's management believes
that by implementing its operating procedures and structure at the centers,
it can continue to operate these centers profitably after the Merger.
2. The complementary nature of the operations of MRI and NMR, which
provided the Board of Directors of MRI with a substantial basis for its
assessment that the potential synergies and efficiencies relating to the
elimination of certain redundant administrative, professional and related
expenditures could be achieved through the combination of the businesses.
3. MRI believes that the Merger will enhance MRI's operating and
financial base by substantially increasing MRI revenues. The Merger will
increase MRI's capital base which should facilitate its ability to effect
possible future debt and equity financings and acquisitions. MRI believes
that its increased size and financial strength resulting from the Merger
will permit it to provide more cost competitive services, thereby enabling
it to compete more effectively for business. In addition, the increased
revenues of the combined companies and geographically broader and larger
network of centers will enable it to take greater advantage of acquisition
opportunities in the diagnostic imaging services industry.
4. The fact that it was a condition to the Merger that MRI receive a
written opinion of Dillon Read with respect to the fairness to MRI, from a
financial point of view, of the Exchange Ratio. See "The Merger--Background
of the Merger; Negotiations; Fairness Opinion; Fairness Opinion of Dillon
Read."
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Receipt of such an opinion with a presentation of Dillon Read's
methodologies and analyses would provide independent verification of the
conclusion of MRI's Board that the Merger was in the best interests of
MRI's stockholders.
5. Information available to the MRI Board of Directors relating to the
risk factors of NMR. See "Risk Factors Regarding MRI and NMR." The MRI Board
determined that the inherent risks of NMR's business were outweighed by the
potential benefits of the transaction.
After taking into consideration all of the factors set forth above, MRI's
Board determined that the Merger and the issuance of the MRI Common Stock in
connection therewith are in the best interests of the stockholders of MRI and
that MRI should proceed with the Merger at this time. In view of the wide
variety of factors considered in connection with its evaluation of the Merger,
MRI's Board did not find it practicable to, and did not, quantify or otherwise
attempt to assign relative weights to the specific factors considered in
reaching its decisions.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF MRI COMMON STOCK PRESENT
IN PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE MRI MEETING WILL
BE REQUIRED TO APPROVE THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. SEE "VOTING
AND PROXIES" ABOVE. THE BOARD OF DIRECTORS OF MRI RECOMMENDS A VOTE FOR APPROVAL
OF THE MERGER AGREEMENT.
FAIRNESS OPINION OF DILLON READ
The Board of Directors of MRI retained Dillon Read to advise it as to the
fairness to MRI, from a financial point of view, of the consideration to be paid
by MRI in the Merger.
On June 14, 1996, Dillon Read rendered its oral opinion, which was confirmed
by its written opinion dated June 14, 1996, to the MRI Board of Directors to the
effect that, based upon and subject to certain matters stated therein, as of the
date of such opinion, the consideration (referred to in the Merger Agreement and
herein as the "Exchange Ratio") to be paid by MRI in the Merger is fair to MRI
from a financial point of view.
THE FULL TEXT OF DILLON READ'S OPINION DATED JUNE 14, 1996, WHICH SETS FORTH
A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS
APPENDIX B. DILLON READ'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE PAID BY MRI IN THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF MRI COMMON STOCK AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE ON THE MERGER AGREEMENT. HOLDERS OF MRI COMMON
STOCK ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY, ESPECIALLY WITH
REGARD TO THE ASSUMPTIONS MADE AND MATTERS CONSIDERED BY DILLON READ. THE
SUMMARY OF THE OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Dillon Read: (i) reviewed certain publicly
available business and historical financial information relating to MRI and NMR,
(ii) reviewed certain financial information and other data provided to Dillon
Read by MRI that is not publicly available relating to the business and
prospects of MRI, including financial projections prepared by the management of
MRI, (iii) reviewed certain financial information and other data provided to
Dillon Read by NMR that is not publicly available relating to the business and
prospects of NMR, including financial projections prepared by the management of
NMR, (iv) conducted discussions with members of the senior managements of MRI
and NMR, (v) reviewed publicly available financial and stock market data with
respect to certain other companies in lines of business Dillon Read believed to
be generally comparable to those of MRI and NMR, (vi) considered the pro forma
effects of the Merger on MRI's financial statements and reviewed certain
estimates of synergies prepared by the managements of MRI and NMR, (vii)
reviewed the historical market prices and trading volumes of MRI Common Stock
and NMR Common Stock, (viii) compared the financial terms of the Merger
Agreement with the financial terms of certain other transactions which Dillon
Read believed to be generally comparable to the Merger, (ix) reviewed the Merger
Agreement in the form provided to Dillon Read, and (x) conducted such other
financial studies, analyses and investigations, and considered such other
information, as Dillon Read deemed necessary or appropriate, but none of which
was, individually, material. Dillon Read's opinion was necessarily based on
economic, monetary and market conditions existing on the date thereof.
In connection with its review, Dillon Read did not assume any responsibility
for independent verification of any of the foregoing information and, with MRI's
consent, relied on such information as being complete and accurate in
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all material respects. In addition, Dillon Read did not make any evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of MRI
or NMR, nor was Dillon Read furnished with any such evaluation or appraisal.
With respect to the financial projections referred to above, Dillon Read
assumed, with MRI's consent, that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of MRI's and
NMR's management as to the future financial performance of each company. In
addition, although Dillon Read evaluated the consideration from a financial
point of view, Dillon Read was not asked to and did not recommend the specific
consideration to be paid in the Merger. No other limits were placed on Dillon
Read with respect to the investigations made or procedures followed by Dillon
Read in rendering its opinion.
In arriving at its opinion, Dillon Read did not assign any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments based on its experience in rendering such opinions and on then
existing economic, monetary and market conditions as to the significance and
relevance of each analysis and factor. Accordingly, Dillon Read believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying such analyses and its opinion. In its analyses, Dillon Read made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond MRI's or NMR's
control. Any estimates contained in Dillon Read's analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of a business or securities do not purport to be
appraisals or to reflect the actual prices at which businesses or securities
might be sold.
The following summarizes the material quantitative analyses performed by
Dillon Read in arriving at the opinion dated June 14, 1996 presented to the MRI
Board of Directors.
Summary of Recent Acquisition Transactions. Using publicly available
information, Dillon Read reviewed the purchase prices and multiples paid in
selected mergers and acquisitions involving diagnostic imaging related companies
which Dillon Read deemed relevant in evaluating the Merger. Dillon Read reviewed
the acquisition of the diagnostic imaging business of MedAlliance, Inc. by
Health Images, Inc.; the acquisition of Medical Diagnostics, Inc. by Advanced
NMR Systems, Inc.; the acquisition of Radiation Care, Inc. by Oncology
Therapies, Inc.; and the acquisition of Morgan Medical Holdings, Inc. by NMR.
Multiples of equity value of the transaction to net income for the 12 months
preceding the acquisition announcement averaged 25.5x and ranged from 6.9x to
47.0x. Dillon Read noted that, based on the closing price of MRI Common Stock on
June 13, 1996 of $9.25 and an Exchange Ratio of 0.6875, the per share Merger
consideration of $6.36 per share of NMR Common Stock resulted in an equity value
to net income for the last 12 months multiple of 21.9x, below the average of the
transactions considered, but within the range. Dillon Read also considered the
multiples of the unlevered value of the transactions (consideration offered for
the equity plus the debt assumed less the cash of the acquired company) to the
operating cash flow and the operating profit of the acquired businesses for the
12 months preceding the acquisition announcement. The multiples of operating
cash flow averaged 9.1x and ranged from 3.8x to 19.6x. The multiples of
operating income averaged 11.4x and ranged from 8.0x to 15.1x. Based on the
closing price of MRI Common Stock on June 13, 1996, the Merger consideration
represented 8.5x operating cash flow, below the average of the transactions
considered, but within the range, and 14.1x operating profit, above the average
of the transactions considered, but within the range.
Analysis of Selected Publicly Traded Comparable Companies in the Diagnostic
Imaging Business. Using publicly available information, Dillon Read reviewed the
stock prices and market multiples of common stocks of the following companies in
the diagnostic imaging business: Alliance Imaging, Inc.; Diagnostic Health
Services, Inc.; Health Images, Inc.; Healthcare Imaging Services, Inc.; Modern
Medical Modalities Corporation; Medical Imaging Centers of America, Inc.; SMT
Health Services, Inc.; and U.S. Diagnostic Labs, Inc. Dillon Read believes these
companies are engaged in lines of business that are generally comparable to
those of NMR. Dillon Read determined the equity market value and derived a "firm
value" (defined as equity market value adjusted by adding total debt and
subtracting cash and cash equivalents) for each of these comparable companies,
and calculated a range of such firm values as a multiple of the latest 12 months
sales, operating cash flow and operating profit. Firm value as a multiple of the
latest 12 months sales averaged 2.2x and ranged from 1.1x to 3.6x for these
comparable companies. Firm value as a multiple of the latest 12 months operating
cash flow averaged 7.5x and ranged from 3.2x to 13.5x. Firm value as a multiple
of the latest 12 months operating profit averaged 13.3x and ranged from 8.6x to
19.2x. Dillon Read noted that, based on the closing price of MRI Common Stock on
June 13, 1996, the Merger consideration was 2.8x sales,
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8.5x operating cash flow and 14.1x operating profit, within the range for these
comparable companies for sales, operating cash flow and operating profit.
No company, transaction or business used in the analyses described under
"-- Summary of Recent Acquisition Transactions" and "-- Analysis of Selected
Publicly Traded Comparable Companies in the Diagnostic Imaging Business" is
identical to MRI, NMR or the Merger. Accordingly, an analysis of the results
thereof necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that
could affect the transaction or public trading or other values of the company or
companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not in itself a meaningful method of using
comparable acquisition or company data.
Discounted Cash Flow Analysis for NMR. Dillon Read performed a discounted
cash flow analysis of NMR using a set of underlying operating projections which
were based upon the forecasts provided by NMR management. Utilizing this set of
projections for NMR, Dillon Read calculated the theoretical unlevered discounted
present value for NMR by adding together the present value of (i) the projected
stream of unlevered free cash flow through the year 2000 and (ii) the projected
value of NMR at the end of the year 2000 (the "Terminal Value"). The Terminal
Value was calculated based on multiples of earnings before interest, taxes,
depreciation and amortization for 2000 ranging from 6.0x to 8.0x. The unlevered
after-tax discount rates utilized in the discounted cash flow analyses ranged
from 12.0% to 14.0%.
The theoretical value of NMR based on the set of projections produced a
range of value per share of NMR Common Stock of $5.86 to $8.04. Dillon Read
estimated the present value of cost savings and other synergies projected by MRI
management to be in the range of $1.94 to $2.74 per share of NMR Common Stock.
Dillon Read noted that, based on the closing price of MRI Common Stock on June
13, 1996, the Merger consideration was within the range of the theoretical value
based on the set of projections, and below the range when considering the
present value of the cost savings and other synergies projected by MRI
management.
Contribution Analysis. Dillon Read analyzed the percentage of sales,
operating cash flow, operating income, net income and book value that each of
MRI and NMR would contribute to the total of the combined entity based on the
set of projections outlined immediately above. Based on this set of projections,
MRI's contribution to the combined entity ranged from 48% to 79%. Dillon Read
noted that, based on an Exchange Ratio of 0.6875 shares of MRI Common Stock for
each share of NMR Common Stock, the owners of MRI Common Stock would own
approximately 66% (after giving effect to (i) the conversion of in-the-money
convertible debt for MRI and NMR and (ii) the exercise of outstanding and
in-the-money options and warrants to purchase MRI Common Stock and NMR Common
Stock) of the combined entity, within the range of contribution of the set of
projections.
Earnings per Share Impact. Dillon Read examined the impact of the Merger on
MRI earnings per share based on operating and financial projections for the two
companies. The projection of such earnings was based upon operating projections
provided by MRI management for MRI, assuming the Merger did not take place,
operating projections provided by NMR management for NMR, assuming the Merger
did not take place, and the cost savings and other synergies expected to result
from the Merger. This analysis indicated that the Merger would be dilutive to
MRI earnings per share in 1996 by $0.08, dilutive to MRI earnings per share in
1997 by $0.03, and accretive to MRI earnings per share in 1998 by $0.07.
Historical Trading Analysis. Dillon Read reviewed the recent stock market
performance of MRI Common Stock and NMR Common Stock in relation to each other.
The analysis indicated that between June 13, 1995 and June 13, 1996 the ratio of
the price of a share of NMR Common Stock to the price of a share of MRI Common
Stock ranged between 0.41 and 1.37. Dillon Read also noted that such ratio was
0.58 based on the closing prices on June 13, 1995, 0.44 based on the closing
prices on May 3, 1996 (two trading days prior to the press release that MRI and
NMR were discussing a merger), 0.56 based on the average of the closing prices
for the 10 trading days ended June 13, 1996, 0.56 based on the average of the
closing prices for the 20 trading days ended June 13, 1996, 0.45 based on the
average of the closing prices for the 10 trading days ended May 3, 1996, and
0.47 based on the average of the closing prices for the 20 trading days ended
May 3, 1996.
Dillon Read is an internationally recognized investment banking firm which,
as a part of its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Dillon Read has not
provided investment
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banking services to MRI prior to its engagement in connection with the Merger.
Dillon Read does not make a market in either MRI Common Stock or NMR Common
Stock; however, in the ordinary course of its business, Dillon Read may trade
the securities of MRI and NMR for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Pursuant to an engagement letter, dated May 24, 1996, between MRI and Dillon
Read, MRI agreed to pay Dillon Read a fee of $250,000 for services rendered in
connection with the preparation of its fairness opinion. MRI has also agreed to
reimburse Dillon Read for the expenses reasonably incurred by it in connection
with its engagement (including reasonable counsel fees) and to indemnify Dillon
Read and its officers, directors, employees, agents and controlling persons
against certain expenses, losses, claims, damages or liabilities in connection
with its services, including those arising under the federal securities laws.
Dillon Read's fee was not contingent on the conclusion reached in its opinion or
the consummation of the Merger.
NMR'S REASONS FOR THE MERGER
The NMR Special Committee and full Board of Directors have unanimously
approved the Merger, and believe that the Merger is in the best interests of NMR
and its stockholders. NMR's Board believes that the increased size, capabilities
and financial strength of the combined entity resulting from the Merger will
enhance its ability to compete in a changing healthcare environment. NMR's Board
also believes that the combined company will benefit from an ability to offer to
various managed care organizations greater geographical coverage of its core
markets. Furthermore, the NMR Board believes that the combined company will be
better able, by virtue of its depth of experience and financial resources, to
achieve additional efficiencies through the continued consolidation of the
diagnostic imaging industry.
Prior to reaching its conclusion, the NMR Special Committee and Board
reviewed and considered the results of a comprehensive due diligence process and
reviewed the terms of the Merger with NMR management and its legal and financial
advisors. During the course of its deliberations, the NMR Special Committee and
Board reviewed, in detail, the following factors which it considered to be
material in reaching its conclusion:
1. Information provided by MRI concerning the financial condition,
results of operations and business of MRI on a historical and prospective
basis, together with current industry, economic and market conditions
applicable to MRI's business. This information showed, to the satisfaction
of the NMR Special Committee and Board of Directors, that MRI is a
well-managed, geographically diversified company, and that NMR, based on the
geographic locations of its centers, would benefit strategically from being
part of MRI's existing center networks and planned expansion program. The
NMR Special Committee and NMR Board of Directors determined that MRI was
well managed based on a number of factors. First, MRI's results of
operations on a historical basis indicated that the management of MRI had
been successful in profitably expanding the company through acquisitions and
internal growth, resulting in increasing revenues in each of the past
several years. Second, MRI's results of operations for 1995 showed strong
improvement in profitability as compared to the prior year. Thirdly, MRI's
operating history reflected the fact that MRI's management has had extensive
experience in managing a complex, geographically diversified network of
medical diagnostic imaging centers and should have the management skills to
successfully integrate the addition of NMR's network of centers.
2. The compatibility of the management and operations of MRI and NMR. The
NMR Special Committee and NMR Board of Directors determined that potential
efficiencies and other advantages could be achieved through the Merger, and
that the combined management of MRI and NMR would be able to guide the
combined company to meet the objectives of the Merger. The NMR Special
Committee and NMR Board of Directors believed that the following particular
efficiencies and other advantages would be achieved through the Merger.
First, the Merger would reduce administrative and overhead expenses by
sharing the necessary administrative expenses with NMR and eliminating
overlapping administrative functions. Second, the combined company would be
better able to compete for business from large health care management
companies because the combined company's operations would permit it to
provide more cost competitive services. Further, the increased resources of
the combined company would enhance its ability to improve revenues and
profitability through further expansion of its network and through the
negotiation of reductions in the combined company's operating costs. Lastly,
large health care providers would be attracted to the combined company
because such providers could negotiate imaging contracts covering a larger
portion of the United States, thereby reducing their costs.
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3. The requirement that consummation of the Merger be conditioned upon
the written opinion of Cowen with respect to the fairness to the holders of
NMR Common Stock, from a financial point of view, of the proposed Exchange
Ratio to be paid to the stockholders of NMR pursuant to the Merger
Agreement, which would provide independent verification of the conclusion of
NMR's Board and Special Committee that the Merger is in the best interests
of NMR stockholders. See "The Merger--Background of the Merger;
Negotiations; Fairness Opinions; Fairness Opinion of Cowen."
4. Alternative growth strategy through acquisition of individual
diagnostic imaging centers. The Merger was deemed by NMR's Board to be a
more favorable means of growing the company than the alternative growth
strategy of acquiring additional individual diagnostic imaging centers.
5. Information available to NMR's Board relating to the risk factors of
MRI. See "Risk Factors Regarding MRI and NMR." The NMR Board determined that
the inherent risks of MRI's business were outweighed by the potential
benefits of the transaction.
After taking into consideration all of the factors set forth above, the NMR
Special Committee and Board determined that the Merger was in the best interests
of the stockholders of NMR. In view of the various factors considered in
connection with its evaluation of the Merger, the NMR Special Committee and NMR
Board did not find it practicable to, and did not, quantify or otherwise attempt
to assign relative weights to the specific factors considered in reaching its
decision.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF NMR COMMON
STOCK WILL BE NECESSARY TO APPROVE THE MERGER AGREEMENT. SEE "VOTING AND
PROXIES" ABOVE. THE BOARD OF DIRECTORS OF NMR RECOMMENDS A VOTE FOR APPROVAL OF
THE MERGER AGREEMENT.
IN APPROVING THE MERGER AGREEMENT, A MEMBER OF THE BOARD OF DIRECTORS OF
NMR MAY BE DEEMED TO HAVE CERTAIN CONFLICTS OF INTEREST. SEE "THE MERGER --
BACKGROUND OF THE MERGER; NEGOTIATIONS; FAIRNESS OPINIONS" AND "TERMS OF THE
MERGER -- INTEREST OF CERTAIN PERSONS IN THE MERGER."
FAIRNESS OPINION OF COWEN
Cowen has acted as financial advisor to the NMR Special Committee in
connection with the Merger. As part of this assignment, Cowen was asked to
render an opinion to the NMR Special Committee as to the fairness,from a
financial point of view, to the holders of the outstanding shares of NMR Common
Stock of the proposed Exchange Ratio.
On June 13, 1996, Cowen delivered its oral opinion confirmed in writing as
of the same date to the NMR Special Committee to the effect that, as of that
date, the proposed Exchange Ratio was fair, from a financial point of view, to
the holders of the outstanding shares of NMR Common Stock. THE FULL TEXT OF THE
WRITTEN OPINION OF COWEN, DATED JUNE 13, 1996, WHICH SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, LIMITATIONS ON AND THE SCOPE OF
THE REVIEW BY COWEN IN RENDERING ITS OPINION IS ATTACHED AS APPENDIX C TO THIS
JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE
SUMMARY OF COWEN'S WRITTEN OPINION SET FORTH IN THE JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO THE FULL TEXT
OF SUCH OPINION. NMR STOCKHOLDERS ARE URGED TO READ COWEN'S OPINION IN ITS
ENTIRETY. Cowen's analyses and opinion were prepared for the NMR Special
Committee and are directed only to the fairness, from a financial point of view,
to the holders of the outstanding shares of NMR Common Stock of the proposed
Exchange Ratio and do not constitute an opinion as to the merits of the Merger
or a recommendation to any holder of NMR Common Stock as to how to vote at the
NMR Meeting.
Cowen was selected by the NMR Special Committee as its financial advisor,
and to render an opinion to the NMR Special Committee, because Cowen is a
nationally recognized investment banking firm and its principals have
substantial experience in transactions similar to the Merger and are familiar
with NMR and its business. In the ordinary course of its investment banking
services, Cowen is regularly engaged in the valuation and pricing of businesses
and their securities in connection with mergers and acquisitions and valuations
for corporate and other purposes and in advising corporate securities issuers on
related matters. In addition, in the ordinary course of its business, Cowen may
trade the debt and equity securities of NMR and MRI for its own account or the
accounts of its customers, and, accordingly, it may at any time hold a long or
short position in such securities.
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In connection with its opinion, Cowen, among other things: (1) reviewed
NMR's financial statements for the three fiscal years ended March 31, 1996,
certain publicly available filings with the SEC and certain other relevant
financial and operating data of NMR; (2) reviewed MRI's financial statements for
the three fiscal years ended December 31, 1995 and the quarter ended March 31,
1996, certain publicly available filings with the SEC and certain other relevant
financial and operating data of MRI; (3) reviewed the Merger Agreement; (4) held
meetings and discussions with management and senior personnel of NMR and MRI to
discuss the business, operations, historical financial results and future
prospects of NMR and MRI; (5) reviewed financial projections furnished to Cowen
by the management of NMR and MRI, including among other things, the capital
structure, sales, net income, cash flow, capital requirements and other data of
NMR and MRI which Cowen deemed relevant; (6) reviewed the valuation of NMR and
MRI in comparison to other similar publicly traded companies; (7) reviewed the
historical prices and trading activity of the securities of NMR and MRI and
compared those trading histories with those of other companies which Cowen
deemed relevant; (8) analyzed the potential pro forma financial effects of the
Merger contemplated by the Merger Agreement; (9) reviewed the proposed financial
terms of the Merger and compared them with the financial terms of certain other
business combinations Cowen deemed relevant; and (10) conducted such other
studies, analysis, inquiries and investigations Cowen deemed appropriate. Cowen
was not requested to, and did not, solicit third party indications of interest
in acquiring NMR.
In rendering its opinion, Cowen assumed and relied, without independent
verification, upon the accuracy and completeness of the financial and other
information that was available to Cowen from public sources, that was provided
to Cowen by NMR or MRI or their representatives, or that was otherwise reviewed
by Cowen. In addition, with respect to the financial projections furnished to
Cowen by the management of NMR and MRI, Cowen assumed the attainability of the
financial results therein and that they were reasonably prepared judgments of
the future financial performance of NMR and MRI. Because such projections are
inherently subject to uncertainty, Cowen assumes no responsibility for their
accuracy. Cowen did not make any independent evaluation or appraisal of the
assets or liabilities of NMR or MRI, nor has Cowen been furnished with any such
appraisals. Cowen made no independent investigation of any legal matters
affecting NMR or MRI. Cowen's opinion was necessarily based on economic, market
and other conditions as in effect on, and the information made available to
Cowen as of, June 13, 1996. Although developments subsequent to June 13, 1996
may affect Cowen's opinion, Cowen does not have any obligation to update, revise
or reaffirm its opinion.
The following paragraphs summarize the significant quantitative and
qualitative analyses performed by Cowen in arriving at its opinion. Cowen
performed certain procedures, including each of the financial analyses described
below, and reviewed with the management of NMR and MRI the assumptions on which
such analyses were based and other factors, including the current and projected
financial results of NMR and MRI. No limitations were imposed by the NMR Special
Committee with respect to the investigations made or procedures followed by
Cowen in rendering its opinion.
Analysis Relating to NMR
Comparative Company Analysis. Cowen compared the historical, current and
relevant projected financial and operating results of NMR with that of selected
publicly traded imaging companies it deemed relevant (the "Comparative Imaging
Company Index"). The companies in the Comparative Imaging Company Index were
chosen based upon conversations with NMR management as to companies which
possess general business, operating and financial characteristics representative
of companies in the industry in which NMR and MRI operate. The Comparative
Imaging Company Index consisted of Alliance Imaging, Inc., Diagnostic Health
Services, Inc., Health Images, Inc., Heico Corp., Medical Imaging Centers of
America, Inc., SMT Health Services, Inc. and U.S. Diagnostic Labs, Inc.
In order to assess the relative public market valuations of NMR and the
Comparative Imaging Company Index, Cowen performed a market analysis of NMR and
the Comparative Imaging Company Index. With respect to such analysis, Cowen
calculated a range of market multiples for each of the companies in the
Comparative Imaging Company Index based on : (i) the market capitalization
(total number of common shares outstanding multiplied by the closing market
price per share on June 7, 1996 plus the last reported total debt, capitalized
leases, preferred stock and other relevant adjustments minus cash, cash
equivalents and other relevant adjustments (the "Market Capitalization")) of
each of the companies in the Comparative Imaging Company Index divided by such
company's latest four quarters net revenue, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and
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earnings before interest and taxes ("EBIT"); (ii) the market price (the closing
market price per share on June 7, 1996 (the "Market Price")) of each of the
companies in the Comparative Imaging Company Index divided by such company's
estimated calendar 1996 and calendar 1997 earnings per share ("EPS") (as
estimated by the Institutional Brokers Estimate Service("IBES") and/or certain
research reports); and (iii) the market value (total common shares outstanding
multiplied by the Market Price (the "Market Value")) of each of the companies in
the Comparative Imaging Company Index divided by such company's latest net
income and book value. The range of market multiples for the Comparative Imaging
Company Index included: (i) Market Capitalization to latest four quarters net
revenue multiples of 1.11x to 3.72x; (ii) Market Capitalization to latest four
quarters EBITDA multiples of 3.4x to 12.7x; (iii) Market Capitalization to
latest four quarters EBIT multiples of 6.2x to 21.7x; (iv) Market Value to
latest four quarters net income multiples of 14.7x to 28.2x; (v) Market Value to
latest four quarters book value multiples of 1.3x to 7.1x; (vi) Market Price to
estimated calendar 1996 EPS multiples of 13.4x to 23.3x; and (vii) Market Price
to estimated calendar 1997 EPS multiples of 11.5x to 18.3x. Based on the above
measures, Cowen then compared NMR's market multiples, based on NMR's
pre-announcement Market Price on May 6, 1996, with the Comparative Imaging
Company Index median market multiples in order to establish the relationship
between NMR's market multiples and those of the Comparative Imaging Company
Index. With respect to such review, Cowen noted that: (i) NMR's Market
Capitalization to latest four quarters net revenue multiple was 1.90x compared
with a median Market Capitalization to latest four quarters net revenue multiple
of 1.66x for the Comparative Imaging Company Index; (ii) NMR's Market
Capitalization to latest four quarters EBITDA multiple was 6.0x compared with a
median Market Capitalization to latest four quarters EBITDA multiple of 5.9x for
the Comparative Imaging Company Index; (iii) NMR's Market Capitalization to
latest four quarters EBIT multiple was 10.1x compared with a median Market
Capitalization to latest four quarters EBIT multiple of 13.7x for the
Comparative Imaging Company Index; (iv) NMR's Market Value to latest four
quarters net income multiple was 16.2x compared with a median Market Value to
latest four quarters net income multiple of 16.4x for the Comparative Imaging
Company Index; (v) NMR's Market Value to latest four quarters book value
multiple was 1.3x compared with a median Market Value to latest four quarters
book value multiple of 4.1x for the Comparative Imaging Company Index; (vi)
NMR's Market Price to estimated fiscal 1997 EPS multiple was 12.1x compared with
a median Market Price to estimated calendar 1996 EPS multiple of 15.8x for the
Comparative Imaging Company Index; and (vii) NMR's Market Price to estimated
fiscal 1998 EPS multiple was 9.8x compared with a median Market Price to
estimated calendar 1997 EPS multiple of 12.4x for the Comparative Imaging
Company Index.
Using such information, Cowen derived a range of implied enterprise values
(a theoretical aggregate valuation of a corporate entity before adjustments for
non-operating assets and liabilities ("Implied Enterprise Value")) for NMR of
$28.8 million to $61.5 million by applying the aforementioned market multiples
of the Comparative Imaging Company Index to the appropriate financial statistics
of NMR. The range of Implied Enterprise Values of NMR was then adjusted for
non-operating assets and liabilities, where relevant, to yield implied equity
values of NMR of $28.8 million to $51.1 million. The range of implied equity
values of NMR was then divided by the fully diluted shares of NMR Common Stock
outstanding to yield implied values of $3.55 to $6.30 per fully diluted share.
Discounted Cash Flow Analysis. Cowen performed a discounted cash flow
analysis of NMR based on the fiscal 1997 to fiscal 2001 financial forecast for
NMR provided by NMR management (the "NMR Financial Forecast"). Using information
set forth in the NMR Financial Forecast, Cowen calculated the estimated "free
cash flow" based on projected unleveraged net income (earnings before interest
and after taxes ("EBIAT")) adjusted for: (i) certain non-cash items (i.e.,
depreciation and amortization); (ii) projected capital expenditures; and (iii)
projected non-cash working capital investment.
Cowen analyzed the NMR Financial Forecast and discounted the stream of cash
flows provided in such projections back to July 31, 1996 using discount rates of
14.0% to 16.0%. To estimate the residual value of NMR at the end of the NMR
Financial Forecast Period, Cowen applied terminal multiples of 4.9x to 6.9x to
the projected fiscal 2001 EBITDA and discounted such value estimates back to
July 31, 1996 using discount rates of 14.0% to 16.0%. Cowen then summed the
present values of the free cash flows and the present values of the residual
values to derive a range of Implied Enterprise Values for NMR of $49.4 million
to $65.5 million. The range of Implied Enterprise Values of NMR was then
adjusted for non-operating assets and liabilities, where relevant, to yield
implied equity values of NMR of $39.1 million to $55.5 million. The range of
implied equity values of NMR was then divided by the fully diluted shares of NMR
Common Stock outstanding to yield implied values of $4.82 to $6.80 per
fully diluted share.
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Comparative Transaction Analysis. Cowen compared certain financial and
operating statistics of NMR with that of such financial and operating results of
selected relevant imaging companies (the "Acquired Comparative Imaging
Companies") immediately prior to being acquired. The transactions involving the
Acquired Comparative Imaging Companies were chosen based upon conversations with
NMR management as to acquired companies which possessed general business,
operating and financial characteristics representative of companies in the
industry in which NMR operates. The selected acquisition transactions involving
the Acquired Comparative Imaging Companies, which occurred or were announced
between April 15, 1995 and September 15, 1995, included (acquirer/acquired
company): Health Images/MedAlliance; Advanced NMR Systems, Inc./Medical
Diagnostics, Inc.; and NMR/Morgan Medical Holdings, Inc.
Cowen performed an analysis of the multiples paid in the selected
acquisition transactions involving the Acquired Comparative Imaging Companies in
which it analyzed the adjusted purchase price (the Equity Cost, as defined
below, plus latest reported total debt and capitalized leases, minus cash, cash
equivalents and cash proceeds from the assumed exercise of in-the-money options
(the "Adjusted Purchase Price")) for each of the Acquired Comparative Imaging
Companies and divided such amount by each of such company's respective latest
four quarters net revenues, EBITDA and EBIT immediately prior to being acquired
to give a range of purchase price multiples. Cowen also analyzed the equity cost
(offer price per share multiplied by total common shares outstanding (the
"Equity Cost")) for each of the Acquired Comparative Imaging Companies acquired
in the selected transactions and divided such amount by each of such company's
respective latest four quarters net income and book value immediately prior to
being acquired to give a range of purchase price multiples. Additionally, Cowen
analyzed the premium paid over the pre-announcement stock price (the percent
increase of the offer price per share over the pre-announcement closing market
price (the "Premium over Stock Price")) for each of the Acquired Comparative
Imaging Companies acquired in the selected transactions. The range of purchase
price multiples and Premium over Stock Price paid in the selected acquisition
transactions involving the Acquired Comparative Imaging Companies included: (i)
Adjusted Purchase Price to latest four quarters (pre-acquisition) net revenue
multiples of 1.43x to 1.93x; (ii) Adjusted Purchase Price to latest four
quarters (pre-acquisition) EBITDA multiples of 4.4x to 7.0x; (iii) Adjusted
Purchase Price to latest four quarters (pre-acquisition) EBIT multiples of 10.7x
to 14.1x; (iv) Equity Cost to latest four quarters (pre-acquisition) net income
multiples of 10.8x to 50.9x; (v) Equity Cost to latest four quarters
(pre-acquisition) book value multiples of 1.2x to 3.5x; and (vi) Premium over
Stock Price of 50.0% to 62.0%.
Using such information, Cowen also compared the implied purchase price
multiples and Premium over Stock Price of the Exchange Ratio to the median
purchase price multiples and Premium over Stock Price paid in the aforementioned
acquisition transactions. Such analysis illustrated that: (i) the implied
Adjusted Purchase Price to the latest four quarters net revenue multiple of the
Exchange Ratio was 2.70x compared with a median latest four quarters net revenue
multiple of 1.62x in the selected transactions; (ii) the implied Adjusted
Purchase Price to the latest four quarters EBITDA multiple of the Exchange Ratio
was 8.5x compared with a median latest four quarters EBITDA multiple of 5.8x in
the selected transactions; (iii) the implied Adjusted Purchase Price to the
latest four quarters EBIT multiple of the Exchange Ratio was 14.3x compared with
a median latest four quarters EBIT multiple of 11.7x in the selected
transactions; (iv) the implied Equity Cost to the latest four quarters net
income multiple of the Exchange Ratio was 28.1x compared with a median latest
four quarters net income multiple of 24.0x in the selected transactions; (v) the
implied Equity Cost to the latest four quarters book value multiple of the
Exchange Ratio was 2.1x compared with a median latest four quarters book value
multiple of 2.6x in the selected transactions; and (vi) the Premium over Stock
Price of the Exchange Ratio was 103.6% compared with a median Premium over Stock
Price of 56.0% in the selected transactions.
Using such information, Cowen derived a range of Implied Enterprise Values
for NMR of $38.4 million to $59.9 million by applying the aforementioned market
multiples of the Comparative Imaging Company Index to the appropriate financial
statistics of NMR. The range of Implied Enterprise Values of NMR was then
adjusted for non-operating assets and liabilities, where relevant, to yield
implied equity values of NMR of $28.1 million to $59.9 million. The range of
implied equity values of NMR was then divided by the fully diluted shares of NMR
Common Stock outstanding to yield implied values of $3.46 to $7.39 per fully
diluted share.
Other Factors. In rendering its opinion, Cowen considered certain other
factors with the respect to NMR, including: (i) a review of NMR's business and
operations and the industry in which NMR operates to increase its understanding
of NMR's business and its position in the industry within which NMR operates;
(ii) a review of NMR's historical operating results and the NMR Financial
Forecast to increase its understanding of the financial
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performance and prospects of NMR's business; (iii) a review of the current book
value of NMR; and (iv) a review of the stock price performance of NMR, the
Comparative Imaging Company Index and selected market indices to provide
perspective on current and historical public market valuations and stock price
performance of NMR relative to selected market indices.
Analysis Relating to MRI
Comparative Company Analysis. Cowen compared the historical, current and
relevant projected financial and operating results of MRI with that of such
financial and operating results of selected publicly traded imaging companies in
the Comparative Imaging Company Index. The companies in the Comparative Imaging
Company Index were chosen based upon conversations with NMR management as to
companies which possess general business, operating and financial
characteristics representative of companies in the industry in which NMR and MRI
operate. In addition, Cowen compared the historical, current and relevant
projected financial and operating results of MRI with that of such financial and
operating results of selected staffing companies it deemed relevant which
included Barrett Business Services, Inc., Career Horizons, Inc., Interim
Services, Inc., Kelly Services Inc., Manpower Inc., Norrell Corp., Personnel
Group of America, Inc. and Robert Half International, Inc. (the "Comparative
Staffing Company Index"). However, Cowen accorded less weight to the analysis
relating to the Comparative Staffing Company Index than to the Comparative
Imaging Company Index, primarily due to the lack of historical earnings
contributed to MRI by its staffing business.
In order to assess the relative public market valuations of MRI and the
Comparative Imaging Company Index, Cowen performed a market analysis of MRI and
the Comparative Imaging Company Index. With respect to such analysis, Cowen
calculated a range of market multiples for each of the companies in the
Comparative Imaging Company Index based on: (i) the Market Capitalization of
each of the companies in the Comparative Imaging Company Index divided by such
company's latest four quarters net revenue, EBITDA and EBIT; (ii) the Market
Price of each of the companies in the Comparative Imaging Company Index divided
by such company's estimated calendar 1996 and calendar 1997 EPS (as per IBES
and/or certain research reports); and (iii) the Market Value of each of the
companies in the Comparative Imaging Company Index divided by such latest
company's net income and book value. The range of market multiples for the
Comparative Imaging Company Index included: (i) Market Capitalization to latest
four quarters net revenue multiples of 1.11x to 3.72x; (ii) Market
Capitalization to latest four quarters EBITDA multiples of 3.4x to 12.7x; (iii)
Market Capitalization to latest four quarters EBIT multiples of 6.2x to 21.7x;
(iv) Market Value to latest four quarters net income multiples of 14.7x to
28.2x; (v) Market Value to latest four quarters book value multiples of 1.3x to
7.1x; (vi) Market Price to estimated calendar 1996 EPS multiples of 13.4x to
23.3x; and (vii) Market Price to estimated calendar 1997 EPS multiples of 11.5x
to 18.3x. Based on the above measures, Cowen then compared MRI's market
multiples, based on its Market Price, with the Comparative Imaging Company Index
median market multiples in order to establish the relationship between MRI's
market multiples and those of the Comparative Imaging Company Index. With
respect to such review, Cowen noted that: (i) MRI's Market Capitalization to
latest four quarters net revenue multiple was 1.81x compared with a median
Market Capitalization to latest four quarters net revenue multiple of 1.66x for
the Comparative Imaging Company Index; (ii) MRI's Market Capitalization to
latest four quarters EBITDA multiple was 8.0x compared with a median Market
Capitalization to latest four quarters EBITDA multiple of 5.9x for the
Comparative Imaging Company Index; (iii) MRI's Market Capitalization to latest
four quarters EBIT multiple was 12.8x compared with a median Market
Capitalization to latest four quarters EBIT multiple of 13.7x for the
Comparative Imaging Company Index; (iv) MRI's Market Value to latest four
quarters net income multiple was 18.2x compared with a median Market Value to
latest four quarters net income multiple of 16.4x for the Comparative Imaging
Company Index; (v) MRI's Market Value to latest four quarters book value
multiple was 4.3x compared with a median Market Value to latest four quarters
book value multiple of 4.1x for the Comparative Imaging Company Index; (vi)
MRI's Market Price to estimated calendar 1996 EPS multiple was 14.7x compared
with a median Market Price to estimated calendar 1996 EPS multiple of 15.8x for
the Comparative Imaging Company Index; and (vii) MRI's Market Price to estimated
calendar 1997 EPS multiple was 11.9x compared with a median Market Price to
estimated calendar 1997 EPS multiple of 12.4x for the Comparative Imaging
Company Index.
In addition, Cowen performed a market analysis of MRI and the Comparative
Staffing Company Index. With respect to such analysis, Cowen calculated a range
of market multiples for each of the companies in the Comparative Staffing
Company Index based on: (i) the Market Capitalization of each of the companies
in the Comparative Staffing Company Index divided by such company's latest four
quarters net revenue, EBITDA and EBIT; (ii) the Market Price
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of each of the companies in the Comparative Staffing Company Index divided by
such company's estimated calendar 1996 and calendar 1997 EPS (as per IBES and/or
certain research reports); and (iii) the Market Value of each of the companies
in the Comparative Staffing Company Index divided by such latest company's net
income and book value. The range of market multiples for the Comparative
Staffing Company Index included: (i) Market Capitalization to latest four
quarters net revenue multiples of 0.35x to 2.30x; (ii) Market Capitalization to
latest four quarters EBITDA multiples of 7.4x to 27.6x; (iii) Market
Capitalization to latest four quarters EBIT multiples of 9.1x to 32.2x; (iv)
Market Value to latest four quarters net income multiples of 15.8x to 47.1x; (v)
Market Value to latest four quarters book value multiples of 2.3x to 7.6x; (vi)
Market Price to estimated calendar 1996 EPS multiples of 14.5x to 35.5x; and
(vii) Market Price to estimated calendar 1997 EPS multiples of 13.1x to 28.1x.
Based on the above measures, Cowen then compared MRI's market multiples, based
on its Market Price, with the Comparative Staffing Company Index median market
multiples in order to establish the relationship between MRI's market multiples
and those of the Comparative Staffing Company Index. With respect to such
review, Cowen noted that: (i) MRI's Market Capitalization to latest four
quarters net revenue multiple was 1.81x compared with a median Market
Capitalization to latest four quarters net revenue multiple of 0.70x for the
Comparative Staffing Company Index; (ii) MRI's Market Capitalization to latest
four quarters EBITDA multiple was 8.0x compared with a median Market
Capitalization to latest four quarters EBITDA multiple of 14.0x for the
Comparative Staffing Company Index; (iii) MRI's Market Capitalization to latest
four quarters EBIT multiple was 12.8x compared with a median Market
Capitalization to latest four quarters EBIT multiple of 17.2x for the
Comparative Staffing Company Index; (iv) MRI's Market Value to latest four
quarters net income multiple was 18.2x compared with a median Market Value to
latest four quarters net income multiple of 28.3x for the Comparative Staffing
Company Index; (v) MRI's Market Value to latest four quarters book value
multiple was 4.3x compared with a median Market Value to latest four quarters
book value multiple of 4.8x for the Comparative Staffing Company Index; (vi)
MRI's Market Price to estimated calendar 1996 EPS multiple was 14.7x compared
with a median Market Price to estimated calendar 1996 EPS multiple of 24.3x for
the Comparative Staffing Company Index; and (vii) MRI's Market Price to
estimated calendar 1997 EPS multiple was 11.9x compared with a median Market
Price to estimated calendar 1997 EPS multiple of 19.7x for the Comparative
StaffingCompany Index.
Pro Forma Analysis. Cowen's analysis of the potential pro forma financial
effects of the Merger on MRI was based principally upon the fiscal 1996 to 1998
financial forecast for MRI provided by MRI management (the "MRI Forecast") and
the NMR Financial Forecast for fiscal 1997 to fiscal 1999. Cowen's pro forma
financial forecast assumed, among other things, that the Merger: (i) would
provide 0.6875 of a share of MRI Common Stock in exchange for each share of NMR
Common Stock; (ii) will be accounted for under the purchase method of
accounting; (iii) will be treated as a tax free exchange; and (iv) will result
in the realization of certain strategic and operating benefits. Among other
things, Cowen's pro forma analysis is dependent upon the ability of both NMR and
MRI to realize the projected operating performance assumptions of the NMR
Financial Forecast and the MRI Financial Forecast, respectively.
Using the data and other information referred to above, Cowen's pro forma
financial analysis suggested that the Merger should result in dilution to MRI's
EPS in each of the fiscal years 1996 to 1998 with such dilution declining in
each year over the same period. Cowen's pro forma analysis also suggested that
MRI's total debt as a percent of total capitalization should decrease as a
result of the Merger.
Other Factors. In rendering its opinion, Cowen considered certain other
factors with respect to MRI, including: (i) a review of MRI's business and
operations and the industry in which MRI operates to increase its understanding
of MRI's business and its position in the industry within which MRI operates;
(ii) a review of MRI's historical operating results and the MRI Financial
Forecast to increase its understanding of the financial performance and
prospects of MRI's business; (iii) a review of the current book value of MRI;
and (iv) a review of the stock price performance of MRI, the Comparative Imaging
Company Index, the Comparative Staffing Company Index and selected market
indices to provide perspective on current and historical public market
valuations and stock price performance of MRI relative to selected market
indices.
The summary set forth above does not purport to be a complete description of
the analyses performed by Cowen. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant quantitative
methods of financial analyses and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Accordingly,
notwithstanding the factors summarized above, Cowen believes that its analysis
must be considered as a whole and
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that considering any portion of such analysis and of the factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the process underlying its opinion. In its analyses, Cowen
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond control of
NMR and MRI. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein, and neither
NMR, MRI nor Cowen assumes responsibility for their accuracy. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses may actually be sold.
As compensation for its services as financial advisor to the NMR Special
Committee, NMR has paid Cowen a fee of $200,000. NMR has also agreed to
reimburse Cowen for its out-of-pocket expenses in an amount not to exceed
$15,000 without the prior written consent of NMR and to indemnify Cowen against
certain liabilities, including liabilities under the federal securities laws,
relating to, arising out of or in connection with Cowen's services as financial
advisor to the NMR Special Committee, unless such liabilities arose out of
Cowen's gross negligence or willful misconduct. Payment of Cowen's fee was not
contingent upon the conclusion reached in its opinion or the consummation of the
Merger.
TERMS OF THE MERGER
The following is a discussion of the material terms of the Merger Agreement.
This section of the Joint Proxy Statement/Prospectus does not contain a complete
explanation or description of the Merger Agreement and is qualified in its
entirety by reference to the terms of the Merger Agreement, a conformed copy of
which (without the exhibits or schedules thereto) is attached to this Joint
Proxy Statement/Prospectus as Appendix A and incorporated herein by reference.
GENERAL
The Merger Agreement provides that, upon effectiveness of the Merger, NMR
will be merged with and into Subsidiary, the separate existence of NMR will
cease, and Subsidiary, the surviving corporation, will be a wholly-owned
subsidiary of MRI. As a consequence of the Merger, title to all of the property
and assets of Subsidiary and NMR will be vested or continue to be vested in
Subsidiary, and Subsidiary will be subject to all of the liabilities of
Subsidiary and NMR. Subsidiary has been formed solely for the purpose of
effecting the Merger, and has conducted no business and has no material assets
or obligations other than as contemplated by the Merger Agreement.
The Merger Agreement further provides that upon consummation of the Merger,
holders of shares of NMR Common Stock will receive shares of MRI Common Stock at
an Exchange Ratio of 0.6875 of a share of MRI Common Stock for each issued and
outstanding share of NMR Common Stock. See "The Merger -- Background of the
Merger; Negotiations; Fairness Opinions."
As of the date hereof, the amount of shares of MRI Common Stock issuable in
connection with the Merger would constitute approximately 48.9% of the amount of
issued and outstanding shares of MRI Common Stock prior to the Merger, without
giving effect to the exercise or conversion of any of MRI's or NMR's warrants,
options or convertible securities outstanding as of the date hereof.
The Merger Agreement provides that, as soon as practicable following
satisfaction of all conditions to the Merger, including the approval of the
Merger Agreement by the stockholders of MRI and by the stockholders of NMR, a
Certificate of Merger will be filed with the Secretary of State of Delaware. The
Merger will become effective upon the acceptance for filing of such Certificate
of Merger by the Secretary of State of Delaware (the "Effective Time", and such
date the "Effective Date"). It is currently expected that the Merger will occur
as soon as practicable following the approval of the Merger Agreement by the
stockholders of MRI and the stockholders of NMR. Either party may terminate the
Merger Agreement if the Effective Time has not occurred on or before December
31, 1996, provided that the failure of the Effective Time to occur on or before
such date does not result from a breach of the Merger Agreement by the
terminating party. See "Terms of the Merger -- Terminationand Amendment."
CONVERSION OF SHARES; TREATMENT OF OPTIONS, WARRANTS,
CONVERTIBLE DEBENTURES AND OTHER RIGHTS; FRACTIONAL SHARES
At the Effective Time, each issued and outstanding share of NMR Common Stock
will automatically convert into 0.6875 of a share of MRI Common Stock. As of the
date hereof, there are 6,310,571 issued and outstanding shares of NMR Common
Stock.
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Each warrant to acquire shares of NMR Common Stock (an "NMR Warrant") that
is outstanding and unexercised at the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, and subject to
the other terms and conditions thereof, automatically be deemed to be
exercisable for that number of shares of MRI Common Stock the holder of such
Warrant would have received in the Merger, had such holder exercised such NMR
Warrant in full immediately prior to the Effective Date, and the price per share
of MRI Common Stock issuable after the Effective Date upon exercise of such NMR
Warrant shall equal the price per share of NMR Common Stock under such NMR
Warrant as in effect prior to the Effective Date divided by the Exchange Ratio.
MRI will be bound by and subject to all registration rights contained in each
NMR Warrant and such rights will apply against MRI with the same legal force and
effect as they applied against NMR prior to effectiveness of the Merger. After
the Effective Date, MRI shall issue to each holder of an NMR Warrant a new
warrant containing the foregoing terms and all other terms set forth in each NMR
Warrant.
Pursuant to the Merger Agreement, each NMR stock option ("NMR Option")
outstanding on May 20, 1996 shall be deemed to constitute and shall
automatically be converted into stock options exercisable for shares of MRI
Common Stock ("New Options"). The number of shares of MRI Common Stock covered
by each New Option shall be the number of shares of MRI Common Stock which the
holder of the NMR Option would have received in the Merger had such holder
exercised the NMR Option in full immediately prior to the Effective Date,
without regard to vesting. The exercise price per share of MRI Common Stock
subject to a New Option shall equal the exercise price per share (subject to the
adjustments provided for in the NMR Option) of NMR Common Stock subject to the
corresponding NMR Option so converted divided by the Exchange Ratio. MRI shall
not be obligated to issue any shares of MRI Common Stock, until such time as the
shares of MRI Common Stock issuable upon exercise of New Options have been
registered with the SEC pursuant to an effective registration statement and
authorized for quotation on the Nasdaq National Market and for sale by any
appropriate state securities regulators, which MRI shall use its best efforts to
effect as promptly as practicable, but in no event more than 15 days after the
Effective Date.
Additionally, under the Merger Agreement, the obligations of NMR under each
8% Convertible Subordinated Debenture due 2001 of NMR (an "NMR Debenture")
including, payment of the principal of and interest thereon that is outstanding
at the Effective Date shall, by virtue of the Merger and without any action on
the part of NMR or MRI, be assumed in full by, and become the obligations of
Subsidiary, as the surviving corporation, which shall comply after the Effective
Date with all requirements of the Indenture, dated as of July 1, 1986 (the
"Indenture") pursuant to which the Debentures were issued. Each NMR Debenture
that is outstanding at the Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, and subject to the other
terms and conditions thereof, automatically be deemed to be convertible for that
number of shares of MRI Common Stock that the holder of such NMR Debenture would
have received in the Merger had such holder converted such NMR Debenture in full
immediately prior to the Effective Date, and the price per share of MRI Common
Stock issuable after the Effective Date upon conversion of such NMR Debenture
shall equal the "conversion price" under such NMR Debenture in effect prior to
the Effective Date divided by the Exchange Ratio.
NMR Warrants, NMR Options and NMR Debentures are sometimes referred to
collectively herein as "NMR Derivative Securities."
On July 29, 1996, the closing sales price quoted on the Nasdaq National
Market for MRI Common Stock was $7.38 per share. If the Merger had occurred on
that date, the equivalent market value for each share of NMR Common Stock would
have been approximately $5.07 per share of NMR Common Stock.
No fractional shares of MRI Common Stock will be issued in connection with
the Merger. In lieu of any fractional share of MRI Common Stock which any NMR
stockholder would otherwise be entitled to receive pursuant to the Merger or any
holder of a NMR Derivative Security would otherwise be entitled to receive upon
exercise of such NMR Derivative Security, MRI shall pay a cash adjustment in
respect of such fraction in an amount equal to the average last reported sales
price of MRI Common Stock on the Nasdaq National Market for the five (5) trading
days ended on the close of business on the second business day before the NMR
Meeting (the "Fair Market Value") multiplied by the fractional share interest to
which such holder would otherwise be entitled.
EXCHANGE OF CERTIFICATES
Prior to the Effective Time, MRI shall designate its transfer agent (the
"Exchange Agent") to act as exchange agent in effecting the exchange of
certificates representing NMR Common Stock for certificates representing the
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shares of MRI Common Stock into which such shares of NMR Common Stock have been
converted. After the Effective Date, the Exchange Agent shall send a letter of
transmittal to the holders of NMR Common Stock offering to exchange the
certificates representing such NMR Common Stock for certificates representing
shares of MRI Common Stock. From and after the Effective Time, each certificate
or instrument which, prior to the Effective Time, represented shares of NMR
Common Stock or NMR Warrants, NMR Options or NMR Debentures (collectively, "NMR
Derivative Securities") will be deemed to represent, as applicable, only the
right to receive certificates for shares of MRI Common Stock or the right to
acquire shares of MRI Common Stock in accordance with the terms of the Merger
Agreement, and the holder of each such certificate or instrument will cease to
have any rights with respect to the shares of NMR Common Stock formerly
represented thereby (in the case of certificates formerly representing shares of
NMR Common Stock) or with respect to the shares of NMR Common Stock issuable
upon exercise thereof (in the case of instruments formerly representing NMR
Derivative Securities), except as otherwise provided in the Merger Agreement or
by law.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Merger Agreement contains certain representations and warranties by MRI,
Subsidiary and NMR, and also contains covenants of the parties with respect to
the conduct of their respective businesses pending the closing under the Merger
Agreement, including agreements (subject to certain exceptions) not to issue any
equity securities, not to pay any dividends or redeem or purchase any of its
securities and not to sell any material amount of their respective assets or
acquire any material assets, equity securities or businesses outside of the
ordinary course of business. In addition, each of the parties has agreed to
carry on its respective business only in the ordinary course and consistent with
past practice and to use all reasonable efforts to preserve intact its present
business organization and relationships with clients and others having business
dealings with it.
There are no agreements or undertakings in the Merger Agreement on the part
of either MRI or NMR to indemnify the other following the Effective Time in the
event any representation or warranty made by either party to the other in the
Merger Agreement was not accurate at the time made. However, in the event the
Merger becomes effective, MRI and Subsidiary each agree to indemnify any person
who prior to the Effective Time is or was an officer, director, employee or
agent of MRI or NMR or Subsidiary against liability, claims or amounts paid in
settlement of any claim, suit or proceeding, including any liabilities arising
under or out of any state or Federal securities laws to the fullest extent
permitted by law, based in whole or in part on the fact that such person is or
was an officer, director, employee or agent of MRI or NMR or arising out of the
transactions contemplated by the Merger Agreement and, to the extent permitted
by law, advance expenses incurred to defend against such liabilities, claims or
amounts.
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
The obligation of the respective parties to the Merger Agreement to
consummate the Merger is subject to the approval of the Merger Agreement by the
stockholders of MRI and the approval of the Merger Agreement by the stockholders
of NMR. The obligations of the parties to consummate the Merger are also subject
to a number of other conditions, including the accuracy as of the closing date
of all material representations and warranties of the parties contained in the
Merger Agreement; the performance in all material respects of all covenants of
the parties contained in the Merger Agreement which are to be performed on or
before the closing date; the absence of any statute, rule, regulation or
governmental or judicial action which prohibits or restrains the transactions
contemplated by the Merger Agreement and the absence of certain suits,
investigations or changes in circumstances which would have a material adverse
effect on the transactions contemplated by the Merger Agreement; the delivery of
certain certificates and agreements by the parties and their respective officers
and directors, including the Non-Competition and Consulting Agreements (as such
terms are defined below); and the delivery of certain opinions by counsel to the
parties.
The Merger Agreement also provides that MRI's obligation to consummate the
Merger is conditioned upon NMR's agreement not to modify the Rights Agreement
between NMR and American Stock Transfer & Trust Company establishing NMR's
stockholder rights plan (the "Rights Agreement"), except as contemplated by the
Merger Agreement, and to take such action as is necessary in order not to
trigger the rights under the Rights Agreement.
The parties may waive compliance with any of the conditions to their
respective obligations to consummate the Merger.
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NON-COMPETITION AND CONSULTING AGREEMENTS
In connection with the Merger, Joseph G. Dasti, Chairman of the Board of
Directors, President and Chief Executive Officer of NMR and John P. O'Malley
III, Executive Vice President -- Finance, Chief Financial Officer and Secretary
of NMR (the "Consultants") have entered into termination agreements (the
"Termination Agreements") and executed non-competition and consulting agreements
(the "Non-Competition and Consulting Agreements"). The Termination Agreements
between NMR and the Consultants provide for the termination of the Consultants'
existing employment agreements with NMR concurrent with the effectiveness of the
Merger in exchange for lump sum cash payments of $650,000 to Mr. Dasti and
$540,000 to Mr. O'Malley. The Termination Agreements and the lump sum payments
thereunder are conditioned on the effectiveness of the Non-Competition
and Consulting Agreements.
Effectiveness of the Non-Competition and Consulting Agreements between MRI
and the Consultants is also a condition to consummation of the Merger and
consummation of the Merger is a condition to effectiveness of the
Non-Competition and Consulting Agreements. Pursuant to the Non-Competition and
Consulting Agreements, Mr. Dasti and Mr. O'Malley would be engaged for periods
of 12 months and 24 months, respectively, to provide consulting services to MRI
which are expected initially to focus on integrating NMR's business and
operations with those of MRI. Additionally, Mr. Dasti and Mr. O'Malley would
agree for periods of 18 and 24 months, respectively (the "Restrictive Period"),
not to directly or indirectly engage in any business or enterprise in the United
States which is competitive with the business conducted by MRI (the
"Non-Competition Covenant"). Additionally, during the applicable Restrictive
Period, each Consultant would be prohibited from soliciting for employment,
either on his own behalf or on behalf of another person or entity, any person
who is then employed by MRI or by any entity owned or otherwise affiliated with
MRI or inducing any person or entity engaged in business with MRI to reduce the
amount of business engaged in with MRI (the "Non-Solicitation Covenant"). In the
event the Consultant terminates the Non-Competition and Consulting Agreement
because of a material breach by MRI of any of the compensation and payment terms
provided for in the Non-Competition and Consulting Agreements, the
Non-Competition and Non-Solicitation Covenants will thereafter not apply to the
Consultants.
The Non-Competition and Consulting Agreement between MRI and Mr. Dasti
provides for an initial term of one year commencing on the Effective Date of the
Merger, which term may be extended upon the mutual agreement of the parties;
however, MRI is under no obligation to renew the agreement. Mr. Dasti's
Non-Competition and Consulting Agreement would be terminable (i) by MRI "for
cause" in the event Mr. Dasti is convicted of a felony against MRI, and (ii) by
Mr. Dasti at any time after MRI materially breaches the compensation and payment
terms of the Non-Competition and Consulting Agreement and fails to correct such
breach within 10 days. In the event the Non-Competition and Consulting Agreement
is terminated by MRI for cause, Mr. Dasti's right to receive compensation and
all other rights pursuant to such agreement would terminate and MRI would have
no further obligation to Mr. Dasti other than payment of accrued and unpaid fees
and reimbursable expenses.
Under the Non-Competition and Consulting Agreement, Mr. Dasti would receive
annual compensation of $133,000 for consulting services, together with
reimbursements of expenses for health benefits and approved business expenses.
Mr. Dasti may elect to defer such compensation for a period of up to six months.
In consideration for Mr. Dasti's agreement to comply with the Non-Competition
and Non-Solicitation Covenants, MRI would pay to Mr. Dasti a fee of $211,000
payable in 18 equal monthly installments, in advance. In addition, to induce Mr.
Dasti to enter into the Non-Competition and Consulting Agreement, MRI would
issue to Mr. Dasti at the closing of the Merger (i) five-year warrants to
purchase 40,000 shares of MRI Common Stock at an exercise price of $8.00 per
share and (ii) six year warrants to purchase 200,000 shares of MRI Common Stock
at an exercise price of $9.50 per share, and (iii) in exchange for his NMR
employee stock options, three (3) separate three year stock purchase warrants to
purchase 34,375, 68,750, and 34,375 shares of MRI Common Stock (subject to
adjustment in the event Mr. Dasti exercises options prior to the Effective Time)
at exercise prices of $9.27, $4.18, and $4.73, respectively. Such warrants would
contain certain rights to require MRI to register under the Securities Act the
resale of shares of MRI Common Stock received upon exercise of the warrants.
The Non-Competition and Consulting Agreement between MRI and Mr. O'Malley
provides for an initial term of two years commencing on the Effective Date of
the Merger which term may be extended upon the mutual agreement of the parties;
however, MRI is under no obligation to renew the agreement. Mr. O'Malley's
Non-Competition and Consulting Agreement would be terminable (i) by MRI "for
cause" in the event Mr. O'Malley is convicted of a felony against MRI, and (ii)
by Mr. O'Malley (y) at any time after MRI materially breaches the compensation
and payment
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terms of the Non-Competition and Consulting Agreement and fails to correct such
breach within 10 days, or (z) 18 months after the Effective Date of the Merger.
In the event of the election by Mr. O'Malley to terminate the Non-Competition
and Consulting Agreement 18 months after the Effective Date, so long as he is
not in breach of the Non-Competition and Non-Solicitation Covenants therein, Mr.
O'Malley would be entitled to all payments under the Non-Competition and
Consulting Agreement as though the agreement had not been terminated. In the
event the Non-Competition and Consulting Agreement is terminated by MRI "for
cause", Mr. O'Malley's right to receive compensation and all other rights
pursuant to such agreement would terminate and MRI would have no further
obligation to Mr. O'Malley, other than for payment of accrued and unpaid fees
and reimbursable expenses. Mr. O'Malley's Non-Competition and Consulting
Agreement also provides that if Mr. O'Malley terminates the Agreement without
cause at any time prior to the period ending 18 months following the Effective
Date of the Merger, Mr. O'Malley would be entitled to continue to receive
compensation and benefits under the Agreement so long as he is not in breach of
the Non-Competition and Non-Solicitation Covenants, but the monthly amount of
such compensation would be reduced, until 18 months following the Effective
Date, by $11,111.
Under the Non-Competition and Consulting Agreement, Mr. O'Malley would
receive annual compensation of $275,000 for consulting services, payable
monthly, in advance, together with reimbursement of expenses for health benefits
and approved business expenses. Mr. O'Malley may elect to defer such
compensation for a period of up to six months. In consideration of Mr.
O'Malley's agreement to comply with the Non-Competition and Non-Solicitation
Covenants, MRI would pay to Mr. O'Malley an annual fee of $275,000 payable in
equal monthly installments, in advance. Certain payments under Mr. O'Malley's
Non-Competition and Consulting Agreement will be secured by a letter of credit.
In addition, in order to induce Mr. O'Malley to enter into the Non-Competition
and Consulting Agreement, MRI would issue to Mr. O'Malley at the closing of the
Merger (i) five-year warrants to purchase 50,000 shares of MRI Common Stock at
an exercise price of $8.00 per share, and (ii) in exchange for his NMR employee
stock options, four (4) separate stock purchase warrants to purchase 10,313,
27,500, 41,250, and 34,375 shares of MRI Common Stock (subject to adjustment in
the event Mr. O'Malley exercises any employee stock options prior to the
Effective Time) at exercise prices of $4.00, $3.36, $4.18 and $4.73,
respectively. Such warrants would contain certain rights to require MRI to
register under the Securities Act the resale of shares of MRI Common Stock
received upon exercise of the warrants.
TERMINATION AND AMENDMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by mutual written consent of the Boards of Directors of NMR and MRI;
(ii) by either MRI or NMR, as the case may be, if (A) any representation or
warranty made by the other party in the Merger Agreement shall not have been
true when made and would be reasonably likely to have a material adverse effect
on the party which made such representation or warranty or any covenant or
agreement made by the other party in the Merger Agreement shall not have been
performed or complied with, (B) any court or governmental body takes any action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
the Merger Agreement and all appeals and means of appeal therefrom have been
reasonably exhausted, (C) the Effective Time shall not have occurred on or
before December 31, 1996, unless the failure of the Effective Time to occur on
or before such date is the result of a breach of the Merger Agreement by the
terminating party, (D) the Merger Agreement shall fail to receive the requisite
votes for approval and adoption by the stockholders of either NMR or MRI at
their respective stockholders' meetings or (E) any other condition to either
MRI's or NMR's obligations to effect the Merger have not been met.
The Merger Agreement may be amended at any time prior to the effective date;
provided, however, that after MRI and NMR stockholder approval, no amendment may
be made which would reduce the amount of consideration payable to NMR
stockholders in the Merger.
EXPENSES OF THE MERGER
MRI and NMR will pay their respective costs and expenses in connection with
the Merger, except under certain circumstances. The Merger Agreement provides
that expenses related to the drafting, preparing, printing, filing, and mailing
the Registration Statement, the Proxy Statement and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the Proxy
Statement shall be allocated between MRI and NMR.
It is anticipated that the costs and expenses of MRI and NMR in connection
with the Merger (including blue sky fees and fees payable to Dillon Read by MRI
and to Cowen by NMR) will be approximately $905,000 and $415,000, respectively.
See "The Merger -- Background of the Merger; Negotiations; Fairness Opinions."
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FEES
In the event that the Merger Agreement is terminated by either MRI or NMR as
a result of (i) a breach by the other party of any representation or warranty
contained in the Merger Agreement which would have or would be reasonably likely
to have a material adverse effect on such other party or (ii) the failure of the
other party to perform or comply with any covenant or agreement made by such
party, then such breaching party shall pay to the non-breaching party the sum of
$2,000,000 plus any fees or expenses incurred by the non-breaching party in
connection with the collection of such amount. In the event the Merger Agreement
is terminated by NMR or MRI for the sole reason that the Merger is not approved
by the stockholders of NMR or MRI, as applicable, then the party whose
stockholders did not approve the Merger shall pay to the other party, in
consideration of the time, effort and resources expended in connection with the
Merger transaction, $1,000,000 plus any fees or expenses incurred by such party
in connection with the collection of such amount.
NO SOLICITATION PROVISION AND FEE PAYABLE
The Merger Agreement imposes certain limitations on the ability of MRI and
NMR to initiate, solicit, encourage or enter into a "Business Transaction",
which is defined to mean any merger, acquisition, consolidation, share exchange
or similar transaction having an aggregate value of $35 million or more, or any
sale, transfer, lease or other disposition of 50% or more of the assets or
capital stock of either MRI or NMR in a transaction or series of transactions.
Specifically, neither party may initiate, solicit, encourage or enter into a
Business Transaction at any time (the "No-Shop Period") between May 20, 1996 and
the earlier of (i) termination of the Merger Agreement by mutual consent of the
parties, by reason of a judicial order prohibiting consummation of the Merger
which is final and non-appealable or as a result of a party's breach of a
material representation, warranty or covenant, (ii) January 31, 1997, if the
Merger is not consummated by December 31, 1996 due to no fault of either party,
and (iii) three months following termination (but no later than January 31,
1997) if the Merger Agreement is not approved by the stockholders of MRI or NMR
or certain closing conditions cannot be met. However, neither MRI nor NMR are
prohibited from furnishing information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited
bonafide proposal by such person or entity to enter into a Business Transaction
if the Board of Directors of MRI or NMR (the "Target Company"), as the case may
be, determines in good faith that such action is required to comply with the
Board of Director's fiduciary duties to the stockholders imposed by the DGCL. In
such event, the Target Company would also be required to notify the other party
that it is furnishing information and, to the extent not prohibited by law,
disclose to the other party the relevant terms of any such proposals received.
Additionally, the foregoing restrictions would not prevent the Target Company
from complying with its obligations under Federal tender offer laws and
regulations.
The Merger Agreement also provides that if the Target Company publicly
announces its intention to or enters into an agreement providing for a Business
Transaction during the No-Shop Period, the Target Company would be required to
pay to the other party, in consideration of the time, effort and resources
expended in connection with the Merger, $2,000,000 (less any amounts paid by the
Target Company to the other party, pursuant to other termination provisions
under the Merger Agreement), plus any fees incurred in connection with
collecting such amount.
INTEREST OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the MRI and NMR Boards of Directors
with respect to the Merger and the Merger Agreement, stockholders of MRI and NMR
should be aware that certain members of NMR's management have certain interests
in the Merger that are in addition to the interests of the stockholders of NMR.
See "Terms of the Merger--Non-Competition and Consulting Agreements." In
addition, 712 Advisory Services, Inc. ("Advisory Services"), a financial
advisory services company owned by Gary N. Siegler, Chairman of the Board of
Directors of MRI, has been engaged by MRI to act as MRI's financial advisor in
connection with the Merger. Advisory Services has assisted MRI in negotiating
and structuring the Merger and provided significant other advice in connection
with preparing this Joint Proxy Statement/Prospectus, performing due diligence,
and other matters pertaining to the Merger, for which it will receive a cash
financial advisory fee of $175,000 and five-year warrants to purchase 120,000
shares of MRI Common Stock at an exercise price of $9.00 per share
(collectively, the "MRI Fee"). Payment of the MRI Fee is conditioned upon
consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general summary of certain material Federal income tax
consequences under the Internal Revenue Code of 1986, as amended (the "Code"),
of the Merger to NMR and the holders of NMR Common Stock.
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This discussion does not consider all the Federal tax consequences of the Merger
that may be relevant to, or may materially affect, individual NMR stockholders
or employees, including, without limitation, holders of shares acquired upon
exercise of NMR Derivative Securities or in compensatory transactions. This
summary is based on certain provisions of the Code, final, temporary and
proposed Treasury Regulations promulgated thereunder (the "Regulations") and
administrative and judicial interpretations thereof, all in effect as of the
date hereof and all subject to change (possibly on a retroactive basis) at any
time. Any such changes in legislative, judicial or administrative actions or
interpretations could alter or significantly modify the tax analysis of the
issues set forth below.
At the Closing and in accordance with the Merger Agreement, NMR will receive
an opinion of NMR's counsel, McCarter & English, with respect to certain Federal
income tax consequences of the Merger to NMR and the holders of NMR Common
Stock. This opinion, which is referred to herein as the "Tax Opinion", will not
be binding on the Internal Revenue Service ("IRS"). In rendering the Tax
Opinion, such counsel will rely on certain representations made or to be made by
certain corporate officers of NMR, Subsidiary and MRI including representations
that (i) the fair market value of the shares of MRI Common Stock to be received
by each stockholder of NMR in connection with the Merger will be approximately
equal to the fair market value of the shares of NMR Common Stock surrendered in
exchange therefor in the Merger, (ii) there is no plan or intention on the part
of the stockholders of NMR who own 5 percent or more of NMR Common Stock and, to
the best of the knowledge of the management of NMR, there is no plan or
intention on the part of the remaining stockholders of NMR to sell, exchange or
otherwise dispose of a number of shares of MRI Common Stock to be received by
them in the Merger that would reduce the aggregate value of such MRI Common
Stock held by the NMR stockholders to less than 50% of the aggregate value of
the outstanding NMR Common Stock immediately prior to the Merger, (iii) no
stockholder of NMR will directly or indirectly receive from MRI any
consideration in the Merger in respect of such stockholder's NMR Common Stock
other than MRI Common Stock, excluding payments of cash to NMR stockholders in
lieu of fractional shares of MRI Common Stock, (iv) MRI has no plan or intention
to reacquire any of the shares of MRI Common Stock to be issued to the
stockholders of NMR pursuant to the Merger and MRI is under no contractual
obligation and has no contractual right to reacquire any such shares of MRI
Common Stock, (v) Subsidiary will continue the historic business of NMR or use a
significant portion of NMR's business assets in a business, (vi) the liabilities
of NMR assumed by Subsidiary and the liabilities to which the assets transferred
to Subsidiary in the Merger are subject were incurred by NMR in the ordinary
course of business, (vii) the payment of cash in lieu of fractional shares of
MRI Common Stock is solely for the purpose of avoiding the expense and
inconvenience to MRI of issuing fractional shares and does not represent
separately bargained for consideration, (viii) the total cash consideration that
will be paid in the Merger to NMR stockholders in lieu of fractional shares of
MRI Common Stock will not exceed one percent (1%) of the aggregate consideration
that will be issued to NMR stockholders with respect to their shares of NMR
Common Stock surrendered in the Merger, (ix) none of the compensation for
services rendered to be received by any employee of NMR who is also a
stockholder of NMR is consideration for, or allocable to, such
stockholder/employee's shares of NMR Common Stock exchanged in the Merger, (x)
there is no intercorporate indebtedness existing between NMR and MRI that was
issued, acquired or will be settled at a discount in connection with the Merger,
(xi) no two parties to the transaction are investment companies as defined in
Code Section 368(a)(2)(F)(iii), (xii) NMR is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Code Section
368(a)(3)(A), (xiii) the fair market value of the assets of NMR transferred to
Subsidiary will equal or exceed the sum of NMR liabilities assumed by Subsidiary
in the Merger, plus the amount of liabilities, if any, to which the transferred
assets are subject, (xiv) the Merger is based upon valid business purposes
unrelated to the avoidance of Federal income taxes and will comply in all
respects with the laws of the states of incorporation of the corporations
involved in the Merger, (xv) in the Merger, the stockholders of NMR will
exchange for voting stock of MRI an amount of voting stock of NMR which
constitutes control of NMR under Section 368(c) of the Code, (xvi) Subsidiary
will acquire at least 90 percent of the fair market value of the net assets and
at least 70 percent of the fair market value of the gross assets held by NMR
immediately prior to the Merger (for purposes of this representation, amounts
paid by NMR to stockholders who receive cash or other property, assets of NMR
used to pay its reorganizational expenses, and all redemptions and distributions
(except for regular dividends) completed by NMR immediately prior to the Merger
are included as assets of NMR held immediately prior to the Merger), (xvii)
prior to the transaction, MRI will be in control of Subsidiary within the
meaning of Section 368(c) of the Code, (xviii) following the Merger, Subsidiary
will not issue additional shares of its stock in a manner that would result in
MRI losing control of Subsidiary within the meaning of Code Section 368(c),
(xix) MRI has no plan or intention to liquidate Subsidiary, to merge Subsidiary
with and into another corporation, to sell or otherwise dispose
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of the stock of Subsidiary or to cause Subsidiary to sell or otherwise dispose
of any of the assets of NMR acquired in the Merger, other than assets located in
NMR's Bel Air, Maryland and Elgin, Illinois centers and except for dispositions
made in the ordinary course of business or transfers described in Code Section
368(a)(2)(c), (xx) MRI, Subsidiary, NMR and the stockholders of NMR will pay
their respective expenses, if any, incurred in connection with the transaction,
and (xxi) no stock of Subsidiary will be issued in the Merger.
The Tax Opinion, which will be limited to the Federal income tax
consequences enumerated below, shall be as follows:
1. The Merger will be a reorganization within the meaning of Code
Sections 368(a)(1)(A) and 368(a)(2)(D) and NMR will be a party to such
reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized for Federal income tax purposes
by NMR on the transfer of its assets to Subsidiary and the assumption by
Subsidiary of NMR's liabilities pursuant to the Merger. Code Sections
361(a) and 357(a).
3. No gain or loss will be recognized by the stockholders of NMR whose
shares of NMR Common Stock are converted solely into shares of MRI Common
Stock in connection with and pursuant to the Merger. CodeSection 354(a).
4. The tax basis of the shares of MRI Common Stock received by the
stockholders of NMR in the Merger will be equal, in each instance, to the
tax basis of the shares of NMR Common Stock surrendered by such stockholders
in exchange therefor. Code Section 358(a).
5. The holding period of the shares of MRI Common Stock received by the
stockholders of NMR in connection with the Merger will include, in each
instance, the period during which the shares of NMR Common Stock surrendered
in exchange therefor were held by such stockholders if, and to the extent
that, the shares of NMR Common Stock were capital assets in the hands of the
NMR stockholders on the Effective Date of the Merger. Code Section 1223(1).
6. The NMR stockholders receiving cash in lieu of fractional shares of
MRI Common Stock will be treated as if such fractional shares had been
issued by MRI and then subsequently redeemed by MRI and will be taxed on any
resulting gain in an amount which shall not exceed the amount of the cash
received. Code Section 356(a). Whether the cash received by such NMR
stockholders in lieu of fractional shares of MRI Common Stock is
characterized as a dividend or as a payment in exchange for the shares of
NMR Common Stock will depend on whether the distribution of cash to such
stockholders, when viewed as part of the reorganization as a whole and as a
redemption by MRI, and in light of tax principles analogous to those set
forth in Code Section 302(b), more closely resembles a dividend distribution
or a payment in exchange for shares of NMR Common Stock.
A successful IRS challenge to the status of the Merger as a reorganization
within the meaning of Code Section 368 would result in each NMR stockholder
recognizing gain or loss with respect to each share of NMR Common Stock
surrendered equal to the difference between the stockholder's tax basis in such
share and the fair market value, as of the time of the Merger, of the MRI Common
Stock received in exchange therefor. Even if the Merger qualifies as a
reorganization within the meaning of Section 368(a)(1)(A) and Section
368(a)(2)(D) of the Code, a recipient of shares of MRI Common Stock may
recognize income, gain or loss to the extent such shares are considered to have
been received in exchange for services or property (i.e. for consideration other
than solely shares of NMR Common Stock).
The Tax Opinion specifically excludes any reference to the tax consequences
of the Merger that may relate to any holder of NMR Derivative Securities or
other rights to acquire shares of NMR Common Stock, including, without
limitation, the tax consequences of the acceleration of the right to exercise
any such rights by the holders thereof pursuant to the Merger. Holders of any
NMR Derivative Securities or other rights to acquire NMR Common Stock are
strongly advised to consult with their tax advisors with respect to the tax
consequences of the Merger that may relate to them.
THE FOREGOING IS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER AND DOES NOT SET FORTH ALL THE ASSUMPTIONS, QUALIFICATIONS AND
LIMITATIONS REFERENCED IN THE TAX OPINION. NMR STOCKHOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER WITH RESPECT
TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING, WITHOUT LIMITATION, THE
APPLICABILITY OF FOREIGN, STATE AND LOCAL LAWS.
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ACCOUNTING TREATMENT
MRI intends to treat the Merger as a purchase, as such term is used under
generally accepted accounting principles, for accounting and financial reporting
purposes. Under the purchase method of accounting, assets and liabilities of NMR
would be recorded at their fair value at the Effective Time, with the excess of
the consideration to be paid by MRI pursuant to the Merger over NMR's net
tangible and identifiable intangible assets being recorded as goodwill. See "MRI
and NMR Unaudited Pro Forma Combined Financial Statements."
RESTRICTIONS ON RESALE OF MRI COMMON STOCK BY FORMER NMR STOCKHOLDERS
MRI has registered under the Securities Act the shares of MRI Common Stock
which holders of shares of NMR Common Stock which are outstanding at the
Effective Time will be entitled to receive upon consummation of the Merger.
Those stockholders of NMR who are not deemed to be "affiliates" of NMR at the
time of the Merger may freely sell the shares of MRI Common Stock they receive
in the Merger. An "affiliate" includes any person who, directly or indirectly,
controls, is controlled by, or is under common control with, NMR at the time the
Merger is submitted to a vote of the stockholders of NMR.
Stockholders of NMR who are deemed to be "affiliates" of NMR may resell the
shares of MRI Common Stock received upon consummation of the Merger in
compliance with Rule 145 promulgated under the Securities Act, pursuant to an
effective registration statement under the Securities Act or in transactions
exempt from registration, and may not use this Joint Proxy Statement/Prospectus
to effect resales of the shares of MRI Common Stock they receive. Rule 145, as
currently in effect, imposes restrictions on the manner in which such affiliates
may make resales and also on the volume of resales which such affiliates, and
others with whom they may act in concert, may make in any three month period.
APPRAISAL RIGHTS
MRI STOCKHOLDERS. Appraisal rights are not available under Delaware law to
MRI's stockholders in connection with the Merger.
NMR STOCKHOLDERS. Appraisal rights are not available under Delaware law to
NMR's stockholders in connection with the Merger.
DESCRIPTION OF MRI CAPITAL STOCK
The authorized capital stock of MRI consists of 20,000,000 shares of MRI
Common Stock, par value $.01 per share, and 100,000 shares of Preferred Stock,
par value $.01 per share ("Preferred Stock"). As of July 1, 1996, MRI had
outstanding 8,866,489 shares of MRI Common Stock and 128 shares of Preferred
Stock.
COMMON STOCK
The holders of outstanding shares of MRI Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the Board of Directors may, from time to time, determine. Each
stockholder is entitled to one vote for each share of MRI Common Stock held by
such stockholder. MRI's Certificate of Incorporation does not provide for
cumulative voting. The MRI Common Stock is not entitled to preemptive rights and
is not subject to redemption. Upon liquidation, dissolution, or winding-up of
MRI, the assets legally available for distribution to stockholders are
distributed ratably among the holders of MRI Common Stock outstanding at that
time after payment of liquidation preferences, if any, on any outstanding
Preferred Stock. Each outstanding share of MRI Common Stock is fully paid and
nonassessable.
PREFERRED STOCK
MRI's Certificate of Incorporation provides that MRI may, without further
action by MRI's stockholders, issue shares of Preferred Stock in one or more
series. The Board of Directors is authorized to establish from time to time the
number of shares to be included in any such series and to fix the relative
rights and preferences of the shares of any such series, including without
limitation dividend rights, dividend rates, voting rights, redemption rights and
terms, liquidation preferences and sinking fund provisions. The Board of
Directors may authorize and issue Preferred Stock with voting or conversion
rights that could adversely affect the voting power or other rights of the
holders of MRI Common Stock. In addition, the issuance of Preferred Stock could
have the effect of delaying or preventing a change in control of MRI.
As part of the total shares of authorized Preferred Stock, MRI's Certificate
of Incorporation designates two series of Preferred Stock of MRI consisting of
2,000 shares of Series A Preferred Stock (the "Series A Preferred
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Stock") and 2,000 shares of Series B Preferred Stock (the "Series B Preferred
Stock", and together with the Series A Preferred Stock, the "Designated
Preferred Stock"). Each issued and outstanding share of Designated Preferred
Stock is entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available therefor annual dividends which shall be
cumulative at the rate of 9% of the applicable liquidation preference. No
dividends have been declared by MRI's Board of Directors and none are expected
to be. Except as otherwise provided by law, the Designated Preferred Stock shall
have no voting rights. The Designated Preferred Stock shall be redeemable, in
whole or in part, at the option of MRI, at any time from time to time, at a
redemption price (the "Redemption Price") per share equal to the sum of (x) the
applicable liquidation preference and (y) any accrued and unpaid dividends on
the Designated Preferred Stock. The Designated Preferred Stock is also subject
to mandatory redemption in the event MRI sells, disposes or transfers any shares
of common stock of Maternity Resources, Inc. ("Maternity Inc.") or all or
substantially all of the assets of Maternity Inc. not in the ordinary course of
business, in which case the Designated Preferred Stock shall be redeemed at the
Redemption Price solely out of the net proceeds from such sale after payment of
all liabilities of Maternity Inc. MRI did not realize any net proceeds from its
disposition of the assets of Maternity Inc. in 1995; therefore, MRI expects the
Designated Preferred Stock to be redeemed or cancelled without the payment of
any material amounts to the holders of the Designated Preferred Stock. MRI has
no present plans to issue any additional shares of Preferred Stock. See
"Information Concerning Medical Resources, Inc. -- Certain Relationships and
Related Party Transactions."
SHARES ELIGIBLE FOR FUTURE SALE
On July 29, 1996, an aggregate 2,819,625 shares of MRI Common Stock were
issuable upon exercise or conversion of MRI Derivative Securities, of which
2,699,625 shares have been registered by MRI for resale under the Securities
Act. In addition, in connection with the Merger, MRI has agreed to register for
resale 1,305,156 shares of MRI Common Stock issuable upon exercise or conversion
of NMR Derivative Securities. Upon such registration, these shares not held by
affiliates of NMR will become freely tradeable and transferable without
restriction. Exercise or conversion of a substantial amount of the MRI
Derivative Securities or the NMR Derivative Securities following the Merger
could adversely affect the market price of the MRI Common Stock due to the large
number of shares issuable upon exercise of such securities in comparison to the
number of shares of MRI Common Stock presently outstanding.
Upon completion of the Merger, there will be approximately 13,205,006
outstanding shares of MRI Common Stock (assuming no exercise or conversion of
outstanding MRI Derivative Securities or NMR Derivative Securities prior to the
Effective Time). Of these shares, approximately 9,316,794 will be freely
transferable and tradable without restriction or further registration under the
Securities Act, except for any shares acquired by any affiliates of MRI, or by
affiliates of NMR pursuant to the Merger, which will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act. In general, under
Rule 144 as currently in effect, affiliates of MRI would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of one percent of the number of shares of MRI Common Stock then
outstanding or the average weekly trading volume of the MRI Common Stock during
the four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about MRI. MRI is unable to estimate accurately the number of shares that will
be sold under Rule 144 since this will depend in part on the market price for
the MRI Common Stock, the personal circumstances of the sellers and other
factors.
MRI has also granted to holders of 958,571 shares of MRI Common Stock
certain rights to have the resale of such shares registered under the Securities
Act. In the event these registration rights are exercised, these shares would
become freely tradable and transferable without restriction.
TRANSFER AGENT
The transfer agent and registrar of MRI Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF MRI AND NMR
At the Effective Time, stockholders of NMR will become stockholders of MRI.
Set forth below is a comparison of the terms of the MRI Common Stock and the
terms of NMR Common Stock, as well as a summary of other material differences
between the rights of holders of MRI Common Stock and the rights of holders of
NMR Common Stock.
47
<PAGE>
This summary does not purport to be complete and is qualified in its entirety by
reference to the MRI's Certificate of Incorporation and Bylaws, and NMR's
Certificate of Incorporation and Bylaws. See "Description of MRI Common Stock."
TERMS OF COMMON STOCK
The rights of holders of MRI Common Stock are nearly identical to the rights
of holders of NMR Common Stock. The holders of MRI Common Stock and NMR Common
Stock each have the same rights with respect to dividends, voting, and
liquidation. In addition, MRI Common Stock and NMR Common Stock are quoted on
the Nasdaq National Market.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
Under the DGCL, an amendment to a corporation's certificate of incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of the corporation entitled to vote thereon and a majority of the
outstanding shares of each class entitled to vote thereon as a class, unless the
corporation's certificate of incorporation provides for a higher percentage.
Holders of the outstanding shares of a class, or series of a class, shall be
entitled to vote as a class with respect to any amendment which would increase
or decrease the aggregate number of authorized shares of such class or series,
increase or decrease the par value of the shares of such class or series, or
alter or change the powers, preferences or special rights of such shares so as
to adversely affect such holders. Neither the Certificate of Incorporation nor
Bylaws of either MRI or NMR alter the procedures set forth in the DGCL for
effecting an amendment to either company's respective Certificate of
Incorporation.
AMENDMENT TO BYLAWS
Under the DGCL, stockholders of a Delaware corporation have the power to
adopt, amend or repeal the bylaws of the corporation. Such action may be taken
by the stockholders at an annual or special meeting at which a quorum is
present. The Certificate of Incorporation of NMR provides that the Board of
Directors shall have the power to adopt, amend or repeal the Bylaws of NMR,
although this provision does not divest or limit the power conferred upon NMR
stockholders by the DGCL.
The Bylaws of MRI authorize the Board of Directors of MRI or MRI's
stockholders to adopt, amend or repeal the MRI Bylaws.
DIRECTORS
Under the Certificate of Incorporation of NMR, the number of directors is to
be fixed by or in the manner provided in NMR's Bylaws. NMR's Bylaws provide that
the number of directors of NMR shall be between five (5) and thirteen (13) as
determined from time to time by the Board. MRI's Bylaws permit the Board of
Directors by resolution to fix the number of directors. The DGCL provides that
the number of directors of a Delaware corporation is to be fixed by or in the
manner provided in the corporation's bylaws unless otherwise fixed in the
corporation's certificate of incorporation.
VACANCIES AND NEWLY CREATED DIRECTORSHIPS
The DGCL provides that, unless otherwise provided in the corporation's
certificate of incorporation or bylaws, vacancies and newly created
directorships resulting from an increase in the authorized number of directors
may be filled by a majority of the directors then in office, although less than
a quorum, or by the sole remaining director; provided, that if the holders of
any class or series are entitled to elect one or more directors, vacancies and
newly created directors of such class or series shall be filled by a majority of
the directors elected by such class or series then in office, or by the sole
remaining director so elected.
The Bylaws of MRI and NMR permit vacancies and newly created directorships
to be filled in the manner set forth in the DGCL, and further state that if no
directors are in office, any officer or stockholder may call a special meeting
of stockholders at which such vacancies may be filled.
REMOVAL OF DIRECTORS
The DGCL permits the removal of any or all directors, with or without cause,
by the holders of a majority of the shares of the corporation entitled to vote
at an election of directors, except that (i) if the board of directors has been
classified into classes, such removal may only be for cause; (ii) if the
corporation has cumulative voting, no director may be removed without cause if
the votes cast against removal would be sufficient to elect such director if
voted
48
<PAGE>
cumulatively at an election of the entire board or the entire class of directors
of which he is a member; and (iii) when the certificate of incorporation
provides that holders of shares of a class or series are entitled to elect one
or more directors, any director so elected may be removed without cause only by
the applicable vote of such holders.
The Bylaws of MRI and NMR also permit the removal of any and all directors
with or without cause by a majority of the shares entitled to vote at an
election of directors.
A Delaware corporation may declare and pay dividends to its stockholders
only out of its surplus, or if there shall be no surplus, out of its net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. The DGCL defines a corporation's surplus as the amount by which its
net assets exceeds the capital of the corporation. Under the DGCL, net assets
means the amount by which a corporation's total assets exceeds its total
liabilities. The respective Certificates of Incorporation of MRI and NMR do not
impose any restriction on the payment of dividends.
POWER TO CALL SPECIAL MEETING OF STOCKHOLDERS
Under the DGCL, special meetings of stockholders may be called by the board
of directors or such other person or persons as may be authorized in the
certificate of incorporation or the bylaws. Neither MRI's nor NMR's respective
Certificates of Incorporation contain provisions relating to special meetings of
stockholders. MRI's Bylaws provide that special meetings may be called by the
directors or any officer instructed by the directors to call the meeting. NMR's
Bylaws provide that special meetings may be called by the Chairman of the Board,
if any, or the President, and shall be called by the President or Secretary at
the request in writing of a majority of the Board of Directors or of the
stockholders owning a majority of the issued and outstanding shares entitled to
vote.
STOCKHOLDER ACTION WITHOUT A MEETING
The DGCL provides that, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a written consent setting forth
the action so taken is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. MRI's Certificate of Incorporation does not prohibit
stockholder action without a meeting. NMR's Certificate of Incorporation
prohibits action by the stockholders of NMR without a meeting of stockholders.
INFORMATION CONCERNING MEDICAL RESOURCES, INC.
MRI specializes in the operation and acquisition of diagnostic imaging
centers and the management of the associated physicians' practices. MRI
currently provides services to physicians through 19 imaging centers in Florida
(8), New Jersey (5) and New York (6) and network management services to managed
care providers in these regions. Through its subsidiary StarMed, MRI provides
healthcare supplemental staffing to acute and sub-acute care facilities
nationwide.
This Joint Proxy Statement/Prospectus is accompanied by MRI's 1995 Annual
Report to Stockholders and its Quarterly Report on Form 10-Q for the three
months ended March 31, 1996, which fully sets forth the business of MRI as of
the date thereof. Other information concerning MRI's business and financial
condition is incorporated by reference from its reports filed with the SEC
including the reports accompanied hereby. See "Incorporation of Certain
Documents by Reference."
MANAGEMENT OF MRI
The directors and executive officers of MRI are as follows:
NAME AGE POSITION
- ---- --- --------
Gary N. Siegler ...... 34 Chairman of the Board
Robert J. Adamson .... 38 Co-President, Chief Financial Officer and Director
William D. Farrell ... 34 Co-President, Chief Operating Officer and Director
Gary L. Fuhrman ...... 34 Director
John H. Josephson .... 34 Director
Stephen M. Davis ..... 42 Director and Secretary
Neil H. Koffler ...... 29 Director
49
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
GARY N. SIEGLER. Mr. Siegler has served as Chairman of the Board of
Directors of MRI since 1990. Mr. Siegler is a co-founder and, since January
1989, has been President of Siegler Collery & Co., a New York-based investment
firm ("Siegler Collery"). Mr. Siegler is an executive officer of the general
partner of The SC Fundamental Value Fund, L.P. ("Fundamental Value Fund"), a
fund investing in marketable securities, and an executive officer of SC
Fundamental Value BVI, Inc. ("Fundamental Value BVI"), the investment advisor to
an off-shore fund investing in marketable securities. Mr. Siegler serves as the
Chairman of the Board of Directors of National R.V. Holdings, Inc., a
manufacturer of motorhomes and other recreational vehicles.
ROBERT J. ADAMSON. Mr. Adamson has been a director of MRI since November
1995 and has been MRI's Co-President and Chief Financial Officer and President
of StarMed, MRI's temporary staffing subsidiary which was acquired by MRI in
August 1994, since September 1994. Prior to that he was Chief Financial Officer
for StarMed from August 1993. Mr. Adamson was employed as Executive Vice
President and Chief Financial Officer of Core International, Inc., a subsidiary
of Aiwa Corp. of Japan, from December 1988 to August 1993. Prior to December
1988, Mr. Adamson held executive finance positions with other corporations. Mr.
Adamson is a Fellow of the Institute of Chartered Management Accountants of the
U.K.
WILLIAM D. FARRELL. Mr. Farrell has been a director of MRI since November
1995 and has been MRI's Co-President since August 1994 and Chief Operating
Officer from April 1994. From September 1992 to April 1994, Mr. Farrell served
as MRI's Vice President--Operations. From May 1986 to September 1992, Mr.
Farrell served as MRI's Manager of Corporate Accounting, Controller and Vice
President--Personnel. Mr. Farrell is a non-practicing certified public
accountant in the State of New Jersey.
GARY L. FUHRMAN. Mr. Fuhrman has been a director of MRI since 1992 and is a
member of MRI's Audit Committee. Mr. Fuhrman has been a Director and a Senior
Vice President of Arnhold and S. Bleichroeder, Inc. since March 1995 and January
1993, respectively, and a vice president of such firm for more than five years
prior thereto. Mr. Fuhrman is a director of National R.V. Holdings, Inc.
JOHN H. JOSEPHSON. Mr. Josephson has been a director of MRI since July
1995. Mr. Josephson is a Vice President and Director of Allen & Company
Incorporated, an investment banking firm, and has been with such firm since
1987. Mr. Josephson is also a director of Norwood Promotional Products, Inc.
STEPHEN M. DAVIS. Mr. Davis has been a director and Secretary of MRI since
1992 and is a member of MRI's Audit Committee. For more than the last five
years, Mr. Davis has been a partner of the law firm Werbel McMillin &
Carnelutti, A Professional Corporation. Mr. Davis is a director of National R.V.
Holdings, Inc.
NEIL H. KOFFLER. Mr. Koffler has been a director of MRI since November 1995
and is a member of MRI's Audit Committee. Mr. Koffler has been employed by
Siegler Collery & Co. since 1989. Mr. Koffler is an executive officer of
Fundamental Value Fund and Fundamental Value BVI. Mr. Koffler is a director of
National R.V. Holdings, Inc.
BOARD OF DIRECTORS AND COMMITTEES
Pursuant to MRI's Bylaws and resolutions, MRI's Board of Directors consists
of seven members, each to hold office (subject to MRI's Bylaws) until the next
annual meeting or until his respective successor is elected and qualified. In
the case of a vacancy, a director will be appointed by a majority of the
remaining directors then in office to serve the remainder of the term left
vacant. Directors do not receive any fees for attending Board meetings.
Directors are entitled to receive reimbursement for travelling costs and other
out-of-pocket expenses incurred in attending Board meetings. During the fiscal
year ended December 31, 1995 ("fiscal 1995"), the Board of Directors held 12
meetings (11 of which were by written consent in lieu of a meeting). All
directors attended at least 75 percent of those meetings and meetings of its
committees of which they were members that were held while they were serving on
the Board or such committee.
The Board of Directors has designated a Stock Option Committee, consisting
of Stephen M. Davis and Gary L. Fuhrman, which makes all decisions with respect
to the grant of stock options and administration of MRI's 1992, 1995 and 1996
Stock Option Plans. The Stock Option Committee held one meeting during fiscal
1995 by written consent. The Stock Option Committee will also administer the
1996 B Stock Option Plan which was adopted by the Board of Directors in May
1996. The Board of Directors has also established an Audit Committee, consisting
of Messrs. Koffler, Fuhrman and Davis. The Audit Committee met once during
fiscal 1995. The Audit Committee reviews the performance of the independent
certified public accountants as auditors for MRI, discusses and reviews the
scope and
50
<PAGE>
the fees of the prospective annual audit and reviews the results with the
auditors. MRI does not have a standing compensation committee or nominating
committee.
Pursuant to MRI's Bylaws, officers of MRI hold office until the first
meeting of directors following the next annual meeting of stockholders and until
their successors are chosen and qualified.
Based solely upon a review of the copies of the forms furnished to MRI, or
written representations from certain reporting persons, MRI believes that during
fiscal 1995, all filing requirements applicable to its officers and directors
were complied with by such individuals.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation awarded to, earned by or
paid to each of MRI's executive officers (the "Named Officers") for MRI's fiscal
years as specified below:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
---------------------------------------
Annual Compensation Awards
------------------------------------------ ----------------------
Securities
Other Restricted Underlying
Name and Salary Bonus Annual Stock Options All Other
Principal Position Year ($) ($) Compensation Awards SARs(#) Compensation(4)
- ------------------ ---- -------- ------- ------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Adamson .......... 1995 $131,643 $25,000 $5,208 -0- 135,000 $3,245
Co-President and Chief
Financial Officer (1) 1994 $112,768 $12,500 $4,800(3) -0- 35,000 $1,191
William D. Farrell ......... 1995 $131,643 $25,000 $5,700 -0- 135,000 $3,245
Co-President and Chief
Operating Officer (2) 1994 $109,308 $25,000 $5,700(3) -0- 50,000 $2,440
</TABLE>
- ----------------
(1) Mr. Adamson was appointed Co-President in August 1994. Mr. Adamson's fiscal
1994 compensation includes compensation paid to him by StarMed prior to its
acquisition by MRI in August 1994.
(2) Mr. Farrell was appointed Co-President in August 1994.
(3) Represents an automobile allowance for Mr. Adamson and Mr. Farrell.
(4) Matching contributions under MRI's 401(k) plan.
EMPLOYMENT AGREEMENTS
MRI is a party to an employment agreement with Mr. William D. Farrell which
expires on August 1, 1998. Pursuant to such employment agreement, Mr. Farrell
acts as Co-President and Chief Operating Officer of MRI, for which he currently
receives an annual salary of $150,000 and is prohibited from competing with MRI
for a period of one year following the term of the agreement.
MRI is also a party to an employment agreement with Mr. Robert J. Adamson
which expires on August 1, 1998. Pursuant to such employment agreement, Mr.
Adamson acts as Co-President and Chief Financial Officer of MRI, for which he
currently receives an annual salary of $150,000 and is prohibited from competing
with MRI for a period of one year following the term of the agreement.
STOCK OPTION PLANS
1992 Stock Option Plan
In July 1992, MRI adopted and approved the 1992 Stock Option Plan (the
"1992 Plan"). The 1992 Plan is designed to serve an incentive for retaining
qualified and competent directors, employees and consultants. The 1992 Plan
provides for the award of options to purchase up to 240,000 shares of MRI Common
Stock, of which options to purchase 227,625 shares were outstanding as of June
30, 1996. The 1992 Plan is administered by the Stock Option Committee of the
Board of Directors. The Stock Option Committee has, subject to the provisions of
the 1992 Plan, full authority to select MRI individuals eligible to participate
in the 1992 Plan, including officers, directors (whether or not employees) and
consultants (the "Plan Participants"). The 1992 Plan provides for the awarding
of incentive stock options (as defined in Section 422 of the Internal Revenue
Code of 1986) and non-incentive stock options. Options
51
<PAGE>
granted pursuant to the 1992 Plan will have such vesting schedules and
expiration dates as the Stock Option Committee shall establish in connection
with each Plan Participant, which terms shall be reflected in an option
agreement executed in connection with the granting of the option.
1995 Stock Option Plan
In March 1995, MRI's Board of Directors adopted and approved the 1995 Stock
Option Plan (the "1995 Plan"). The 1995 Plan is designed to serve as an
incentive for retaining qualified and competent directors, employees and
consultants. The 1995 Plan provides for the award of options to purchase up to
400,000 shares of MRI Common Stock, of which options to purchase 316,000 shares
were outstanding as of June 30, 1996. The 1995 Plan is administered by the Stock
Option Committee of the Board of Directors. The Stock Option Committee has,
subject to the provisions of the 1995 Plan, full authority to select MRI
individuals eligible to participate in the 1995 Plan, including officers,
directors (whether or not employees) and consultants (the "1995 Plan
Participants"). The 1995 Plan provides for the awarding of incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986) and
non-incentive stock options. Options granted pursuant to the 1995 Plan will have
such vesting schedules and expiration dates as the Stock Option Committee shall
establish in connection with each 1995 Plan Participant, which terms shall be
reflected in an option agreement executed in connection with the granting of the
option.
1996 Stock Option Plans
In February 1996 and in May 1996, MRI's Board of Directors adopted and
approved the 1996 Stock Option Plan and the 1996 B Stock Option Plan
(collectively, the "1996 Option Plans"), respectively. The 1996 Option Plans are
designed to serve as an incentive for retaining qualified and competent
directors, employees and consultants. The 1996 Option Plans provide for the
award of options to purchase up to 400,000 shares of MRI Common Stock, of which
options to purchase 369,000 shares were outstanding as of June 30, 1996. The
1996 Option Plans are administered by the Stock Option Committee of the Board of
Directors. The Stock Option Committee has, subject to the provisions of the 1996
Option Plans, full authority to select MRI individuals eligible to participate
in the 1996 Option Plans, including officers, directors (whether or not
employees) and consultants (the "1996 Plans Participants"). The 1996 Option
Plans provide for the awarding of incentive stock options (as defined in Section
422 of the Internal Revenue Code of 1986) and non-incentive stock options.
Options granted pursuant to the 1996 Option Plans will have such vesting
schedules and expiration dates as the Stock Option Committee shall establish in
connection with each 1996 Plan Participant, which terms shall be reflected in an
option agreement executed in connection with the grantingof the option.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during fiscal 1995 to the Named Officers.
<TABLE>
<CAPTION>
Potential realizable
value at assumed
annual rates of stock
price appreciation for
Individual Grants option term (1)
---------------------------------------------- -----------------------
Percent of
total
options/SARs
granted to Exercise or
Options employees in base price Expiration
Name Granted fiscal year ($/Sh) date 0% ($) 5% ($) 10% ($)
- ---- ------- ------------ ----------- ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Adamson ........... 17,500 3.6% $4 3/02/05 $0 $36,890 $100,212
17,500 3.6% 5 3/02/05 0 19,390 82,712
50,000 10.4% 6.75 10/11/00 0 77,200 185,913
50,000 10.4% 5 8/01/00 0 37,100 112,363
William D. Farrell .......... 17,500 3.6% $4 3/02/05 0 $36,890 $100,212
17,500 3.6% 5 3/02/05 0 19,390 82,712
50,000 10.4% 6.75 10/11/00 0 77,200 185,913
50,000 10.4% 5 8/01/00 0 37,100 112,363
</TABLE>
- -------------
(1) The 5% and 10% assumed annual rates of appreciation of the grant date
market prices are mandated by rules of the SEC do not reflect estimates or
projections of future Common Stock prices. There can be no assurance that
the amounts reflected in this table will be achieved.
52
<PAGE>
OPTION VALUES
The following table sets forth, as of December 31, 1995, the number of
options and the value of unexercised options held by the Named Officers.
<TABLE>
<CAPTION>
Number of Value of unexercised
unexercised options in-the-money options at
at December 31, 1995 (#) December 31, 1995 ($) (1)
------------------------- --------------------------
Shares
Acquired in Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Adamson ....... -- -- 11,667 158,333 $18,959 $108,542
William D. Farrell ...... -- -- 31,667 168,333 $36,459 $124,794
</TABLE>
- -----------------
(1) On December 31, 1995, the last reported sales price for MRI Common Stock on
the Nasdaq National Market was $5.625.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On February 24, 1995, MRI consummated the acquisition (the "Maternity
Acquisition") of Maternity Inc., a Delaware corporation formed by the partners
of Maternity Retail Partners L.P. and Kik Kin L.P. The Maternity Acquisition was
consummated pursuant to a Stock Purchase Agreement (the "Purchase Agreement")
dated as of February 24, 1995 by and among MRI, Maternity Inc. and the other
parties named therein (the "Sellers"). Pursuant to the Purchase Agreement, MRI
acquired (i) 100% of the issued and outstanding common stock of Maternity Inc.
from the Sellers in exchange for an aggregate of 480,000 shares of MRI Common
Stock and (ii) 100% of the issued and outstanding shares of Series B and Series
C Preferred Stock of Maternity Inc. from the holders thereof in exchange for
shares of MRI's Series A Preferred Stock and Series B Preferred Stock. Messrs.
Gary N. Siegler and Peter M. Collery, controlling persons of the Sellers, are
Chairman and a former Director of MRI, respectively, and principal stockholders
of MRI. An independent committee, comprised of Gary Fuhrman and John Josephson,
were appointed to structure and negotiate the terms of the Maternity Acquisition
with Maternity Inc.'s negotiating team of senior executive officers. The
independent committee was authorized to retain professional advisors and with
respect thereto engaged Howard Lawson & Co. ("HL&C") as its financial advisor.
HL&C rendered to the independent committee its written opinion that the terms of
the Maternity Acquisition were fair from a financial point of view to all of the
stockholders of MRI. The independent committee subsequently recommended to MRI
that it consummate the Maternity Acquisition at which time the Board of
Directors of MRI authorized the same.
MRI pays a financial advisory fee to Advisory Services, the sole
stockholder of which is Mr. Siegler, for extensive financial advisory services
such firm renders on behalf of MRI and its subsidiaries. Such advisory fee
amounted to $225,000 for fiscal 1995.
Werbel McMillin & Carnelutti, a law firm in which Mr. Davis, a Director, is
a partner, performed legal services for MRI during fiscal 1995.
53
<PAGE>
OWNERSHIP OF MRI COMMON STOCK
The following table sets forth as of July 1, 1996 the number and percentage
of shares of MRI Common Stock held by (i) each of the executive officers and
directors of MRI, (ii) all persons who are known by MRI to be the beneficial
owners of, or who otherwise exercise voting or dispositive control over, five
percent or more of MRI's outstanding Common Stock and (iii) all of MRI's present
executive officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address Common Stock Percentage of
of Beneficial Owner Owned (1) Outstanding
------------------- ------------ -------------
<S> <C> <C>
Gary N. Siegler(2)(3) .................................... 3,228,942 34.8%
c/o Siegler, Collery & Co.
712 Fifth Avenue
New York, NY 10019
Peter M. Collery (2)(10) ................................. 2,896,493 32.1%
c/o Siegler, Collery & Co.
712 Fifth Avenue
New York, NY 10019
StarMed Investors, L.P. (2) .............................. 1,578,914 17.8%
c/o Siegler, Collery & Co.
712 Fifth Avenue
New York, NY 10019
New England MRI, Inc. .................................... 730,000 8.2%
3000 Colby Street
Berkeley, California 94705
Robert J. Adamson (4) .................................... 60,050 *
c/o Medical Resources, Inc.
155 State Street
Hackensack, NJ 07601
William D. Farrell (5) ................................... 85,439 *
c/o Medical Resources, Inc.
155 State Street
Hackensack, NJ 07601
Gary L. Fuhrman (6) ...................................... 115,666 1.3%
c/o Arnhold and S. Bleichroeder, Inc.
45 Broadway
New York, NY 10006
John H. Josephson (7) .................................... 25,000 *
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10022
Stephen M. Davis (8) ..................................... 33,387 *
c/o Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, NY 10022
Neil H. Koffler (9) ...................................... 63,580 *
c/o Siegler, Collery & Co.
712 Fifth Avenue
New York, NY 10019
All officers and directors as a group (7 in number) ...... 3,612,064 37.5%
(2)(3)(4)(5)(6)(7)(8)(9)
</TABLE>
- ----------------
* Less than one percent.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of MRI Common Stock
shown as beneficially owned by them.
(2) Messrs. Siegler and Collery, due to their joint ownership of Siegler
Collery and other affiliates which control StarMed Investors, L.P. (which
is included in the table) and certain other entities which beneficially own
an aggregate of 1,158,880 shares of MRI Common Stock, including 112,500
shares underlying convertible debentures are each deemed to beneficially
own all of the shares of MRI Common Stock owned of record by all such
entities.
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<PAGE>
(3) Includes 282,000 shares underlying outstanding options which are
exercisable immediately or within 60 days and 6,250 shares underlying
convertible debentures.
(4) Includes 51,665 shares underlying outstanding options which are exercisable
immediately or within 60 days.
(5) Includes 76,665 shares underlying outstanding options which are exercisable
immediately or within 60 days.
(6) Includes 71,000 shares underlying outstanding options which are exercisable
immediately or within 60 days and 41,666 shares underlying convertible
debentures.
(7) Includes 25,000 shares underlying outstanding options which are exercisable
immediately or within 60 days.
(8) Includes 31,000 shares underlying outstanding options which are exercisable
immediately or within 60 days.
(9) Includes 60,000 shares underlying outstanding options which are exercisable
immediately or within 60 days.
(10) Includes 51,000 shares underlying outstanding options which are exercisable
immediately or within 60 days and 6,250 shares underlying convertible
debentures.
INFORMATION CONCERNING NMR OF AMERICA, INC.
NMR is engaged, directly and through limited partnerships, in the business
of installing, managing and maintaining magnetic resonance imaging ("MR") and
other imaging systems used for diagnostic purposes on an outpatient basis in
facilities operated by private physicians not employed by NMR.
NMR's principal executive offices are located at 430 Mountain Avenue,
Murray Hill, New Jersey 07974-2732, telephone (908) 665-9400.
This Joint Proxy Statement/Prospectus is accompanied by NMR's 1996 Annual
Report to Stockholders (which includes NMR's Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1996), which fully sets forth the business of
NMR as of the date thereof.
DIRECTORS
The directors of NMR, their age, and the year in which each first became a
director of NMR are as follows:
Name Age Director Since
- ---- --- --------------
Joseph Guy Dasti ..................... 63 1990
Donald W. Arthur ..................... 41 1990
Dr. David L. Bloom ................... 66 1990
John A. Faraone ...................... 62 1990
Joseph Zappala ....................... 61 1990
All of NMR's directors serve for a period of one year and until their
successors are elected and qualified.
Mr. Dasti was elected Chairman of Board of NMR in August 1990 and President
and Chief Executive Officer in October 1990. Prior thereto he was engaged for
more than five years in the securities business with Seaboard Securities, Inc.,
except that from January 1985 to October 1986, Mr. Dasti was employed by
Swartwood, Hesse Inc., a securities broker-dealer. Mr. Dasti was a director of
NMR from 1986 to February 1990 and was re-elected as director in August 1990.
Mr. Arthur has been employed by Schering Plough Research Institute in
various capacities in its research and development activities for more than the
past five years. Mr. Arthur is currently a Foreperson, engaged in pharmaceutical
process development.
Dr. Bloom is a Medical Director and Director of Magnetic Resonance Imaging
for Somerset Diagnostic Centers, a privately held provider of MR services
located in Boston, Massachusetts. He is also a Senior Vice President and a
Director of Medical Diagnostics, Inc., which provides MR services and is a
wholly-owned subsidiary of Advanced
55
<PAGE>
NMR Systems, Inc., a publicly held company which manufactures MR systems and
provides MR services, and the President and Clinical Director of Imaging
Consultants, Inc., positions he has held since 1987. From 1983 to 1987, Dr.
Bloom was President and Chief Executive Officer and a director of NMR. See
"--Certain Transactions" below.
Mr. Faraone has been a practicing attorney specializing in real estate and
personal injury law as a sole practitioner in Wilmington, Delaware for more than
the past five years.
Mr. Zappala has been engaged as a retail equities broker in the securities
business for more than the past five years with Seaboard Securities, Inc.
("Seaboard"). Mr. Zappala is a principal owning 50% of Seaboard. From January
1985 until September 1986, he was employed by Swartwood, Hesse Inc., a
securities broker-dealer.
Except for Dr. Bloom, who is also a director of Medical Diagnostics Inc., a
wholly-owned subsidiary of a public company, no director of NMR is a director of
any other corporation which is subject to the periodic reporting requirements of
the Securities Exchange Act of 1934 or is a registered investment company under
the Investment Company Act of 1940.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of NMR.
<TABLE>
<CAPTION>
Name Age Principal Occupation
- ---- --- --------------------
<S> <C> <C>
Joseph Guy Dasti ............. 63 Chairman of the Board, President and Chief
Executive Officer
John P. O'Malley III ......... 34 Executive Vice President-Finance, Chief
Financial Officer and Secretary
</TABLE>
Mr. Dasti's employment background is described above.
Mr. O'Malley was appointed Secretary in March 1994 and Executive Vice
President-Finance and Chief Financial Officer in December 1992 and was initially
employed by NMR in May 1992. Prior thereto, he was, commencing in August, 1984,
employed by Ernst & Young, a public accounting firm, and its predecessors, most
recently as a manager in its Audit Department. Mr. O'Malley holds a B.S. degree
in Accounting from the University of Delaware and is a Certified Public
Accountant.
NMR's executive officers hold office for a term of one year unless removed
earlier by the Board of Directors.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
NMR's Board of Directors held eight meetings during the fiscal year ended
March 31, 1996. The NMR Board of Directors has established four committees.
Messrs. Dasti, Faraone and Bloom are members of the Executive Committee of the
Board of Directors, Messrs. Arthur, Faraone, and Zappala are members of the
Compensation/Stock Option Committee of the Board of Directors, Messrs. Arthur,
Faraone and Zappala are members of the Audit/Finance Committee of the Board of
Directors and Messrs. Dasti, Bloom and Faraone are members of the Nominating
Committee of the Board of Directors.
Executive Committee. The Executive Committee did not meet during the fiscal
year ended March 31, 1996. It has and may exercise those rights, powers and
authority of the Board of Directors as may from time to time be granted to it by
the Board of Directors to the extent permitted by law.
Audit/Finance Committee. The Audit/Finance Committee met one time during
the fiscal year ended March 31, 1996. The Audit/Finance Committee recommends the
appointment of independent public accountants for NMR and reviews the scope of
audits proposed by the independent public accountants. In addition, this
committee makes recommendations to the Board of Directors as to finance related
matters.
Compensation/Stock Option Committee. The Compensation/Stock Option
Committee met four times during the fiscal year ended March 31, 1996. The
Compensation/Stock Option Committee reviews and approves compensation of
employees above a certain salary level, reviews management proposals relating to
incentive compensation plans and the employee stock option plan, and reviews and
makes recommendations concerning directors' compensation.
56
<PAGE>
Nominating Committee. The Nominating Committee met one time during the
fiscal year ended March 31, 1996. The Nominating Committee recommends the
appointment of persons to the Board of Directors and to various committees of
the Board of Directors.
DIRECTOR COMPENSATION
Directors of NMR received compensation at the rate of $2,500 per quarter
plus $500 for each meeting of a committee of directors attended.
NMR has entered into an agreement with Dr. Bloom, a director of NMR,
whereby he provides consulting and advisory services to NMR in connection with
the purchase and technical use of diagnostic imaging equipment and other
services. As compensation for these services, Dr. Bloom receives $77,000 per
annum, payable monthly. The term of the agreement is for one year expiring
December 31, 1996, subject to automatic renewal unless terminated by either
party. In addition, Dr. Bloom was issued a warrant to purchase 20,000 shares of
NMR Common Stock at an exercise price of $6.38 per share exercisable through
August 29, 2001.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during NMR's three
fiscal years ended March 31, 1996 to the chief executive officer of NMR and the
other executive officer(s) of NMR whose compensation exceeded $100,000 in the
last fiscal year.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
-------------------------
Annual Compensation Awards
----------------------- -------------------------
Securities
Restricted Underlying All Other
Name and Stock Awards Options/ Compensation
Principal Position Year(1) Salary($)(2) Bonus($) ($)(4) SARs (#) ($)(5)
- ------------------ ------- ------------ -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Guy Dasti ........... 1996 215,193 15,384 47,500 50,000 21,481
President and Chief ........ 1995 206,923 19,450 0 0 14,531
Executive Officer .......... 1994 150,384 50,000(3) 0 100,000 27,450
John P. O'Malley III ....... 1996 169,519 12,617 47,500 50,000 33,869
Executive Vice ............. 1995 155,369 15,951 0 0 20,302
President-Finance .......... 1994 105,726 55,000(3) 0 100,000 12
</TABLE>
- ---------------------
(1) Information relates to the fiscal years ended March 31.
(2) Includes amounts for periods during which executive officers were employed
by NMR, regardless of capacity in which employed.
(3) $40,000 of bonus was earned during fiscal 1994 and paid subsequent to year
end.
(4) The values of restricted stock awards were determined using the market
price for the stock at the date of the grant. Such restricted stock vests
ratably, on a quarterly basis, over two years from the date of the grant,
subject to provisions for acceleration of vesting in the event of a change
in control of NMR or the termination of the named executive without cause.
(5) Amounts of All Other Compensation include (i) amounts contributed or
accrued to NMR's 401(k) plan, (ii) employee portion of premiums on key-man
life insurance and (iii) amounts paid for accumulated unused vacation pay
which was earned during prior fiscal years.
57
<PAGE>
OPTION/SAR AND WARRANT GRANTS IN LAST FISCAL YEAR
No warrants or stock appreciation rights (SAR's) were granted to any named
executive officer of NMR during the fiscal year ended March 31, 1996.
The following table sets forth certain information concerning options
granted during the fiscal year ended March 31, 1996 to the named executives:
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Number of % of Total
Securities Options/SAR's
Underlying and Warrants
Options/SAR's Granted To Exercise
and Warrants Employees in or Base Price Expiration
Name Granted Fiscal Year ($/Share) Date (1)
- ---- ------------- ----------------- ------------- ----------
<S> <C> <C> <C> <C>
Joseph Guy Dasti .................... 50,000 34.89% 3.25 3/5/2006
John P. O'Malley III ................ 50,000 34.89% 3.25 3/5/2006
</TABLE>
- ------------------
(1) Options are not exercisable when granted. 25% of the options granted become
exercisable on each of the first fouranniversary dates of the grant of the
options.
AGGREGATED OPTION/SAR AND WARRANT EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR AND WARRANT VALUES
No options or warrants were exercised by executive officers during the
fiscal year ended March 31, 1996. The following table sets forth, for each of
the named executive officers, the number of unexercised options/SAR's and
warrants remaining at March 31, 1996 and the potential value thereof based on
the year-end closing per share sales price of NMR Common Stock of $3.38 on March
29, 1996.
<TABLE>
<CAPTION>
Number of Securities In-the-Money
Underlying Unexercised Options/SAR's and
Options/SAR's and Warrants Warrants at
Shares at Fiscal Year-End(#) Fiscal Year-End($)
Acquired on Value Exercisable (E)/ Exercisable (E)/
Name Exercise(#) Realized($) Unexercisable (U) Unexercisable (U)
- ---- ----------- ----------- --------------------------- -------------------
<S> <C> <C> <C> <C>
Joseph Guy Dasti ............... 0 0 255,000 E(1) 53,500 E
100,000 U(2) 31,500 U
John P. O'Malley III ........... 0 0 61,250 E(3) 43,487 E
103,750 U(4) 45,262 U
</TABLE>
- -------------------
(1) Includes 30,000 shares issuable pursuant to a warrant exercisable at $3.92
per share, 75,000 shares issuable pursuant to a warrant exercisable at
$3.00 per share, 50,000 shares issuable pursuant to a warrant exercisable
at $6.38 per share, 50,000 shares issuable pursuant to an option
exercisable at $6.38 per share and 50,000 shares issuable pursuant to an
option exercisable at $2.88 per share.
(2) Includes 50,000 shares issuable pursuant to an option exercisable at $3.25
per share and 50,000 shares issuable pursuant to an option exercisable at
$2.88 per share.
(3) Includes 20,000 shares issuable pursuant to an option exercisable at $2.31
per share, 30,000 shares issuable pursuant to an option exercisable at
$2.88 per share and 11,250 shares issuable pursuant to an option
exercisable at $2.75 per share.
(4) Includes 20,000 shares issuable pursuant to an option exercisable at $2.31
per share, 30,000 shares issuable pursuant to an option exercisable at
$2.88 per share, 3,750 shares issuable pursuant to an option exercisable at
$2.75 per share and 50,000 shares issuable pursuant to an option
exercisable at $3.25 per share.
58
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
NMR has entered into separate indemnification agreements with each of its
officers that could require NMR, among other things, to indemnify its officers
against certain liabilities that may arise by reason of their status or service
as officers and to advance expenses incurred by them as a result of any
proceeding against them as to which they could be indemnified.
In addition, NMR's Bylaws provide that NMR shall indemnify its officers and
directors made, or threatened to be made, a party to any action (other than an
action by or in the right of NMR) by reason of the fact that such individual is
or was a director or officer of NMR against liabilities and reasonable expenses
incurred in connection with such action if such person acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal proceedings, had no reasonable
cause to believe that such conduct was unlawful. NMR's Bylaws also provide that
NMR shall, with certain exceptions, indemnify its officers and directors against
reasonable expenses incurred in connection with any action by or in the right of
NMR if such person acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation. Under NMR's Bylaws,
NMR must also indemnify its directors and officers against reasonable expenses
if such person is successful in the defense of any action of the nature
described above.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of NMR pursuant
to the foregoing provisions, or otherwise, NMR has been advised that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
EMPLOYMENT AGREEMENTS
NMR has entered into executive employment agreements with Messrs. Dasti and
O'Malley which expire on June 20, 2000 and provide for annual base salaries in
amounts of $225,000 and $175,000, respectively. Pursuant to the contracts,
Messrs. Dasti and O'Malley are entitled to receive quarterly bonus payments
calculated as a percentage of NMR's consolidated quarterly pre-tax income (as
defined in the agreements) as follows:
<TABLE>
<CAPTION>
Percentage Percentage
Payable to Payable to
Quarterly Pre-Tax Income ("PTI") Mr. Dasti Mr. O'Malley
- -------------------------------- ---------- ------------
<S> <C> <C>
PTI in excess of $450,000 but less than $674,000 .............. 4.45% 3.65%
PTI in excess of $674,000 but less than $900,000 .............. 2.92% 2.38%
PTI in excess of $900,000 but less than $1,125,000 ............ 1.98% 1.62%
PTI in excess of $1,125,000 ................................... 1.65% 1.35%
</TABLE>
Each of the employment agreements of Messrs. Dasti and O'Malley provides
that if the executive is terminated without cause, he shall be entitled to
receive severance pay equal to his base salary and bonus for the remainder of
the term of his contract. In addition, he would be entitled to continued
participation in NMR benefit plans until the earlier of (i) the expiration date
of his contract or (ii) the date he becomes employed by another company
providing similar benefits. In the event that the executive is terminated for
cause, he is not entitled to receive any monetary compensation under his
employment agreement beyond the date his employment is terminated.
Each of the employment agreements also provides that if, following a change
of control (as defined in the agreements) of NMR, NMR, among other things,
assigns to the executive duties inconsistent with his position, materially
reduces his powers or functions, fails to provide annual salary increases
consistent with past practices or requires the executive to change his place of
employment, then the executive will have the right to terminate his employment
agreement. In such an event, the executive would be entitled to receive the same
severance pay as he would receive in the event his employment is terminated
without cause.
In the event either executive terminates his employment agreement for
cause, any stock purchase options held by him issued pursuant to any stock
option plan of NMR would, to the extent permissible, become immediately vested
and exercisable. If the vesting of such options is not permitted, he would be
entitled to receive a five-year warrant immediately exercisable for the same
number of shares of NMR Common Stock subject to such options and exercisable at
the same per share exercise price. The executive would also be entitled in
certain instances to have the resale of the shares subject to the warrant
registered under the Securities Act.
If the Merger is consummated, each of the foregoing employment agreements
would be terminated and Messrs. Dasti and O'Malley would enter into
Non-Competition and Consulting Agreements with MRI. See "Terms of the
Merger--Non-Competition and Consulting Agreements."
59
<PAGE>
DIRECTOR AND OFFICER SECURITIES REPORTS
The Federal securities laws require NMR's directors and executive officers,
and persons who own more than 10% of a registered class of NMR's equity
securities, to file with the SEC reports of changes in ownership of any equity
securities of NMR. Copies of such reports are required to be furnished to NMR.
To NMR's knowledge, based solely on a review of the copies of such reports
furnished to NMR, all persons subject to these reporting requirements filed the
required reports on a timely basis during the 1996 fiscal year.
CERTAIN TRANSACTIONS
Ten of the operational diagnostic imaging systems owned by NMR at March 31,
1996 have been installed in offices leased by professional corporations whose
principal is Dr. David L. Bloom, who is also a director of NMR. These agreements
in general, provide for the payment to NMR of a periodic fixed fee, a fee based
upon the number of scans performed and a billing charge. Local radiologists are
under contract with these professional corporations pursuant to which such local
radiologists serve as the professional staff at the center and read the scans
produced at the center for a fee. Under the agreements, NMR is obligated to make
the necessary leasehold alterations or site improvements at each installation
for the diagnostic imaging systems, and provide the furniture, fixtures, and
furnishings necessary for the operation of the office. NMR is also obligated to
provide all the ancillary supplies and equipment used by the diagnostic imaging
systems and for arranging and paying for maintenance of the diagnostic imaging
systems. NMR also provides consultation with respect to the financial management
of the center, including billing and collecting fees. All fees are collected by
the physician professional corporations; however, NMR has the contractual
responsibility to maintain all financial and other records and prepare and
transmit bills. Pursuant to the foregoing agreements, NMR billed affiliated
professional corporations, net of contractual adjustments, $13,431,954 and
$14,784,092 during the fiscal years ended March 31, 1996 and 1995, respectively.
See "Director Compensation" above.
On January 21, 1992, the Board of Directors authorized NMR to enter into an
agreement with Seaboard to provide advisory services to NMR in exchange for a
warrant to purchase 100,000 shares of NMR's Common Stock at an exercise price of
$8.00 per share through February 6, 1997, subject to vesting as services are
provided. NMR's consulting agreement with Seaboard expired on February 7, 1995.
In addition, NMR granted rights to certain persons who are shareholders of
Seaboard, including Mr. Zappala, a Director of NMR, to have the resale of the
shares of NMR Common Stock issuable on exercise of warrants held by such persons
registered under the Securities Act at the expense of such persons.
PRINCIPAL AND OTHER STOCKHOLDERS OF NMR
The following table sets forth the number of shares of NMR Common Stock
beneficially owned as of March 31, 1996 by (i) each person known to NMR to be a
beneficial owner of more than 5% of the outstanding Common Stock of NMR; (ii)
each Director of NMR; (iii) NMR's chief executive officer and its other four
most highly compensated executive officers whose total salary and bonus for the
fiscal year ended March 31, 1996 exceeded $100,000, and (iv) all directors and
officers of NMR as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and address of Beneficial Owner of Beneficial Ownership (1) Percent of Class
- ------------------------------------ --------------------------- ----------------
<S> <C> <C>
Joseph G. Dasti .................................... 392,357(2) 6.0%
c/o NMR of America, Inc.
430 Mountain Avenue
Murray Hill, NJ 07974
John P. O'Malley III ............................... 87,795(3) 1.4%
c/o NMR of America, Inc.
430 Mountain Avenue
Murray Hill, NJ 07974
Donald W. Arthur ................................... 63,000(4) 1.0%
4 Kalman Court
Warren Township, NJ 07060
Dr. David L. Bloom ................................. 190,000(5) 3.0%
Somerset Diagnostic
400 Commonwealth Avenue
Boston, MA 02215
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
Name and address of Beneficial Owner of Beneficial Ownership (1) Percent of Class
- ------------------------------------ --------------------------- ----------------
<S> <C> <C>
John A. Faraone .................................... 104,000(6) 1.6%
1213 King Street
Wilmington, DE 19899
Joseph T. Zappala .................................. 77,900(7) 1.2%
30 South Broadway
Pennsville, NJ 08070
Dr. Donald A. Tobias ............................... 311,000(8) 5.0%
97 Biltmore Estates
Phoenix, AZ 85016
All Directors and Officers ......................... 915,052(9) 13.3%
as a Group (6 persons) (1) through (7)
</TABLE>
- ----------------
(1) Unless otherwise disclosed, all of such persons hold their shares of record
and beneficially.
(2) Includes 124,700 shares held of record and beneficially, 12,657 shares
owned through NMR's 401(k) Plan, 30,000 shares issuable pursuant to a
warrant exercisable at $3.92 per share through May 18, 1999, 75,000 shares
issuable pursuant to a warrant exercisable at $3.00 per share through
November 5, 1998, 50,000 shares issuable pursuant to a warrant exercisable
at $6.38 per share through December 18, 2001 and 50,000 stock options
exercisable at $6.38 per share through December 18, 2001 and 50,000 shares
issuable pursuant to a stock option exercisable at $2.88 per share through
March 14, 2004. Does not include 50,000 shares issuable pursuant to a stock
option exercisable at $2.88 per share through March 14, 2004 and 50,000
shares issuable pursuant to a stock option exercisable at $3.25 per share
through March 5, 2006, which are not currently exercisable. Does not
include 266,821 shares subject to a proxy authorizing Messrs. Dasti and
O'Malley to vote such shares only in the event of a directors' election
contest.
(3) Includes 20,000 shares held of record and beneficially, 6,545 shares owned
through NMR's 401 (k) Plan, 11,250 shares issuable pursuant to a stock
option exercisable at $2.75 per share through December 16, 2002, 20,000
shares issuable pursuant to a stock option exercisable at $2.31 per share
through August 4, 2003 and 30,000 shares issuable pursuant to a stock
option exercisable at $2.88 per share through March 14, 2004. Does not
include 3,750 shares issuable pursuant to a stock option exercisable at
$2.75 per share through December 16, 2002, 20,000 shares issuable pursuant
to a stock option exercisable at $2.31 per share through August 4, 2003,
30,000 shares issuable pursuant to a stock option exercisable at $2.88 per
share through March 14, 2004 and 50,000 shares issuable pursuant to a stock
option exercisable at $2.75 per share through March 5, 2006, which are not
currently exercisable. Does not include 266,821 shares subject to a proxy
authorizing Messrs. Dasti and O'Malley to vote such shares only in the
event of a directors' election contest.
(4) Includes 3,000 shares held of record and beneficially, 20,000 shares
issuable pursuant to a warrant exercisable at $6.38 per share through
December 18, 2001 and 40,000 shares issuable pursuant to a warrant
exercisable at $3.25 per share through April 16, 2001.
(5) Includes 110,000 shares held of record and beneficially, 40,000 shares
issuable pursuant to warrants exercisable at $6.38 per share through
December 18, 2001 and 40,000 shares issuable pursuant to a warrant
exercisable at $3.25 per share through April 16, 2001.
(6) Includes 44,000 shares held of record and beneficially, 20,000 shares
issuable pursuant to a warrant exercisable at $6.38 per share through
December 18, 2001 and 40,000 shares issuable to a warrant exercisable at
$3.25 per share through April 16, 2001.
(7) Includes 3,900 shares held of record and beneficially, 20,000 shares
issuable pursuant to a warrant exercisable at $6.38 per share through
December 18, 2001, 14,000 shares issuable pursuant to a warrant exercisable
at $3.92 per share through May 18, 1999 and 40,000 shares issuable pursuant
to a warrant exercisable at $3.25 per share through April 16, 2001.
(8) Based on information set forth in Schedule 13D dated February 19, 1986
filed by Dr. Tobias.
(9) Includes shares issuable on exercise of options and warrants held by
Officers and Directors which are exercisable within 60 days of March 31,
1996.
61
<PAGE>
GOVERNMENT REGULATION OF MRI AND NMR
GENERAL
Various Federal and state statutes and regulations affect virtually all
aspects of MRI's and NMR's operations. These include statutes intended to
facilitate healthcare planning by placing limitations on the purchase of medical
equipment and other capital expenditures and by seeking to contain healthcare
costs within the Medicare and Medicaid reimbursement programs. Federal and state
statutes also seek to prohibit or limit referrals of patients to facilities in
which the referring physician has an ownership interest. These statutes and
regulations, as well as the reimbursement policies of the various state and
Federal government programs and other aspects of government regulation of the
healthcare industry are subject to amendment, revision and further
interpretation from time to time. These amendments, revisions and
interpretations could change the regulatory environment relating to MRI's and
NMR's operations and the programs under which physicians and others are
reimbursed for diagnostic imaging procedures, and thereby could have a material
effect on MRI's and NMR's business activities.
CERTIFICATE OF NEED REQUIREMENTS
Certain states have enacted certificate of need ("CON") laws to facilitate
healthcare planning by placing limitations on the purchase of major medical
equipment and other capital expenditures. CON legislation has been enacted in
the states of New Jersey, Pennsylvania, Florida and Illinois, where MRI and NMR
have imaging centers, as well as a number of other states where MRI and NMR do
not currently have imaging centers. These statutes, together with their
implementing regulations, could limit MRI's and NMR's ability to acquire new
imaging equipment or expand or replace its existing equipment, and no assurances
can be given that the required regulatory approvals for any future acquisitions,
expansions or replacements will be granted to MRI or NMR. With respect to MRI's
and NMR's operations in Florida, magnetic resonance imaging equipment and the
free standing centers from which they are operated are presently exempt from CON
review in the State of Florida. The exemption in Florida is based upon prior
Federal Food and Drug Administration approval of the technology for human use.
REIMBURSEMENT UNDER FEDERAL PROGRAMS
The services offered at MRI's and NMR's imaging centers are made available
to private pay patients (including those covered by a health benefit plan of a
third-party payer) and patients relying on Medicare and/or Medicaid for payment
of their expenses. Medicaid is a program administered by the various states to
provide medical assistance to the indigent. For example, Florida's Department of
Health and Rehabilitative Services promulgates and administers rules affecting
services to Florida Medicaid patients. Medicare, on the other hand, is a
Federally-funded program pursuant to the Federal Health Insurance For the Aged
and Disabled Act. To receive reimbursement under the Medicare and/or Medicaid
programs, MRI, NMR, and/or the physicians rendering services at their imaging
centers, must be certified as a provider of Medicare and/or Medicaid services.
The qualifications for participation in these programs, as well as the programs'
coverage requirements for reimbursement of imaging services, depend upon a
number of factors, and no assurances can be made that MRI and NMR may not be
required to change or improve their facilities, personnel, relationships with
personnel, equipment or services to maintain their Medicare/Medicaid
certification.
STARK LAW
As part of the Federal Omnibus Budget Reconciliation Act of 1993, Congress
established a ban on physician referrals of Medicare and Medicaid patients to
"designated health services" in which a physician or member of a physician's
immediate family has a "financial interest." A "financial interest" includes
both an ownership or investment interest, including a limited partnership
interest, in the entity furnishing designated health services, and a
compensation arrangement between the physician (or immediate family member) and
the entity furnishing designated health services.
This law, generally referred to as "Stark II," applies to referrals made on
or after January 1, 1995 to entities furnishing designated health services.
Specifically with regard to MRI's and NMR's operations, the "designated health
services" covered by Stark II's physician self-referral prohibition include
"radiology or other diagnostic services, including magnetic resonance imaging,
computerized axial tomography scans and ultrasound services."
Stark II provides exceptions, including employment and certain contractual
relationships, but unless an exception to the self-referral restrictions
applies, physicians will be precluded from billing for referred services
rendered to Medicare and Medicaid patients. Violations of Stark II prohibitions
include denial of payment for
62
<PAGE>
designated health services, refunds of amounts billed and collected for such
services, civil monetary penalties and exclusion from the Medicare and Medicaid
programs.
Stark II also requires MRI and NMR, as providers of diagnostic services, to
report to the Department of Health and Human Services ("HHS") the names and
identification number of physicians who have, or whose immediate family members
have, an investment interest in MRI or NMR, as the case may be.
In response to the enactment of Stark II, NMR purchased limited partnership
interests from physician and non-physician investors in certain of its limited
partnerships during the fourth quarter of fiscal 1994, and any physician
investors who chose not to divest their interests in NMR's imaging centers are
not permitted to make Medicare or Medicaid referrals to NMR imaging centers.
Prior to the acquisitions of these limited partnership interests, NMR's imaging
centers did not receive a material amount of Medicare or Medicaid referrals from
those physician limited partners who chose not to divest their interests.
Accordingly, any loss of referrals from non-exempt physician limited partners
who chose not to divest their interests in NMR's imaging centers prior to
January 1, 1995 is not expected to have a material adverse impact on NMR's
revenues, net, results of operations and liquidity.
Although MRI and NMR believe that they are in material compliance with all
applicable Federal laws and regulations which place limitations on referrals of
patients, there can be no assurance that such laws or regulations will not be
amended, interpreted or applied in the future in such a way as to have a
material adverse impact on MRI and/or NMR, or that the Federal government will
not impose additional restrictions upon all or a portion of MRI's and/or NMR's
activities, which might adversely affect MRI's and/or NMR's businesses.
FEDERAL FRAUD AND ABUSE LAW
MRI and NMR are subject to Federal fraud and abuse laws. The principal
Federal fraud and abuse law contains the illegal remuneration provisions which
prohibit the offering or payment, or the solicitation or acceptance of any
bribe, kickback, rebate or any direct or indirect remuneration, in exchange for
the referral of a patient for items or services reimbursed by the Medicare or
Medicaid programs (the "Anti-Kickback Statute"). The Anti-Kickback Statute is
intended, in part, to prevent the improper referral of patients for medical
tests or treatment by healthcare providers who may have a financial interest in
the entity which provides such services. Among other situations to which this
legislation may be applicable, governmental authorities have from time to time
maintained under certain circumstances that where physicians or other healthcare
providers have made investments in medical care enterprises, although no express
agreement regarding referrals of patients to the enterprise may exist, payments
to the physicians or healthcare providers who refer patients to the enterprise
may violate the Anti-Kickback Statute. Violation of this law may result in
significant criminal and civil penalties and exclusion from participation in the
Medicare and Medicaid programs.
On July 29, 1991, HHS issued "safe harbor" regulations under the
Anti-Kickback Statute, which define safe payment practices which are not subject
to criminal or civil prosecution. Additional safe harbors were proposed in
September of 1993, but they have not yet been adopted. A safe harbor for
investment interests sets forth eight conditions, which if all are met, assure a
partnership that distributions of profits to its partners who refer patients to
or provide services for the partnership will be deemed not to violate the
Anti-Kickback Statute.
The safe harbor regulations are not the sole determinant of whether a
healthcare business is operating in compliance with the Anti-Kickback Statute,
and failure to comply with applicable safe harbors does not necessarily make a
particular payment practice illegal. If a payment practice does not fall within
the applicable safe harbors, the arrangement must be examined in light of the
language and intent of the Anti-Kickback Statute. Thus, a healthcare business
can fail to meet the safe harbors and still be operating lawfully under the
Anti-Kickback Statute. Although MRI and NMR believe that they are in general and
substantial compliance with the Anti-Kickback Statute, there can be no assurance
that the HHS' Office of Inspector General, which is responsible for enforcing
the Anti-Kickback Statute, will not challenge MRI's or NMR's position on
compliance with such statute or that, if such a challenge occurred, a court
would uphold MRI's or NMR's position.
STATE REFERRAL LAWS
Many states, including those states in which MRI and NMR conduct their
businesses, have their own laws which impose restrictions on physicians and
other healthcare providers in connection with the referral of patients to
facilities in which such physicians and providers have an ownership interest.
Unlike the Anti-Kickback Statute, these state referral laws are not limited to
items and services reimbursed by Medicare and Medicaid.
Although MRI and NMR believe that they are in material compliance with all
applicable state laws and regulations which place limitations on referrals of
patients, there can be no assurance that such laws or regulations
63
<PAGE>
will not be amended, interpreted or applied in the future in such a way as to
have a material adverse impact on MRI and/or NMR, or that state governments will
not impose additional restrictions upon all or a portion of MRI's and/or NMR's
activities, which might adversely affect MRI's and NMR's businesses.
PRACTICE OF MEDICINE
MRI's and NMR's imaging centers are subject to state laws prohibiting the
practice of medicine by non-physicians and the rebate or division of fees
between physicians and non-physicians. Professional radiology services are
performed at MRI's and NMR's respective imaging centers by licensed physicians
under contract with a medical professional corporation, while MRI and NMR
provide the imaging equipment and technical employees. The physicians with whom
MRI and NMR enter into agreements are subject to requirements of the licensing
authorities of the states in which they practice medicine to assure that such
persons meet the requirements necessary to practice medicine and for the
protection of the public. In addition, the respective imaging centers of MRI and
NMR may be subject to certain states' healthcare facility licensure
requirements. There can be no assurance that state authorities or others may not
challenge this structure as involving MRI or NMR, as the case may be, in the
unlawful practice of medicine or that any required facility licensure approvals
will be granted to MRI or NMR.
Florida's Department of Health and Rehabilitative Services is required by
law to license MRI's and NMR's imaging centers and to collect certain financial
and operating information from MRI and NMR. Florida law also subjects the
medical personnel performing services at each center to licensure and
regulation.
HEALTHCARE COST CONTAINMENT LEGISLATION
Federal and state agencies have adopted or are considering medical cost
containment legislation which has restricted or may restrict prices charged by
hospitals and other healthcare providers. Such legislation, together with cost
constraints imposed by insurance companies and other third-party payers, has
reduced, and can be expected to continue to reduce, the fees which MRI and NMR
collect for the use of their diagnostic imaging equipment and/or for the
provision of diagnostic imaging services.
Federal and state cost containment proposals have not been fully formulated
at this time. Thus, MRI and NMR are unable to determine at this time how any
such proposals that are adopted may affect their businesses, but MRI and NMR
expect that these proposals will reduce their average revenue, net realized for
diagnostic imaging procedures.
MRI and NMR have been pursuing agreements with health maintenance
organizations (HMOs), preferred provider organizations (PPOs), and others to
provide services to these organizations and their members. These organizations
typically negotiate for and receive an allowance deducted from the standard fee
thereby reducing revenues to MRI and NMR on a per procedure basis. MRI and NMR
expect these contracts to become an increasingly significant part of their mix
of business. Significant changes in coverage, possibly combined with a reduction
in payment rates by third-party payers, would have a material adverse effect on
MRI's and NMR's revenues, net income, results of operations and liquidity.
POSSIBLE NATIONAL HEALTHCARE REFORM
The enactment of national healthcare reform legislation is uncertain.
Although national healthcare reform laws, if enacted, may have the beneficial
effect of increasing the number of persons who will have access to services
provided by MRI and NMR, such reform laws may also reduce the fees that may be
charged for such services. In particular, there is a possibility that a
significant portion of healthcare services will be rendered and administered
through a system which could force price concessions from service providers such
as MRI and NMR. Moreover, national healthcare reform laws could cause greater
analysis of each patient's need for diagnostic testing, with the aim of
eliminating unnecessary tests and reducing the volume and cost of medical care.
Depending on the nature and extent of any new Federal laws and/or regulations,
or possible changes in the interpretation of existing laws and/or regulations,
the foregoing may have a material adverse effect on MRI's and NMR's revenues,
operating marginsand profitability.
FDA REGULATION
The use of diagnostic imaging systems are subject to regulation by the Food
and Drug Administration ("FDA") as a medical device. The FDA has approved all of
the devices used by MRI and NMR in substantially all currently utilized
procedures. Although considered by MRI and NMR to be unlikely, there can be no
assurance that the FDA may not promulgate regulations in the future that may
negatively affect their use of diagnostic imaging systems.
64
<PAGE>
MRI AND NMR UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Following is an unaudited pro forma combined balance sheet of MRI (the
"Unaudited Pro Forma Balance Sheet") as of March 31, 1996, an unaudited pro
forma combined statement of income for the fiscal year ended December 31, 1995
(the "Unaudited Pro Forma Statement of Income") and an unaudited pro forma
combined statement of income for the three months ended March 31, 1996 (the
"Unaudited Pro Forma Statement of Income for the Three Months Ended March 31,
1996"). These unaudited pro forma combined financial statements include
historical amounts for MRI and NMR adjusted to reflect the Merger and historical
acquisitions. MRI's historical acquisitions during the year ended December 31,
1995 included New England MRI, Inc. and PCC Imaging, Inc., which were effective
on May 26, 1995 and June 19, 1995, respectively. NMR's historical acquisitions
during its fiscal year ended March 31, 1996 included Morgan Medical Holdings,
Inc. and Central Diversey MRI Center, Inc., which were effective on September
15, 1995 and January 1, 1996, respectively. MRI's historical acquisitions for
which pro forma adjustments have been made for the three months ended March 31,
1996 included MRI-CT, Inc. on January 9, 1996, Nurse Care Plus, Inc. on January
12, 1996, Americare Imaging Centers, Inc. and MRI Associates of Tarpon Springs,
Inc. on April 19, 1996 and Access Imaging Center, Inc. on April 30, 1996. For
purposes of presenting the Unaudited Pro Forma Balance Sheet, the Merger is
considered to have occurred on March 31, 1996. MRI's fiscal year end is December
31 and NMR's fiscal year end is March 31. Accordingly, the Unaudited Pro Forma
Statement of Income has been presented as if the Merger and the historical
acquisitions of MRI had occurred on January 1, 1995 and as if the Merger and the
historical acquisitions of NMR had occurred on April 1, 1995. The Unaudited Pro
Forma Income Statement for the Three Months Ended March 31, 1996 has been
prepared on the basis that the Merger and the historical acquisitions of MRI
occurred as of January 1, 1996. The Merger will be accounted for under the
purchase method of accounting and, therefore, these statements are prepared on
such a basis.
These unaudited pro forma combined financial statements do not purport to
be indicative of the actual financial position or results of operations that
would have been achieved had the transaction been consummated on such date, or
at the beginning of the periods, for which the pro forma unaudited combined
financial statements are presented, nor do they purport to be indicative of
future operating results or financial position.
The following unaudited pro forma combined financial statements should be
read in conjunction with the historical consolidated financial statements and
related notes thereto of MRI and NMR, incorporated by reference herein, as
certain data and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.
65
<PAGE>
<TABLE>
UNAUDITED PRO FORMA BALANCE SHEET
(In thousands)
<CAPTION>
(1) (2)
MRI NMR Combined
March 31, March 31, Pro Forma MRI and NMR
1996 1996 Adjustments Pro Forma
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents ............................. $ 8,528 $ 3,782 $(1,320)(A) $ 9,766
(1,225)(B)
Short term investments ................................ -- 664 664
Accounts receivable, net .............................. 18,147 14,182 32,329
Other assets .......................................... 4,232 1,442 5,674
------- ------- ------- --------
Total current assets ................................ 30,907 20,070 (2,545) 48,432
Medical diagnostic and office equipment, net .......... 12,681 14,451 (3,351)(C) 23,781
Goodwill, net ......................................... 11,247 10,805 (10,805)(D) 47,600
36,353(E)
Other assets .......................................... 2,700 1,748 329(F) 3,907
(870)(G)
------- ------- ------- --------
Total assets ........................................ $57,535 $47,074 $19,111 $123,720
======= ======= ======= ========
Current portion of notes payable ...................... $ 1,395 $ 4,911 $ 6,306
Current portion of obligations under capital leases ... 3,723 613 4,336
Accounts payable and accrued expenses ................. 6,823 4,277 11,100
Other current liabilities ............................. 1,284 -- $2,054(H) 3,338
Income taxes payable .................................. 398 -- 398
------- ------- ------- --------
Total current liabilities ........................... 13,623 9,801 2,054 25,478
Notes payable ......................................... 5,260 11,029 16,289
Obligations under capital leases ...................... 7,841 1,152 8,993
Convertible debentures ................................ 10,233 1,976 12,209
Other long-term liabilities ........................... 890 2,127 3,017
------- ------- ------- --------
Total liabilities ................................... 37,847 26,085 2,054 65,985
Common stock .......................................... 81 67 (67)(I) 124
43(E)
Common stock to be issued ............................. 1,721 -- 1,721
Additional paid in capital ............................ 22,306 17,028 (17,028)(I) 60,310
38,004(E)
Retained (deficit) earnings ........................... (3,001) 5,632 (5,632)(I) (3,001)
Treasury stock ........................................ (1,419) (1,737) 1,737(I) (1,419)
------- ------- ------- --------
Total stockholders' equity .......................... 19,689 20,989 17,057 57,735
Total liabilities and stockholders' equity ............ $57,535 $47,074 $19,111 $123,720
======= ======= ======= ========
</TABLE>
- ---------------
(1) MRI's March 31, 1996 unaudited balance sheet as presented in its March 31,
1996 Form 10-Q.
(2) NMR's March 31, 1996 audited balance sheet as presented in its March 31,
1996 Form 10-KSB, reclassified to conform with MRI's presentation.
See Notes to Pro Forma Combined Financial Statements and
Notes to Consolidated Financial Statements
66
<PAGE>
<TABLE>
UNAUDITED PRO FORMA STATEMENT OF INCOME
(In thousands, except per share data)
<CAPTION>
MRI/NMR
(1) (2) MRI NMR Combined
MRI NMR Historical Historical and
Year Ended Year Ended MRI and NMR Acquisitions Acquisitions Historical
Dec. 31, March 31, Pro Forma Pro Forma Pro Forma Pro Forma Acquisitions
1995 1996 Adjustments Combined Adjustments Adjustments Pro Forma
---------- ---------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net service revenues .......... $51,994 $23,957 $(1,791)(a) $74,307 $1,600 (j) $3,467 (k) $79,374
147 (b)
Operating costs, excluding
interest, depreciation and
amortization ................. 31,564 13,125 (1,754)(a) 42,935 958 (j) 1,641 (k) 45,534
Provision for uncollectible
account receivable ........... 3,378 -- 3,378 128 (j) 3,506
Corporate general and
administrative ............... 4,978 2,916 356 (c) 8,250 442 (j) 344 (k) 9,036
Depreciation and amortization . 4,567 3,094 (532)(a) 8,048 113 (j) 408 (k) 8,569
(420)(d)
1,818 (e)
(60)(f)
(419)(g)
------- ------- ------- ------- ------ ------ -------
Operating income ............ 7,507 4,822 (633) 11,696 (41) 1,074 12,729
Interest expense .............. 1,829 1,678 (518)(a) 2,989 165 (j) 356 (k) 3,510
------- ------- ------- ------- ------ ------ -------
Income from continuing
operations before minority
interest and taxes ........... 5,678 3,144 (115) 8,707 (206) 718 9,219
Minority interest ............. (124) 411 -- 287 -- -- 287
------- ------- ------- ------- ------ ------ -------
Income from continuing
operations before income
taxes ........................ 5,802 2,734 (115) 8,421 (206) 718 8,933
Income taxes .................. 1,659 956 (46)(h) 2,570 8 (j) 238 (k) 2,816
------- ------- ------- ------- ------ ------ -------
Income from continuing
operations ................... $ 4,143 $ 1,777 $ (69) $ 5,851 $ (214) $ 480 $ 6,117
======= ======= ======= ======= ====== ====== =======
Weighted average shares
outstanding .................. 7,785 5,870 4,036 (i) 11,821 720 (l) 378 (m) 12,918
======= ======= ======= ======= ====== ====== =======
Primary earnings per share .... $ 0.53 $ 0.30 $ 0.49 $ 0.47
======= ======= ======= =======
</TABLE>
- ----------------
(1) MRI's year ended December 31, 1995 audited statement of income as presented
in its Form 10-K.
(2) NMR's year ended March 31, 1996 audited statement of income as presented in
its Form 10-KSB, reclassified to conform with MRI's presentation.
See Notes to Pro Forma Combined Financial Statements and
Notes to Consolidated Financial Statements
67
<PAGE>
<TABLE>
UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1996
(In thousands, except per share data)
<CAPTION>
MRI/NMR
MRI Combined
(1) (2) MRI Historical and MRI
MRI NMR and NMR Acquisitions Historical
March 31, March 31, Pro Forma Pro Forma Pro Forma Acquisitions
1996 1996 Adjustments Combined Adjustments Pro Forma
-------- -------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net service revenues .......... $18,098 $6,960 $(483)(aa) $24,672 $2,165 (jj) $26,837
97 (bb)
Operating costs,
excluding interest,
depreciation and
amortization ................. 12,037 3,740 (501)(aa) 15,276 1,275 (jj) 16,551
Provision for uncollectible
accounts receivable .......... 815 -- 815 17 (jj) 832
Corporate general and
administration ............... 1,601 844 89 (cc) 2,534 235 (jj) 2,769
Depreciation and
amortization ................. 1,317 892 (134)(aa) 2,233 412 (jj) 2,645
(176)(dd)
454 (ee)
(15)(ff)
(105)(gg)
------- ------ ----- ------- ------ -------
Operating income .............. 2,328 1,484 2 3,814 226 4,040
Interest expense .............. 549 463 (131)(aa) 881 10 (jj) 891
------- ------ ----- ------- ------ -------
Income from continuing
operations before minority
interest and taxes ........... 1,779 1,021 133 2,933 216 3,149
Minority interest ............. 44 76 120 120
------- ------ ----- ------- ------ -------
Income from continuing
operations before income
taxes ........................ 1,735 945 133 2,813 216 3,029
Income taxes .................. 438 315 53 (hh) 806 118 (jj) 924
------- ------ ----- ------- ------ -------
Income from continuing
operations ................... $ 1,298 $ 630 $ 80 $ 2,007 $ 98 $ 2,105
======= ====== ===== ======= ====== =======
Weighted average shares
outstanding .................. 8,333 6,340 4,359 (ii) 12,692 615 (kk) 13,307
======= ====== ===== ======= ====== =======
Earnings per share ............ $ 0.16 $ 0.10 $ 0.16 $ 0.16
======= ====== ===== ======= ====== =======
</TABLE>
- ---------------
(1) NMR's unaudited statement of income for the quarter ended March 31,1996,
reclassified to conform with MRI's presentation. This quarter is also
included in the Unaudited Pro Forma Statement of Income for the year ended
December 31, 1995.
(2) MRI's unaudited statement of income for the quarter ended March 31, 1996 as
presented in its March 31, 1996 Form 10-Q.
See Notes to Pro Forma Combined Financial Statements and
Notes to Consolidated Financial Statements
68
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The Historical Financial Statements
The Merger--
The unaudited pro forma combined financial statements are presented for
illustrative purposes only, giving effect to the Merger and historical
acquisitions of MRI and NMR, and therefore, are not necessarily indicative of
the financial position or financial results that might have been achieved had
the Merger occurred as of an earlier date, nor are they necessarily indicative
of the financial position or financial results which may occur in the future.
The Unaudited Pro Forma Balance Sheet has been presented assuming the Merger
occurred on March 31, 1996. MRI's fiscal year end is December 31 and NMR's
fiscal year end is March 31. Accordingly, the Unaudited Pro Forma Statement of
Income has been presented as if the Merger and historical acquisitions of MRI
had occurred on January 1, 1995 and as if the Merger and the historical
acquisitions of NMR had occurred on April 1, 1995. The Unaudited Pro Forma
Income Statement for the Three Months Ended March 31, 1996, has been prepared on
the basis that the Merger and the historical acquisitions of MRI occurred as of
January 1, 1996. The Merger will be accounted for under the purchase method of
accounting, whereby the respective assets and liabilities of NMR are recorded at
their estimated fair values. The total purchase cost of the transaction is
estimated to be approximately $38,952,000 and the excess of the purchase cost
over the estimated fair value of net assets acquired is estimated to be
approximately $36,353,000.
The Unaudited Pro Forma Statement of Income for the fiscal year ended
December 31, 1995 reflects the impact of historical acquisitions made by MRI and
NMR. MRI's acquisition of New England MRI, Inc. ("NEM") and PCC Imaging, Inc.
("PCC"), which were effective on May 26, 1995 and June 19, 1995, respectively,
are reflected as if such acquisitions had occurred on January 1, 1995. NMR's
acquisition of Morgan Medical Holdings, Inc. ("Morgan") and Central Diversey MRI
Center, Inc. ("CD MRI"), which were effective on September 15, 1995 and January
1, 1996, respectively, are reflected as if such transactions had occurred on
April 1, 1995. MRI acquisitions and NMR's acquisition of CD MRI did not require
shareholder approval. NMR's acquisition of Morgan was approved by its
shareholders.
The Unaudited Pro Forma Statement of Income for the Three Months Ended
March 31, 1996 reflects the impact of historical acquisitions made by MRI. MRI's
acquisition of MRI-CT, Inc. ("MRI-CT") on January 9, 1996, NurseCare Plus, Inc.
("NurseCare") on January 12, 1996, Americare Imaging Centers, Inc. and MRI
Associates of Tarpon Springs, Inc. (collectively known as "Americare") on April
19, 1996 and Access Imaging Center, Inc. ("Access") on April 30, 1996, are
reflected as if these transactions had occurred on January 1, 1996. These
acquisitions did not require shareholder approval.
2. REVENUE RECOGNITION
For MRI centers and those centers that NMR acquired (as opposed to
developed, see next paragraph), revenues are recognized on an accrual basis as
earned and consist of patient service revenues adjusted for contractual
adjustments (net patient service revenue) allocated to MRI and NMR under the
terms of management agreements maintained. This revenue is derived from charges
for patient services rendered in diagnostic imaging centers under the terms of
certain payment arrangements with various third party payors, such charges are
paid at amounts less than the Company's established rates.
For the centers which NMR has developed, agreements have been entered into
with physicians engaging in business as professional associations ("Physicians")
pursuant to which NMR maintains and operates imaging systems in offices operated
by Physicians. The agreements have terms of up to six years and are renewable at
NMR's option. Under the agreements, Physicians have agreed to be obligated to
contract for radiological services at the centers and to sublease each facility.
NMR is obligated to make necessary leasehold improvements, provide furniture and
fixtures and perform certain administrative functions relating to the provisions
of technical aspects of the centers' operations for which Physicians pay a
quarterly fee composed of a fixed sum based on the cost of the respective
imaging system installed, including the related financing costs, a charge per
invoice processed and a charge based upon system usage for each NMR-installed
imaging system in operation. These fees, net of a contractual allowance based
upon Physicians ability to pay after Physicians have fulfilled their obligations
under facility subleases and radiological service contracts as set forth above,
constitute NMR's net revenue for sites developed by NMR.
MRI also recognizes revenue from temporary nurse staffing.
69
<PAGE>
3. EARNINGS PER SHARE
MRI and NMR Unaudited Pro Forma Combined earnings per share has been
calculated by dividing net income by the weighted average shares outstanding
during the period, including the weighted average effect of the estimated
4,308,859 shares of MRI Common Stock to be issued in the Merger. MRI, NMR
Combined and MRI, NMR Historical Acquisitions Unaudited Pro Forma earnings per
share has been calculated assuming an additional 600,000 shares issued and
600,000 shares of MRI Common Stock to be issued by MRI in conjunction with the
acquisition of NEM were issued on January 1, 1995 and an additional 1,195,848
and 10,000 shares of NMR Common Stock issued by NMR for the acquisitions of
Morgan and CD MRI, respectively, had occurred on April 1, 1995. The
potentialdilutive effect of warrants to be issued upon consummation of the
Merger and the conversion of all NMR optionsand warrants into MRI options and
warrants was taken into consideration in the pro forma earnings pershare
calculations.
4. PRO FORMA ADJUSTMENTS
Unaudited Pro Forma Balance Sheet
(A) To reflect expenditure of estimated professional fees and other costs
expected to be expended by MRI and NMR relating to the Merger, including
investment banking, legal, accounting and appraisal fees.
MRI:
Investment banking .................... $265
Fixed asset appraisal ................. 30
Printing and mailing .................. 85
Financial advisory .................... 175
Accounting ............................ 150
Legal ................................. 200
----
$ 905
------
NMR:
Investment banking .................... $215
Accounting ............................ 50
Legal ................................. 150
----
$ 415
$1,320
------
(B) To reflect lump sum cash payments to be made to Mr. Joseph G. Dasti,
President of NMR ($670,000 including employer portion of taxes) and Mr.
John P. O'Malley III, Executive Vice President, ($555,000 including
employer portion of taxes) in consideration of the termination of their
existing employment agreements pursuant to terms of the Merger. These
payments will be a liability of NMR and will be paid in conjunction with
the consummation of the Merger.
(C) To adjust NMR's fixed assets to their estimated fair value based upon
preliminary appraisals.
(D) To eliminate NMR's historical goodwill.
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<PAGE>
(E) To record the estimated goodwill and equity relating to the Merger based
upon a purchase price of approximately $38,047,000 calculated based on the
issuance of an estimated 4,308,859 shares of MRI Common Stock in exchange
for the outstanding stock of NMR. For purposes of pro forma presentation,
MRI Common Stock was valued at $8.83 per share which is the average of the
five days before, the day of, and the five days after the date of the
Merger Agreement (May 20, 1996).
<TABLE>
<S> <C> <C>
NMR historical book value as of March 31, 1996 ................... $20,989
Adjusted by the following:
To reflect the expenditure of costs related to the Merger ....... (415) (see (A))
To reflect lump sum payments to Messrs. Dasti and O'Malley ...... (1,225) (see (B))
To adjust fixed assets to appraised fair value .................. (3,351) (see (C))
To remove historical goodwill ................................... (10,805) (see (D))
To adjust the deferred tax asset, net ........................... 329 (see (F))
To adjust intangible and other assets ........................... (870) (see (G))
To adjust accrued liabilities ................................... (2,054) (see (H))
-------
Adjusted book value of NMR (net assets acquired) ................. $ 2,599
=======
Purchase price ................................................... $38,047
Adjusted book value of NMR (net assets acquired) ................. 2,599
-------
Excess of purchase price over net assets acquired ................ $35,448
Capitalized Merger costs ......................................... 905 (see (A))
-------
Goodwill .......................................................... $36,353
=======
</TABLE>
(F) To reflect the adjustment of pro forma combined deferred income tax assets
and liabilities based upon the tax effect of adjustments (C) and (G) as
follows:
<TABLE>
<CAPTION>
MRI NMR
March 31, March 31, Pro Forma Pro Forma
1996 1996 Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Deferred income taxes .................. $2,487 $2,936 $5,423
Less:
Valuation allowance .................... 200 -- 200
Liabilities:
Deferred income taxes .................. 89 2,827 ($ 80)(1) 2,587
(249)(2)
------ ------ ---- ------
Net deferred tax asset .................. $2,198 $ 109 ($329) $2,636
====== ====== ==== ======
</TABLE>
-------------
(1) To adjust NMR's deferred tax liability related to fixed assets for the
tax effect impact, using 40%, of pro forma adjustment (C) to adjust
NMR's fixed assets by $200,000.
(2) To adjust NMR's deferred tax liability related to an intangible asset
for tax effect impact, using 40%, of pro forma adjustment (G) to
adjust the book value of an NMR intangible asset.
For purposes of pro forma presentation, as of March 31, 1996, the tax
effect of the combined Companies' future deductible amounts exceeds future
taxable amounts, as defined under Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes", by approximately $2,636,000
and is reflected in the unaudited pro forma balance sheet as of March 31,
1996 as a component of other assets.
As discussed in Note 10 to NMR's 1996 Consolidated Financial Statements,
NMR has recorded deferred tax assets of $2,332,000 related to net operating
loss carryforwards of $6,389,000. Utilization of certain of these net
operating loss carryforwards is limited to $520,000 (pre tax effect) per
year and could be limited further if there are future changes in the
ownership of NMR. The Merger may result in further limitations on the
utilization of certain of these net operatingloss carryforwards. No
adjustment for additional limitations has been made in these pro forma
combined financial statements because the amounts are not yet known.
71
<PAGE>
(G) To eliminate NMR's joint venture option and to reflect the adjustment of
other assets including deferred organizational costs and other
miscellaneous assets for items that MRI would account for as period
expenses.
Joint venture/purchase option ................... $628
Deferred organizational costs ................... 136
Miscellaneous other assets ...................... 106
----
$870
====
(H) To reflect liabilities that arise as a result of potential actions to be
taken by MRI following the Merger as follows:
Center closing costs (1) ........................ $1,565
Accrual of corporate rent (2) ................... 269
Employee severance (3) .......................... 220
------
$2,054
======
-------------
(1) Represents liabilities assumed as of the consummation date in
conjunction with the closing of the Elgin and Bel Air centers. The
components of the costs are: $1,200,000 for the remaining rental
terms; $100,000 for the removal of the equipment at the Bel Air
facility; $200,000 to restore rental facilities to good condition; and
$65,000 for severance to involuntarily terminated employees. There can
be no assurance that the cost of such closing will not be greater than
the anticipated amount shown herein.
(2) Represents the rental liability related to NMR's corporate office
which is expected to be closed after the Merger.
(3) Represents the severance for employees at NMR's corporate office that
are expected to be involuntarily terminated as a result of the Merger.
(I) To eliminate NMR's historical stockholders' equity.
Unaudited Pro Forma Statement of Income
(a) To eliminate the operations of NMR's Bel Air and Elgin centers which MRI
expects it will close after the Merger. The unaudited historical operating
results of the centers to be closed are as follows:
For the year
ended
March 31, 1996
(unaudited)
--------------
Revenue, net
Bel Air ............................. $1,706
Elgin ............................... 85
------
$1,791
======
Operating costs
Bel Air ............................. $1,399
Elgin ............................... 355
------
$1,754
======
Depreciation
Bel Air ............................. $ 518
Elgin ............................... 14
------
$ 532
======
Interest
Bel Air ............................. $ 514
Elgin ............................... 4
------
$ 518
======
72
<PAGE>
(b) To reflect the increase in other income relating to the elimination of the
losses at the Austin, Texas center (in which NMR owned a minority interest)
which, for pro forma purposes, is assumed to have been disposed on January
1, 1995 (the center was closed on December 31, 1995).
(c) To reflect the increase of corporate general and administrative expense
resulting from non-competition and consulting agreements with Messrs. Dasti
and O'Malley offset by the elimination of their historical compensation.
Executive compensation (1) ......................... $(468)
Non-competition and consulting (2) ................. 824
-----
Net increase in corporate general and
administrative .................................... $ 356
=====
--------------
(1) Represents the elimination of the historical compensation for Messers.
Dasti and O'Malley.
(2) Represents the expenses to be incurred during the pro forma period
presented relating to the non-competition and consulting agreements entered
into by Mr. Dasti ($274,000) and Mr. O'Malley ($550,000).
(d) To eliminate amortization expense relating to NMR's historical goodwill.
(e) To reflect the amortization of the goodwill that results from the Merger
using the straight-line method over20 years.
(f) To eliminate amortization of adjusted intangible assets.
(g) To reflect the decrease in depreciation of fixed assets (not including
land) based upon adjustments to record the assets at the estimated fair
value as determined by preliminary appraisals, depreciated over an
estimated weighted average remaining useful life of eight years.
Adjustment to decrease fixed assets to preliminary
appraisal of fair value ............................. $(3,351)
Weighted average depreciable life (years) ............ 8
-------
Pro forma decrease in depreciation expense ........... $ (419)
=======
(h) To reflect the pro forma income taxes calculated at statutory rates.
(i) To reflect the weighted average of the estimated shares to be issued in
conjunction with the Merger at the 0.6875 Exchange Ratio.
(j) To reflect pro forma operating results for MRI's acquisition of NEM (two
imaging centers in Ft. Myers, Florida) on May 26, 1995 and PCC (a
Hackensack, New Jersey imaging center) on June 19, 1995 as though the
transactions were consummated on January 1, 1995.
(k) To reflect pro forma operating results for NMR's acquisition of Morgan
(four imaging centers in Florida) on September 15, 1995 and CD MRI (a
Chicago, Illinois area imaging center) on January 1, 1996 as though the
transactions were consummated on April 1, 1995.
(l) To reflect the pro forma effect of the shares issued in conjunction with
the acquisitions noted in (j) on the weighted average of shares
outstanding.
(m) To reflect the pro forma effect of the shares issued in conjunction with
the acquisition noted in (k) on the weighted average of shares outstanding.
The shares were also adjusted for the 0.6875 Exchange Ratio.
73
<PAGE>
Pro Forma Statement of Income for the Three Months Ended March 31, 1996
(aa) To eliminate the operations of NMR's Bel Air and Elgin centers which MRI
expects it will close after the Merger. The unaudited historical operating
results of the centers to be closed are as follows:
For the quarter
ended
March 31, 1996
(unaudited)
---------------
Revenue, net
Bel Air ............................. $462
Elgin ............................... 21
----
$483
====
Operating costs
Bel Air ............................. $428
Elgin ............................... 73
----
$501
====
Depreciation
Bel Air ............................. $130
Elgin ............................... 4
----
$134
====
Interest
Bel Air ............................. $130
Elgin ............................... 1
----
$131
====
(bb) To reflect the increase in other income relating to the elimination of the
losses at the Austin, Texas center (in which NMR owned a minority
interest) which, for pro forma purposes, is assumed to have been disposed
on January 1, 1995 (the center was closed on December 31, 1995).
(cc) To reflect the increase of corporate general and administrative expense
resulting from non-competition and consulting agreements with Messrs.
Dasti and O'Malley offset by the elimination of their historical
compensation.
Executive compensation (1) .............................. $(117)
Non competition and consulting (2) ...................... 206
-----
Net increase in corporate general and administrative .... $ 89
=====
-------------
(1) Represents the elimination of the historical compensation for Messrs.
Dasti and O'Malley.
(2) Represents the expenses to be incurred during the pro forma period
presented relating to the non competition and consulting agreements
entered into by Mr. Dasti ($274,000 annually, $69,000 per quarter) and
Mr. O'Malley ($550,000 annually, $137,000 per quarter).
(dd) To eliminate amortization expense relating to NMR's historical goodwill.
(ee) To reflect the amortization of the goodwill that results from the Merger
using the straight-line method over20 years.
(ff) To eliminate amortization of adjusted intangible assets.
74
<PAGE>
(gg) To reflect the decrease in depreciation of fixed assets (not including
land) based upon adjustments to record the assets at the estimated fair
value as determined by preliminary appraisals, depreciated over an
estimated weighted average remaining useful life of eight years.
Adjustment to decrease fixed assets to preliminary
appraisal of fair value ............................... $(3,351)
Weighted average depreciable life (years) .............. 8
-------
Pro forma decrease in depreciation expense ............. (419)
One quarter expense ............................ (division sign)4
------
Pro forma quarterly decrease in depreciation expense ... $ (105)
======
(hh) To reflect the pro forma income taxes calculated at statutory rates.
(ii) To reflect the weighted average of the estimated shares to be issued in
conjunction with the Merger at the 0.6875 Exchange Ratio.
(jj) To reflect pro forma operating results for MRI's acquisition of MRI-CT
(four New York imaging centers) on January 9, 1996, NurseCare (a San
Diego, California based supplemental healthcare staffing company) on
January 12, 1996, Americare (three Florida imaging centers) on April 19,
1996 and Access (one Florida imaging center) on April 30, 1996, as though
the transactions were consummated on January 1, 1995.
(kk) To reflect the pro forma effect of the shares issued in conjunction with
the acquisitions noted in (jj) on the weighted average of shares
outstanding.
75
<PAGE>
AMENDMENT OF MRI'S CERTIFICATE OF INCORPORATION
(ITEM NO. 2) (FOR MRI STOCKHOLDERS ONLY)
At the MRI Meeting, MRI stockholders will be asked to vote on a proposal,
which would only become effective if the Merger is consummated, to amend MRI's
Certificate of Incorporation in order the increase the number of authorized
shares of MRI Common Stock from 20,000,000 shares to 50,000,000. IF THE MERGER
IS NOT CONSUMMATED, THE VOTE ON THIS PROPOSAL WILL BE CONSIDERED VOID AND OF NO
FORCE AND EFFECT.
By resolution adopted on June 19, 1996, the Board of Directors of MRI
proposed the adoption by MRI stockholders of an amendment to MRI's Certificate
of Incorporation pursuant to which the number of authorized shares of MRI Common
Stock would be increased from 20,000,000 shares to 50,000,000 shares, and the
MRI Board directed that the proposed amendment be submitted to a vote of the
stockholders at the MRI Meeting. If the proposed amendment is approved and upon
its filing with the Secretary of State of the State of Delaware, the newly
authorized shares of MRI Common Stock will have voting and other rights
identical to the currently authorized shares of MRI Common Stock. The proposed
Amendment to MRI's Certificate of Incorporation is attached hereto as Appendix
D.
Of the 20,000,000 currently authorized shares of MRI Common Stock, as of
July 29, 1996, 8,866,489 shares were issued and outstanding and an additional
2,819,625 shares were reserved for issuances in connection with outstanding MRI
Derivative Securities. MRI's Board of Directors has also reserved for issuance
an additional 114,459 shares upon the exercise of options which may be granted
under MRI's existing option plans. In connection with the Merger, approximately
4,338,517 shares of MRI Common Stock will be issued (assuming no exercise or
conversion of outstanding NMR Derivative Securities) and an additional 1,305,156
shares of MRI Common Stock will be issuable upon exercise or conversion of NMR
Derivative Securities following the Merger. Although presently authorized shares
are sufficient to meet all present requirements of MRI, including shares of MRI
Common Stock to be issued in the Merger, MRI's Board of Directors believes that
it is desirable that MRI have the flexibility to issue a substantial number of
share of MRI Common Stock without further stockholder action unless required by
applicable law or regulation. The availability of additional shares will enhance
MRI's flexibility in connection with possible future actions, such as
acquisitions, stock dividends, stock splits and employee benefit programs. The
MRI Board will determine whether, when and on what terms the issuance of shares
of MRI Common Stock may be warranted in connection with any of the foregoing
purposes.
The MRI Board of Directors does not intend to seek further stockholder
approval prior to the issuance of any additional shares in future transaction
unless required by law, the Certificate of Incorporation or the rules of any
stock exchange upon which the stock may be listed or quoted, or unless MRI deems
its advisable to do so. Further, the MRI Board does not intend to issue any MRI
Common Stock to be authorized under the proposed amendment to the Certificate of
Incorporation except upon the terms the MRI Board deems to be in the best
interests of MRI and its stockholders. The issuance of additional MRI Common
Stock without further stockholder approval may, among other things, have a
dilutive effect on earnings per share and on the equity of the present holders
of MRI Common Stock and their voting rights, Holders of MRI Common Stock have no
preemptive rights. The availability for issuance of additional shares of MRI
Common Stock also could have the effect of rendering more difficult or
discouraging an attempt to obtain control of MRI.
The proposed amendment to MRI's Certificate of Incorporation is subject to
approval by the affirmative vote of the holders of a majority of the outstanding
shares of MRI Common Stock.
It is the intention of the persons named in the accompanying proxy to vote
FOR the election of the proposed amendment to MRI's Certificate of
Incorporation, unless contrary instructions are given or authority to do so is
withheld.
AT THE MRI MEETING, THE STOCKHOLDERS OF MRI WILL BE REQUESTED TO APPROVE
THE AMENDMENT TO MRI'S CERTIFICATE OF INCORPORATION. THE PROPOSED AMENDMENT TO
MRI'S CERTIFICATE OF INCORPORATION UNDER THIS PROPOSAL WILL ONLY BE GIVEN EFFECT
IF THE MERGER IS CONSUMMATED.
76
<PAGE>
ELECTION OF DIRECTORS OF NMR (ITEM NO. 3)
(FOR NMR STOCKHOLDERS ONLY)
At the NMR Meeting, NMR stockholders will be asked to vote on a proposal,
which would only become effective if the Merger is not consummated, to elect
five (5) directors to hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. IF THE MERGER
IS CONSUMMATED, THE VOTE ON THIS PROPOSAL WILL BE CONSIDERED VOID AND OF NO
FORCE AND EFFECT.
The following five individuals have been nominated for election as
directors in the event the Merger is not consummated: Joseph G. Dasti, Donald W.
Arthur, David L. Bloom, John A. Faraone and Joseph T. Zappala. Each of the
nominees is currently a director of NMR. For biographical and other information
on the nominees, see "Information Concerning NMR of America, Inc."
The directors of NMR will be elected by a plurality of the votes cast by
stockholders of NMR present at the NMR Meeting in person or represented by proxy
if a quorum is present.
It is the intention of the persons named in the accompanying proxy to vote
FOR the election of the five nominees, unless contrary instructions are given or
authority to do so is withheld.
AT THE NMR MEETING, THE STOCKHOLDERS OF NMR WILL BE REQUESTED TO ELECT FIVE
DIRECTORS TO THE BOARD OF DIRECTORS. THE DIRECTORS OF NMR WILL BE ELECTED BY A
PLURALITY OF THE VOTES CAST BY STOCKHOLDERS OF NMR PRESENT AT THE NMR MEETING IN
PERSON OR REPRESENTED BY PROXY. THE ELECTION OF ANY DIRECTORS UNDER THIS
PROPOSAL WILL ONLY BE GIVEN EFFECT IF THE MERGER IS NOT CONSUMMATED.
INDEPENDENT ACCOUNTANTS
NMR has appointed Coopers & Lybrand L.L.P. as the independent accountants
to examine the consolidated financial statements of NMR for the current fiscal
year. Said firm was first retained by NMR as its independent public accountants
for the fiscal year ended March 31, 1984. The selection of Coopers & Lybrand
L.L.P. was approved by the Board of Directors prior to their appointment.
Coopers & Lybrand L.L.P. has advised NMR that they do not have any material
financial interests in, or any connection (other than as independent
accountants) with, NMR.
Ernst & Young LLP and Coopers & Lybrand L.L.P. are expected to be present
at the MRI Meeting and the NMR Meeting, respectively, and will have the
opportunity to make a statement, if they desire to do so, and they are expected
to be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the Board of
Directors of MRI knows of no other business to be presented at the MRI Meeting
and the Board of Directors of NMR knows of no other business to be presented at
the NMR Meeting. However, if any other matters properly come before either such
meeting, the persons named in the enclosed form of proxy are expected to vote
the proxy in accordance with their best judgment onsuch matters.
LEGAL OPINIONS
Werbel McMillin & Carnelutti, counsel to MRI, has rendered an opinion as to
the legality of the shares of MRI Common Stock offered hereby. Counsel to NMR,
McCarter & English, will render an opinion at the closing under the Merger
Agreement as to certain tax matters with respect to the Merger.
77
<PAGE>
EXPERTS
The consolidated financial statements and schedule of Medical Resources,
Inc. at December 31, 1995 and 1994, and the years then ended, incorporated by
reference in this Joint Proxy Statement/Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon incorporated by reference
herein which, as to the year ended December 31, 1994, is based in part on the
reports of Dixon, Odom & Co., L.L.P. and Kempisty & Company, Certified Public
Accountants, P.C., independent accountants. The consolidated financial
statements referred to above are incorporated herein by reference in reliance
upon the authority of such firms as experts in accounting and auditing. The
consolidated financial statements and schedule of Medical Resources, Inc. for
the year ended December 31, 1993 incorporated by reference in this Joint Proxy
Statement/Prospectus and Registration Statement have been audited, as to
combination only, by Ernst & Young LLP, independent certified public
accountants, as set forth in their report thereon incorporated by reference
elsewhere herein, which is based in part on the reports of Price Waterhouse LLP,
Dixon, Odom & Co., L.L.P. and Kempisty & Company, Certified Public Accountants,
P.C., independent accountants. The consolidated financial statements for the
year ended December 31, 1993 are incorporated herein by reference in reliance
upon the authority of such firms as experts in accounting and auditing.
The financial statements of Nurse Care Plus, Inc. at December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon incorporated
by reference herein, and is included in reliance upon such report given on the
authority of said firm as experts in accounting and auditing.
The financial statements of MRI-CT, Inc. at December 31, 1995 and for the
year then ended, incorporated by reference in this Joint Proxy
Statement/Prospectus, have been so incorporated in reliance on the report of
Bard & Glassman, independent accountants, given on the authority of said firm as
experts in accounting and auditing.
The financial statements of Americare Imaging Center, Inc. at December 31,
1995 and for the year then ended and of Access Imaging Center, Inc. at December
31, 1995 and for the year then ended, incorporated by reference in this Joint
Proxy Statement/Prospectus and Registration Statement have been so incorporated
in reliance on the report of Weisberg, Polansky, Kulberg, Einhorn & Mole, LLP,
independent certified public accountants, as set forth in their report thereon
incorporated by reference herein, and is included in reliance upon such report
given on the authority of said firm as experts in accounting and auditing.
The consolidated balance sheets of NMR of America, Inc. as of March 31,
1996 and 1995 and consolidated statements of income, retained earnings and cash
flows for each of the three years in the period ended March 31, 1996
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been incorporated herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing.
BY ORDER OF THE BOARD BY ORDER OF THE BOARD OF
OF DIRECTORS OF DIRECTORS OF NMR OF
MEDICAL RESOURCES, INC. AMERICA, INC.
/s/ GARY N. SIEGLER /s/ JOSEPH G. DASTI
- -------------------------------- ----------------------------------
Gary N. Siegler, Joseph G. Dasti,
Chairman of the President and Chief
Board of Directors Executive Officer
78
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDICAL RESOURCES, INC.,
MRI SUB, INC.
AND
NMR OF AMERICA, INC.
DATED AS OF MAY 20, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 THE MERGER .................................................... A-1
SECTION 1.1 The Merger ........................................... A-1
SECTION 1.2 Stockholders' Meetings ............................... A-1
SECTION 1.3 Consummation of the Merger; Effective Date ........... A-1
SECTION 1.4 Effect of the Merger ................................. A-1
ARTICLE 2 CONVERSION AND CANCELLATION OF SECURITIES ..................... A-2
SECTION 2.1 Conversion of Shares; Treatment of Warrants,
Options and Convertible Securities .................... A-2
(a) Common Stock ...................................... A-2
(b) Warrants .......................................... A-2
(c) Options ........................................... A-2
(d) Convertible Securities ............................ A-3
SECTION 2.2 Appraisal Rights ...................................... A-3
SECTION 2.3 Surrender and Payment ................................. A-3
SECTION 2.4 Common Stock of Sub ................................... A-3
SECTION 2.5 Closing ............................................... A-3
ARTICLE 3 CERTIFICATES OF INCORPORATION AND BY-LAWS ..................... A-4
SECTION 3.1 Certificate of Incorporation and By-Laws .............. A-4
SECTION 3.2 Directors and Officers of Sub ......................... A-4
ARTICLE 4 CERTAIN PROVISIONS RELATING TO SHARES ......................... A-4
SECTION 4.1 No Fractional Shares of MRI Common Stock .............. A-4
SECTION 4.2 MRI to Make Merger Consideration Available ............ A-4
SECTION 4.3 Dividends; Transfer Taxes; Voting Rights .............. A-4
SECTION 4.4 Abandoned Property; Lost Certificates ................. A-5
SECTION 4.5 Taking of Necessary Action; Further Action ............ A-5
SECTION 4.6 Closing of NMR's Transfer Books ....................... A-5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF NMR ......................... A-5
SECTION 5.1 Organization and Qualification; Subsidiaries ......... A-5
Section 5.2 Certificates of Incorporation and By-Laws ............ A-5
SECTION 5.3 Capitalization ....................................... A-6
SECTION 5.4 Authority ............................................ A-6
SECTION 5.5 No Conflict; Required Filings and Consents ........... A-6
SECTION 5.6 Permits; Compliance .................................. A-7
SECTION 5.7 Reports; Financial Statements ........................ A-7
SECTION 5.8 Absence of Certain Changes or Events ................. A-8
SECTION 5.9 Absence of Litigation ................................ A-8
SECTION 5.10 Taxes ................................................ A-8
SECTION 5.11 Certain Business Practices ........................... A-8
SECTION 5.12 Brokers .............................................. A-8
SECTION 5.13 Board Recommendation ................................. A-8
SECTION 5.14 Books and Records .................................... A-8
SECTION 5.15 No Undisclosed Liabilities ........................... A-9
SECTION 5.16 Contracts ............................................ A-9
SECTION 5.17 Disclosure ........................................... A-9
SECTION 5.18 Affiliates ........................................... A-9
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF MRI AND SUB ................. A-9
SECTION 6.1 Organization and Qualification; Subsidiaries .......... A-9
SECTION 6.2 Certificate of Incorporation and By-Laws .............. A-9
SECTION 6.3 Capitalization ........................................ A-9
SECTION 6.4 Authority ............................................. A-10
A-i
<PAGE>
PAGE
----
SECTION 6.5 No Conflict; Required Filings and Consents ........... A-10
SECTION 6.6 Permits; Compliance .................................. A-11
SECTION 6.7 Reports; Financial Statements ........................ A-11
SECTION 6.8 Absence of Certain Changes or Events ................. A-11
SECTION 6.9 Absence of Litigation ................................ A-11
SECTION 6.10 Taxes ................................................ A-12
SECTION 6.11 Certain Business Practices ........................... A-12
SECTION 6.12 Brokers .............................................. A-12
SECTION 6.13 Books and Records .................................... A-12
SECTION 6.14 Contracts ............................................ A-12
SECTION 6.15 No Undisclosed Liabilities ........................... A-12
SECTION 6.16 Board Recommendation ................................. A-12
SECTION 6.17 Disclosure ........................................... A-12
ARTICLE 7 COVENANTS ..................................................... A-12
SECTION 7.1 Affirmative Covenants of NMR and MRI .................. A-12
SECTION 7.2 Negative Covenants of NMR ............................. A-13
SECTION 7.3 Negative Covenants of MRI ............................. A-15
SECTION 7.4 Access and Information ................................ A-16
SECTION 7.5 Confidentiality ....................................... A-16
SECTION 7.6 No Solicitation of Business Transactions by NMR;
Fee Payable for Violation ............................. A-16
SECTION 7.7 Additional Affirmative Covenant of MRI ................ A-17
SECTION 7.8 Directors' and Officers' Indemnification .............. A-17
ARTICLE 8 ADDITIONAL AGREEMENTS ......................................... A-17
SECTION 8.1 Meetings of Stockholders .............................. A-17
SECTION 8.2 Registration Statement; Proxy Statement ............... A-18
SECTION 8.3 Appropriate Action; Consents; Filings ................. A-18
SECTION 8.4 Affiliates ............................................ A-19
SECTION 8.5 Public Announcements .................................. A-19
SECTION 8.6 NASDAQ Listing ........................................ A-19
SECTION 8.7 Existing Executive Employment Arrangements ............ A-19
SECTION 8.8 Disclosure Schedules .................................. A-20
SECTION 8.9 Financial Advisors .................................... A-20
ARTICLE 9 CLOSING CONDITIONS ............................................ A-20
SECTION 9.1 Conditions to Obligations of Each Party
Under This Agreement .................................. A-20
(a) Effectiveness of the
Registration Statement ......................... A-20
(b) Stockholder Approval ........................... A-20
(c) No Order ....................................... A-20
(d) HSR Act ........................................ A-20
SECTION 9.2 Additional Conditions to Obligations of MRI ........... A-20
(a) Representations and Warranties ................. A-20
(b) Agreements and Covenants ....................... A-20
(c) Consents and Approvals ......................... A-20
(d) Opinion of NMR's Counsel ....................... A-20
(e) No NMR Material Adverse Effect ................. A-20
(f) Stockholders Rights Agreement .................. A-21
(g) Appraisal Rights ............................... A-21
(h) Certificates ................................... A-21
(i) Affiliates' Letters ............................ A-21
SECTION 9.3 Additional Conditions to Obligations of NMR ........... A-21
(a) Representations and Warranties ................. A-21
(b) Agreements and Covenants ....................... A-21
(c) Consents and Approvals ......................... A-21
A-ii
<PAGE>
PAGE
----
(d) Opinion of Counsel to MRI ...................... A-21
(e) No MRI Material Adverse Effect ................. A-21
(f) Certificates ................................... A-21
(g) Tax Opinion .................................... A-21
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER ............................ A-22
SECTION 10.1 Termination .......................................... A-22
SECTION 10.2 Effect of Termination ................................ A-22
SECTION 10.3 Amendment ............................................ A-22
SECTION 10.4 Waiver ............................................... A-23
SECTION 10.5 Fees, Expenses and Other Payments .................... A-23
ARTICLE 11 GENERAL PROVISIONS ........................................... A-23
SECTION 11.1 Effectiveness of Representations, Warranties
and Agreements ...................................... A-23
SECTION 11.2 Notices ............................................. A-23
SECTION 11.3 Certain Definitions ................................. A-24
SECTION 11.4 Headings ............................................ A-25
SECTION 11.5 Severability ........................................ A-25
SECTION 11.6 Entire Agreement .................................... A-25
SECTION 11.7 Assignment .......................................... A-25
SECTION 11.8 Parties in Interest ................................. A-25
SECTION 11.9 Failure or Indulgence Not Waiver;
Remedies Cumulative ................................. A-25
SECTION 11.10 Governing Law ....................................... A-25
SECTION 11.11 Counterparts ........................................ A-25
SECTION 11.12 Determination of Market Value ....................... A-26
Schedule 9.2(d)
Schedule 9.3(d)
Schedule 9.2(g) of NMR Disclosure Schedule
Schedule 9.3(g) of MRI Disclosure Schedule
Exhibit 8.7A NMR Executive Agreements
Exhibit 8.7B Non-Competition and Consulting Agreements
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of May 20, 1996 (the "Agreement"), by
and among MEDICAL RESOURCES, INC., a Delaware corporation ("MRI"), MRI SUB,
INC., a Delaware corporation and wholly-owned subsidiary of MRI ("Sub"), and NMR
OF AMERICA, INC., a Delaware corporation ("NMR") (Sub and NMR being hereinafter
collectively referred to as the "Constituent Corporations").
WHEREAS, the respective Boards of Directors of MRI, Sub, and NMR have each
determined that it is advisable and for the benefit and in the best interests of
their corporations and their respective stockholders that NMR be acquired by MRI
(the "Acquisition") by means of a merger of NMR with and into Sub, with Sub
being the surviving corporation, on the terms and conditions hereinafter set
forth (the "Merger");
WHEREAS, the Board of Directors of MRI has determined that the Acquisition
is consistent with and in furtherance of the long-term business strategy of MRI
and is fair to, and in the best interests of, MRI and the holders of MRI Common
Stock, as hereinafter defined, and has approved and adopted this Agreement and
has approved the Merger and the other transactions contemplated hereby and
recommended approval and adoption of the Agreement and approval of the Merger by
the stockholders of MRI; and
WHEREAS, the Board of Directors of NMR has determined that the Acquisition
is fair to, and in the best interests of, NMR and the holders of NMR Common
Stock, as hereinafter defined, and has approved and adopted this Agreement and
has approved the Merger and the other transactions contemplated hereby and
recommended approval and adoption of the Agreement and approval of the Merger by
the stockholders of NMR;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a)(1)(A) and
368(a)(2)(D);
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
representations and warranties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto intending to be bound hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. Subject to the terms and conditions hereof, on the
Effective Date (as defined in Section 1.3), NMR shall be merged with and into
Sub in accordance with the applicable provisions of the laws of the State of
Delaware ("Delaware Law"); Sub, as the surviving corporation in the Merger (the
"Surviving Corporation"), shall continue its corporate existence under Delaware
Law; the separate existence of NMR shall thereupon cease; and its corporate
existence shall be merged into and transferred to the Surviving Corporation.
SECTION 1.2 STOCKHOLDERS' MEETINGS. To the extent consistent with the
fiduciary duty of their respective Boards of Directors, each of NMR and MRI
shall, as soon as practicable, take all action necessary in accordance with
applicable law and its Certificate of Incorporation and By-Laws to convene a
meeting of its stockholders to consider and vote upon the approval of the Merger
(together, the "Stockholders' Meetings") and to solicit proxies with respect to
such meeting. The Boards of Directors of each of NMR and MRI has recommended
that its stockholders approve the Merger.
SECTION 1.3 CONSUMMATION OF THE MERGER; EFFECTIVE DATE. As soon as
practicable following the Closing (as that term is hereinafter defined in
Section 2.5), the parties hereto will file with the Secretary of State of the
State of Delaware a Certificate of Merger in such form as required by, and
executed in accordance with, the relevant provisions of Delaware Law. The Merger
shall become effective at such time (the "Effective Time") as the Certificate of
Merger shall have been duly filed with the Secretary of State of the State of
Delaware (the "Effective Date").
SECTION 1.4 EFFECT OF THE MERGER. Upon the effectiveness of the Merger, the
Surviving Corporation shall succeed, without any other action, to all rights and
property of each of the Constituent Corporations, and shall be subject to all
the debts and liabilities of each of the Constituent Corporations in the same
manner as if the Surviving Corporation had itself incurred them, all with the
effect set forth in Delaware law. Without limiting the generality of the
foregoing, following effectiveness of the Merger, the Surviving Corporation
shall assume responsibility, either directly or indirectly, for the
administration of NMR's 401(K) Plan.
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ARTICLE 2
CONVERSION AND CANCELLATION
OF SECURITIES
SECTION 2.1 CONVERSION OF SHARES; TREATMENT OF WARRANTS, OPTIONS AND
CONVERTIBLE SECURITIES. As of the Effective Date, by virtue of the Merger and
without any action on the part of the holders thereof:
(a) Common Stock. (i) On the Effective Date, the shares of NMR's
Common Stock, $.01 par value (the "NMR Common Stock"), issued and
outstanding immediately prior to the Effective Date, other than Dissenting
Shares (as hereinafter defined) and other than any shares of NMR Common
Stock held by MRI, Sub or NMR, shall, by virtue of the Merger automatically
and without any action on the part of the holder thereof, become and be
converted into the right to receive shares of fully paid and nonassessable
Common Stock, $.01 par value, of MRI (the "MRI Common Stock"). The shares
of MRI Common Stock issuable in the Merger are sometimes collectively
referred to hereinafter as the "Merger Consideration" and the ratio of
0.6875 shares of MRI Common Stock to one share of NMR Common Stock is
herein referred to as the "Exchange Ratio."
(ii) Capital Stock Held by NMR, MRI or Sub. On the Effective Date,
each share of capital stock of NMR held in the treasury of NMR, or by MRI
or Sub immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
automatically cancelled and retired and cease to exist and no securities or
other consideration shall be payable in respect thereof.
(b) Warrants. Each warrant to acquire shares of NMR Common Stock (a
"Warrant") that is outstanding and unexercised at the Effective Date shall,
by virtue of the Merger and without any action on the part of the holder
thereof, and subject to the other terms and conditions thereof,
automatically be deemed to be exercisable for that number of shares of MRI
Common Stock the holder of such Warrant would have received in the Merger
pursuant to Section 2.1(a) had such holder exercised such Warrant in full
immediately prior to the Effective Date, and the price per share of MRI
Common Stock issuable after the Effective Date upon exercise of such
Warrant shall equal the price per share of NMR Common Stock under such
Warrant as in effect prior to the Effective Date divided by the Exchange
Ratio. Without limiting the generality of the foregoing, following
effectiveness of the Merger, MRI shall be bound by and subject to all
registration rights contained in each Warrant and such rights shall apply
against MRI with the same legal force and effect as they applied against
NMR prior to effectiveness of the Merger. After the Effective Date, MRI
shall issue to each holder of a Warrant a new warrant containing the
foregoing terms and all other terms set forth in each Warrant, including
without limitation, all registration rights; provided, however, that the
failure of MRI to so issue new warrants in substitution of Warrants shall
not limit the rights of the holder hereunder or thereunder and each such
Warrant will be deemed amended to substitute MRI in place of NMR and the
terms and conditions of each such Warrant shall be applicable to MRI in the
same manner as they would be applicable to NMR if the Merger had not
occurred.
(c) Options. At the Effective Date, each stock option ("NMR Option")
outstanding on the date hereof pursuant to the 1986 Incentive Stock Option
and Nonstatutory Option Plan ("NMR Plan") shall be deemed to constitute and
shall automatically be converted into stock options ("New Options")
exercisable for shares of MRI Common Stock and each NMR Option shall be
administered in accordance with the terms and conditions provided for in
the NMR Plan under which the corresponding NMR Option was granted and the
stock option agreement by which it was evidenced, including terms and
provisions regarding exercisability. The number of shares of MRI Common
Stock covered by each New Option shall be the number of shares of MRI
Common Stock which the holder of the NMR Option would have received in the
Merger pursuant to Section 2.1(a) had such holder exercised the NMR Option
in full immediately prior to the Effective Date, without regard to vesting;
provided, however, that the number of shares of MRI Common Stock that may
be purchased upon exercise of a New Option shall not include any fractional
share interest which shall be cashed out upon exercise for an amount of
cash (without interest) determined by multiplying such fractional share
interest by the average reported last sale price of MRI Common Stock on the
NASDAQ system for the five (5) trading days ending on the close of business
on the last business day immediately preceding the date of such exercise.
The exercise price per share of MRI Common Stock subject to a New Option
shall equal the exercise price per share (subject to the adjustments
provided for in the NMR Option) of NMR Common Stock subject to the
corresponding NMR Option so converted divided by the Exchange Ratio.
Without limiting the rights of holders of NMR Options, as soon as
practicable after the Effective Date, MRI shall issue to the holders of
such NMR Options appropriate instruments
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evidencing New Options and confirming the rights of such holders with
respect to MRI Stock on the terms and conditions provided by this Section
2.1, upon surrender of the outstanding instruments representing such NMR
Option; provided, however, that MRI shall not be obligated to issue any
shares of MRI Stock, until such time as the shares of MRI Stock issuable
upon exercise of New Options shall have been registered with the Securities
and Exchange Commission (the "SEC") pursuant to an effective registration
statement and authorized for quotation on the NASDAQ--National Market
System and for sale by any appropriate state securities regulators, which
MRI shall use its best efforts to effect as promptly as practicable, but in
no event more than 15 days after the Effective Date, and MRI shall use its
best efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectus or prospectuses
contained therein) for so long as the NMR Options remain outstanding. At or
prior to the Effective Date, MRI shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of MRI Common Stock
for delivery upon exercise of New Options. Notwithstanding the requirements
of the NMR Plan, so long as a registration statement covering the MRI
Common Stock underlying the New Option is effective, if any holder of a New
Option sells any or all of the shares of MRI Common Stock covered by such
New Option in a brokers transaction prior to the exercise of such New
Option ("Short Sale"), MRI shall, upon written notice to MRI of such Short
Sale by the holder or his or her broker, cause its transfer agent to issue
in the name of holder and deliver to the holder's broker within three
business days a certificate evidencing such shares to be applied against
the Short Sale and upon receipt of payment against delivery of the shares,
the holder will direct his or her broker to authorize payment directly to
MRI of the exercise price from the proceeds of such Short Sale.
(d) Convertible Securities. The obligations of NMR under each 8%
Convertible Subordinated Debenture due 2001 of NMR (a "Debenture")
(including, without limitation, the due and punctual payment of the
principal of (and premium, if any) and interest thereon) that is
outstanding at the Effective Date shall, by virtue of the Merger and
without any action on the part of NMR or MRI, be assumed in full by, and
become the obligations of, the Surviving Corporation which shall comply
after the Effective Date with all requirements of the Indenture, dated as
of July 1, 1986 (the "Indenture") pursuant to which the Debentures were
issued. Each Debenture that is outstanding at the Effective Date shall, by
virtue of the Merger and without any action on the part of the holder
thereof, and subject to the other terms and conditions thereof,
automatically be deemed to be convertible for that number of shares of MRI
Common Stock that the holder of such Debenture would have received in the
Merger pursuant to Section 2.1(a) had such holder converted such Debenture
in full immediately prior to the Effective Date, and the price per share of
MRI Common Stock issuable after the Effective Date upon conversion of such
Debenture shall equal the "conversion price" under such Debenture in effect
prior to the Effective Date divided by the Exchange Ratio. MRI shall, and
shall cause the Surviving Corporation to, comply with any and all
requirements of, and execute and deliver any and all agreements required
by, the Indenture pertaining to a merger or consolidation of NMR.
SECTION 2.2 APPRAISAL RIGHTS. Holders of shares of NMR Common Stock, who
duly exercise and perfect appraisal rights under Section 262 of the Delaware
General Corporation Law (such shares referred to herein as "Dissenting Shares")
shall have the appraisal rights set forth in Section 262 of the Delaware General
Corporation Law and no other rights; provided, however, that Dissenting Shares
beneficially and legally owned by the holder thereof at the Effective Date who
shall, after the Effective Date, withdraw the demand for appraisal or lose the
right of appraisal as provided in such law, shall be deemed to be converted as
of the Effective Date, into the right to receive the Merger Consideration set
forth in Section 2.1 hereof.
SECTION 2.3 SURRENDER AND PAYMENT. After the Effective Date, each holder of
a certificate that formerly represented shares of NMR Common Stock, issued and
outstanding on the Effective Date (other than any Dissenting Shares and shares
held by NMR, MRI or Sub) shall be entitled, upon surrender thereof to the
Surviving Corporation, to receive the Merger Consideration for each share of MRI
Common Stock theretofore represented by the certificate so surrendered as
provided in Section 2.1 hereof, and the certificate so surrendered shall
forthwith be cancelled.
SECTION 2.4 COMMON STOCK OF SUB. Each share of common stock, par value $.01
per share, of Sub issued and outstanding on the Effective Date shall, by virtue
of the Merger and without any action on the part of the holder thereof, remain
outstanding and shall thereafter represent one share of common stock of the
Surviving Corporation.
SECTION 2.5 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place, unless the parties shall otherwise
agree, at the offices of Werbel McMillin & Carnelutti, 711 Fifth Avenue, New
York, New York 10022 at 10:00 A.M. local time (i) as soon as practicable after
the day on which the last
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condition set forth in Article 9 shall have been fulfilled or waived or (ii) at
such other time as NMR and MRI may mutually agree (the "Closing Date").
ARTICLE 3
CERTIFICATES OF INCORPORATION AND BY-LAWS
SECTION 3.1 CERTIFICATE OF INCORPORATION AND BY-LAWS. As of the Effective
Date, the Certificate of Incorporation and By-laws of Sub as in effect on the
Effective Date shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until thereafter amended as provided by law.
SECTION 3.2 DIRECTORS AND OFFICERS OF SUB. The directors and officers of
Sub at the Effective Time shall be the initial directors and officers of the
Surviving Corporation and shall hold office from the Effective Time until the
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation or By-Laws of the Surviving
Corporation or as otherwise provided by law.
ARTICLE 4
CERTAIN PROVISIONS RELATING TO SHARES
SECTION 4.1 NO FRACTIONAL SHARES OF MRI COMMON STOCK. No fractional shares
of MRI Common Stock shall be issued by MRI in the Merger. Each stockholder of
NMR who otherwise would be entitled to a fractional interest in any share of MRI
Common Stock shall receive an amount of cash (without interest) determined by
multiplying the average reported last sale price of MRI Common Stock on the
NASDAQ system for the five (5) trading days ending on the close of business on
the second (2) business day before the Stockholders' Meeting of NMR (the "Fair
Market Value") by the fractional share interest to which such holder would
otherwise be entitled. Unless and until the certificate which immediately prior
to the Effective Date represented shares of NMR Common Stock (the
"Certificates") shall have been surrendered, the holder of any Certificate
representing a fraction of a share of MRI Common Stock shall not be entitled to
receive the cash payment described in this Section 4.1 for such fraction of a
share. Such payment shall be remitted, without interest, after the surrender of
the Certificates held by such holder as provided in Section 4.2.
SECTION 4.2 MRI TO MAKE MERGER CONSIDERATION AVAILABLE. MRI shall designate
its stock transfer agent to act as exchange agent (the "Exchange Agent") in
connection with the Merger. As soon as practicable after the Effective Date, MRI
shall make available and, subject to Section 4.1, each holder of a Certificate
shall be entitled to receive, upon surrender to the Exchange Agent of such
Certificate for cancellation and subject to any required withholding of taxes
under any applicable federal income tax laws ("Backup Withholding"), the
aggregate number of shares of MRI Common Stock into which the shares of NMR
Common Stock, previously represented by each Certificate shall have been
converted in the Merger. Until so surrendered and exchanged, each Certificate
(other than Certificates representing any Dissenting Shares or shares of the
capital stock of NMR held by NMR, MRI or Sub) shall represent solely the right
to receive the Merger Consideration into which the shares of NMR Common Stock it
represented prior to the Effective Date shall have been converted pursuant to
Section 2.1, less any Backup Withholding. As soon as practicable after the
Effective Date, MRI shall cause the Exchange Agent to mail a transmittal form to
each holder of a Certificate advising such holder of the procedure for
surrendering to the Exchange Agent such Certificates for payment in accordance
with this Section 4.2.
SECTION 4.3 DIVIDENDS; TRANSFER TAXES; VOTING RIGHTS. (a) No dividends or
distributions that are otherwise payable on MRI Common Stock will be paid to
persons entitled to receive MRI Common Stock until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name MRI Common Stock shall be issued, any dividends or distributions which
shall have become payable with respect to MRI Common Stock between the Effective
Date and the time of such surrender. After such surrender, there shall be paid
to the person in whose name the MRI Common Stock shall be issued any dividends
or distributions on MRI Common Stock which shall have a record date prior to
such surrender and a payment date after such surrender, and such payment shall
be made on such payment date.
(b) If shares of MRI Common Stock are to be issued or delivered to any
person other than the person in whose name the Certificate surrendered for
exchange is registered, it shall be a condition of the exchange that the person
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requesting such exchange shall deliver to the Exchange Agent all documents
required to evidence and effect such transfer, and pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance or delivery of a
certificate representing such shares of MRI Common Stock to other than the
registered owner of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
SECTION 4.4 ABANDONED PROPERTY; LOST CERTIFICATES. Notwithstanding anything
to the contrary contained herein, neither the Exchange Agent nor any party
hereto shall have any liability to a holder of a Certificate for the payment of
the Merger Consideration to be issued in accordance with the provisions hereof
if such Merger Consideration is paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to three (3) years after the Effective Date (or
immediately prior to such earlier date on which any payment in respect thereof
would otherwise escheat to or become the property of any governmental unit or
agency), the payment in respect of such Certificates shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims of interest of any person previously entitled
thereto. Lost Certificates shall be treated in accordance with the normal
procedures of the Exchange Agent.
SECTION 4.5 TAKING OF NECESSARY ACTION; FURTHER ACTION. Sub, MRI and NMR
shall each take all such action as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible, subject to all of the terms and
conditions hereof. If, at any time after the Effective Date, any further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of either of the
Constituent Corporations, the officers and directors of such corporation are
fully authorized in the name of such corporation or otherwise to take, and shall
take, all such action.
SECTION 4.6 CLOSING OF NMR'S TRANSFER BOOKS. On the Effective Date, the
stock transfer books of NMR shall be closed and no transfer of shares of capital
stock of NMR shall thereafter be made, except for transfers of Dissenting
Shares, as permitted by law. If, after the Effective Date, certificates
representing shares of NMR Common Stock are presented to the Surviving
Corporation, they shall, subject to the provisions of Section 4.4 hereof, be
cancelled and exchanged for the Merger Consideration provided in Section 2.1
hereof.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NMR
Except as set forth in the Disclosure Schedule to be delivered by NMR to
MRI (the "NMR Disclosure Schedule"), which shall identify exceptions by specific
Section references, NMR hereby represents and warrants to MRI that:
SECTION 5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of NMR and
its subsidiaries is a corporation or limited partnership, as the case may be,
duly incorporated (if a corporation), duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be in good standing, or to have such power and authority, or to be duly
qualified and in good standing, as the case may be, would not have a NMR
Material Adverse Effect. The term "NMR Material Adverse Effect" as used in this
Agreement shall mean any event, change or effect that, individually or when
taken together with all other such events, changes or effects, would be
materially adverse to the condition (financial or otherwise), prospects,
properties, assets, business or operations of NMR and its subsidiaries, taken as
a whole, at the time of such event, change or effect; provided, however, that
for purposes of this Agreement, any change occurring between the date of this
Agreement and the Effective Date in the amount of cash held by NMR as a direct
result of payment of expenses relating to the Merger (including the payments to
Joseph G. Dasti and John P. O'Malley referred to in Section 7.7) shall not be
deemed an NMR Material Adverse Effect.
SECTION 5.2 CERTIFICATES OF INCORPORATION AND BY-LAWS. NMR has heretofore
furnished to MRI complete and correct copies of the Certificates of
Incorporation and the By-Laws or the equivalent organizational
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documents, in each case as amended or restated, of NMR and each subsidiary.
Neither NMR nor any subsidiary is in violation of any of the provisions of its
Certificate of Incorporation or By-Laws or certificate of limited partnership,
or equivalent organizational document, as the case may be.
SECTION 5.3 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of NMR consists of (i) 30,000,000 shares of NMR Common
Stock, of which: (v) 6,273,683 shares of NMR Common Stock are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, common
law, NMR's Certificate of Incorporation or By-Laws or, any agreement to which
NMR is a party or is bound or otherwise; (w) 430,797 shares of NMR Common Stock
are held in the treasury of NMR; (x) 454,222 shares of NMR Common Stock are
reserved for future issuance in connection with NMR's outstanding Convertible
Subordinated Debentures (the "Debt Securities"); (y) 1,480,409 shares of NMR
Common Stock are reserved for future issuance pursuant to (1) outstanding
employee stock options (collectively the "NMR Employee Stock Options") granted
pursuant to the 1986 Incentive Stock Option and Non-Statutory Option Plan, as
amended, (the "Employee Option Plan"), and (2) outstanding stock purchase
warrants or other rights to purchase NMR Common Stock (the "NMR Warrants" and,
together with NMR Employee Stock Options, collectively the "Stock Options"); and
(z) 57,337 shares of NMR Common Stock issued to the trustee of NMR's 401(K) Plan
and (ii) 500,000 shares of preferred stock, par value $.05 per share ("NMR
Preferred Stock"), of NMR, of which no shares are issued or outstanding. Each of
the outstanding shares of capital stock of, or other equity interests in, each
of NMR's subsidiaries is duly authorized and validly issued and, if applicable,
fully paid and nonassessable, and such shares or other equity interests owned by
NMR or any subsidiary of NMR are owned free and clear of all security interests,
liens, claims, pledges, agreements, limitations on NMR's or any subsidiary's
voting rights, charges or other encumbrances of any nature whatsoever. As of the
date of this Agreement, there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of any
character to which NMR or any of its subsidiaries is a party relating to the
issued or unissued capital stock or other securities of NMR or any of its
subsidiaries or obligating NMR or any of its subsidiaries to grant, issue or
sell any shares of the capital stock or other securities of NMR or any of its
subsidiaries, by sale, lease, license or otherwise, except (A) as disclosed in
Section 5.3 of the NMR Disclosure Schedule and (B) for NMR's existing stock
option plans to the extent stock options for such shares thereunder have not yet
been granted. As of the date of this Agreement, except as set forth in Section
5.3 of the NMR Disclosure Schedule, there are no obligations, contingent or
otherwise, of NMR or any of its subsidiaries to (x) repurchase, redeem or
otherwise acquire any shares of NMR Common Stock or NMR Preferred Stock, or the
capital stock of, or other equity interests in, any subsidiary of NMR or (y)
(other than advances to subsidiaries in the ordinary course of business) provide
funds to, or make any investment in (in the form of a loan, capital contribution
or otherwise), or provide any guarantee with respect to the obligations of, any
subsidiary of NMR or any other person.
SECTION 5.4 AUTHORITY. NMR has all requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby (other than with respect to
the Merger, the approval and adoption of this Agreement by the holders of the
NMR Common Stock in accordance with Delaware Law). The execution and delivery of
this Agreement by NMR and the consummation by NMR of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on the part of NMR are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other
than, with respect to the approval and adoption of this Agreement, by the
holders of a majority of the outstanding shares of NMR Common Stock in
accordance with Delaware Law). This Agreement has been duly executed and
delivered by NMR and, assuming the due authorization, execution and delivery
thereof by MRI and Sub, constitutes the legal, valid and binding obligation of
NMR, enforceable against NMR in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other laws affecting the enforcement of
creditors' rights in general from time to time in effect and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
SECTION 5.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by NMR does not, and the performance of this
Agreement by NMR and the consummation of the transactions contemplated hereby
will not, excepting any shareholder votes required by Delaware Law, (i) conflict
with or violate the Certificate of Incorporation or By-Laws, or the equivalent
organizational documents, in each case as amended or restated, of NMR or any of
its subsidiaries, (ii) conflict with or violate any federal, state, foreign or
local law, statute, ordinance, rule, regulation, order, judgment, arbitration
award or decree (collectively, "Laws") or NMR Permit (as hereinafter defined) in
effect as of the date of this Agreement and applicable to NMR or any of its
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subsidiaries or by which any of their respective properties is bound or subject
to including, without limitation, Section 203 of Delaware Law or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of NMR or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, order, decree, franchise or other
instrument or obligation to which NMR or any of its subsidiaries is a party or
by which NMR or any of its subsidiaries or any of their respective properties is
bound or is subject to, except for any such conflicts or violations described in
clause (ii) or breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation or liens or encumbrances described in clause (iii)
that would not have a NMR Material Adverse Effect. The Board of Directors of NMR
has taken all actions necessary under Delaware Law, including approving the
transactions contemplated in this Agreement, to ensure that Section 203 of
Delaware Law does not, or will not, apply to the transactions contemplated in
this Agreement. The Board of Directors of NMR has taken all actions necessary or
appropriate to preclude the triggering or applicability of the provisions of
NMR's Stockholders' Rights Agreement to the Merger and transactions contemplated
hereby.
(b) The execution and delivery of this Agreement by NMR does not, and the
performance of this Agreement by NMR and the ownership and operation of the
business and properties of NMR and its subsidiaries by the Surviving Corporation
following the Effective Date will not, as of the date of this Agreement, require
NMR or any of its subsidiaries to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any governmental or
regulatory authority ("Governmental Entities"), except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
state securities or blue sky laws ("Blue Sky Laws") the Hart-Scott-Rodino
Antitrust Improvements Act ("HSR Act"), the New Jersey Industrial Site Recovery
Act ("ISRA"), the NASD, the Philadelphia Stock Exchange and the filing and
recordation of appropriate merger documents as required by Delaware Law and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not, either individually or in
the aggregate, prevent NMR from performing its obligations under this Agreement
or otherwise have a NMR Material Adverse Effect.
SECTION 5.6 PERMITS; COMPLIANCE. Each of NMR and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "NMR Permits"), and there is no
action or proceeding or, to the knowledge of NMR, investigation pending or
threatened regarding suspension or cancellation of any NMR Permits, except where
the failure to possess, or the suspension or cancellation of, such NMR Permits
would not have a NMR Material Adverse Effect. Neither NMR nor any of its
subsidiaries is in conflict with, or in default or violation of (a) any Law or
any rule of professional conduct applicable thereto and applicable to NMR or any
of its subsidiaries or by which any of their respective properties is bound or
subject to or (b) any of NMR Permits, except for any such conflicts, defaults or
violations which would not have a NMR Material Adverse Effect.
SECTION 5.7 REPORTS; FINANCIAL STATEMENTS. (a) Since April 1, 1995, (x) NMR
has filed timely all forms, reports, statements and other documents required to
be filed with (i) the Securities and Exchange Commission (the "SEC") including,
without limitation, (A) all Annual Reports on Form 10-KSB, (B) all Quarterly
Reports on Form 10-QSB, (C) all proxy statements relating to meetings of
stockholders (whether annual or special), (D) all Current Reports on Form 8-K,
(E) all other reports or registration statements and (F) all amendments and
supplements to all such reports and registration statements (collectively
referred to as the "SEC Reports") and (ii) any other applicable state securities
authorities and (y) NMR has filed all forms, reports, statements and other
documents required to be filed with any other applicable federal or state
regulatory authorities, except where the failure to file any such forms,
reports, statements or other documents referred to in this clause (ii) would not
have a NMR Material Adverse Effect (all such forms, reports, statements and
other documents in clauses (x) and (y) of this Section 5.7(a) being referred to
herein, collectively, as the "Reports"). The Reports, including all Reports
filed after the date of this Agreement and prior to the Effective Date, (i) were
or will be prepared in all material respects in accordance with the requirements
of applicable Law (including, with respect to the SEC Reports, the Securities
Act and the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such SEC Reports) and (ii) did not at the time
they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the SEC Reports filed prior to or after
the date of this Agreement (i) have been or will be prepared in accordance with
the published rules and regulations of the SEC and generally accepted accounting
principles and (ii) fairly present or will fairly present the consolidated
financial position of NMR and its subsidiaries as of the respective dates
thereof and consolidated results of operations and cash flows for the periods
indicated (including reasonable estimates of normal and recurring year-end
adjustments), except that (A) any unaudited interim financial statements were or
will be subject to normal and recurring year-end adjustments and (B) any pro
forma financial information contained in such consolidated financial statements
is not necessarily indicative of the consolidated financial position of NMR and
its subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated.
SECTION 5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. During the period
commencing April 1, 1995, and ending on the date of this Agreement, there has
not been (a) a NMR Material Adverse Effect or (b) any change by NMR or its
subsidiaries in their accounting methods, principles or practices.
SECTION 5.9 ABSENCE OF LITIGATION. In addition to the NMR Disclosure
Schedule, except as disclosed in the SEC Reports filed prior to the date of this
Agreement, there is no claim, action, suit, litigation, proceeding, arbitration
or, to the knowledge of NMR, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to the
knowledge of NMR, threatened in writing against NMR or any of its subsidiaries
or any properties or rights of NMR or any of its subsidiaries (except for
claims, actions, suits, litigations, proceedings, arbitrations, or
investigations which, individually or in the aggregate, would not reasonably be
expected to have a NMR Material Adverse Effect), and neither NMR nor any of its
subsidiaries is subject to any continuing order of, consent decree, or, the
knowledge of NMR, continuing investigation by, any Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders,
except for matters which, individually or in the aggregate, would not have a NMR
Material Adverse Effect.
SECTION 5.10 TAXES. Except for such matters that would not have a NMR
Material Adverse Effect and are disclosed in Section 5.10 of the NMR Disclosure
Schedule (a) NMR and its subsidiaries have timely filed or will timely file all
returns and reports required to be filed by them with any taxing authority with
respect to Taxes for any period ending on or before the Effective Date, taking
into account any extension of time to file granted to or obtained on behalf of
NMR and its subsidiaries, (b) all Taxes shown to be payable on such returns or
reports that are due prior to the Effective Date have been paid or will be paid
when due, (c) as of the date hereof, no deficiency for any material amount of
Tax has been asserted or assessed by a taxing authority against NMR or its
subsidiaries, (d) all liability for Taxes of NMR or its subsidiaries that are or
will become due or payable with respect to periods covered by the financial
statements referred to in Section 5.7(b) hereof have been paid or adequately
reserved for on such financial statements and (e) no Tax return or reports of
NMR or any of its subsidiaries are under examination.
SECTION 5.11 CERTAIN BUSINESS PRACTICES. As of the date hereof, except for
such actions which would not have a NMR Material Adverse Effect, neither NMR nor
any of its subsidiaries nor, to the knowledge of NMR, any directors, officers,
agents or employees of NMR or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to government officials or
employees, or (iii) made any other unlawful payment.
SECTION 5.12 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of NMR.
SECTION 5.13 BOARD RECOMMENDATION. The Board of Directors of NMR, at a
meeting duly called and held, has by requisite vote under applicable Laws (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the transactions contemplated thereby, taken together,
are fair to and in the best interests of the stockholders of NMR, and (ii)
resolved to recommend that the holders of the shares of NMR Common Stock approve
this Agreement and the transactions contemplated herein, including the Merger.
SECTION 5.14 BOOKS AND RECORDS. The books of account and other financial
records of NMR and its subsidiaries are in all material respects complete and
correct, are maintained in accordance with good business practices and all Laws
applicable to NMR, and are accurately reflected in the consolidated financial
statements of NMR contained in the SEC Reports. The minute books of NMR contain
accurate records of all meetings, and accurately reflect all other corporate
action of the shareholders and directors of NMR.
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SECTION 5.15 NO UNDISCLOSED LIABILITIES. There are no liabilities of NMR or
any of its subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the consolidated
financial statements contained in the NMR SEC Reports;
(b) liabilities incurred in the ordinary course of business consistent
with past practice since March 31, 1995; and
(c) liabilities which either individually or collectively would not
have an NMR Material Adverse effect.
SECTION 5.16 CONTRACTS. Listed on Section 5.16 of the NMR Disclosure
Schedule are all contracts and agreements of NMR and its subsidiaries, oral (in
which case a summary thereof should be provided) and written, including, but not
limited to, employment contracts, leases and management agreements, which
require the payment by or to NMR or an NMR subsidiary of more than $50,000
annually ($25,000 in the case of employment contracts).
SECTION 5.17 DISCLOSURE. No representation or warranty of NMR in this
Agreement or any document, certificate or statement issued in connection
herewith contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained herein and
therein, in the light of the circumstances in which they were made, not
misleading.
SECTION 5.18 AFFILIATES. Concurrently with the execution and delivery of
this Agreement, NMR has delivered to MRI a letter identifying all persons who,
to the knowledge of NMR, may be deemed to be affiliates of NMR under Rule 145 of
the Securities Act, including, without limitation, all directors and executive
officers of NMR.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF MRI AND SUB
Except as set forth in the Disclosure Schedule to be delivered by MRI and
Sub to NMR (the "MRI Disclosure Schedule"), which shall identify exceptions by
specific Section references, MRI and Sub hereby represent and warrant to NMR
that:
SECTION 6.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of MRI, Sub
and their subsidiaries is a corporation or limited partnership, as the case may
be, duly incorporated (if a corporation), duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be in good standing, or to have such power and authority, or to be duly
qualified and in good standing, as the case may be, would not have a MRI
Material Adverse Effect. The term "MRI Material Adverse Effect" as used in this
Agreement shall mean any event, change or effect that, individually or when
taken together with all other such events, changes or effects, would be
materially adverse to the condition (financial or otherwise), prospects,
properties, assets, business or operations of MRI and all of its subsidiaries,
taken as a whole, at the time of such event, change or effect.
SECTION 6.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. MRI has heretofore
furnished to NMR complete and correct copies of the Certificates of
Incorporation and the By-Laws or the equivalent organizational documents in each
case, as amended or restated, of MRI and each subsidiary. Neither MRI nor any
subsidiary is in violation of any of the provisions of its Certificate of
Incorporation or By-Laws or Certificate of Limited Partnership, or equivalent
organizational documents, as the case may be.
SECTION 6.3 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of MRI consists of (a) 20,000,000 shares of MRI Common
Stock and (b) 100,000 shares of preferred stock, par value $.01 per share ("MRI
Preferred Stock"). As of the date of this Agreement: (i) 8,970,262 shares of MRI
Common Stock are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, common law, MRI's Certificate of Incorporation or
By-Laws, or any agreement to which MRI is a party or is bound or otherwise; (ii)
265,000 shares of MRI Common Stock are held in treasury; and (iii) 1,307,125
shares of MRI Common Stock are reserved for future issuance pursuant to
outstanding stock options and warrants issued to certain officers, employees,
directors, consultants and other persons. As of the
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date of this Agreement, 128 shares of MRI Preferred Stock are issued and
outstanding. The shares of MRI Common Stock to be issued in the Merger have been
duly authorized and, when issued in accordance with the Merger, will be validly
issued, fully paid and nonassessable. Each of the outstanding shares of capital
stock of, or other equity interests in, each of MRI's subsidiaries is duly
authorized and validly issued and, if applicable, fully paid and nonassessable.
As of the date of this Agreement, there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of any
character to which MRI or any of its subsidiaries is a party relating to the
issued or unissued capital stock or other securities of MRI to grant, issue or
sell any shares of the capital stock or other securities of MRI or any of its
subsidiaries, by sale, lease, license or otherwise, except (A) as disclosed in
Section 6.3 of the MRI Disclosure Schedule and (B) for options to purchase MRI
Common Stock under MRI's existing stock option plans to the extent stock options
for such shares thereunder have not yet been granted. As of the date of this
Agreement, there are no obligations, contingent or otherwise, of MRI or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of MRI
Common Stock.
SECTION 6.4 AUTHORITY. Each of MRI and Sub has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby
(other than with respect to the Merger, the approval and adoption of this
Agreement by the holders of the MRI Common Stock in accordance with applicable
law or the rules of the NASD). The execution and delivery of this Agreement by
MRI and Sub and the consummation by MRI and Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of MRI or Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the approval and adoption of this Agreement, by the holders of a
majority of the outstanding shares of MRI Common Stock in accordance with
Delaware Law). This Agreement has been duly executed and delivered by MRI and
Sub and, assuming the due authorization, execution and delivery thereof by NMR,
constitutes a legal, valid and binding obligation of MRI and Sub enforceable
against MRI and Sub in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other laws affecting the enforcement of
creditors' rights in general from time to time in effect and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
SECTION 6.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by MRI and Sub does not, and the performance of
this Agreement by MRI and Sub and the consummation of the transactions
contemplated hereby will not, excepting any shareholder votes required by
applicable law or the rules of the NASD, (i) conflict with or violate the
Certificate of Incorporation or By-Laws, as amended or restated, of MRI or Sub,
(ii) conflict with or violate any Laws or MRI Permit (as hereinafter defined) in
effect as of the date of this Agreement applicable to MRI or Sub or by which any
of their respective properties is bound or subject to, including, without
limitation, Section 203 of Delaware Law or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on the properties or assets of MRI or Sub pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit, order,
decree, franchise or other instrument or obligation to which MRI or Sub is a
party or by which MRI or Sub or any of their respective properties is bound or
subject to, except for any such conflicts or violations described in clause (ii)
or breaches, defaults, events, rights of termination, amendment, acceleration or
cancellation or liens or encumbrances described in clause (iii) that would not
have a MRI Material Adverse Effect. The Board of Directors of MRI has taken all
actions necessary under Delaware Law, including approving the transactions
contemplated in this Agreement, to ensure that Section 203 of Delaware Law does
not, or will not, apply to the transactions contemplated in this Agreement. As
used herein, "MRI Permit" shall mean all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary for MRI and its subsidiaries to own, lease and
operate its properties and to carry on its business as it is now being
conducted.
(b) The execution and delivery of this Agreement by MRI and Sub does not,
and the performance of this Agreement by MRI and Sub will not, as of the date of
this Agreement, require MRI or any subsidiary of MRI to obtain any consent,
approval, authorization or permit of, or to make any filing with or notification
to, any Governmental Entities, except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, HSR Act and ISRA and the
filing and recordation of appropriate merger documents as required by Delaware
Law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent either MRI or Sub from
performing its obligations under this Agreement or otherwise have a MRI Material
Adverse Effect.
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SECTION 6.6 PERMITS; COMPLIANCE. Each of MRI and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "MRI Permits"), and there is no
action or proceeding or, to the knowledge of MRI, investigation pending or
threatened regarding suspension or cancellation of any MRI Permits, except where
the failure to possess, or the suspension or cancellation of, such MRI Permits
would not have a MRI Material Adverse Effect. Neither MRI nor any of its
subsidiaries is in conflict with, or in default or violation of (a) any Law or
any rule of professional conduct applicable thereto and applicable to MRI or any
of its subsidiaries or by which any of their respective properties is bound or
subject to or (b) any of MRI Permits, except for any such conflicts, defaults or
violations which would not have a MRI Material Adverse Effect.
SECTION 6.7 REPORTS; FINANCIAL STATEMENTS. (a) Since January 1, 1996, MRI
and its subsidiaries have timely filed (i) all forms, reports, statements and
other documents required to be filed with (A) the SEC, including, without
limitation, (1) all Annual Reports on Form 10-K, (2) all Quarterly Reports on
Form 10-Q, (3) all proxy statements relating to meetings of stockholders
(whether annual or special), (4) all Current Reports on Form 8-K, (5) all other
reports or registration statements and (6) all amendments and supplements to all
such reports and registration statements (collectively, the "MRI SEC Reports")
and (B) any other applicable state securities authorities and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities, except where the failure to
file any such forms, reports, statements or other documents referred to in this
clause (ii) would not have a MRI Material Adverse Effect (all such forms,
reports, statements and other documents in clauses (i) and (ii) of this Section
6.6(a) being referred to herein, collectively, as the "MRI Reports"). The MRI
Reports, including all MRI Reports filed after the date of this Agreement and
prior to the Effective Date (x) were or will be prepared in all material
respects in accordance with the requirements of applicable Law (including, with
respect to the MRI SEC Reports, the Securities Act and the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such MRI SEC Reports) and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the MRI SEC Reports filed prior to, on
or after the date of this Agreement (i) have been or will be prepared in
accordance with the published rules and regulations of the SEC and generally
accepted accounting principles and (ii) fairly present or will fairly present
the consolidated financial position of MRI and its subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated (including reasonable estimates of normal and
recurring year-end adjustments), except that (A) any unaudited interim financial
statements were or will be subject to normal and recurring year-end adjustments
and (B) any pro forma financial information contained in such consolidated
financial statements is not necessarily indicative of the consolidated financial
position of MRI and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated.
SECTION 6.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. During the period
commencing January 1, 1996 and ending on the date of this Agreement, there has
not been (a) a MRI Material Adverse Effect or (b) any change by MRI or its
subsidiaries in their accounting methods, principles or practices.
SECTION 6.9 ABSENCE OF LITIGATION. In addition to the MRI Disclosure
Schedule, except as disclosed in the SEC Reports filed prior to the date of this
Agreement, there is no claim, action, suit, litigation, proceeding, arbitration
or, to the knowledge of MRI, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to the
knowledge of MRI, threatened in writing against MRI or any of its subsidiaries
or any properties or rights of MRI or any of its subsidiaries (except for
claims, actions, suits, litigations, proceedings, arbitrations, or
investigations which, individually or in the aggregate, would not reasonably be
expected to have a MRI Material Adverse Effect), and neither MRI nor any of its
subsidiaries is subject to any continuing order of, consent decree, or, the
knowledge of MRI, continuing investigation by, any Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders,
except for matters which, individually or in the aggregate, would not have a MRI
Material Adverse Effect.
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SECTION 6.10 TAXES. Except for such matters that would not have a MRI
Material Adverse Effect and are disclosed in Section 6.10 of the MRI Disclosure
Schedule (a) MRI and its subsidiaries have timely filed or will timely file all
returns and reports required to be filed by them with any taxing authority with
respect to Taxes for any period ending on or before the Effective Date, taking
into account any extension of time to file granted to or obtained on behalf of
MRI and its subsidiaries, (b) all Taxes shown to be payable on such returns or
reports that are due prior to the Effective Date have been paid or will be paid
when due, (c) as of the date hereof, no deficiency for any material amount of
Tax has been asserted or assessed by a taxing authority against MRI or its
subsidiaries, (d) all liability for Taxes of MRI or its subsidiaries that are or
will become due or payable with respect to periods covered by the financial
statements referred to in Section 6.7(b) hereof have been paid or adequately
reserved for on such financial statements and (e) no Tax return or reports of
MRI or any of its subsidiaries are under examination.
SECTION 6.11 CERTAIN BUSINESS PRACTICES. As of the date hereof, except for
such actions which would not have a MRI Material Adverse Effect, neither MRI nor
any of its subsidiaries nor, to the knowledge of MRI, any directors, officers,
agents or employees of MRI or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to government officials or
employees, or (iii) made any other unlawful payment.
SECTION 6.12 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of MRI.
SECTION 6.13 BOOKS AND RECORDS. The books of account and other financial
records of MRI and its subsidiaries are in all material respects complete and
correct, are maintained in accordance with good business practices and all Laws
applicable to MRI, and are accurately reflected in the consolidated financial
statements of MRI contained in the SEC Reports. The minute books of MRI contain
accurate records of all meetings, and accurately reflect all other corporate
action of the shareholders and directors of MRI.
SECTION 6.14 CONTRACTS. Listed on Section 6.14 of the MRI Disclosure
Schedule are all contracts and agreements of MRI and its subsidiaries, oral (in
which case a summary thereof should be provided) and written, including, but not
limited to, employment contracts, leases and management agreements, which
require the payment by or to MRI or an MRI subsidiary of more than $50,000
annually ($25,000 in the case of employment contracts).
SECTION 6.15 NO UNDISCLOSED LIABILITIES. There are no liabilities of MRI or
any of its subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than:
(a) liabilities disclosed or provided for in the consolidated
financial statements contained in the MRI SEC Reports;
(b) liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1995; and
(c) liabilities which either individually or collectively would not
have an MRI Material Adverse effect.
SECTION 6.16 BOARD RECOMMENDATION. The Board of Directors of MRI, at a
meeting duly called and held, has by requisite vote under applicable laws, (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the transactions contemplated thereby, taken together,
are fair to and in the best interests of the stockholders of MRI, and (ii)
resolved to recommend that the holders of the shares of MRI Common Stock approve
this Agreement and the transactions contemplated herein, including the Merger.
SECTION 6.17 DISCLOSURE. No representation or warranty of MRI or Sub in
this Agreement or in any document, certificate or statement issued in connection
herewith contains any untrue statement of a material fact, or omits to state any
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE 7
COVENANTS
SECTION 7.1 AFFIRMATIVE COVENANTS OF NMR AND MRI. (a) Each of NMR and MRI
hereby covenants and agrees that, during the period commencing on the date
hereof and continuing until the Effective Date unless
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otherwise expressly contemplated by this Agreement or consented to in writing by
the other party, it will and will cause its subsidiaries to:
(i) operate its business only in the usual and ordinary course
consistent with past practices;
(ii) use its best efforts to preserve substantially intact its
business organizations, maintain its rights and franchises, retain the
services of its key employees and maintain its relationships with its
customers and suppliers, and otherwise operate its business in a manner
that breaches no Material Contract (as defined);
(iii) use its best efforts to maintain and keep its business
relationships intact and unimpaired, and its properties and assets in as
good repair and condition as at present, ordinary wear and tear excepted;
(iv) use its best efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that currently
maintained;
(v) promptly advise the other party of the commencement of, or threat
or (to the extent that such threat comes to its knowledge), any claim,
action, suit, proceeding or investigation against, relating to or involving
it or any of its directors, officers, employees, agents or consultants in
connection with its businesses or the transactions contemplated hereby;
(vi) provide the other party with unaudited quarterly consolidating
balance sheets and income statements and unaudited quarterly statements of
cash position for each fiscal quarter following the date of this Agreement
as soon as practicable following the end of each such fiscal quarter and
provide the other party with monthly management reports; and
(vii) promptly provide the other party with copies of any and all
reports or documents filed with the Securities and Exchange Commission.
(b) NMR will cause its transfer agent to make stock transfer records
relating to, and stockholder lists of, NMR available to the extent reasonably
necessary to effectuate the intent of this Agreement.
SECTION 7.2 NEGATIVE COVENANTS OF NMR. Except as expressly contemplated by
this Agreement or otherwise consented to in writing by MRI, from the date of
this Agreement until the Effective Date, NMR will not do, and will not permit
any of its subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become payable to
any director, officer or employee earning more than $75,000 or being
increased to more than $75,000 (provided, however, that NMR may increase
the compensation of any employee consistent with NMR's customary annual
salary increase practices which, in any event, shall not exceed 10% of an
employee's salary and provided further that NMR and MRI shall consult and
mutually agree upon any transition bonuses and provided further that on the
Effective Date, NMR may pay to Joseph G. Dasti and John P. O'Malley the
termination payments which are a condition to the effectiveness of their
respective Non-Competition and Consulting Agreements referred to in Section
8.7); (ii) grant any severance or termination pay (other than pursuant to
the normal severance policy of it or its subsidiaries as in effect on the
date of this Agreement) to, or enter into any employment or severance
agreement with, any director, officer or employee other than employment
agreements entered into with the consent of MRI, which consent shall not be
unreasonably withheld); or (iii) establish, adopt, enter into or amend any
employee benefit plan or arrangement except as may be required by
applicable Law;
(b) declare or pay any dividend on, or make any other distribution
(however characterized) in respect of, outstanding shares of its capital
stock, except for dividends by its subsidiaries to it or another of its
subsidiaries in accordance with past practice;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its subsidiaries' capital stock or equity interest or any securities or
obligations convertible into or exchangeable for any shares of its or its
subsidiaries' capital stock or equity interest (other than any such
acquisition directly from any of its wholly-owned subsidiaries in exchange
for capital contributions or loans to such subsidiaries), or any options,
warrants or conversion or other rights to acquire any shares of its or its
subsidiaries' capital stock or any such securities or obligations (except
in connection with the exercise of outstanding stock options or stock
purchase warrants referred to herein, in accordance with their terms or, in
connection with the conversion of convertible debentures, in accordance
with their terms); (ii) effect any reorganization or recapitalization; or
(iii) split, combine or reclassify any of its or its subsidiaries' capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its or its
subsidiaries' capital stock;
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(d) except as otherwise provided by the last paragraph of this Section
7.2, (i) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale (including the grant of any
security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its or its
subsidiaries' capital stock or other securities (including shares held in
treasury), any securities convertible into or exercisable or exchangeable
for any such shares, or any rights, warrants or options to acquire, any
such shares (except for the issuance of shares upon the exercise of
outstanding stock options, stock purchase warrants or the conversion of
outstanding convertible debentures, in accordance with their terms or the
issuance of shares consistent with past practices to the trustee of NMR's
401 (K) Plan); (ii) amend or otherwise modify the terms of any such rights,
warrants or options the effect of which shall be to make such terms more
favorable to the holders thereof; or (iii) subject to Section 2.1(c), take
any action to accelerate the vesting of any of the stock options;
(e) except as otherwise provided by the last paragraph of this Section
7.2, acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division (other than a wholly-owned
subsidiary) thereof, or otherwise acquire or agree to acquire any assets of
any other person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business and consistent with past
practice) in each case which are material, individually or in the
aggregate, to it and its subsidiaries, taken as a whole;
(f) except as otherwise provided by the last paragraph of this Section
7.2, sell, lease, exchange, mortgage, pledge, transfer or otherwise dispose
of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its assets or any assets of any of its
subsidiaries outside of the ordinary course of business; provided, however,
that the foregoing shall not prohibit NMR from proceeding with the
dissolution of Austin MRI Partners, L.P. or pledging any assets to secure
obligations permitted to be incurred by Section 7.1(i) hereof;
(g) propose or adopt any amendments to its Certificate of
Incorporation or By-Laws, except as otherwise provided in Section 7.2(g) of
NMR's Disclosure Schedule, or its Stockholders Rights Agreements;
(h) (i) change any of its methods of accounting in effect, or (ii)
make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes (except where the
amount of such settlements or controversies, individually or in the
aggregate, does not exceed $50,000), or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the
taxable year ended March 31, 1996, except as may be required by Law or
generally accepted accounting principles;
(i) except as set forth in Section 7.2(i) of the NMR Disclosure
Schedule to be provided to MRI by the Due Diligence Date (as defined) or in
conjunction with any of the transactions permitted under the last paragraph
of this Section, incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except (i) obligations arising from establishment of a
line of credit or similar arrangement not exceeding $6.5 million in the
aggregate and borrowings under such line of credit or similar arrangement
not in excess of $500,000; or (ii) in the ordinary course of business
consistent with past practice and not in excess of $100,000 in the
aggregate;
(j) enter into any material arrangement, agreement or contract with
any third party, other than professional services agreements with
radiologists, which provides for an exclusive arrangement with that third
party or is substantially more restrictive on NMR, or substantially less
advantageous to NMR, than arrangements, agreements or contracts existing on
the date hereof;
(k) amend any of the material terms or provisions of its capital
stock;
(l) except as set forth in Section 7.2(l) of the NMR Disclosure
Schedule, to be delivered to MRI by the Due Diligence Date (i) make any
capital expenditures individually in excess of $50,000 or in the aggregate
in excess of $100,000, (ii) enter into or terminate (except in the ordinary
course of business and consistent with past practice) any lease of, or
purchase or sell, any real property, or (iii) enter into any leases of
personal property involving individually in excess of $50,000 annually or
in the aggregate in excess of $100,000 annually; and
(m) agree in writing or otherwise to do any of the foregoing.
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Notwithstanding anything contained in the foregoing Section 7.2 or any
other provision of this Agreement, NMR or affiliates may, (A) without the
consent of MRI, (i) effect the sale of the business of the Cape Coral, Florida
facility in the event Cape Coral Hospital exercises its option to purchase such
business pursuant to the existing ground lease between a subsidiary of NMR and
Cape Coral Hospital, (ii) immediately, prior to the Effective Date, transfer
ownership to Mr. Dasti (or his designee) of the "key man" life insurance policy
owned by NMR, which insures Mr. Dasti's life and transfer ownership to Mr.
O'Malley (or his designee) of the "key man" life insurance policy owned by MRI,
which insures Mr. O'Malley's life, (iii) restructure the financial terms of any
outstanding indebtedness of NMR on terms which are more favorable to NMR than
what then exists and (iv) renew existing or enter into new professional services
agreements with radiologists, in accordance with past practices; and (B) with
the prior written consent of MRI, (i) become a joint venturer with Illinois
Masonic Medical Center to operate a diagnostic imaging center pursuant to the
terms of that certain Agreement dated April 21, 1993 among Illinois Masonic
Medical Center, MR Associates of Chicago and Imaging Networks, Inc., or (ii)
enter into a joint venture arrangement with Parrish Medical Center for the
installation and operation of magnetic resonance imaging equipment.
SECTION 7.3 NEGATIVE COVENANTS OF MRI. Except as expressly contemplated by
this Agreement or otherwise consented to in writing by NMR, from the date of
this Agreement until the Effective Time, MRI will not do, and will not permit
any of its subsidiaries to do, any of the following:
(a) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock, except for dividends
by its subsidiaries to it or another of its subsidiaries in accordance with
past practice;
(b) (i) redeem, purchase or otherwise acquire any shares of its or any
of its subsidiaries' capital stock or equity interest or any securities or
obligations convertible into or exchangeable for any shares of its or its
subsidiaries' capital stock or equity interest (other than any such
acquisition directly from any of its wholly-owned subsidiaries in exchange
for capital contributions or loans to such subsidiaries), or any options,
warrants or conversion or other rights to acquire any shares of its or its
subsidiaries' capital stock or any such securities or obligations (except
in connection with the exercise of outstanding stock options or stock
purchase warrants referred to herein, in accordance with their terms or, in
connection with the conversion of convertible debentures, in accordance
with their terms); (ii) effect any reorganization or recapitalization; or
(iii) split, combine or reclassify any of its or its subsidiaries' capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its or its
subsidiaries' capital stock;
(c) propose or adopt any amendments to its Certificate of
Incorporation or By-Laws, except as otherwise provided in Section 7.2(c) of
MRI's Disclosure Schedule;
(d) (i) change any of its methods of accounting in effect, or (ii)
make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes (except where the
amount of such settlements or controversies, individually or in the
aggregate, does not exceed $50,000), or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the
taxable year ended December 31, 1995, except as may be required by Law or
generally accepted accounting principles;
(e) enter into any material arrangement, agreement or contract with
any third party, other than radiology contracts which provides for any
exclusive arrangement with that third party or is substantially more
restrictive on MRI, or substantially less advantageous to MRI, than
arrangements, agreements or contracts existing on the date hereof;
provided, however, that MRI shall be permitted to renew existing or enter
into new professional services agreements with radiologists in accordance
with past practice;
(f) amend any of the material terms or provision of its capital stock;
(g) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its or its
subsidiaries' capital stock or other securities (including shares held in
treasury), any securities convertible into or exercisable or exchangeable
for any such shares, or any rights, warrants or options to acquire, any
such shares (except for the issuance of shares upon the exercise of
outstanding stock options, stock purchase warrants or the conversion of
outstanding convertible debentures, in accordance with their terms or (ii)
amend or otherwise modify the terms of any such rights,
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warrants or options, the effect of which shall be to make such terms more
favorable to the holders thereof; provided, however, that until the earlier
to occur of (A) July 31, 1996 or (B) the date upon which NMR and MRI shall
have submitted written responses to the SEC's initial comments to the
Registration Statement (as such term is defined in Section 8.2) (such
earlier date is herein referred to as the "Transaction Termination Date")
the Company may enter into definitive agreements relating to Permitted
Transactions (as that term is defined herein below), and consummate such
transactions thereafter; a "Permitted Transaction" is one or more
acquisitions by MRI of entities related to MRI's core businesses with
aggregate consideration in the form of cash, securities or notes, not
exceeding $15,000,000 (excluding the assumption of debt of the acquired
entities);
(h) other than in connection with Permitted Transactions in which
definitive agreements are entered into on or prior to the Transaction
Termination Date (which Permitted Transactions may be consummated after
such date), acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division (other than a wholly-owned
subsidiary) thereof, or otherwise acquire or agree to acquire any assets of
any other person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business and consistent with past
practice) in each case which are material, individually or in the
aggregate, to it and its subsidiaries, taken as a whole;
(i) other than in connection with Permitted Transactions in which
definitive agreements are entered into on or prior to the Transaction
Termination Date (which Permitted Transactions may be consummated after
such date), sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its assets or any assets of any of its
subsidiaries outside of the ordinary course of business;
(j) agree in writing or otherwise to do any of the foregoing.
SECTION 7.4 ACCESS AND INFORMATION. Between the date of this Agreement and
the Effective Date or earlier termination of this Agreement, each of MRI and NMR
shall, and shall cause its subsidiaries to (i) afford the other party and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, the "Representatives") access upon
reasonable prior notice to its officers, employees, agents, properties, offices
and other facilities and to the books and records thereof and (ii) furnish
promptly to the other party and its Representatives such information concerning
the business, properties, contracts, records and personnel of it and its
subsidiaries (including, without limitation, financial, operating and other data
and information) as may be requested, from time to time, by the other party. All
of such data and information shall be subject to the terms and conditions of the
confidentiality agreement each signed for the benefit of the other party dated
May 1, 1996 (the "Confidentiality Agreement").
SECTION 7.5 CONFIDENTIALITY. The parties will comply with all of their
respective obligations under the Confidentiality Agreement.
SECTION 7.6 NO SOLICITATION OF BUSINESS TRANSACTIONS BY NMR; FEE PAYABLE
FOR VIOLATION. (a) Between the date hereof and the earlier to occur of (i)
termination of this Agreement in the event that this Agreement is terminated
pursuant to Sections 10.1(a), 10.1(b), 10.1(c), 10.1(d) or 10.1(i); (ii) January
31, 1997 in the event that this Agreement is terminated pursuant to Section
10.1(e) and (iii) three months following the date this Agreement terminates, but
no later than January 31, 1997, in the event this Agreement terminates pursuant
to Section 10.1(f), 10.1(g) or 10.1(h) (the "No-Shop Period"), neither NMR nor
MRI (the "Target Company," as the case may be) shall, nor shall it permit any of
its principals, agents or representatives to initiate, solicit or encourage
(including by way of furnishing information or assistance), or take any other
action intended to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Business Transaction
(as hereinafter defined), or enter into discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Business Transaction,
or agree to or endorse any Business Transaction, or authorize or permit any of
its officers, directors or employees or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by its or any of its subsidiaries to take any such
action; provided, however, that nothing contained in this subsection (a) shall
prohibit the Board of Directors of the Target Company from (i) furnishing
information to, or entering into discussions or negotiations with, any persons
or entity in connection with an unsolicited bona fide proposal by such person or
entity to enter into a Business Transaction if, and only to the extent that (A)
the Board of Directors of the Target Company, after consultation with
independent legal counsel
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(which may include its regularly engaged outside legal counsel), determines in
good faith that such action is required for the Board of Directors of the Target
Company to comply with its fiduciary duties to stockholders imposed by Delaware
Law and (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Target Company (x)
provides written notice to the other party (the "Other Party") to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity and, unless the Target Company receives
the written advice of counsel from the Target Company's independent counsel that
disclosure would violate Delaware law, promptly notify the Other Party of all
relevant terms of any such inquiries and proposals received relating to any of
such matters, and (y) receives from such person or entity an executed
confidentiality agreement on terms no less favorable to NMR or MRI than those
contained in the Confidentiality Agreement between NMR and MRI; or (ii)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
Business Transaction. For purposes of this Agreement, "Business Transaction"
shall be defined as any merger, acquisition, whether in the form of a
consolidation, share exchange or otherwise having an aggregate value of $35
million or more; or any sale, transfer, lease or other disposition of 50% or
more of the assets of the Target Company and its subsidiaries or 50% of the
capital stock of the Target Company, in each case, in a transaction or related
series of transactions.
(b) If the Target Company publicly announces its intention to or enters
into an agreement providing for a Business Transaction on or prior to the end of
the No-Shop Period (the "Transaction Event"), the Target Company shall pay to
the Other Party, in consideration of the time, effort and resources expended in
connection herewith, $2,000,000 (less any amounts paid by the Target Company to
the Other Party pursuant to Section 10.5(c)) plus any fees and expenses incurred
in connection with collecting such amount (the "Transaction Fee"). The
Transaction Fee shall be payable no later than ten business days after the
Transaction Event and shall be made by wire transfer of immediately available
funds to an account designated by the Other Party.
SECTION 7.7 ADDITIONAL AFFIRMATIVE COVENANT OF MRI. MRI agrees that it
shall, simultaneous with the Effective Date, make a capital contribution to NMR
in such amount, if any, as shall be necessary to permit NMR to make the
termination payments to Joseph G. Dasti and John P. O'Malley which are a
condition to the effectiveness of their respective Non-Competition and
Consulting Agreements referred to in Section 8.7.
SECTION 7.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION. In the event the
Merger shall become effective, then from and after the Effective Date, MRI and
the Surviving Corporation (the "Indemnifying Parties") shall indemnify, defend
and hold harmless each person who is now, or who becomes prior to the Effective
Date, an officer, director, employee or agent of MRI or NMR (the "Indemnified
Parties") against (i) all losses, claims, damages, cost, expenses, liability or
judgment or amounts paid with the approval of the Indemnifying Party (which
approval shall not be unreasonably withheld) in settlement of or in connection
with any claim, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was an officer, director, employee or agent of MRI or NMR, whether pertaining to
any matter existing or occurring at or prior to the Effective Date, and whether
asserted or claimed prior to, at or after, the Effective Date (the "Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on
or arising in whole or in part out of or pertaining to this Agreement or the
transactions contemplated hereby, including, without limitation, any Indemnified
Liabilities arising under or out of any state or federal securities laws, in
each case to the fullest extent permitted by law (and MRI and the Surviving
Corporation, as the case may be, shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking that may be
required by law).
ARTICLE 8
ADDITIONAL AGREEMENTS
SECTION 8.1 MEETINGS OF STOCKHOLDERS. NMR and MRI shall each, promptly
after the date of this Agreement, take all action necessary in accordance with
Delaware Law, NASDAQ and their respective Certificates of Incorporation and
By-Laws to convene the Stockholders' Meeting of its stockholders to act on this
Agreement. NMR and MRI shall each use its reasonable best efforts to solicit
from their respective stockholders proxies in favor of the approval and adoption
of this Agreement and to secure the vote or consent of stockholders required by
Delaware Law or NASDAQ to approve and adopt this Agreement, unless otherwise
required by the applicable fiduciary duties of the directors of NMR or MRI, as
determined by such directors in good faith after consultation with independent
legal counsel.
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SECTION 8.2 REGISTRATION STATEMENT; PROXY STATEMENT. (a) As promptly as
practicable after the execution of this Agreement, MRI shall prepare and file
with the SEC a registration statement on Form S-4 (the registration statement,
together with the amendments thereto, being the "Registration Statement"),
containing a proxy statement/prospectus, in connection with the registration
under the Securities Act of the MRI Common Stock constituting the Merger
Consideration and the other transactions contemplated by the Agreement. As
promptly as practicable after the execution of this Agreement, NMR and MRI shall
prepare and file with the SEC a Joint Proxy Statement that will be the same
proxy statement/prospectus contained in the Registration Statement, and a form
of proxy, in connection with the votes of NMR's and MRI's stockholders with
respect to the Merger (such proxy statement/prospectus, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to NMR's and MRI's stockholders, being the "Proxy Statement"). Each of
MRI and NMR will use all reasonable best efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and shall
take any action required to be taken under any applicable federal or state
securities laws in connection with the issuance of shares of MRI Common Stock in
the Merger. Each of MRI and NMR shall furnish all information concerning it and
the holders of its capital stock as the other may reasonably request in
connection with such actions. As promptly as practicable after the Registration
Statement shall have become effective, NMR and MRI shall mail the Proxy
Statement to their respective stockholders. The Proxy Statement shall include
the recommendations of NMR's and MRI's Board of Directors in favor of the Merger
unless otherwise required by the applicable fiduciary duties of the directors of
NMR or MRI, as determined by such directors in good faith after consultation
with independent legal counsel. The parties shall use their best efforts to file
the Registration Statement and Proxy Statement no later than eight weeks
following the date of this Agreement.
(b) The information supplied by MRI to NMR for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The information supplied by MRI for
inclusion in the Proxy Statement to be sent to the stockholders of NMR and MRI
in connection with the Stockholders Meetings shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders, at the time of the Stockholders' Meetings or at the Effective
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Date any event or circumstance
relating to MRI or any of its affiliates, or its or their respective officers or
directors, should be discovered by MRI which should be set forth in an amendment
to the Registration Statement or a supplement to the Proxy Statement, MRI shall
promptly inform NMR. All documents that MRI is responsible for filing with the
SEC in connection with the transactions contemplated herein will comply as to
form and substance in all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder.
(c) The information supplied by NMR for inclusion in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. The information supplied by NMR for inclusion
in the Proxy Statement in connection with the Stockholders' Meetings shall not,
at the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to stockholders, at the time of the Stockholders' Meetings or at
the Effective Date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Date any event
or circumstance relating to NMR or any of its respective affiliates, or to their
respective officers or directors, should be discovered by NMR which should be
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, NMR shall promptly inform MRI. All documents that NMR is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
SECTION 8.3 APPROPRIATE ACTION; CONSENTS; FILINGS. (a) NMR and MRI shall
each use their best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate, satisfy the conditions to, and
make effective the transactions contemplated by this Agreement, (ii) obtain from
any Governmental Entities or other persons any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
MRI or
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NMR or any of their subsidiaries in connection with the authorization, execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein, including, without limitation, the Merger, (iii) make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
and the Exchange Act and the rules and regulations thereunder, and any other
applicable federal or state securities laws, and (B) any other applicable Law;
provided that MRI and NMR shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the nonfiling party and its advisors prior to filing and, if requested, to
accept all reasonable additions, deletions or changes suggested in connection
therewith. To assist in obtaining necessary consents from NMR's lenders, MRI Sub
agrees to offer the type and nature of collateral, guaranty and other security
at Closing to secure NMR's existing indebtedness which is no less favorable to
NMR's present lenders than the assets which currently secure the NMR
indebtedness. NMR and MRI shall furnish all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable Law (including all information required to be included in the
Proxy Statement and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) Without limiting the application of Article X hereof and subject to the
respective fiduciary obligations of the directors of NMR and MRI, each of NMR
and MRI agree to cooperate and use their best efforts vigorously to contest and
resist any action, including administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that is
in effect and that restricts, prevents or prohibits the consummation of the
Merger or any other transactions contemplated by this Agreement, including,
without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal; provided, however, that in no event shall
either party take, or be required to take, any action that would have a NMR
Material Adverse Effect or a MRI Material Adverse Effect.
(c) Each of NMR and MRI shall give (or shall cause their respective
subsidiaries to give) any notices to third parties, and use, and cause their
respective subsidiaries to use, its best efforts to obtain any third party
consents (i) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement, (ii) disclosed or required to be disclosed in
the NMR Disclosure Schedule or the MRI Disclosure Schedule, as the case may be,
(iii) otherwise required under any contracts, licenses, leases or other
agreements in connection with the consummation of the transactions contemplated
herein or (iv) required to prevent a NMR Material Adverse Effect from occurring
prior to or after the Effective Date or a MRI Material Adverse Effect from
occurring prior to or after the Effective Date.
(d) In the event that either party shall fail to obtain any third party
consent described in subsection (c) above, such party shall use its best
efforts, and shall take any such actions reasonably requested by the other party
hereto, to minimize any adverse effect upon NMR and MRI, their respective
subsidiaries, and their respective businesses resulting, or which could
reasonably be expected to result, after the Effective Date, from the failure to
obtain such consent.
SECTION 8.4 AFFILIATES. NMR will advise its affiliates (as such term is
defined in Rule 405 under the Securities Act) of the resale restrictions imposed
by federal securities laws, including Rule 145 under the Securities Act on the
shares of MRI Common Stock received by them pursuant to the Merger, and will use
its best efforts to obtain from each such affiliate a letter stating that such
affiliate is aware of such restrictions.
SECTION 8.5 PUBLIC ANNOUNCEMENTS. Unless otherwise required by applicable
Law or stock exchange requirements or the requirements of the NASD (and in that
event only if time does not permit), MRI and NMR shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Merger and the transactions contemplated thereby and shall not
issue any such press release or make any such public statement prior to such
consultation.
SECTION 8.6 NASDAQ LISTING. MRI shall use its best efforts to cause the
shares of MRI Common Stock to be issued in connection with the Merger to be
approved for quotation on the NASDAQ-National Market System prior to the
Effective Date.
SECTION 8.7 EXISTING EXECUTIVE EMPLOYMENT ARRANGEMENTS. NMR shall enter
into agreements with Messrs. Joseph G. Dasti and John P. O'Malley in the form
annexed hereto as Exhibit 8.7A (the "NMR Executive Agreements"). MRI shall enter
into non-competition and consulting agreements with Messrs. Dasti and O'Malley
in the form annexed hereto as Exhibit 8.7B (the "Non-Competition and Consulting
Agreements").
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SECTION 8.8 DISCLOSURE SCHEDULES. Each of NMR and MRI shall deliver their
Disclosure Schedules to the other within fifteen business days from the date of
this Agreement.
SECTION 8.9 FINANCIAL ADVISORS. Each of NMR and MRI shall retain a
nationally recognized investment banking firm to render its written opinion to
its Board of Directors to the effect that the terms of the Merger are fair, from
a financial point of view, to such party and its stockholders. The firm retained
by NMR is referred to herein as "NMR's Financial Advisor" and the firm retained
by MRI is referred to herein as "MRI's Financial Advisor."
ARTICLE 9
CLOSING CONDITIONS
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
The respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Date of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings
for that purpose shall have been initiated by the SEC. All necessary state
securities and blue sky permits, approvals and exemption orders required in
connection with the transactions contemplated by this Agreement shall have
been obtained.
(b) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite votes of the stockholders of
each of NMR and MRI.
(c) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(d) HSR Act. The waiting period under the HSR Act, if applicable,
shall have expired or been terminated.
SECTION 9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF MRI. The obligations of
MRI to effect the Merger and the other transactions contemplated herein are also
subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions (any of which may be waived by MRI in its sole discretion):
(a) Representations and Warranties. The representations and warranties
of NMR contained in this Agreement shall be true and correct in all
material respects as of the Effective Date as though made on and as of the
Effective Date, except as expressly permitted or contemplated by this
Agreement, and the aggregate effect of all differences in the
representations and warranties of NMR between those as of the date of this
Agreement and those as of the Effective Date does not and will not have an
NMR Material Adverse Effect. MRI shall have received a certificate of the
President or Executive Vice President-Finance of NMR to such effect.
(b) Agreements and Covenants. NMR shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it in all material respects prior to the
Effective Date. MRI shall have received a certificate of the President or
Executive Vice President-Finance of NMR to such effect.
(c) Consents and Approvals. All material consents, approvals and
authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all required Governmental Entities and any
other third party.
(d) Opinion of NMR's Counsel. MRI shall have received an opinion,
dated the Effective Date, of McCarter & English, counsel to NMR, in form
and substance reasonably satisfactory to MRI substantially in the form set
forth as Schedule 9.2(d).
(e) No NMR Material Adverse Effect. Since December 31, 1995, there
shall have been no NMR Material Adverse Effect nor shall there have
occurred prior to the Effective Date any change, occurrence or circumstance
in the business, results of operations or financial condition of NMR or any
of its subsidiaries likely to have,
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individually or in the aggregate, a NMR Material Adverse Effect. MRI shall
have received a Certificate of each of the President and the Chief
Financial Officer of NMR to such effect.
(f) Stockholders Rights Agreement. The Board of Directors of NMR shall
not have amended or modified the NMR Stockholders Rights Agreement, except
as contemplated by this Merger Agreement, and shall have taken whatever
action is necessary so as not to trigger the rights under such agreement.
(g) Appraisal Rights. The holders of more than ten (10%) percent of
the issued and outstanding shares of NMR Common Stock shall not have
demanded appraisal rights in respect of the Merger.
(h) Certificates. MRI shall have received such certificates from
officers and representatives of NMR as it shall have reasonably requested,
including those matters set forth in Section 9.2(h) of the NMR Disclosure
Schedule.
(i) Affiliates' Letters. NMR shall have obtained from each person who
is an "affiliate" (as such term is defined in Rule 144 of the Securities
Act) of NMR an executed letter agreement to the effect that such person
will not sell or otherwise transfer any shares of MRI Common Stock received
pursuant to the Merger except pursuant to an effective registration
statement or in compliance with Rule 145 or other exemption from the
registration requirements of the Securities Act.
SECTION 9.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF NMR. The obligations of
NMR to effect the Merger and the other transactions contemplated in this
Agreement are also subject to the satisfaction, on or prior to the Closing Date,
of each of the following conditions (any of which may be waived by NMR in its
sole discretion):
(a) Representations and Warranties. The representations and warranties
of MRI contained in this Agreement shall be true and correct in all
material respects as of the Effective Date, except as expressly permitted
or contemplated by the terms of this Agreement and the aggregate effect of
all differences in the representations and warranties of MRI between those
as of the date of this Agreement and those as of the Effective Date does
not and will not have an MRI Material Adverse Effect. In the event this
Agreement is assigned by Sub pursuant to Section 11.7 of this Agreement,
any representation or warranty made by MRI in this Agreement with respect
to Sub shall be deemed to have been made by MRI with respect to such entity
and shall be true and correct in all material respects as of the Effective
Date and NMR shall have received a certificate of a Co-President or Senior
Vice President (or equally senior officer) to such effect.
(b) Agreements and Covenants. MRI shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Date. NMR
shall have received a certificate of a Co-President or Senior Vice
President (or equally senior officer) of MRI to such effect.
(c) Consents and Approvals. All material consents, approvals and
authorizations legally required to be obtained to consummate the Merger
shall have been obtained from and made with all required Governmental
Entities and any other third party.
(d) Opinion of Counsel to MRI. NMR shall have received an opinion,
dated the Effective Date, of Werbel McMillin & Carnelutti, A Professional
Corporation, counsel to MRI, in form and substance reasonably satisfactory
to NMR, substantially in the form set forth as Schedule 9.3(d).
(e) No MRI Material Adverse Effect. Since December 31, 1995, there
shall have been no MRI Material Adverse Effect nor shall there have
occurred prior to the Effective Date any change, occurrence or circumstance
in the business, results of operations or financial condition of MRI or any
MRI subsidiary likely to have, individually or in the aggregate, a MRI
Material Adverse Effect. NMR shall have received a Certificate of a
Co-President or Senior Vice President (or equally senior officer) of MRI to
such effect.
(f) Certificates. NMR shall have received such certificates from
officers and representatives of MRI as it shall have reasonably requested,
including those set forth in Section 9.3(f) of the MRI Disclosure
Statement.
(g) Tax Opinion. NMR shall have received an opinion of NMR's tax
counsel that the Merger will be treated as a tax-free exchange to NMR
stockholders.
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ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Date, whether before or after approval of this Agreement
and the Merger by the stockholders of each of NMR and MRI:
(a) by mutual written consent of MRI and NMR;
(b) by MRI, if any representation or warranty made by NMR in this
Agreement shall not have been true when made and such breach would have or
would be reasonably likely to have an NMR Material Adverse Effect or the
failure of NMR to satisfy its obligations under Section 9.2(b);
(c) by NMR, if any representation or warranty made by MRI in this
Agreement shall not have been true when made and such breach would have or
would be reasonably likely to have an MRI Material Adverse Effect or the
failure of MRI to satisfy its obligations under Section 9.3(b);
(d) by either MRI or NMR, if there shall be any Order which is final
and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order has not complied with its obligations under
Section 8.3(b);
(e) by either MRI or NMR, if the Effective Date shall not have
occurred before December 31, 1996; provided, however, that the right to
terminate this Agreement pursuant to this Section 10.1(e) shall not be
available to any party whose (or whose affiliate(s)) breach of any
representation or warranty or failure to perform or comply with any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Date to occur on or before such date;
(f) by either MRI or NMR, if the Agreement shall fail to receive the
requisite votes for approval and adoption by the stockholders of each of
NMR and MRI at the Stockholders' Meeting or if any of the conditions
specified in Section 9.1 shall not have been met in all material respects
or waived prior to such time as such condition can no longer be satisfied;
(g) be either MRI or NMR, (i) at any time prior to 11:59 p.m. New York
City time on June 19, 1996 (or at such later date as mutually agreed upon
by the parties hereto) (the "Due Diligence Date"), if the results of its
due diligence investigation of the other party's affairs and business
operations make it inadvisable or undesirable in such party's sole and
reasonable discretion to proceed with the transactions contemplated hereby;
or (ii) if the written fairness opinion by MRI's or NMR's Financial Advisor
is not delivered to the appropriate party by June 14, 1996;
(h) by MRI or NMR at any time prior to the Effective Date if (i) in
the case of termination by MRI, any of the conditions specified in Section
9.2(a) and 9.2(c) through (i) shall not have been met or waived prior to
such time as such condition can no longer be satisfied or (ii) in the case
of termination by NMR, any of the conditions specified in Section 9.3(a)
and 9.3(c) through (g) shall not have been met or waived prior to such time
as such condition can no longer be satisfied; or
(i) if a Transaction Event occurs, in which event the Target Company
shall pay to the Other Party the amounts set forth in Section 7.6(b).
The right of any party hereto to terminate this Agreement pursuant to this
Section 10.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 10.2 EFFECT OF TERMINATION. Subject to the provisions of Section
11.1(b), in the event of the termination of this Agreement pursuant to Section
10.1, this Agreement shall forthwith become void, there shall be no liability on
the part of MRI or NMR or any of their respective officers or directors to the
other and all rights and obligations of any party hereto shall cease.
Notwithstanding the foregoing, nothing herein shall relieve any party of
liability for failure to perform or comply with any obligation under Sections
7.4 and 7.5 of this Agreement prior to the termination hereof.
SECTION 10.3 AMENDMENT. To the extent permitted by applicable law, this
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective Date;
provided, however, that, after approval of the Merger by the stockholders of
each of NMR and MRI,
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no amendment may be made which would reduce the amount or change the type of
consideration into which each share of NMR Common Stock shall be converted
pursuant to this Agreement upon consummation of the Merger. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
SECTION 10.4 WAIVER. At any time prior to the Effective Time, any party
hereto may a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
SECTION 10.5 FEES, EXPENSES AND OTHER PAYMENTS. (a) Except as provided in
Sections 7.6(b) or 10.5(c), all Expenses (as defined in paragraph (b) of this
Section 10.5) incurred by the parties hereto shall be borne solely and entirely
by the party which has incurred such Expenses; provided, however, that the
allocable share of each of MRI and NMR for all Expenses related to drafting,
preparing, printing, filing and mailing the Registration Statement and the Proxy
Statement and all SEC and other regulatory filing fees incurred in connection
with the Registration Statement and the Proxy Statement shall be one-half. Each
party shall disclose to the other any agreement with respect to such Expenses
and shall advise the other as to the then current Expenses during the course of
the transaction contemplated hereby.
(b) "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Registration Statement and the Proxy Statement and the mailing of the Proxy
Statement, the solicitation of stockholder approvals and all other matters
related to the closing of the transactions contemplated herein.
(c) If this Agreement shall be terminated (i) by NMR pursuant to Section
10.1(c), (ii) by MRI pursuant to Section 10.1(b) (either of such events in (i)
and (ii) shall be deemed a "Breach Event"), or (iii) by either party pursuant to
Section 10(f) for the sole reason that the Merger is not approved by the
stockholders (a "Non-Approval Event"), then the other party shall pay to the
non-breaching party (NMR in (i), MRI in (ii) and the party whose stockholders
approved the Merger in (iii) are herein referred to as a "Non-Breaching Party"),
in consideration of the time, effort and resources expended in connection
herewith, an amount equal to, in the case of a Breach Event, the sum of
$2,000,000, and, in the case of a Non-Approval Event, $1,000,000, plus in all
such cases any fees or expenses incurred by the Non-Breaching Party in
connection with the collection of such amount (the "Collection Expenses").
(d) Any payment required to be made pursuant to Section 10.5(c) shall be
made to the Non-Breaching Party entitled to receive such payment not later than
ten (10) days after delivery to the other party of notice of demand for payment
and an itemization setting forth in reasonable detail all Collection Expenses,
if any, of the Non-Breaching Party and shall be made by wire transfer of
immediately available funds to an account designated by the Non-Breaching Party
in the notice of demand for payment delivered pursuant to this Section 10.5(d).
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth in Section 11.1(b), the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their officers or
directors, whether prior to or after the execution of this Agreement.
(b) Notwithstanding anything to the contrary contained herein, the
representations, warranties and agreements in this Agreement shall terminate at
the Effective Date or upon the termination of this Agreement pursuant to Article
10, except that the agreements set forth in Articles 1, 2, 3 and 4 shall survive
the Effective Date and those set forth in Sections 7.4, 7.5, 7.6 (to the extent
provided therein), 10.2, 10.5 and Article 11 hereof shall survive termination.
SECTION 11.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall
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be effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier
number specified below:
(a) If to MRI:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey
Attention: Mr. William D. Farrell
and
Medical Resources, Inc.
2701 N. Rocky Point Drive
Suite 650
Tampa, Florida 33607
Attention: Mr. Robert J. Adamson
with a copy to:
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
Telecopier No.: (212) 832-3353
(b) If to NMR:
NMR of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974-2732
Attention: Mr. Joseph G. Dasti
with a copy to:
McCarter & English
4 Gateway Center
Newark, New Jersey 07102
Attention: Peter S. Twombly, Esq.
Telecopier No.: (201) 624-7070
SECTION 11.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in
the State of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled", "controlled by" and
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of NMR, MRI or Sub, as the case may be,
has actual knowledge of such matter;
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(e) "Laws" shall mean all applicable federal, state, local or foreign
laws, regulations or orders or any other requirements of any governmental,
regulatory or administrative agency or authority or court or other tribunal
(including, but not limited to, any laws, regulations, or requirements
under the Medicare Anti-Kickback Statute, the Medicaid Patient and Program
Protection Act of 1987, P.L. 103-432, 1994 HR 5252 (known as Stark II) and
the Florida Patient Self Referral Act of 1992.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(g) "subsidiary" or "subsidiaries" of NMR, MRI or any other person,
means any corporation, partnership, joint venture or other legal entity of
which NMR, MRI or such other person, as the case may be (either alone or
through or together with any other subsidiary), controls or owns, directly
or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity or, which by contract or agreement, has the power to control
such corporation or other legal entity, or which otherwise constitutes a
"subsidiary" as defined in Regulation S-X, ss.210.1-02(w). A "significant
subsidiary" shall mean any entity constituting a significant subsidiary
under Regulation S-X, ss.210.1-02(v).
(h) "Tax" or "Taxes" shall mean any and all taxes, charges, fees,
levies, payable to any federal, state, local or foreign taxing authority or
agency, including, without limitation, i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
payroll, withholding disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer and gains taxes, ii) customs duties, imposts,
charges, levies or other similar assessments of any kind, and iii)
interest, penalties and additions to tax imposed with respect thereto.
SECTION 11.4 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.5 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 11.6 ENTIRE AGREEMENT. This Agreement (together with the Exhibits
and Schedules hereto) and the Confidentiality Agreement constitute the entire
agreement of the parties and supersede all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 11.7 ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise; provided that Sub may assign this Agreement in its sole
discretion to any entity which is, either directly or indirectly, a wholly-owned
subsidiary of MRI.
SECTION 11.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 11.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 11.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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SECTION 11.12 DETERMINATION OF MARKET VALUE. If any calculation of market
price or value per share of common stock required to be made by this Agreement
becomes incapable of calculation in accordance with the terms of this Agreement
due to the failure of sales of the common stock to be reported on the NASDAQ
system, then for purposes of making such calculation, reference shall be made to
(i) reported sale prices for comparable periods if the common stock is quoted on
a national exchange, or (ii) the average of the mean between each days' highest
"bid" price and lowest "asked" price for comparable periods if the common stock
is quoted over-the-counter or (iii) book value per share of common stock based
on most recent quarterly financial report or, if more recent, annual report or
financial statement of the issuer of such shares.
IN WITNESS WHEREOF, MRI, Sub and NMR have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
MEDICAL RESOURCES, INC.
By: /s/ ROBERT J. ADAMSON
--------------------------------
Name: Robert J. Adamson
Title: Co-President
By: /s/ WILLIAM D. FARRELL
--------------------------------
Name: William D. Farrell
Title: Co-President
MRI SUB, INC.
By: /s/ ROBERT J. ADAMSON
--------------------------------
Name: Robert J. Adamson
Title: Co-President
By: /s/ WILLIAM D. FARRELL
--------------------------------
Name: William D. Farrell
Title: Co-President
NMR OF AMERICA, INC.
By: /s/ JOSEPH G. DASTI
--------------------------------
Name: Joseph G. Dasti
Title: President and
Chief Executive Officer
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APPENDIX B
[DILLON, READ LETTERHEAD]
June 14, 1996
Board of Directors
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Gentlemen:
We understand that Medical Resources, Inc. (the "Company") is undertaking a
transaction whereby NMR of America, Inc., a Delaware corporation ("NMR"), will
be merged with and into a wholly owned subsidiary of the Company, pursuant to
the terms of an Agreement and Plan of Merger, dated as of May 20, 1996 (the
"Merger Agreement"), such that NMR becomes a wholly owned subsidiary of the
Company (the "Transaction"). Pursuant to the Transaction, each outstanding share
of NMR's Common Stock, $0.01 par value, shall be converted into 0.6875 shares of
the Company's Common Stock, par value $0.01 per share (the "Consideration"). The
terms and conditions of the Transaction are more fully set forth in the Merger
Agreement.
You have requested our opinion as to whether the Consideration to be paid
by the Company in the Transaction is fair to the Company, from a financial point
of view.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and NMR, (ii) reviewed certain financial information and
other data provided to us by the Company that is not publicly available relating
to the business and prospects of the Company, including financial projections
prepared by the management of the Company, (iii) reviewed certain financial
information and other data provided to us by NMR that is not publicly available
relating to the business and prospects of NMR, including financial projections
prepared by the management of NMR, (iv) conducted discussions with members of
the senior managements of the Company and NMR, (v) reviewed publicly available
financial and stock market data with respect to certain other companies in lines
of business we believe to be generally comparable to those of the Company and
NMR, (vi) considered the pro forma effects of the Transaction on the Company's
financial statements and reviewed certain estimates of synergies prepared by the
managements of the Company and NMR, (vii) reviewed the historical market prices
and trading volumes of the common stocks of the Company and NMR, (viii) compared
the financial terms of the Transaction with the financial terms of certain other
transactions which we believe to be generally comparable to the Transaction,
(ix) reviewed the Merger Agreement in the form provided to us, and (x) conducted
such other financial studies, analyses and investigations, and considered such
other information as we deemed necessary or appropriate.
In connection with our review, we have not independently verified any of
the foregoing information and have, with your consent, relied on its being
complete and accurate in all material respects. In addition, we have not made
any evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of the Company or NMR, nor have we been furnished with any such
evaluation or appraisal. With respect to the financial projections referred to
above, we have assumed, with your consent, that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's and NMR's management as to the future financial
performance of each company. Further, our opinion is based on economic, monetary
and market conditions existing on thedate hereof.
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<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be paid by the Company in the Transaction is
fair to the Company from a financial point of view.
Very Truly Yours,
DILLON, READ & CO. INC.
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APPENDIX C
[COWEN LETTERHEAD]
June 13, 1996
Special Committee of the Board of Directors
NMR of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974-2732
Gentlemen:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the holders of the outstanding shares of common
stock, par value $0.01 per share of NMR of America, Inc. (the "Company" or
"NMR") ("NMR Common Stock") (other than Dissenting Shares (as defined in the
Agreement and Plan of Merger by and among Medical Resources, Inc. ("MRII"), MRI
Sub, Inc. ("MRI Sub") and NMR dated May 20, 1996 (the "Agreement"))) of the
proposed Exchange Ratio (as hereinafter defined) in the proposed Transaction (as
hereinafter defined) with MRII. For the purposes of this opinion, the
"Transaction" means the transaction described pursuant to the Agreement.
As more specifically set forth in the Agreement, and subject to certain terms
and conditions thereof, on the Effective Date (as defined in the Agreement) each
share of NMR Common Stock that is issued and outstanding immediately prior to
the Effective Date (other than Dissenting Shares) shall be converted solely into
the right to receive 0.6875 shares of common stock, par value $0.01 per share of
MRII ("MRII Common Stock") (the "Exchange Ratio").
In the ordinary course of its services, Cowen & Company ("Cowen") is regularly
engaged in the valuation and pricing of businesses and their securities and in
advising corporate securities issuers on related matters.
In arriving at our opinion, Cowen has, among other things:
(1) reviewed the Company's financial statements for the three fiscal years
ended March 31, 1996, certain publicly available filings with the
Securities and Exchange Commission and certain other relevant
financial and operating data of the Company;
(2) reviewed MRII's financial statements for the three fiscal years ended
December 31, 1995 and the quarter ended March 31, 1996, certain
publicly available filings with the Securities and Exchange Commission
and certain other relevant financial and operating data of MRII;
(3) reviewed the Agreement;
(4) held meetings and discussions with management and senior personnel of
the Company and MRII to discuss the business, operations, historical
financial results and future prospects of the Company and MRII;
(5) reviewed financial projections furnished to us by the management of
the Company and MRII, including among other things, the capital
structure, sales, net income, cash flow, capital requirements and
other data of the Company and MRII we deemed relevant;
(6) reviewed the valuation of the Company and MRII in comparison to other
similar publicly traded companies;
(7) reviewed the historical prices and trading activity of the securities
of the Company and MRII and compared those trading histories with
those of other companies which we deemed relevant;
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<PAGE>
(8) analyzed the potential pro forma financial effects of the Transaction
contemplated by the Agreement;
(9) reviewed the proposed financial terms of the Transaction and compared
them with the financial terms of certain other business combinations
we deemed relevant; and
(10) conducted such other studies, analysis, inquiries and investigations
as we deemed appropriate.
Cowen was not requested to, and did not, solicit third party indications of
interest in acquiring the Company.
In rendering our opinion, we relied upon the Company's and MRII's management
with respect to the accuracy and completeness of the financial and other
information furnished to us as described above. We have not assumed any
responsibility for independent verification of such information, including
financial information, nor have we made an independent evaluation or appraisal
of any of the properties or assets of the Company or MRII.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the Transaction and received a fee
for our services. We also received a fee for rendering this opinion. In
addition, in the ordinary course of its business, Cowen may trade the debt and
equity securities of the Company and MRII for its own account and for the
accounts of its customers, and, accordingly, it may at any time hold a long or
short position in such securities.
On the basis of our review and analysis, as described above, it is our opinion
as investment bankers that the proposed Exchange Ratio is fair, from a financial
point of view, to the holders of NMR Common Stock (other than Dissenting
Shares).
Very Truly Yours,
COWEN & COMPANY
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APPENDIX D
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MEDICAL RESOURCES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Medical Resources, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended by
striking out Article FOURTH thereof and by substituting in lieu of said Article
the following new Article FOURTH:
"FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have the authority to issue is Fifty Million and One
Hundred Thousand (50,100,000) shares, of which Fifty Million (50,000,000)
shares will be common stock, $.01 par value (the "Common Stock"), and One
Hundred Thousand (100,000) shares will be series preferred stock, $.01 par
value (the "Series Preferred Stock"). The Series Preferred Stock may be
issued, from time to time, in one or more series as authorized by the Board
of Directors. Prior to issuance of a series, the Board of Directors by
resolution shall designate it from other series and classes of stock of the
Corporation, shall specify the number of shares to be included in the
series, and shall fix the terms, rights, restrictions and qualifications of
the shares of a series, including any preferences, voting powers, dividend
rights and redemption, sinking fund and conversion rights. Subject to the
express terms of the Series Preferred Stock outstanding at the time, the
Board of Directors may increase or decrease the number of shares or alter
the designation or classify or re-classify any unissued shares of a
particular series of Series Preferred Stock by fixing or altering in any
one or more respects from time to time before issuing the shares, any
terms, rights restrictions and qualifications of the shares."
3. The Amendment of the Certificate of Incorporation of the Corporation
herein certified has been duly adopted, pursuant to the provisions of Sections
228 and 242 of the General Corporation Law of the State of Delaware.
Signed and attested to on _____________, 1996.
------------------------------------
President
Attest:
- ----------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") empowers the Company to, and the Certificate of Incorporation of the
Company provides that it shall, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by any reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; except
that, in the case of an action or suit by or in the right of the Company, no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for negligence or misconduct
in the performance of his duty to the Company unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine that such person is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall deem
proper.
The Company's Certificate of Incorporation provides, pursuant to Section
145 of the DGCL, for indemnification of officers, directors, employees and
agents of the Company and persons serving at the request of the Company in such
capacities within other business organizations against certain losses, costs,
liabilities and expenses incurred by reason of their position with the Company
or such other business organizations.
Article Ninth of the Registrant's Certificate of Incorporation limits a
directors liability in accordance with Section 102(b) of the DGCL. Specifically,
Article Ninth provides that no director of the Company shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article Ninth also provides that if the DGCL is further amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, the liability of a director of the Company shall be eliminated or
limited to the fullest extent permitted by the DGCL.
ITEM 21. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger, dated as of May 20, 1996, between MRI,
NMR and MRI-Sub, Inc.(8)
3.1 Certificate of Incorporation of the Registrant.(2)
3.2 By-Laws of the Registrant.(2)
4.1 Convertible Debenture, dated June 2, 1995, issued by the Company to
Patricia Capone. (Substantially identical convertible debentures
were issued by the Company as of the same date to other subscribers
in MRI's private placement.)(1)
4.2 Convertible Debenture, dated January 31, 1996, issued by the Company
to Dorchester Partners L.P. (Substantially identical convertible
debentures were issued as of the same date to other subscribers in
MRI's private placement.)(9)
5.1 Opinion of Werbel McMillin & Carnelutti, a Professional
Corporation.
8.1 Form of opinion of McCarter & English regarding tax matters.
10.1 Agreement of Limited Partnership of Essex-Passaic Services Group
L.P. dated as of November 1986.(2)
II-1
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.2 Agreement of Limited Partnership of North Bronx Services Group, L.P.
dated as of January 30, 1987.(2)
10.3 Agreement of Limited Partnership of South Umberton Assets Management
Associates, L.P. dates as of October 26, 1983 as amended to date.(2)
10.4 Joint Venture Agreement dated as of December 1, 1985 by and between
East Bergen Resources, Inc. and East Bergen Assets Management,
Inc.(2)
10.5 Management Agreement dated as of December 1, 1985 by and between
East Bergen Resources, Inc. and Radiological Diagnostic Center of
Englewood, P.A. as amended to date.(2)
10.6 Management Agreement dated as of June, 1986 by and between
Essex-Passaic Resources, Inc. and Clifton Medical Imaging, P.A.(2)
10.7 Management Agreement dated as of February 1, 1992 by and between
South Umberton Asset Management Associates, L.P. and Radiology
Associates of St. Petersburg.(2)
10.8 Management Agreement dated as of September 30, 1991 by and between
West Essex Resources, Inc. and Radiological Diagnostic Center of
Englewood, P.A.(2)
10.9 Management Agreement dated as of March 1, 1990 by and between North
Bronx Resources, Inc. and Enrique Bursztyn, M.D. P.C., as amended
to date.(2)
10.10 Management Agreement dated as of October 31, 1991 by and between
South Hudson Resources, Inc. and County M.R.I., P.A. as amended to
date.(2)
10.11 Lease Agreement dated as of December 20, 1989 by and between Newdow
and East Bergen Services Group Radiologic Diagnostic Center, as
amended to date.(2)
10.12 Sublease Agreement between Essex Passaic Services Group and Medical
Resources, Inc. dated March 1990.(2)
10.13 Sublease Agreement dated as of June 1, 1986 between Essex Passaic
Resources, Inc. and Clifton Medical Imaging, P.A.(2)
10.14 Sublease Agreement dated as of January 17, 1984 by and between St.
Anthony's Ancillary Services, Inc. and South Umberton Assets
Management.(2)
10.15 Form of 1992 Stock Option Plan.(2)
10.16 Form of Contribution Agreement.(2)
10.17 Agreement of Limited Partnership dated April 17, 1992 of
MRI-Brooklyn, L.P.(3)
10.18 Lease Agreement dated April 7, 1992 by and between Teicher
Enterprises, Inc. and MRI-Brooklyn, L.P., as amended to date.(2)
10.19 Lease Agreement dated February 25, 1992 by and between BARI Joint
Venture and South Hudson Resources, Inc.(2)
10.20 Business Lease dated March 21, 1992 by and between Continental
Property Management Corp., as agent for Continental Medial Partners
I, and West Essex SPECT, L.P.(2)
10.21 Management Agreement dated June 12, 1992 by and between West Essex
SPECT, L.P. and Ruby Bendersky, M.D.(2)
10.22 Joint Venture Agreement of 49th Street Imaging Associates dated
April 17, 1992.(3)
10.23 Technical Component Supplier Agreement by and between 49th Street
Imaging Associates and MRA Imaging Associates, P.C. dated April 17,
1992.(3)
10.24 Management Agreement dated as of December 1, 1992 between West Essex
Resources, Inc. and Radiological Diagnostic Center Medical
Association, P.A.(3)
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.25 Management Agreement dated as of December 1, 1992 between East
Bergen Resources, Inc. and Radiological Diagnostic Center Medical
Association, P.A.(3)
10.26 Management Agreement dated December 1, 1992 between MRI-BCC, Inc.
and Radiological Diagnostic Center Medical Association, P.A.(3)
10.27 Revolving Credit and Security Agreement dated June 30, 1995 between
the Company and StarMed Staffing L.P. and First Union Bank of
Florida.(4)
10.28 Employment Agreement, dated September 30, 1994, between the Company
and Robert J. Adamson.(4)
10.29 Amendment, dated August 1, 1995, to Employment Agreement between the
Company and Robert J. Adamson.(4)
10.30 Employment Agreement, dated September 30, 1994, between the Company
and William Farrell.(4)
10.31 Amendment, dated August 1, 1995, to Employment Agreement between the
Company and William Farrell.(4)
10.32 1995 Stock Option Plan.(4)
10.33 Asset Purchase Agreement dated as of May 17, 1995 between Fort Myers
Resources, Inc., Central Fort Myers Resources, Inc. and New England
MRI, Inc.(5)
10.34 Asset Purchase Agreement dated as of June 19, 1995 between
Hackensack Resources, Inc. and PCC Imaging, Inc.(6)
10.35 Asset Purchase Agreement dated as of December 21, 1995 between the
Company and MRI-CT, Inc.(7)
10.36 Stock Purchase Agreement dated as of January 11, 1996 between
StarMed Staffing, Inc. and LouAnn Berg.(7)
10.37 1996 Stock Option Plan.(9)
10.38 Non-Competition and Consulting Agreement dated May 20, 1996 by and
between MRI and Joseph G. Dasti.
10.39 Non-Competition and Consulting Agreement dated May 20, 1996 by and
between MRI and John P. O'Malley, III.
23.1 Consent of Werbel McMillin & Carnelutti (included in Exhibit 5.1).
23.2 Consent of Ernst & Young, LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Dixon, Odom & Co., L.L.P.
23.5 Consent of Kempisty & Company, Certified Public Accountants, P.C.
23.6 Consent of Bard & Glassman.
23.7 Consent of Weisberg, Polansky, Kulberg, Einhorn & Mole, LLP.
23.8 Consent of Weisberg, Polansky, Kulberg, Einhorn & Mole, LLP.
23.9 Consent of Coopers & Lybrand L.L.P.
23.10 Consent of McCarter & English.
23.11 Consent of Dillon, Read & Co., Inc.
23.12 Consent of Cowen & Company.
24.1 Power of Attorney (Reference is made to the signature page of the
Registration Statement).
99.1 Proxy Card of MRI for the MRI Meeting.
99.2 Proxy Card of NMR for the NMR Meeting.
- ------------------
(1) Incorporated herein by reference from the Company's Registration Statement
on Form S-2 (Registration No. 33-94738).
II-3
<PAGE>
(2) Incorporated herein by reference from the Company's Registration Statement
on Form S-1 (Registration No. 33-48848).
(3) Incorporated herein by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
(4) Incorporated herein by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
(5) Incorporated herein by reference from the Company's Current Report on Form
8-K dated May 26, 1995.
(6) Incorporated herein by reference from the Company's Current Report on Form
8-K dated June 19, 1995.
(7) Incorporated herein by reference from the Company's Current Report on Form
8-K dated January 9, 1996 (as amended on Form 8-K/A dated March 19, 1996).
(8) Incorporated herein by reference from the Company's Current Report on Form
8-K dated May 20, 1996.
(9) Incorporated herein by reference from the Company's Registration Statement
on Form S-2 (Registration No. 333-4056).
ITEM 22. UNDERTAKING.
(a) Insofar as indemnifications for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 15 above, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
(b) MRI hereby undertakes:
(1) to respond to requests for information that is incorporated by
reference into this Joint Proxy Statement/Prospectus pursuant to Item 4,
10(b), 11 or 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(2) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
(3)(A) that prior to any public re-offering of the securities
registered hereunder through the use of a prospectus which is a part of the
Registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Act, such re-offering
prospectus will contain the information called for by the applicable
registration form with respect to re-offerings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(B) that every prospectus that (i) is filed pursuant to paragraph 3(A)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415 will be filed as part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Tampa, State of Florida on July 30, 1996.
MEDICAL RESOURCES, INC.
By: /s/ ROBERT J. ADAMSON
-------------------------------------
Robert J. Adamson, Co-President and
Chief Financial Officer (Co-Principal
Executive Officer and Principal
Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert J. Adamson and Stephen M. Davis, or either
of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any or all amendments (including post-effective
amendments) to this registration statements and any related registration
statement filed under Rule 462(b), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully for
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting along, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed below by the following
persons in the capacities and on July 30, 1996.
Signature Capacity in Which Signed
--------- ------------------------
/s/ GARY N. SIEGLER Chairman of the Board of Directors
- -----------------------------------
Gary N. Siegler
/s/ NEIL H. KOFFLER Director
- -----------------------------------
Neil H. Koffler
/s/ STEPHEN M. DAVIS Director
- -----------------------------------
Stephen M. Davis
/s/ GARY FUHRMAN Director
- -----------------------------------
Gary Fuhrman
/s/ JOHN JOSEPHSON Director
- -----------------------------------
John Josephson
/s/ ROBERT J. ADAMSON Co-President (Co-Principal Executive
- ----------------------------------- Officer), Chief Financial Officer
Robert J. Adamson (Principal Accounting Officer) and
Director
/s/ WILLIAM D. FARRELL Co-President (Co-Principal Executive
- ----------------------------------- Officer), Chief Operating Officer
William D. Farrell and Director
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
</TABLE>
2.1 Agreement and Plan of Merger, dated as of May 20, 1996, between MRI,
NMR and MRI-Sub, Inc.(8)
3.1 Certificate of Incorporation of the Registrant.(2)
3.2 By-Laws of the Registrant.(2)
4.1 Convertible Debenture, dated June 2, 1995, issued by the Company to
Patricia Capone. (Substantially identical convertible debentures
were issued by the Company as of the same date to other subscribers
in MRI's private placement.)(1)
4.2 Convertible Debenture, dated January 31, 1996, issued by the Company
to Dorchester Partners L.P. (Substantially identical convertible
debentures were issued as of the same date to other subscribers in
MRI's private placement.)(9)
5.1 Opinion of Werbel McMillin & Carnelutti, a Professional
Corporation.
8.1 Form of opinion of McCarter & English regarding tax matters.
10.1 Agreement of Limited Partnership of Essex-Passaic Services Group
L.P. dated as of November 1986.(2)
10.2 Agreement of Limited Partnership of North Bronx Services Group, L.P.
dated as of January 30, 1987.(2)
10.3 Agreement of Limited Partnership of South Umberton Assets Management
Associates, L.P. dates as of October 26, 1983 as amended to date.(2)
10.4 Joint Venture Agreement dated as of December 1, 1985 by and between
East Bergen Resources, Inc. and East Bergen Assets Management,
Inc.(2)
10.5 Management Agreement dated as of December 1, 1985 by and between
East Bergen Resources, Inc. and Radiological Diagnostic Center of
Englewood, P.A. as amended to date.(2)
10.6 Management Agreement dated as of June, 1986 by and between
Essex-Passaic Resources, Inc. and Clifton Medical Imaging, P.A.(2)
10.7 Management Agreement dated as of February 1, 1992 by and between
South Umberton Asset Management Associates, L.P. and Radiology
Associates of St. Petersburg.(2)
10.8 Management Agreement dated as of September 30, 1991 by and between
West Essex Resources, Inc. and Radiological Diagnostic Center of
Englewood, P.A.(2)
10.9 Management Agreement dated as of March 1, 1990 by and between North
Bronx Resources, Inc. and Enrique Bursztyn, M.D. P.C., as amended
to date.(2)
10.10 Management Agreement dated as of October 31, 1991 by and between
South Hudson Resources, Inc. and County M.R.I., P.A. as amended to
date.(2)
10.11 Lease Agreement dated as of December 20, 1989 by and between Newdow
and East Bergen Services Group Radiologic Diagnostic Center, as
amended to date.(2)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
</TABLE>
10.12 Sublease Agreement between Essex Passaic Services Group and Medical
Resources, Inc. dated March 1990.(2)
10.13 Sublease Agreement dated as of June 1, 1986 between Essex Passaic
Resources, Inc. and Clifton Medical Imaging, P.A.(2)
10.14 Sublease Agreement dated as of January 17, 1984 by and between St.
Anthony's Ancillary Services, Inc. and South Umberton Assets
Management.(2)
10.15 Form of 1992 Stock Option Plan.(2)
10.16 Form of Contribution Agreement.(2)
10.17 Agreement of Limited Partnership dated April 17, 1992 of
MRI-Brooklyn, L.P.(3)
10.18 Lease Agreement dated April 7, 1992 by and between Teicher
Enterprises, Inc. and MRI-Brooklyn, L.P., as amended to date.(2)
10.19 Lease Agreement dated February 25, 1992 by and between BARI Joint
Venture and South Hudson Resources, Inc.(2)
10.20 Business Lease dated March 21, 1992 by and between Continental
Property Management Corp., as agent for Continental Medial Partners
I, and West Essex SPECT, L.P.(2)
10.21 Management Agreement dated June 12, 1992 by and between West Essex
SPECT, L.P. and Ruby Bendersky, M.D.(2)
10.22 Joint Venture Agreement of 49th Street Imaging Associates dated
April 17, 1992.(3)
10.23 Technical Component Supplier Agreement by and between 49th Street
Imaging Associates and MRA Imaging Associates, P.C. dated April 17,
1992.(3)
10.24 Management Agreement dated as of December 1, 1992 between West Essex
Resources, Inc. and Radiological Diagnostic Center Medical
Association, P.A.(3)
10.25 Management Agreement dated as of December 1, 1992 between East
Bergen Resources, Inc. and Radiological Diagnostic Center Medical
Association, P.A.(3)
10.26 Management Agreement dated December 1, 1992 between MRI-BCC, Inc.
and Radiological Diagnostic Center Medical Association, P.A.(3)
10.27 Revolving Credit and Security Agreement dated June 30, 1995 between
the Company and StarMed Staffing L.P. and First Union Bank of
Florida.(4)
10.28 Employment Agreement, dated September 30, 1994, between the Company
and Robert J. Adamson.(4)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
</TABLE>
10.29 Amendment, dated August 1, 1995, to Employment Agreement between the
Company and Robert J. Adamson.(4)
10.30 Employment Agreement, dated September 30, 1994, between the Company
and William Farrell.(4)
10.31 Amendment, dated August 1, 1995, to Employment Agreement between the
Company and William Farrell.(4)
10.32 1995 Stock Option Plan.(4)
10.33 Asset Purchase Agreement dated as of May 17, 1995 between Fort Myers
Resources, Inc., Central Fort Myers Resources, Inc. and New England
MRI, Inc.(5)
10.34 Asset Purchase Agreement dated as of June 19, 1995 between
Hackensack Resources, Inc. and PCC Imaging, Inc.(6)
10.35 Asset Purchase Agreement dated as of December 21, 1995 between the
Company and MRI-CT, Inc.(7)
10.36 Stock Purchase Agreement dated as of January 11, 1996 between
StarMed Staffing, Inc. and LouAnn Berg.(7)
10.37 1996 Stock Option Plan.(9)
10.38 Non-Competition and Consulting Agreement dated May 20, 1996 by and
between MRI and Joseph G. Dasti.
10.39 Non-Competition and Consulting Agreement dated May 20, 1996 by and
between MRI and John P. O'Malley, III.
23.1 Consent of Werbel McMillin & Carnelutti (included in Exhibit 5.1).
23.2 Consent of Ernst & Young, LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Dixon, Odom & Co., L.L.P.
23.5 Consent of Kempisty & Company, Certified Public Accountants, P.C.
23.6 Consent of Bard & Glassman.
23.7 Consent of Weisberg, Polansky, Kulberg, Einhorn & Mole, LLP.
23.8 Consent of Weisberg, Polansky, Kulberg, Einhorn & Mole, LLP.
23.9 Consent of Coopers & Lybrand L.L.P.
23.10 Consent of McCarter & English.
23.11 Consent of Dillon, Read & Co., Inc.
23.12 Consent of Cowen & Company.
24.1 Power of Attorney (Reference is made to the signature page of the
Registration Statement).
99.1 Proxy Card of MRI for the MRI Meeting.
99.2 Proxy Card of NMR for the NMR Meeting.
- ------------------
(1) Incorporated herein by reference from the Company's Registration Statement
on Form S-2 (Registration No. 33-94738).
(2) Incorporated herein by reference from the Company's Registration Statement
on Form S-1 (Registration No. 33-48848).
(3) Incorporated herein by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
(4) Incorporated herein by reference from the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
(5) Incorporated herein by reference from the Company's Current Report on Form
8-K dated May 26, 1995.
(6) Incorporated herein by reference from the Company's Current Report on Form
8-K dated June 19, 1995.
(7) Incorporated herein by reference from the Company's Current Report on Form
8-K dated January 9, 1996 (as amended on Form 8-K/A dated March 19, 1996).
(8) Incorporated herein by reference from the Company's Current Report on Form
8-K dated May 20, 1996.
(9) Incorporated herein by reference from the Company's Registration Statement
on Form S-2 (Registration No. 333-4056).
Exhibit 5.1
[Letterhead of Werbel McMillin & Carnelutti]
July 30, 1996
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Gentlemen:
We refer to the Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended, to be filed by Medical
Resources, Inc., a Delaware corporation (the "Company"), on or about the date
hereof. The Registration Statement covers a maximum of 5,643,673 shares of the
Company's common stock (the "Shares") to be issued in connection with the merger
of NMR of America, Inc. ("NMR") with and into a wholly-owned subsidiary of the
Company ("Sub"), pursuant to the Agreement and Plan of Merger dated May 20, 1996
by and among the Company, Sub and NMR (the "Merger Agreement").
We have examined the Registration Statement and we further have examined
the Certificate of Incorporation of the Company as certified by the Secretary of
State of the State of Delaware, the By-Laws, the minute books and certain other
agreements of the Company as a basis for the opinion hereafter expressed.
Based on the foregoing examination, we are of the opinion that when the
Shares have been issued and delivered as contemplated in the Merger Agreement
and the Registration Statement the Shares will be legally issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including any Prospectus constituting a part thereof,
and any amendments thereto.
This opinion is rendered solely for your benefit in connection with the
transaction described above. This opinion may not be used or relied upon by any
other person without our prior written consent.
Very truly yours,
WERBEL MCMILLIN & CARNELUTTI
/s/ Werbel McMillin & Carnelutti
Exhibit 8.1
FORM OF TAX OPINION
NMR of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
MRI Sub, Inc.
155 State Street
Hackensack, New Jersey 07601
Dear Ladies and Gentlemen:
We have acted as counsel to NMR of America, Inc., a Delaware corporation
("NMR"), in connection with the proposed acquisition of NMR by Medical
Resources, Inc., a Delaware corporation ("MRI"), by means of a merger of MRI
Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of MRI
("Subsidiary"), with NMR, with Subsidiary as the surviving corporation (the
"Merger"). The Merger will be effected pursuant to the provisions of an
Agreement and Plan of Merger dated as of May 20, 1996 by and among MRI,
Subsidiary and NMR (the "Merger Agreement"). Capitalized terms used herein that
are not otherwise defined shall have the meanings given such terms in the Merger
Agreement.
Pursuant to the Merger Agreement, on the Effective Date, each share of NMR
Common Stock shall be converted into the right to receive 0.6875 of a share of
MRI Common Stock (the "Exchange Ratio"). Further, on the Effective Date, each
outstanding warrant, option, convertible debenture and other right to acquire
shares of NMR Common Stock will automatically be deemed exercisable into shares
of MRI Common Stock in accordance with the Exchange Ratio. No fractional shares
of MRI Common Stock will be issued pursuant to the Merger, and in lieu thereof,
<PAGE>
any holder of NMR Common Stock who would otherwise be entitled to receive a
fractional share of MRI Common Stock will receive an amount of cash
determined by multiplying such fraction by the market price of a share of MRI
Common Stock in accordance with the terms of the Merger Agreement.
In addition to providing the foregoing facts, you have made the following
additional representations to us with respect to the Merger and have authorized
us to rely on such representations in expressing the opinion set forth below:
1. The fair market value of the shares of MRI Common Stock to be received
by each stockholder of NMR in connection with the Merger will be approximately
equal to the fair market value of the shares of NMR Common Stock surrendered in
exchange therefor in the Merger.
2. There is no plan or intention on the part of the stockholders of NMR who
own five percent (5%) or more of the NMR Common Stock and to the best knowledge
of the management of NMR, there is no plan or intention on the part of the
remaining stockholders of NMR, to sell, exchange or otherwise dispose of a
number of shares of MRI Common Stock to be received in the Merger that would
reduce the aggregate value of such MRI Common Stock held by the former NMR
stockholders to less than fifty percent (50%) of the aggregate value of the
outstanding NMR Common Stock immediately prior to the Merger. For purposes of
this representation, shares of NMR Common Stock exchanged for cash in lieu of
fractional shares of MRI Common Stock will be treated as outstanding NMR Common
Stock as of the Effective Date. Moreover, shares of NMR Common Stock held by
stockholders of NMR and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger will be considered in making this representation.
3. Subsidiary will acquire at least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the fair market
value of the gross assets held by NMR immediately prior to the Merger. For
purposes of this representation, amounts paid by NMR to stockholders who receive
cash or other property, assets of NMR used to pay its reorganizational expenses,
and all redemptions and distributions (except for regular dividends) made by NMR
immediately prior to the Merger are deemed to constitute assets of NMR held
immediately prior to the Merger.
4. Prior to the Merger, MRI will be in control of Subsidiary within the
meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended (the
"Code").
5. Following the Merger, Subsidiary will not issue additional shares of its
stock that would result in MRI losing control of Subsidiary within the meaning
of Code Section 368(c).
6. MRI has no plan or intention to reacquire any of the shares of MRI
Common Stock to be issued to the stockholders
-2-
<PAGE>
of NMR pursuant to the Merger and MRI is under no contractual obligation and has
no contractual right to reacquire any of such shares of MRI Common Stock.
7. MRI has no plan or intention to liquidate Subsidiary, to merge
Subsidiary with and into another corporation, to sell or otherwise dispose of
the stock of Subsidiary, or to cause Subsidiary to sell or otherwise dispose of
any of the assets of NMR acquired in the Merger, other than the assets located
in NMR's Bel Air, Maryland and Elgin, Illinois centers and except for
dispositions made in the ordinary course of business or for transfers described
in Code Section 368(a)(2)(c).
8. The liabilities of NMR assumed by Subsidiary in the Merger and the
liabilities to which the NMR assets transferred to Subsidiary in the Merger are
subject were incurred by NMR in the ordinary course of business.
9. Following the Merger, Subsidiary will continue the historic business of
NMR or use a significant portion of NMR's business assets in a business.
10. MRI, Subsidiary, NMR and the shareholders of NMR will pay their
respective expenses, if any, incurred in connection with the transaction.
11. There is no intercorporate indebtedness existing between NMR and MRI
that was issued, acquired or will be settled at a discount in connection with
the Merger.
12. No two parties to the transaction are investment companies as defined
in Code Section 368(a)(2)(F)(iii).
13. NMR is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Code Section 368(a)(3)(A).
14. The fair market value of the assets of NMR transferred to Subsidiary in
the Merger will equal or exceed the sum of NMR liabilities assumed by Subsidiary
in the Merger, plus the amount of liabilities, if any, to which the transferred
assets are subject.
15. No stock of Subsidiary will be issued in the Merger.
16. The total cash consideration that will be paid in the Merger to NMR
stockholders in lieu of fractional shares of MRI Common Stock will not exceed
one percent (1%) of the aggregate consideration that will be issued to NMR
stockholders
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with respect to their shares of NMR Common Stock surrendered in the Merger.
17. None of the compensation for services rendered to be received by any
employee of NMR who is also a stockholder of NMR is consideration for, or
allocable to, such employee/stockholder's shares of NMR Common Stock exchanged
in the Merger.
18. The Merger is based upon and motivated by valid business purposes
unrelated to the avoidance of Federal income taxes and will comply in all
respects with the laws of the states of incorporation of the corporations
involved in the Merger.
19. In the Merger, the stockholders of NMR will exchange for voting stock
of MRI an amount of voting stock of NMR which constitutes control of NMR under
Section 368(c) of the Code.
LIMITATIONS ON OPINION
Our opinion expressed herein is based exclusively upon the facts and
representations set forth above and in the Joint Proxy Statement/Prospectus of
MRI and NMR dated ____________________, upon which we have relied. To the extent
any of the facts or representations relied upon by us are inaccurate for any
reason, the opinion set forth below would necessarily have to be modified in
whole or in part or may be rendered undeliverable.
Additionally, our opinion is based upon our interpretation of the Code, the
applicable United States Treasury Department Regulations promulgated or proposed
thereunder (the "Regulations"), current positions of the Internal Revenue
Service (the "Service") contained in published revenue rulings and revenue
procedures, current administrative positions of the Service and existing
judicial decisions, all of which are subject to change or modification at any
time. Any future amendments to the Code or the Regulations or new Federal
judicial decisions or administrative interpretations (any of which could be
retroactive in effect) could cause the opinion set forth herein to require
modification in whole or in part or render it undeliverable. No opinion is
expressed herein with regard to the Federal tax consequences of the Merger under
any Section of the Code except if and to the extent such section is specifically
referenced below.
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<PAGE>
OPINION
Based solely upon the referenced facts and representations, and assuming
that the Merger occurs in accordance with the Merger Agreement (and taking into
consideration the limitations set forth above and at the end of this opinion),
it is our opinion that under current Federal law:
1. The Merger will be a reorganization within the meaning of Code Sections
368(a)(1)(A) and 368(a)(2)(D). MRI, Subsidiary and NMR will each be considered a
"party to a reorganization" within the meaning of Code Section 368(b).
2. No gain or loss will be recognized for Federal income tax purposes by
NMR on the transfer of its assets to Subsidiary and the assumption by Subsidiary
of NMR's liabilities pursuant to the Merger. Code Sections 361(a) and 357(a).
3. No gain or loss will be recognized by the stockholders of NMR whose NMR
Common Stock is converted solely into MRI Common Stock in connection with and
pursuant to the Merger. Code Section 354(a).
4. The tax basis of the shares of MRI Common Stock received by the
stockholders of NMR in exchange for NMR Common Stock in the Merger will be
equal, in each instance, to the adjusted tax basis of the shares of NMR Common
Stock surrendered by such stockholders in exchange therefor. Code Section
358(a).
5. The holding period of the shares of MRI Common Stock received by the
stockholders of NMR in connection with the Merger will include, in each
instance, the period during which the shares of NMR Common Stock surrendered in
exchange therefor were held by such stockholders if, and to the extent that, the
shares of NMR Common Stock were capital assets in the hands of the NMR
stockholders on the Effective Date of the Merger. Code Section 1223(1).
6. The NMR stockholders receiving cash in lieu of fractional shares of MRI
Common Stock will be treated as if such fractional shares had been issued by MRI
and then subsequently redeemed by MRI and will be taxed on any resulting gain in
an amount which shall not exceed the amount of the cash received. Code Section
356(a). Whether the cash received by such NMR stockholders in lieu of fractional
shares is characterized as a dividend or as a payment in exchange for NMR Common
Stock will depend on whether the distribution of cash to such stockholders when
viewed as part of the reorganization as a whole and as a redemption by MRI (and
applying principles analogous to those set forth in Code Section 302(b)) more
closely resembles a dividend distribution or a payment in exchange for shares of
NMR Common Stock surrendered in exchange therefor.
It should be noted that a successful IRS challenge to the status of the
Merger as a reorganization within the meaning
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<PAGE>
of Code Section 368 would result in each NMR stockholder recognizing gain
or loss with respect to each share of NMR Common Stock surrendered equal to the
difference between the stockholder's tax basis in such share and the fair market
value, as of the time of the Merger, of the MRI Common Stock received in
exchange therefor. Even if the Merger qualifies as a reorganization within the
meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code, a
recipient of shares of MRI Common Stock may recognize income, gain or loss to
the extent such shares are considered to have been received in exchange for
services or property (i.e., as consideration for services or property other than
solely shares of NMR Common Stock).
No opinion is expressed herein with respect to the tax consequences of the
Merger to the holders of outstanding NMR warrants, options, convertible
debentures and other rights to acquire shares of NMR Common Stock, including,
without limitation, the acceleration of any exercise provisions under such
rights and/or securities as a consequence of the Merger.
This opinion represents our views as to the interpretation of existing law
and cannot be taken as an assurance as to the manner in which the law will
subsequently develop. Accordingly, no assurance can be given that the Service
will not alter its present positions either prospectively or retrospectively, or
will not adopt new positions with regard to any of the matters upon which we are
rendering an opinion, nor can any assurance be given that the Service will not
audit NMR or its shareholders and/or question or challenge the opinion expressed
herein. The Service is in no way bound by the opinion expressed herein.
Very truly yours,
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FINAL EXECUTION COPY
NON-COMPETITION AND CONSULTING AGREEMENT
This Non-Competition and Consulting Agreement ("Agreement") by and between
Medical Resources, Inc., a Delaware corporation ("MRI" or the "Company"), and
Joseph G. Dasti ("Consultant").
RECITALS
A. The Company has entered into an Agreement and Plan of Merger, dated as
of May 20, 1996 (the "Merger Agreement"), by and among MRI, MRI Sub, Inc.
("Sub") and NMR of America, Inc., a Delaware corporation ("NMR"), pursuant to
which NMR will merge into Sub (the "Merger").
B. The Company desires the association and services of Consultant for the
Company.
C. Consultant is willing and desires to be engaged by the Company, and the
Company is willing to engage Consultant, upon the terms, covenants and
conditions hereinafter set forth.
D. MRI has made the execution and delivery of this Agreement, including,
but not limited to, Consultant's entering into and agreeing to the terms of
non-competition and non-solicitation covenants in accordance with the terms
hereof, a condition to the consummation of the Merger.
E. Consultant is willing to enter into the non-competition and
non-solicitation covenants described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Engagement. The Company hereby engages Consultant and Consultant accepts
such engagement.
2. Term. The term of this Agreement shall be for a period of twelve (12)
months commencing on the effective date of the Merger and satisfaction of the
conditions to effectiveness of this Agreement set forth in Section 7.14 hereof
(the "Effective Date"), unless terminated earlier pursuant to Section 6 herein.
The term of this Agreement may be extended by the mutual written agreement of
the Company and the Consultant, subject to the provisions of Section 6.4. The
initial twelve month period, together with any extension thereof, is herein
referred to as the "Term."
<PAGE>
3. Compensation; Reimbursement; Warrants; Other Payments.
3.1 Annual Compensation. For consulting services rendered by Consultant
under this Agreement, the Company shall pay Consultant a fee of $133,000 payable
in equal monthly installments, in advance, and reimbursements of expenses for
family health and medical benefits under COBRA or such other comparable health
coverage, as Consultant elects. Consultant may in his sole discretion, elect to
defer such monthly payments, without interest, at anytime, for a period of up to
six months upon written notice to the Company.
3.2 Reimbursement. Consultant shall be reimbursed for all reasonable
"out-of-pocket" business expenses incurred in connection with the performance of
his duties under this Agreement (including, but not limited to reimbursement for
automobile mileage at rates established by the Internal Revenue Code of 1986, as
amended, and regulations thereunder (collectively, the "Code")). The
reimbursement of Consultant's business expenses shall be upon presentation to
and approval by the Company of valid receipts and other appropriate
documentation for such expenses and within 15 days of submission of such
documentation to the Company.
3.3 Issuance of Warrants. At the closing of the Merger, MRI agrees to
issue to Consultant (i) five-year warrants to purchase 40,000 shares of MRI
Common Stock at an exercise price of $8.00 per share, (ii) six year warrants to
purchase 200,000 shares of MRI Common Stock at an exercise price of $9.50 per
share, and (iii) in exchange for and replacement of Consultant's existing NMR
employee stock options, three (3) separate three-year stock warrants to purchase
34,375, 68,750 and 34,375 shares of MRI Common Stock, at exercise prices of
$9.27, $4.18 and $4.73, respectively, each of the foregoing warrants referred to
in (i), (ii) and (iii) to be in the form attached hereto as Exhibit A
(collectively, the "Warrants") the amount of such Warrants to be adjusted to the
extent Consultant exercises his employee stock options prior to the Merger.
3.4 Payment for Non-Competition and Non-Solicitation Agreements. In
consideration of the Consultant's agreements contained in Article 5 hereof, the
Company shall pay the Consultant a fee of $211,000 payable in 18 equal
monthly installments, in advance, each in the amount of $11,722.22.
4. Scope of Duties.
4.1 Assignment of Duties. Consultant shall have such duties as may be
assigned to him from time to time by either of the Company's Co-Presidents or
the Board of Directors commensurate with his experience and responsibilities.
Such duties shall be exercised subject to the control, supervision and
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direction of either of the Co-Presidents or the Board of Directors of the
Company. The Consultant's duties shall initially focus on integrating NMR's
business and operations with those of MRI.
4.2 Consultant's Devotion of Time. Consultant hereby agrees to devote all
of his business time, subject to the provisions of Section 4.4 hereof, to the
faithful performance of the duties assigned to him and to the business affairs
of the Company, and not to divert any business opportunities relating to the
Company's current core businesses from the Company to himself or to any other
person or business entity. Notwithstanding the foregoing, after the expiration
of the Restrictive Period (as defined below), the Consultant can pursue any and
all business opportunities without limitation.
4.3 Location. Consultant shall perform the within described duties and
devotion of efforts based out of the Company's Hackensack or Murray Hill, New
Jersey or Tampa, Florida offices as directed by the Company's Co-Presidents or
the Board of Directors and shall be expected to spend a reasonable amount of
time traveling to MRI's other facilities, meeting with investors and potential
investors and securities industry personnel, attending "road show" presentations
and other related activities, as requested by management. Consultant is expected
to maintain a home office location containing the requisite data processing and
telecommunications equipment necessary to carry out his duties.
4.4 Vacation. Consultant shall be entitled to three weeks paid vacation per
year in accordance with the Company's general practice with senior management
and six days paid sick leave. Notwithstanding anything to the contrary contained
herein, in the event that the Company's vacation and sick leave policy with
respect to senior management is improved during the term of this Agreement, the
Consultant shall have the benefit of such change.
5. Non-Competition/Non-Solicitation.
5.1 Non-Competition. Notwithstanding earlier termination of this Agreement,
for a period of 18 months from the Effective Date (the "Restrictive Period"),
Consultant will not, directly or indirectly, as principal, agent, employee,
officer, director or shareholder (except as an investor in securities of
publicly-owned corporations so long as Consultant's ownership of stock of any
one company does not exceed 5% of the outstanding stock of said company) engage
in any business or enterprise in the United States which is competitive with the
business heretofore conducted or hereafter conducted by the Company or any
present subsidiary or affiliate of the Company, including any business or
enterprise involving magnetic resonance imaging or
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other diagnostic imaging procedure; provided, however, that the restrictions
contained in this Section 5.1 shall no longer apply, and shall be of no further
force and effect, in the event the Consultant terminates this Agreement pursuant
to Section 6.3 hereof; and provided, further, that nothing contained in this
Section 5.1 shall prevent Consultant from engaging in any business or enterprise
as principal, agent, employee, officer, director or shareholder of any entity
which, as its primary business, performs clinical laboratory services or engages
in the testing, development or manufacturing of pharmaceutical products, so long
as such entity does not engage in diagnostic imaging services.
5.2 Severability. If, in any judicial proceeding, the duration or scope of
any covenant or agreement of Consultant contained in this Section 5 shall be
adjudicated to be invalid or unenforceable, the parties agree that this
Agreement shall be deemed amended to reduce such duration or scope to the extent
necessary to permit enforcement of such covenant or agreement, such amendment to
apply only with respect to the operation of such covenant and agreement in the
particular jurisdiction in which such adjudication is made.
5.3 Trade Secrets. Other than in the performance of his duties hereunder,
during the Restrictive Period, Consultant agrees not to disclose, to any person,
firm or corporation any information (whether or not in written or tangible form)
concerning the business and marketing methods, referral contacts, physician
relationships, vendor relationships, projection and budgets, costs and expenses
and similar confidential information of the Company (all such information being
referred to in this Agreement as "Trade Secrets"). Consultant shall not deliver,
reproduce or in any way allow such Trade Secrets to be delivered or used by any
third party during the Restrictive Period without specific direction or consent
of the Board of Directors of the Company. Consultant hereby assigns to the
Company any rights which he may have in any such Trade Secret during the
Restrictive Period. The restrictions contained in this Section 5.3 shall no
longer apply, and shall be of no further force and effect, upon termination of
this Agreement by Consultant pursuant to Section 6.3.
5.4 Non-Solicitations. During the Restrictive Period, Consultant shall not,
without the prior written consent of the Company, solicit for employment, either
on his own behalf or on behalf of any other person or entity, any person who is
then employed by the Company or by any entity owned or otherwise affiliated with
the Company or induce, encourage or request, directly or indirectly, any person
or entity engaged in business with the Company, including, but not limited to,
referring physicians, technicians, medical providers, health organizations or
lenders, to reduce the amount of business engaged in with the
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Company; provided, however, that the restrictions contained in this Section 5.4
shall no longer apply, and shall be of no further force and effect, upon
termination of this Agreement by Consultant pursuant to Section 6.3.
5.5 Injunctive Relief. The parties hereto acknowledge and agree that money
damages would constitute an inadequate remedy in the event of a breach of this
Section 5 and that in addition to any other remedies which may be available, the
obligations of Consultant under this Section 5 shall be specifically
enforceable.
6. Expiration and Termination of Agreement.
6.1 Expiration. Consultant's engagement by the Company shall automatically
expire in accordance with Section 2 of this Agreement, unless sooner terminated
pursuant to the provisions of this Section 6.
6.2 Termination For Cause by the Company. The Company shall have the right
and option, exercisable by giving written notice to Consultant, to terminate
Consultant's engagement by the Company and this Agreement at any time after the
conviction by Consultant of a felony against the Company. Such termination shall
constitute the only basis for termination of Consultant for cause by the Company
and any other termination of Consultant's engagement by Company hereunder shall
be deemed to be "without cause" and subject to Section 6.6 hereof.
6.3 Termination For Cause by Consultant. Consultant shall have the right
and option, exercisable by giving written notice to the Company to terminate
this Agreement at any time after the Company materially breaches, repudiates or
otherwise fails to comply with or perform a material term of Section 3 of this
Agreement, but only if the Company has not corrected such breach, repudiation or
failure 10 days after written notice specifying such breach, repudiation or
failure.
6.4 No Obligation to Renew, Etc. The Company shall have no obligation to
renew or extend the term of this Agreement. None of (i) the expiration of the
Term, or (ii) the failure or refusal of the Company to renew or extend the Term
or Consultant's retention by the Company after the expiration of the Term shall
be deemed to constitute a termination of this Agreement by the Company "without
cause" for the purpose of triggering any rights of or cause of action by
Consultant; provided, however, in the event that the Company wishes to renew
this Agreement, it shall provide written notice to the Consultant ninety (90)
days prior to the termination of the Agreement and the Company and the
Consultant shall use their best efforts to negotiate a mutually satisfactory
agreement within forty-five (45) days following such notice.
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<PAGE>
6.5 Effect of Termination for Cause by Company. If this Agreement is
terminated by Company for cause pursuant to Section 6.2, Consultant's right to
receive compensation from the Company and all other rights and entitlements of
Consultant pursuant to this Agreement shall forthwith cease and terminate and
the Company shall have no liability or obligation whatsoever to Consultant
except that:
(1) The Company shall be obligated to pay to Consultant not later than
seven calendar days following the effective date of such termination all unpaid
fees payable pursuant to Section 3.1 which shall have accrued as of the
effective date of such termination;
(2) The Company shall promptly reimburse to Consultant his unpaid
reimbursable expenses payable in accordance with Section 3.2 hereof; and
(3) The provisions of Section 7 shall continue in accordance with their
terms.
6.6 Effect of Termination Without Cause or For Cause by Consultant, etc.
In the event that this Agreement is terminated (i) without cause
(including, without limitation, termination by reason of death or disability),
or (ii) pursuant to Section 6.3, Consultant (or his legal representatives or
estate in the case of death or disability) shall be entitled to payment of (i)
all amounts payable pursuant to Section 3 of this Agreement as though this
Agreement had not been terminated and (ii) his unpaid reimbursable expenses
payable in accordance with Section 3.2 hereof; and the provisions of Section 7
shall continue in accordance with their terms.
7. Miscellaneous.
7.1 Transfer and Assignment. This Agreement is personal as to Consultant
and shall not be assigned or transferred by Consultant without the prior written
consent of the Company. This Agreement shall be binding upon, and inure to, the
benefit of all of the parties hereto and their respective permitted heirs,
personal representatives, successors and assigns.
7.2 Severability. If any term, paragraph, section, provision, covenant or
condition of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect and in no way shall be affected or invalidated.
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<PAGE>
7.3 Governing Law. This Agreement is made under and shall be construed
pursuant to the laws of the State of New Jersey.
7.4 Counterparts. This Agreement may be executed in several counterparts
and all documents so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all of the parties did not sign the
original or the same counterparts.
7.5 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement or statement not so set forth herein.
7.6 Modification. This Agreement may be modified, amended, superseded, or
cancelled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by the
party or parties to be bound by any such modification, amendment, supersession,
cancellation or waiver.
7.7 Waiver. The waiver by either of the parties, express or implied, of any
right under this Agreement or any failure to perform under this Agreement by the
other party, shall not constitute or be deemed as a waiver of any other right
under this Agreement or of any other failure to perform under this Agreement by
the other party, whether of a similar or dissimilar nature.
7.8 Cumulative Remedies. Each and all of the several rights and remedies
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one or such rights or remedies shall not be deemed a waiver of, or an
election to, exercise any other such right or remedy.
7.9 Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
7.10 Notices. Any notice under this Agreement must be in writing, may be
telecopied, sent by express 24-hour guaranteed courier, or hand-delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage-prepaid and registered or certified with a
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return receipt requested. The addresses of the parties for the receipt of notice
shall be as follows:
If to the Company:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey
Attention: William D. Farrell
If to Consultant:
Joseph G. Dasti
2013 Palaco Grande Parkway
Cape Coral, Florida 33904
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice by
giving notice thereof in the manner provided above.
7.11 Survival. Except as otherwise provided herein, any provision of this
Agreement which imposes an obligation after termination or expiration of this
Agreement, including Section 7.12, shall survive the termination and expiration
of this Agreement and be binding on Consultant and the Company.
7.12 Indemnification. If any of the payments to Consultant provided under
Section 3 of this Agreement (the "Contract Payments") or any other portion of
the Total Payments (as defined below) at any time are subject to the tax imposed
by Section 4999 of the Code (the "Excise Tax"), the Company shall pay to the
Consultant at the time described below, an additional amount (the "Gross-Up
Payment") which shall be equal to (i) the Excise Tax assessed or imposed on the
Consultant as a result of the Contract Payments or Total Payments and (ii) any
related excise, federal, state and local taxes resulting from payment of the
Gross-Up Payment.
The amount of any Gross-Up Payment shall be set forth in a notice (the
"Indemnity Notice") to the Company by the Consultant stating that such amount is
payable. Such Indemnify Notice shall be signed by the Consultant and state in
reasonable detail (i) the computation of the amount of the Gross-Up Payment and
(ii) the basis upon which such amount has been determined. The Gross-Up Payment
shall be due and payable on the date which is thirty (30) days after the date of
such Indemnity Notice pursuant to this Section.
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For purposes of this Agreement, any other payments or benefits received or
to be received by Consultant in connection with a change in control of NMR or
the termination of his employment with NMR or the Company (whether payable
pursuant to the terms of this Agreement or of any other plan, arrangement or
agreement with the Company or NMR or any corporation affiliated (or which, as a
result of the completion of the transactions causing a change in control, will
become affiliated with the Company or NMR within the meaning of Section 1504 of
the Code) shall be referred to as the "Total Payments."
7.13 Specific Performance and Expenses. The parties hereto acknowledge and
agree that money damages would constitute an inadequate remedy in the event of
certain breaches hereof and that in addition to any other remedies which may be
available, the obligations of the parties shall be specifically enforceable. In
the event of a dispute hereunder which is adjudicated, the non-prevailing party
shall bear the out-of-pocket expenses (including fees and disbursements of
counsel) of the prevailing party.
7.14 Effectiveness. The effectiveness of this Agreement is conditioned upon
(i) the prior consummation of the Merger in accordance with the Merger Agreement
(ii) effectiveness in accordance with its terms of that certain Agreement
("Termination Agreement") dated the date hereof between NMR and Consultant, a
copy of which is annexed hereto as Exhibit B and (iii) issuance to Consultant of
all Warrants referred to in Section 3.3 above. If the Merger Agreement is
terminated prior to consummation of the Merger or any of the preceding
conditions to effectiveness shall not be satisfied in full, this Agreement shall
not become effective and shall be null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be executed as of May 20, 1996.
MEDICAL RESOURCES, INC.
By: /s/ ROBERT J. ADAMSON
----------------------------------
Name: Robert J. Adamson
Title: Co-President
/s/ JOSEPH G. DASTI
-----------------------------------
Consultant: Joseph G. Dasti
ME5B:605817.2
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FINAL EXECUTION COPY
NON-COMPETITION AND CONSULTING AGREEMENT
This Non-Competition and Consulting Agreement ("Agreement") by and between
Medical Resources, Inc., a Delaware corporation ("MRI" or the "Company"), and
John P. O'Malley, III ("Consultant").
RECITALS
A. The Company has entered into an Agreement and Plan of Merger, dated as
of May 20, 1996 (the "Merger Agreement"), by and among MRI, MRI Sub Inc. ("Sub")
and NMR of America, Inc., a Delaware corporation ("NMR") pursuant to which NMR
will merge into Sub (the "Merger").
B. The Company desires the association and services of Consultant for the
Company.
C. Consultant is willing and desires to be engaged by the Company, and the
Company is willing to engage Consultant, upon the terms, covenants and
conditions hereinafter set forth.
D. MRI has made the execution and delivery of this Agreement, including,
but not limited to, Consultant's entering into and agreeing to the terms of
non-competition and non- solicitation covenants in accordance with the terms
hereof, a condition to the consummation of the Merger.
E. Consultant is willing to enter into this Agreement for the payments
described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Engagement. The Company hereby engages Consultant and Consultant accepts
such engagement.
2. Term. The term of this Agreement shall be for a period of twenty-four
(24) months commencing on the effective date of the Merger and satisfaction of
the conditions to effectiveness of this Agreement set forth in Section 7.14
hereof (the "Effective Date"), unless terminated earlier pursuant to Section 6
herein. The term of this Agreement may be extended by the mutual written
agreement of the Company and the Consultant, subject to the provisions of
Section 6.4. The initial twenty-four month period, together with any extension
thereof, is herein referred to as the "Term."
<PAGE>
3. Compensation; Reimbursement; Warrants; Other Payments.
3.1 Annual Compensation. For consulting services rendered by Consultant
under this Agreement, the Company shall pay to Consultant an annual fee of
$275,000 payable in equal monthly installments, in advance, and reimbursements
of expenses for family health and medical benefits under COBRA or such other
comparable health coverage, as Consultant elects. Consultant may, in his sole
discretion, elect to defer such monthly payments, without interest, at anytime,
for a period of up to six months upon written notice to the Company.
3.2 Reimbursement. Consultant shall be reimbursed for all reasonable
"out-of-pocket" business expenses incurred in connection with the performance of
his duties under this Agreement (including, but not limited to reimbursement for
automobile mileage at rates established by the Internal Revenue Code of 1986, as
amended, and regulations thereunder (collectively, the "Code")). The
reimbursement of Consultant's business expenses shall be upon presentation to
and approval by the Company of valid receipts and other appropriate
documentation for such expenses and within 15 days of submission of such
documentation to the Company.
3.3 Issuance of Warrants. At the closing of the Merger, MRI agrees to issue
to Consultant (i) five-year warrants to purchase 50,000 shares of MRI Common
Stock at an exercise price of $8.00 per share and (ii) in exchange for and
replacement of Consultant's existing NMR employee stock options, four (4)
separate stock purchase warrants to purchase 10,313, 27,500, 41,250 and 34,375
shares of MRI Common Stock, at exercise prices of $4.00, $3.36, $4.18 and $4.73,
respectively, each of the foregoing warrants referred to in (i) and (ii) to be
in the form attached hereto as Exhibit A (collectively, the "Warrants") the
amount of such Warrants to be adjusted to the extent Consultant exercises his
employee stock options prior to the Merger.
The Company hereby agrees and covenants that it shall consider granting
Consultant additional warrants in form comparable to the Warrants twelve (12)
months following the Effective Date of this Agreement.
3.4 Payment for Non-Competition and Non-Solicitation Agreements. In
consideration of the Consultant's agreements contained in Article 5 hereof, the
Company shall pay to Consultant an annual fee of $275,000 payable in equal
monthly installments, in advance, each in the amount of $22,916.66.
3.5 Letter of Credit. As security for any payments to be made to Consultant
by the Company hereunder, the Company shall obtain from a national bank having
total capital of $500,000,000 or more a seven (7) year irrevocable standby
Letter of Credit
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<PAGE>
("Letter of Credit") issued in favor of Consultant as beneficiary in the
amount of $600,000 payable to the Consultant or his beneficiary on demand and
without the need to present further documentation to such bank in the event that
any payment required to be made by the Company hereunder is not made by the
Company unless a court of competent jurisdiction shall have previously
determined that Consultant has breached his obligations under Section 5 hereof.
Such Letter of Credit shall be in form reasonably acceptable to Consultant. In
the event that the Letter of Credit is drawn-upon prior to payment in full of
all amounts due to Consultant under Sections 3.1, 3.2 and 3.4 during the Term,
the Company hereby agrees to promptly replenish the face amount of such Letter
of Credit such that the face amount at all times shall be at least $600,000
during the Term. Such Letter of Credit shall be delivered to Consultant on the
Effective Date, shall have a term of seven years and shall not be subject to
cancellation prior to seven years without Consultant's consent. Any draw by the
Consultant under the Letter of Credit shall not be deemed to limit any other
remedies available to Consultant, whether at law or equity, in the event the
Company shall breach any of its obligations hereunder.
4. Scope of Duties.
4.1 Assignment of Duties. Consultant shall have such duties as may be
assigned to him from time to time by either of the Company's Co-Presidents or
the Board of Directors commensurate with his experience and responsibilities.
Such duties shall be exercised subject to the control, supervision and direction
of either of the Co-Presidents or the Board of Directors of the Company. The
Consultant's duties shall initially focus on integrating NMR's business and
operations with those of MRI.
4.2 Consultant's Devotion of Time. Consultant hereby agrees to devote all
of his business time, subject to the provisions of Section 4.4 hereof, to the
faithful performance of the duties assigned to him and to the business affairs
of the Company, and not to divert any business opportunities relating to the
Company's current core businesses from the Company to himself or to any other
person or business entity. Notwithstanding the foregoing, after the expiration
of the Restrictive Period (as defined below), the Consultant can pursue any and
all business opportunities without limitation.
4.3 Location. Consultant shall perform the within described duties and
devotion of efforts based out of the Company's Hackensack or Murray Hill, New
Jersey offices as directed by the Company's Co-Presidents or the Board of
Directors and shall be expected to spend a reasonable amount of time traveling
to MRI's other facilities, meeting with investors and potential investors and
securities industry personnel, attending
-3-
<PAGE>
"road show" presentations and other related activities, as requested by
management. Consultant is expected to maintain a home office location containing
the requisite data processing and telecommunications equipment necessary to
carry out his duties.
4.4 Vacation. Consultant shall be entitled to three weeks paid vacation per
year in accordance with the Company's general practice with senior management
and six days paid sick leave. Notwithstanding anything to the contrary contained
herein, in the event that the Company's vacation and sick leave policy with
respect to senior management is improved during the term of this Agreement, the
Consultant shall have the benefit of such change.
5. Non-Competition/Non-Solicitation.
5.1 Non-Competition. Notwithstanding earlier termination of this Agreement,
for a period of 24 months from the Effective Date (the "Restrictive Period"),
Consultant will not, directly or indirectly, as principal, agent, employee,
officer, director or shareholder (except as an investor in securities of
publicly-owned corporations so long as Consultant's ownership of stock of any
one company does not exceed 5% of the outstanding stock of said company) engage
in any business or enterprise in the United States which is competitive with the
business heretofore conducted or hereafter conducted by the Company or any
present subsidiary or affiliate of the Company, including any business or
enterprise involving magnetic resonance imaging or other diagnostic imaging
procedure; provided, however, that the restrictions contained in this Section
5.1 shall not apply, and shall be of no force and effect, in the event the
Consultant terminates this Agreement pursuant to Section 6.3(a) hereof; and
provided, further, that nothing contained in this Section 5.1 shall prevent
Consultant from engaging in any business or enterprise as principal, agent,
employee, officer, director or shareholder of any entity which, as its primary
business, performs clinical laboratory services or engages in the testing,
development or manufacturing of pharmaceutical products, so long as such entity
does not engage in diagnostic imaging services.
5.2 Severability. If, in any judicial proceeding, the duration or scope of
any covenant or agreement of Consultant contained in this Section 5 shall be
adjudicated to be invalid or unenforceable, the parties agree that this
Agreement shall be deemed amended to reduce such duration or scope to the extent
necessary to permit enforcement of such covenant or agreement, such amendment to
apply only with respect to the operation of such covenant and agreement in the
particular jurisdiction in which such adjudication is made.
5.3 Trade Secrets. Other than in the performance of his duties hereunder,
during the Restrictive Period, Consultant
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<PAGE>
agrees not to disclose, to any person, firm or corporation any information
(whether or not in written or tangible form) concerning the business and
marketing methods, referral contacts, physician relationships, vendor
relationships, projection and budgets, costs and expenses and similar
confidential information of the Company (all such information being referred to
in this Agreement as "Trade Secrets"). Consultant shall not deliver, reproduce
or in any way allow such Trade Secrets to be delivered or used by any third
party during the Restrictive Period without specific direction or consent of the
Board of Directors of the Company. Consultant hereby assigns to the Company any
rights which he may have in any such Trade Secret during the Restrictive Period.
The restrictions contained in this Section 5.3 shall no longer apply, and shall
be of no further force and effect, upon termination of this Agreement by
Consultant pursuant to Section 6.3(a) hereof.
5.4 Non-Solicitations. During the Restrictive Period, Consultant shall not,
without the prior written consent of the Company, solicit for employment, either
on his own behalf or on behalf of any other person or entity, any person who is
then employed by the Company or by any entity owned or otherwise affiliated with
the Company or induce, encourage or request, directly or indirectly, any person
or entity engaged in business with the Company, including, but not limited to,
referring physicians, technicians, medical providers, health organizations or
lenders, to reduce the amount of business engaged in with the Company; provided,
however, that the restrictions contained in this Section 5.4 shall no longer
apply, and shall be of no further force and effect, in the event the Consultant
terminates this Agreement pursuant to Section 6.3(a) hereof.
5.5 Injunctive Relief. The parties hereto acknowledge and agree that money
damages would constitute an inadequate remedy in the event of a breach of this
Section 5 and that in addition to any other remedies which may be available, the
obligations of Consultant under this Section 5 shall be specifically
enforceable.
6. Expiration and Termination of Agreement.
6.1 Expiration. Consultant's engagement by the Company shall automatically
expire in accordance with Section 2 of this Agreement, unless sooner terminated
pursuant to the provisions of this Section 6.
6.2 Termination For Cause by the Company. The Company shall have the right
and option, exercisable by giving written notice to Consultant, to terminate
Consultant's engagement by the Company and this Agreement at any time after the
conviction by Consultant of a felony against the Company. Such termination shall
constitute the only basis for termination of Consultant for
-5-
<PAGE>
cause by the Company and any other termination of Consultant's engagement
by Company hereunder shall be deemed to be "without cause" and subject to
Section 6.6 hereof.
6.3 Termination For Cause by Consultant; After 18 months. (a) Consultant
shall have the right and option, exercisable by giving written notice to the
Company to terminate this Agreement at any time after the Company materially
breaches, repudiates or otherwise fails to comply with or perform a material
term of Section 3 of this Agreement, but only if the Company has not corrected
such breach, repudiation or failure 10 days after written notice specifying such
breach, repudiation or failure.
(b) Notwithstanding anything otherwise contained herein to the contrary,
Consultant may, at his election, terminate this Agreement 18 months after the
Effective Date in which event the Company shall be subject to the requirements
of Section 6.6.
6.4 No Obligation to Renew, Etc. The Company shall have no obligation to
renew or extend the term of this Agreement beyond the Term. None of (i) the
expiration of the Term or (ii) the failure or refusal of the Company to renew or
extend the Term or Consultant's retention by the Company after the expiration of
the Term, shall be deemed to constitute a termination of this Agreement by the
Company "without cause" for the purpose of triggering any rights of or cause of
action by Consultant; provided, however, that in the event the Company wishes to
renew this Agreement, it shall provide written notice to the Consultant nine (9)
months prior to the termination of the Agreement and the Company and the
Consultant shall use their best efforts to negotiate a mutually satisfactory
agreement within forty-five (45) days following such notice.
6.5 Effect of Termination for Cause by Company. If this Agreement is
terminated by Company for cause pursuant to Section 6.2, Consultant's right to
receive compensation from the Company and all other rights and entitlements of
Consultant pursuant to this Agreement shall forthwith cease and terminate, and
the Company shall have no liability or obligation whatsoever to Consultant
except that:
(1) The Company shall be obligated to pay to Consultant not later than
seven calendar days following the effective date of such termination all unpaid
fees payable pursuant to Section 3.1 which shall have accrued as of the
effective date of such termination;
(2) The Company shall promptly reimburse to Consultant his unpaid
reimbursable expenses payable in accordance with Section 3.2 hereof; and
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<PAGE>
(3) The provisions of Section 7 and Section 3.5 shall continue in
accordance with their terms.
6.6 Effect of Termination Without Cause or For Cause by Consultant, etc.
(a) In the event that this Agreement is terminated (i) without cause by Company
(including, without limitation, termination by reason of death or disability),
(ii) at the election of Consultant 18 months after the Effective Date pursuant
to Section 6.3(b), or (iii) pursuant to Section 6.3(a), Consultant (or his legal
representatives or estate in the case of disability or death) shall be entitled
to payment of (A) all amounts payable during the Term pursuant to Section 3 of
this Agreement as though this Agreement had not been terminated prior to the end
of the Term and (B) his unpaid reimbursable expenses payable in accordance with
Section 3.2 hereof (except that in the case of termination under clause (ii),
Consultant shall be entitled to such amounts payable pursuant to Section 3 so
long as he is not in breach of his obligations under Section 5 hereunder); and
the provisions of Section 7 shall continue in accordance with their terms.
(b) In the event that this Agreement is terminated at any time by
Consultant for any reason other than as described in Section 6.3, so long as
Consultant is not in breach of his obligations under Section 5 hereunder,
Consultant shall be entitled to payment of (i) all amounts payable during the
Term pursuant to Section 3 of this Agreement as though this Agreement had not
been terminated prior to the end of the Term, except that with respect to the
amount of any of the first 18 monthly payments following the Effective Date
which become payable after the date this Agreement is terminated by Consultant
under this Section 6.6(b), the amount of each such monthly payment shall be
reduced by $11,111; and (ii) his unpaid reimbursable expenses payable in
accordance with Section 3.2 hereof; and the provisions of Section 7 shall
continue in accordance with their terms.
7. Miscellaneous.
7.1 Transfer and Assignment. This Agreement is personal as to Consultant
and shall not be assigned or transferred by Consultant without the prior written
consent of the Company. This Agreement shall be binding upon, and inure to, the
benefit of all of the parties hereto and their respective permitted heirs,
personal representatives, successors and assigns.
7.2 Severability. If any term, paragraph, section, provision, covenant or
condition of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect and in no way shall be affected or invalidated.
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<PAGE>
7.3 Governing Law. This Agreement is made under and shall be construed
pursuant to the laws of the State of New Jersey.
7.4 Counterparts. This Agreement may be executed in several counterparts
and all documents so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all of the parties did not sign the
original or the same counterparts.
7.5 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement or statement not so set forth herein.
7.6 Modification. This Agreement may be modified, amended, superseded, or
cancelled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by the
party or parties to be bound by any such modification, amendment, supersession,
cancellation or waiver.
7.7 Waiver. The waiver by either of the parties, express or implied, of any
right under this Agreement or any failure to perform under this Agreement by the
other party, shall not constitute or be deemed as a waiver of any other right
under this Agreement or of any other failure to perform under this Agreement by
the other party, whether of a similar or dissimilar nature.
7.8 Cumulative Remedies. Each and all of the several rights and remedies
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one or such rights or remedies shall not be deemed a waiver of, or a
election to, exercise any other such right or remedy.
7.9 Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
7.10 Notices. Any notice under this Agreement must be in writing, may be
telecopied, sent by express 24-hour guaranteed courier, or hand-delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage-prepaid and registered or certified with a
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<PAGE>
return receipt requested. The addresses of the parties for the receipt of
notice shall be as follows:
If to the Company:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey
Attention: William D. Farrell
If to Consultant:
John P. O'Malley, III
2013 Palaco Grande Parkway
Cape Coral, Florida 33904
Each notice given by registered or certified mail shall be deemed delivered and
effective on the date of delivery as shown on the return receipt, and each
notice delivered in any other manner shall be deemed to be effective as of the
time of actual delivery thereof. Each party may change its address for notice by
giving notice thereof in the manner provided above.
7.11 Survival. Except as otherwise provided herein, any provision of this
Agreement which imposes an obligation after termination or expiration of this
Agreement, including Sections 3.5 and 7.12, shall survive the termination and
expiration of this Agreement and be binding on Consultant and the Company.
7.12 Indemnification. If any of the payments to Consultant provided under
Section 3 of this Agreement (the "Contract Payments") or any other portion of
the Total Payments (as defined below) are at any time subject to the tax imposed
by Section 4999 of the Code (the "Excise Tax"), the Company shall pay to the
Consultant at the time described below, an additional amount (the "Gross-Up
Payment") which shall be equal to (i) the Excise Tax assessed or imposed on the
Consultant as a result of the Contract Payments or Total Payments, and (ii) any
related excise, federal, state and local taxes resulting from payment of the
Gross-Up Payment.
The amount of any Gross-Up Payment shall be set forth in a notice (the
"Indemnity Notice") to the Company by the Consultant stating that such amount is
payable. Such Indemnity Notice shall be signed by the Consultant and state in
reasonable detail (i) the computation of the amount of the Gross-Up Payment and
(ii) the basis upon which such amount has been determined. The Gross-Up Payment
shall be due and payable on the date which is thirty (30) days after the date of
such Indemnity Notice pursuant to this Section.
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<PAGE>
For purposes of this Agreement, any other payments or benefits received or
to be received by Consultant in connection with a change in control of NMR or
the termination of his employment with NMR or the Company (whether payable
pursuant to the terms of this Agreement or of any other plan, arrangement or
agreement with the Company or NMR or any corporation affiliated or which, as a
result of the completion of the transactions causing a change in control, will
become affiliated with the Company or NMR within the meaning of Section 1504 of
the Code) shall be referred to as the "Total Payments."
7.13 Specific Performance and Expenses. The parties hereto acknowledge and
agree that money damages would constitute an inadequate remedy in the event of
certain breaches hereof and that in addition to any other remedies which may be
available, the obligations of the parties shall be specifically enforceable. In
the event of a dispute hereunder which is adjudicated, the non-prevailing party
shall bear the out-of-pocket expenses (including fees and disbursements of
counsel) of the prevailing party.
7.14 Effectiveness. The effectiveness of this Agreement is conditioned upon
(i) the prior consummation of the Merger in accordance with the Merger
Agreement, (ii) effectiveness in accordance with its terms of that certain
Agreement ("Termination Agreement") dated the date hereof between NMR and
Consultant, a copy of which is annexed hereto as Exhibit B, (iii) issuance to
Consultant of all Warrants referred to in Section 3.3 above and (iv)
Consultant's receipt of the Letter of Credit described in Section 3.5 hereof. If
the Merger Agreement is terminated prior to consummation of the Merger or any of
the preceding conditions to effectiveness shall not be satisfied in full, this
Agreement shall not become effective and shall be null and void.
IN WITNESS WHEREOF, the parties hereto have caused this Non-Competition and
Consulting Agreement to be executed as of May 20, 1996
MEDICAL RESOURCES, INC.
By: /s/ STEPHEN M. DAVIS
--------------------------------
Name: Stephen M. Davis
Title: Secretary
/s/ JOHN P. O'MALLEY III
-------------------------------------
Consultant: John P. O'Malley III
ME5B:605818.6
-10-
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Joint Proxy Statement/Prospectus and Registration Statement (Form S-4) of
Medical Resources, Inc. for the registration of 5,643,673 shares of its common
stock and to the incorporation by reference therein of our report dated February
29, 1996, with respect to the consolidated financial statements and schedule of
Medical Resources, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission. We
also consent to the incorporation by reference therein of our report dated
January 29, 1996, with respect to the financial statements of Nurse Care Plus,
Inc. included in the Company's Current Report (Form 8-K/A) dated July 19, 1996,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG
Tampa, Florida
July 26, 1996
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-4 of Medical
Resources, Inc. of our report dated March 22, 1994 appearing on page F-4 of
Medical Resources, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1995. We also consent to the references to us under the headings "Experts"
and "Selected Historical Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such "Selected
Historical Financial Data".
/s/ PRICE WATERHOUSE LLP
Morristown, New Jersey
July 25, 1996
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Medical Resources, Inc. for the registration of 5,643,673 shares of its
common stock and to the incorporation by reference therein of our reports dated
February 21, 1995 with respect to the financial statements of Kik Kin, L.P. for
the years ended December 31, 1994 and January 1, 1994.
/s/ DIXON, ODOM & CO., L.L.P.
July 29, 1996
Exhibit 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated February 9, 1996, which appears in the
annual report on Form 10-K of Medical Resources, Inc. for the year ended
December 31, 1995, and to the reference to our Firm under the caption "Experts"
in the Prospectus.
/s/ KEMPISTY & COMPANY
Certified Public Accountants, PC.
New York, New York
July 30, 1996
Exhibit 23.6
INDEPENDENT AUDITOR'S CONSENT
We consent to the references to us under the heading "Experts" in
Registration Statement on Form S-4 to be filed on or about July 30, 1996 and to
the incorporation by reference therein of our reports dated February 2, 1995 and
October 6, 1995, with respect to the financial statements of MRI-CT, Inc.
/s/ BARD & GLASSMAN
New York, New York
July 30, 1996
Exhibit 23.7
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement of Medical Resources,
Inc. on Form S-4 of our report dated May 31, 1996 with respect to the financial
statements of Americare Imaging Center, Inc. incorporated by reference in the
Joint Proxy Statement/Prospectus, which is a part of the Registration Statement,
and to reference to us under the heading "Experts" in such Joint Proxy
Statement/Prospectus.
/s/ WEISBERG, POLANSKY, KULBERG,
EINHORN & MOLE, LLP
Carle Place, New York
July 30, 1996
Exhibit 23.8
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement of Medical Resources,
Inc. on Form S-4 of our report dated May 31, 1996 with respect to the financial
statements of Access Imaging Center, Inc. incorporated by reference in the Joint
Proxy Statement/Prospectus, which is a part of the Registration Statement, and
to reference to us under the heading "Experts" in such Joint Proxy
Statement/Prospectus.
/s/ WEISBERG, POLANSKY, KULBERG,
EINHORN & MOLE, LLP
Carle Place, New York
July 30, 1996
Exhibit 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Medical Resources, Inc. on Form S-4 of our report dated June 21, 1996, on our
audits of the consolidated financial statements of NMR of America, Inc, and
Subsidiaries as of March 31, 1996 and 1995, and for the three years in the
period ended March 31, 1996, which report is included in the Company's Annual
Report on Form 10-KSB. We also consent to the reference to our firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
July 25, 1996
EXHIBIT 23.10
CONSENT OF McCARTER & ENGLISH
We hereby consent to the inclusion of our Form of Tax Opinion as an exhibit
to the Registration Statement on Form S-4 of Medical Resources, Inc. and to the
references to and the summary of such Opinion in such Registration Statement.
/s/McCARTER & ENGLISH
McCarter & English
July 29, 1996
Exhibit 23.11
CONSENT OF DILLON, READ & CO. INC.
We hereby consent to the use of Appendix B containing our opinion letter
dated June 14, 1996 to the Board of Directors of Medical Resources, Inc. ("MRI")
in the Joint Proxy Statement/Prospectus constituting a part of the Registration
Statement on Form S-4 relating to the acquisition of NMR of America, Inc. by MRI
and to the references to our firm in such Joint Proxy Statement/Prospectus. In
giving this consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
/s/DILLON READ & CO. INC.
New York, New York
July 26, 1996
Exhibit 23.12
July 29, 1996
Special Committee of the Board of Directors
NMR of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974-2732
Gentlemen:
We hereby consent to the inclusion of our written fairness opinion dated
June 13, 1996 to the Special Committee of the Board of Directors of NMR of
America, Inc. (the "Company") in the proxy statement/prospectus constituting a
part of the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the merger pursuant to the Agreement and
Plan of Merger by and among Medical Resources, Inc., MRI Sub, Inc., and the
Company dated May 20, 1996. In giving this consent, we do not hereby admit that
Cowen & Company is within the class of persons whose consent is required by
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.
Very truly yours,
/s/ COWEN & COMPANY
MEDICAL RESOURCES, INC.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 30, 1996
The undersigned hereby appoints Robert J. Adamson and William D. Farrell
proxies of the undersigned, with full power of substitution, to vote all shares
of Common Stock, par value $.01 per share, of Medical Resources, Inc., a
Delaware corporation ("MRI" or the "Company"), the undersigned is entitled to
vote at the Special Meeting of Stockholders of the Company to be held on Friday,
August 30, 1996 at 10:00 a.m., New York City Time, at The Sheraton New York
Hotel, 811 7th Avenue (at 52nd Street), New York, New York 10019, or any
adjournments or postponements thereof, with all the powers the undersigned would
have if personally present.
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2 AND THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN ITEM 3. THE VOTE WITH
RESPECT TO ITEM 2 WILL ONLY BE GIVEN EFFECT IF ITEM 1 IS APPROVED AND THE MERGER
IS CONSUMMATED.
The undersigned stockholder(s) acknowledges receipt of an accompanying
Notice of Special Meeting of Stockholders and accompanying Joint Proxy
Statement/Prospectus dated August 1, 1996.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
(To be signed on Reverse Side)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
[X] Please mark your
votes as in this
example.
FOR AGAINST ABSTAIN
1. Proposal to approve an Agreement and Plan of [ ] [ ] [ ]
Merger dated May 20, 1996, providing for the
merger (the "Merger") of NMR of America, Inc.
into a wholly-owned subsidiary of MRI.
2. Proposal to approve an amendment to MRI's [ ] [ ] [ ]
Certificate of Incorporation which will increase
the number of authorized shares of MRI Common Stock
from 20,000,000 to 50,000,000.
3. In their discretion, the above-named proxies are
authorized to vote in accordance with their own
judgment upon such other matters as may properly
come before the Special Meeting or any adjournments
or postponements thereof.
SIGNATURE(S) _______________________________________ DATED:______________, 1996
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
(NOTE: Please complete, date and sign exactly as your name appears hereon. When
signing as attorney, administrator, executor, guardian, trustee or
corporate official, please add your title. If shares are held jointly,
each holder should sign.)
NMR OF AMERICA, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders--August 30, 1996
The undersigned hereby appoints Joseph G. Dasti and John P. O'Malley III
and each of them, with full power of substitution, the true and lawful proxies
and attorneys-in-fact of the undersigned to vote, as designated below, all
shares of Common Stock, par value $.01 per share, of NMR of America, Inc., a
Delaware corporation ("NMR" or the "Company"), which the undersigned is entitled
to vote, as fully and with the same effect as the undersigned might do if
personally present, at the Annual Meeting of Stockholders of the Company to be
held on Friday, August 30, 1996 at 10:00 a.m., New York City Time, at The
Sheraton New York Hotel, 811 7th Avenue (at 52nd Street), New York, New York
10019, or any adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED "FOR" ITEM 1, "FOR" THE ELECTION OF ALL THE NOMINEES TO THE
BOARD OF DIRECTORS IDENTIFIED BELOW (ITEM 2) AND, IN THE DISCRETION OF THE
PROXIES NAMED, ON ANY MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
THE VOTE WITH RESPECT TO ITEM 2 WILL ONLY BE GIVEN EFFECT IF ITEM 1 IS NOT
APPROVED OR THE MERGER IS NOT OTHERWISE CONSUMMATED.
(To be signed on Reverse Side)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
[X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN FOR WITHHELD
<S> <C> <C> <C> <C> <C> <C> <C>
1. Proposal to approve [ ] [ ] [ ] 2. Election of the following [ ] [ ] Nominees: Joseph G. Dasti,
Agreement and Plan nominees to serve as Donald W. Arthur, David L.
of Merger. (Item Directors. (Item Bloom, John A. Faraone and
No. 1 in the Joint No. 3 in Joint Joseph T. Zappala.
Proxy Statement/ Proxy Statement/
Prospectus) Prospectus) Instructions: To withhold
authority to vote for any
individual nominee, write
that nominee's name in the
space provided below.
For, except vote withheld from the
following nominee(s).
______________________________________
3. In the discretion of such proxies, upon such other
matters as may properly come before the Annual Meeting
or any adjournments or postponements thereof.
</TABLE>
The undersigned stockholder(s) acknowledges receipt of an accompanying Notice of
Annual Meeting of Stockholders and accompanying Joint Proxy Statement/Prospectus
dated August 1, 1996. This Proxy is revocable at any time, and the undersigned
reserves the right to attend the Annual Meeting and vote in person. The
undersigned hereby revokes any proxy heretofore given in respect of the shares
of the Company.
SIGNATURE(S) _______________________________________ DATED:______________, 1996
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
*NOTE: Please complete, date and sign exactly as your name appears hereon. When
signing as attorney, administrator, executor, guardian, trustee or
corporate official, please add your title. If shares are held jointly,
each holder should sign.
