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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 21, 1997
MEDICAL RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-20440 13-3584552
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(State or other (Commission (I.R.S. Employer
jurisdiction) File Number) Identification No.)
155 State Street, Hackensack, New Jersey 07601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 488-6230
N/A
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(Former name and former address, if changed since last report)
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Item 5. Other Events.
On July 21, 1997. Medical Resources, Inc. (the "Company")
completed a private placement of $18,000,0000 of a newly designated
Series C Convertible Preferred Stock (the "Preferred Stock") to an
institutional investor. The Preferred Stock was sold pursuant to
an exemption from the registration requirements of the Securities
Act of 1933.
The face amount of the Preferred Stock accrues at a rate
of 3% per annum from the closing date to the conversion date. The
Preferred Stock is convertible from time to time into the Company's
Common Stock at a price equal to the lesser of (i) an amount equal
to 100% of the average of the closing bid prices of the Company's
Common Stock for the five consecutive trading days ending on the
fifth trading day preceding a notice of conversion and (ii) $20.70.
The Company has agreed to file a registration statement under the
Securities Act of 1933 covering the shares of Common Stock issuable
upon conversion of the Preferred Stock issued in the private
placement. Subject to certain limitations, the Company may require
the conversion of all the outstanding Preferred Stock beginning 180
days following the date such registration statement is declared
effective by the Securities and Exchange Commission. The Company
intends to use the net proceeds of the private offering to fund
acquisitions and for working capital and general corporate
purposes.
Reference is made to the Certificate of Designations,
Preferences and Rights of the Company's Series C Convertible
Preferred Stock and related agreements, filed as exhibits hereto,
for a full description of the terms and provisions of the Preferred
Stock and the terms of the private placement described above.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
4(a) Certificate of Designations, Preferences
and Rights of the Company's Series C Convertible
Preferred Stock.
10(a) Securities Purchase Agreement, dated as of
July 21, 1997, between the Company and RGC
International Investors, LDC.
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10(b) Registration Rights Agreement, dated as of
July 21, 1997, between the Company and RGC
International Investors, LDC.
99(a) Press release issued on July 23, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
MEDICAL RESOURCES, INC.
Registrant
By: /s/ John P. O'Malley III
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Name: John P. O'Malley III
Title: Executive Vice President - Finance
Date: July 23, 1997
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<EX.4a>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
MEDICAL RESOURCES, INC.
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
Medical Resources, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions
were adopted by the Board of Directors of the Corporation on July
21, 1997 pursuant to authority of the Board of Directors as
required by Section 151(g) of the General Corporation Law of the
State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the "Board of
Directors" or the "Board") in accordance with the provisions of its
Certificate of Incorporation, the Board of Directors hereby
authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes
the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
Series C Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 18,000
shares of Preferred Stock, is Series C Convertible Preferred Stock
(the "Series C Preferred Stock") and the stated value shall be One
Thousand Dollars ($1,000) per share (the "Stated Value").
II. Rank
The Series C Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.01 per share (the "Common
Stock"); (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than "Pari Passu Securities"
and "Senior Securities" (collectively, with the Common Stock,
"Junior Securities"); (iii) pari passu with any class or series of
capital stock of the Corporation hereafter created specifically<PAGE>
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ranking on parity with the Series C Preferred Stock ("Pari Passu
Securities"); and (iv) junior to any class or series of capital
stock of the Corporation hereafter created (with the consent of the
holders of Series C Preferred Stock obtained in accordance with
Article IX hereof, unless the market capitalization of the
Company's Common Stock exceeds $300,000,000 based on the ten (10)
Trading Day average ending one (1) day prior to the date on which
the Board of Directors approve of the issuance of such class or
series of capital stock, in which case such consent will not be
required) specifically ranking, by its terms, senior to the Series
C Preferred Stock ("Senior Securities"), in each case as to
distribution of assets upon liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
III. Dividends
The Series C Preferred Stock shall not bear any
dividends. In no event, so long as any Series C Preferred Stock
shall remain outstanding, shall any dividend whatsoever be declared
or paid upon, nor shall any distribution be made upon, any Junior
Securities, nor shall any shares of Junior Securities be purchased
or redeemed by the Corporation nor shall any moneys be paid to or
made available for a sinking fund for the purchase or redemption of
any Junior Securities, without, in each such case, the written
consent of the holders of a majority of the outstanding shares of
Series C Preferred Stock, voting together as a class.
IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal
or State bankruptcy, insolvency or similar law, or consent to the
entry of an order for relief in an involuntary case under any law
or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an
assignment for the benefit of its creditors, or admit in writing
its inability to pay its debts generally as they become due, or if
a decree or order for relief in respect of the Corporation shall be
entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and any such decree
or order shall be unstayed and in effect for a period of thirty
(30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the<PAGE>
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Corporation shall otherwise liquidate, dissolve or wind up (each
such event being considered a "Liquidation Event"), no distribution
shall be made to the holders of any shares of capital stock of the
Corporation (other than Senior Securities) upon liquidation,
dissolution or winding up unless prior thereto, the holders of
shares of Series C Preferred Stock, subject to Article VI, shall
have received the Liquidation Preference (as defined in Article
IV.C) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution
among the holders of the Series C Preferred Stock and holders of
Pari Passu Securities shall be insufficient to permit the payment
to such holders of the preferential amounts payable thereon, then
the entire assets and funds of the Corporation legally available
for distribution to the Series C Preferred Stock and the Pari Passu
Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate liquidation preference
payable on all such shares.
B. At the option of the Corporation, the sale,
conveyance or disposition of all or substantially all of the assets
of the Corporation, the effectuation by the Corporation of a
transaction or series of related transactions in which more than
50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the
Corporation with or into any other Person (as defined below) or
Persons when the Corporation is not the survivor shall either: (i)
be deemed to be a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall be required to
distribute, upon consummation of and as a condition to, such
transaction an amount equal to 115% of the Liquidation Preference
with respect to each outstanding share of Series C Preferred Stock
in accordance with and subject to the terms of this Article IV or
(ii) be treated pursuant to Article VI.C(c) hereof. "Person" shall
mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference"
with respect to a share of the Series C Preferred Stock shall mean
an amount equal to the sum of (i) the Stated Value thereof, plus
(ii) an amount equal to three percent (3%) per annum of such Stated
Value for the period beginning on the date of issuance of such
share and ending on the date of final distribution to the holder
thereof (pro rated for any portion of such period). The
liquidation preference with respect to any Pari Passu Securities
shall be as set forth in the Certificate of Designation filed in
respect thereof.
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V. Redemption
A. If any of the following events (each, a "Default
Event") shall occur:
(i) The Corporation fails to issue shares of Common
Stock to the holders of Series C Preferred Stock upon exercise by
the holders of their conversion rights in accordance with the terms
of this Certificate of Designation (for a period of at least ninety
(90) days if such failure is solely as a result of the
circumstances governed by the second paragraph of Article VI.F
below and the Corporation is using all commercially reasonable
efforts to authorize a sufficient number of shares of Common Stock
as soon as practicable), fails to transfer or to cause its transfer
agent to transfer (electronically or in certificated form) any
certificate for shares of Common Stock issued to the holders upon
conversion of the Series C Preferred Stock as and when required by
this Certificate of Designation or the Registration Rights
Agreement, dated as of July 21, 1997, by and among the Corporation
and the other signatories thereto (the "Registration Rights
Agreement"), fails to remove any restrictive legend (or to withdraw
any stop transfer instructions in respect thereof) on any
certificate or any shares of Common Stock issued to the holders of
Series C Preferred Stock upon conversion of the Series C Preferred
Stock as and when required by this Certificate of Designation, the
Securities Purchase Agreement dated as of July 21, 1997, by and
between the Corporation and the other signatories thereto (the
"Purchase Agreement") or the Registration Rights Agreement, or
fails to fulfill its obligations pursuant to Section 5 of the
Purchase Agreement (or makes any announcement that it does not
intend to honor the obligations described in this paragraph) and
any such failure shall continue uncured (or any announcement not to
honor its obligations shall not be rescinded) for twenty (20)
business days after notice of such failure is received by the
Corporation;
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC") of the
Registration Statement (as defined in the Registration Rights
Agreement) prior to January 31, 1997 or such Registration Statement
lapses in effect (or sales otherwise cannot be made thereunder,
whether by reason of the Company's failure to amend or supplement
the prospectus included therein in accordance with the Registration
Rights Agreement or otherwise) for more than thirty (30)
consecutive days or sixty (60) days in any three (3) month period
(excluding Allowed Delays, as defined in Section 3(f) of the
Registration Rights Agreement) after such Registration Statement
becomes effective;
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(iii) The Corporation shall fail to maintain
the listing of the Common Stock on the Nasdaq National Market
("Nasdaq"), the Nasdaq SmallCap Market, the New York Stock Exchange
or the American Stock Exchange and such failure shall remain
uncured for at least sixty (60) days;
then, upon the occurrence and during the continuation of any
Default Event specified in subparagraphs (i), (ii) or (iii) after
the holders of at least 50% of the then outstanding shares of
Series C Preferred Stock have given written notice (the "Optional
Redemption Notice") to the Corporation of such Default Event, the
Corporation shall either (i) pay the holder an amount equal to the
Default Amount (as defined below) multiplied by the number of
shares of Series C Preferred Stock held by such holder on the date
of the Optional Redemption Notice or (ii) purchase each holder's
shares of Series C Preferred Stock for an amount per share equal to
the greater of (1) 115% multiplied by the sum of (a) the Stated
Value of the shares to be redeemed, plus (b) an amount equal to
three percent (3%) per annum of such Stated Value for the period
beginning on the issuance of such shares and ending on the date of
payment of the Optional Redemption Amount (as defined herein) (the
"Optional Redemption Date") and (2) the "parity value" of the
shares to be redeemed, where parity value means the product of (a)
the number of shares of Common Stock issuable upon conversion of
such shares in accordance with Article VI below (treating the
Trading Day immediately preceding the Optional Redemption Date as
the "Conversion Date" (as hereinafter defined), unless the Default
Event arises as a result of a breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the closing sale price for the
Common Stock on the principal trading market for such shares on
such "Conversion Date" (the greater of such amounts being referred
to as the "Optional Redemption Amount"). "Default Amount" shall
mean One Hundred U.S. Dollars ($100) except when the Default Amount
is payable in connection with a willful failure by the Corporation
to fulfill its obligations described in Article V.A.(i), including
without limitation, a willful failure to issue Common Stock upon
conversion of Series C Preferred Stock in accordance with the terms
of Article VI hereof, in which case the Default Amount shall be Two
Hundred Fifty U.S. Dollars ($250). The choice of which to pay (the
Default Amount or Optional Redemption Amount) shall be the
Corporation's.
In the case of a Default Event, if the Corporation fails
to pay the Default Amount or the Optional Redemption Amount, as
applicable, for each share within five (5) business days of written
notice that such amount is due and payable, then (assuming there
are sufficient authorized shares) in addition to all other
available remedies, each holder of Series C Preferred Stock shall<PAGE>
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have the right at any time, so long as the Default Event continues,
to require the Corporation, upon written notice, to immediately
issue (in accordance with and subject to the terms of Article VI
below), in lieu of the Default Amount or the Optional Redemption
Amount, as applicable, with respect to each outstanding share of
Series C Preferred Stock held by such holder, the number of shares
of Common Stock of the Corporation equal to the Default Amount or
the Optional Redemption Amount, as applicable, divided by the
Conversion Price then in effect. Payment of the Default Amount
shall not affect the holders ongoing rights with respect to the
then outstanding shares of Series C Preferred Stock or the rights
of such holders to pursue alternate damages in respect of the
events giving rise to such payments.
B. If the Series C Preferred Stock ceases to be
convertible as a result of the limitations described in the second
paragraph of Article VI.A below (a "19.99% Redemption Event"), and
the Corporation has not prior to, or within ninety (90) days of,
the date that such 19.99% Redemption Event arises, (i) obtained
approval of the issuance of the Conversion Shares by the requisite
vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former
holders of Series C Preferred Stock that were issued upon
conversion of Series C Preferred Stock) or (ii) received other
permission pursuant to Nasdaq Requirement 4460(i) allowing the
Corporation to resume issuances of shares of Common Stock upon
conversion of Series C Preferred Stock, then the Corporation shall
be obligated to redeem immediately all of the then outstanding
Series C Preferred Stock, in accordance with this Article V.B. An
irrevocable notice of redemption (the "Redemption Notice") shall be
delivered promptly to the holders of Series C Preferred Stock at
their registered address appearing on the records of the
Corporation and shall state (1) that 19.99% of the Outstanding
Common Amount (as defined in Article VI.A below) has been issued
upon exercise of the Series C Preferred Stock, (2) that the
Corporation is obligated to redeem all of the outstanding Series C
Preferred Stock and (3) the Optional Redemption Date, which shall
be a date within five (5) business days of the date of the
Redemption Notice. On the Optional Redemption Date, the
Corporation shall make payment equal to one hundred percent (100%)
of the Liquidation Preference (as defined in Section IV.C.) with
respect to each outstanding share of Series C Preferred Stock in
cash.
VI. Conversion at the Option of the Holder
A. Each holder of shares of Series C Preferred Stock
may, at its option at any time and from time to time after the date
of issuance thereof, upon surrender of the certificates therefor,
convert any or all of its shares of Series C Preferred Stock into
Common Stock as follows (an "Optional Conversion"). Each share of<PAGE>
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Series C Preferred Stock shall be convertible into such number of
fully paid and nonassessable shares of Common Stock as is
determined by dividing (1) the sum of (a) the Stated Value thereof,
plus, (b) the Premium Amount (as defined below), by (2) the then
effective Conversion Price (as defined herein); provided, however,
that, unless the Holder delivers a waiver in accordance with the
immediately following sentence, and except for conversions on the
Mandatory Conversion Date (as defined below), in no event shall a
holder of shares of Series C Preferred Stock be entitled to convert
any such shares in excess of that number of shares upon conversion
of which the sum of (x) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the shares of
Series C Preferred Stock) and (y) the number of shares of Common
Stock issuable upon the conversion of the shares of Series C
Preferred Stock with respect to which the determination of this
proviso is being made, would result in beneficial ownership by a
holder and such holder's affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, (i) beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (x) of such proviso and (ii)
a holder may waive the limitations set forth therein by written
notice to the Corporation upon not less than sixty-one (61) days
prior written notice (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period). The "Premium
Amount" means the product of the Stated Value, multiplied by .03,
multiplied by (N/365), where "N" equals the number of days elapsed
from the date of issuance of the Series C Preferred Stock to and
including the Conversion Date (as defined in Article VI.B. below).
If it is determined (upon written notice from Nasdaq)
that the provisions of Nasdaq Requirement 4460(i) are applicable to
the issuance of Common Stock upon conversion of the Series C
Preferred Stock in accordance with this Article VI, then
notwithstanding anything to the contrary contained herein, if, at
any time, the aggregate number of shares of Common Stock then
issued upon conversion of the Series C Preferred Stock equals
19.99% of the "Outstanding Common Amount" (as hereinafter defined),
the Series C Preferred Stock shall, from that time forward, cease
to be convertible into Common Stock in accordance with the terms of
this Article VI and Article VII below, unless the Corporation (i)
has obtained approval of the issuance of the Series C Preferred
Stock by a majority of the total votes cast on such proposal, in
person or by proxy, by the holders of the then-outstanding Common
Stock (not including any shares of Common Stock held by present or
former holders of Series C Preferred Stock that were issued upon
conversion of Series C Preferred Stock), or (ii) shall have
otherwise obtained permission to allow such issuances from Nasdaq<PAGE>
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in accordance with Nasdaq Requirement 4460(i). For purposes of
this paragraph, "Outstanding Common Amount" means (i) the number of
shares of the Common Stock outstanding on the date of issuance of
the Series C Preferred Stock pursuant to the Purchase Agreement
plus (ii) any additional shares of Common Stock issued thereafter
in respect of such shares pursuant to a stock dividend, stock split
or similar event. The maximum number of shares of Common Stock
issuable as a result of the 19.99% limitation set forth herein is
hereinafter referred to as the "Maximum Share Amount." With
respect to each holder of Series C Preferred Stock, the Maximum
Share Amount shall refer to such holder's pro rata share thereof
determined in accordance with Article X below. In the event that
Corporation obtains Stockholder Approval, the approval of The
Nasdaq Stock Market or otherwise concludes that it is able to
increase the number of shares to be issued above the Maximum Share
Amount (such increased number being the "New Maximum Share
Amount"), the references to Maximum Share Amount, above, shall be
deemed to be, instead, references to the greater New Maximum Share
Amount. In the event that Stockholder Approval is not obtained,
there are insufficient reserved or authorized shares or a
registration statement covering the additional shares of Common
Stock which constitute the New Maximum Share Amount is not
effective prior to the Maximum Share Amount being issued (if such
registration statement is necessary to allow for the public resale
of such securities), the Maximum Share Amount shall remain
unchanged; provided, however, that the Holder may grant an
extension to obtain a sufficient reserved or authorized amount of
shares or of the effective date of such registration statement. In
the event that (a) the aggregate number of shares of Common Stock
issued pursuant to the outstanding Series C Preferred Stock
represents at least seventy percent (70%) of the Maximum Share
Amount and (b) the sum of (x) the aggregate number of shares of
Common Stock issued upon conversion of Series C Preferred Stock
plus (y) the aggregate number of shares of Common Stock that remain
issuable upon conversion of Series C Preferred Stock, represents at
least one hundred percent (100%) of the Maximum Share Amount (the
"Triggering Event"), the Corporation will use its best efforts to
seek and obtain Stockholder Approval (or obtain such other relief
as will allow conversions hereunder in excess of the Maximum Share
Amount) as soon as practicable following the Triggering Event and
before the Optional Redemption Date in respect thereof.
B. The "Conversion Price" shall be the lesser of (i)
the Variable Conversion Price (as defined herein) and (ii) the
Fixed Conversion Price (as defined herein)(in each case, subject to
adjustment pursuant to the provisions of Article VI.C. below). The
"Variable Conversion Price" shall mean the Market Price (as defined
herein). "Market Price" shall mean 100% of the average of the
daily closing bid prices of the Common Stock on Nasdaq, or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded (in each case, as reported by<PAGE>
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Bloomberg, L.P. ("Bloomberg")), for the five (5) consecutive
Trading Days (as defined herein) ending five (5) Trading Days prior
to the date the Conversion Notice is sent by a holder to the
Corporation via facsimile or other reasonable means of dispatch
resulting in notice to the Corporation (the "Conversion Date").
"Trading Day" shall mean any day on which the Common Stock is
traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is
then being traded. The "Fixed Conversion Price" shall mean $20.70.
C. The Conversion Price shall be subject to adjustment
from time to time as follows:
(a) Adjustment to Fixed Conversion Price Due to
Stock Split, Stock Dividend, Etc. If at any time when the Series
C Preferred Stock is issued and outstanding, the number of
outstanding shares of Common Stock is increased by a stock split,
stock dividend, combination, reclassification or other similar
event, the Fixed Conversion Price shall be proportionately reduced,
or if the number of outstanding shares of Common Stock is decreased
by a reverse stock split, combination or reclassification of
shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased. In such event, the Corporation shall
notify its transfer agent ("Transfer Agent") of such change on or
before the effective date thereof.
(b) Adjustment to Variable Conversion Price Due to
Stock Split, Stock Dividend, Etc. If at any time when Series C
Preferred Stock is issued and outstanding, the number of
outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, combination, reclassification or other
similar event, which event shall have taken place during the
reference period for determination of the Conversion Price for any
Optional Conversion or Mandatory Conversion of the Series C
Preferred Stock, then the Variable Conversion Price shall be
calculated giving appropriate effect to the stock split, stock
dividend, combination, reclassification or other similar event for
all five (5) Trading Days used to determine the Variable Conversion
Price. In such event, the Corporation shall notify the Transfer
Agent of such change on or before the effective date thereof.
(c) Adjustment Due to Merger, Consolidation, Etc.
If, at any time when Series C Preferred Stock is issued and
outstanding and prior to the conversion of all Series C Preferred
Stock, there shall be any merger, consolidation, exchange of
shares, recapitalization, reorganization, or other similar event,
as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Corporation
or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Corporation other than in<PAGE>
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connection with a plan of complete liquidation of the Corporation,
then the holders of Series C Preferred Stock shall thereafter have
the right to receive upon conversion of the Series C Preferred
Stock, upon the bases and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or
assets which the holders of Series C Preferred Stock would have
been entitled to receive in such transaction had the Series C
Preferred Stock been converted in full (without regard to any
limitations on conversion contained herein) immediately prior to
such transaction, and in any such case appropriate provisions shall
be made with respect to the rights and interests of the holders of
Series C Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares of Common Stock
issuable upon conversion of the Series C Preferred Stock) shall
thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon
the conversion of Series C Preferred Stock. The Corporation shall
not effect any transaction described in this subsection (c) unless
(a) it first gives, to the extent practical, twenty (20) days'
prior written notice of such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the holders of Series C Preferred
Stock shall be entitled to convert the Series C Preferred Stock)
and (b) the resulting successor or acquiring entity (if not the
Corporation) assumes by written instrument the obligations of this
subsection (c). The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share
exchanges.
(d) Adjustment Due to Distribution. Subject to
Article III, if the Corporation shall declare or make any
distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares
(or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "Distribution"), then the holders of Series
C Preferred Stock shall be entitled, upon any conversion of shares
of Series C Preferred Stock after the date of record for
determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the
holder with respect to the shares of Common Stock issuable upon
such conversion had such holder been the holder of such shares of
Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(e) Purchase Rights. Subject to Article III, if at
any time when any Series C Preferred Stock is issued and
outstanding, the Corporation issues any convertible securities or
rights to purchase stock, warrants, securities or other property<PAGE>
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(the "Purchase Rights") pro rata to the record holders of any class
of Common Stock, then the holders of Series C Preferred Stock will
be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common
Stock acquirable upon complete conversion of the Series C Preferred
Stock (without regard to any limitations on conversion contained
herein) immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to
this Article VI.C, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to
each holder of Series C Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any
holder of Series C Preferred Stock, furnish to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii)
the Conversion Price at the time in effect and (iii) the number of
shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of
a share of Series C Preferred Stock.
D. In order to convert Series C Preferred Stock into
full shares of Common Stock, a holder of Series C Preferred Stock
shall: (i) submit a copy of the fully executed notice of conversion
in the form attached hereto as Exhibit A ("Notice of Conversion")
to the Corporation by facsimile dispatched on the Conversion Date
(or by other means resulting in notice to the Corporation on the
Conversion Date) at the office of the Corporation or its designated
Transfer Agent for the Series C Preferred Stock that the holder
elects to convert the same, which notice shall specify the number
of shares of Series C Preferred Stock to be converted, the
applicable Conversion Price and a calculation of the number of
shares of Common Stock issuable upon such conversion (together with
a copy of the first page of each certificate to be converted) prior
to Midnight, New York City time (the "Conversion Notice Deadline")
on the date of conversion specified on the Notice of Conversion;
and (ii) surrender the original certificates representing the
Series C Preferred Stock being converted (the "Preferred Stock
Certificates"), duly endorsed, along with a copy of the Notice of
Conversion to the office of the Corporation or the Transfer Agent
for the Series C Preferred Stock as soon as practicable thereafter.
The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such
conversion, unless either the Preferred Stock Certificates are<PAGE>
<PAGE>
delivered to the Company or its Transfer Agent as provided above,
or the holder notifies the Corporation or its Transfer Agent that
such certificates have been lost, stolen or destroyed (subject to
the requirements of subparagraph (a) below). In the case of a
dispute as to the calculation of the Conversion Price, the
Corporation shall promptly issue such number of shares of Common
Stock that are not disputed in accordance with subparagraph (b)
below. The Corporation shall submit the disputed calculations to
its outside accountant via facsimile within two (2) business days
of receipt of the Notice of Conversion. The accountant shall audit
the calculations and notify the Corporation and the holder of the
results no later than 48 hours from the time it receives the
disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by
the Corporation of evidence of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing shares
of Series C Preferred Stock, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Preferred
Stock Certificate(s), if mutilated, the Corporation shall execute
and deliver new Preferred Stock Certificate(s) of like tenor and
date.
(b) Delivery of Common Stock Upon Conversion. Upon
the surrender of certificates as described above together with a
Notice of Conversion, the Corporation shall issue and, within two
(2) business days after such surrender (or, in the case of lost,
stolen or destroyed certificates, after provision of agreement and
indemnification pursuant to subparagraph (a) above) (the "Delivery
Period"), deliver (or cause its Transfer Agent to so issue and
deliver) to or upon the order of the holder (i) that number of
shares of Common Stock for the portion of the shares of Series C
Preferred Stock converted as shall be determined in accordance
herewith and (ii) a certificate representing the balance of the
shares of Series C Preferred Stock not converted, if any.
In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the
Corporation's Transfer Agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the holder and its compliance with the
provisions contained in Article VI.A. and in this Article VI.E.,
the Corporation shall use its best efforts to cause its Transfer
Agent to electronically transmit the Common Stock issuable upon
conversion to the holder by crediting the account of holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system. The time periods for delivery described in the
immediately preceding paragraph shall apply to the electronic
transmittals described herein.
<PAGE>
<PAGE>
(c) No Fractional Shares. If any conversion of
Series C Preferred Stock would result in a fractional share of
Common Stock or the right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon Conversion of the Series C
Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall
be the date specified in the Notice of Conversion, provided that
the Notice of Conversion is submitted by facsimile (or by other
means resulting in notice) to the Corporation or its Transfer Agent
before Midnight, New York City time, on the Conversion Date. The
person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion
Date and all rights with respect to the shares of Series C
Preferred Stock surrendered shall forthwith terminate except the
right to receive the shares of Common Stock or other securities or
property issuable on such conversion and except that the holders
preferential rights as a holder of Series C Preferred Stock shall
survive to the extent the Corporation fails to deliver such
securities.
F. A number of shares of the authorized but unissued
Common Stock sufficient to provide for the conversion of the Series
C Preferred Stock outstanding at the then current Conversion Price
shall at all times be reserved by the Corporation, free from
preemptive rights, for such conversion or exercise. As of the date
of issuance of the Series C Preferred Stock, a sufficient number of
authorized and unissued shares of Common Stock have been duly
reserved for issuance upon conversion of the Series C Preferred
Stock (the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Company's
obligations pursuant to Section 4(h) of the Purchase Agreement. In
addition, if the Corporation shall issue any securities or make any
change in its capital structure which would change the number of
shares of Common Stock into which each share of the Series C
Preferred Stock shall be convertible at the then current Conversion
Price, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of
shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series C
Preferred Stock.
If at any time a holder of shares of Series C Preferred
Stock submits a Notice of Conversion, and the Corporation does not
have sufficient authorized but unissued shares of Common Stock
available to effect such conversion in accordance with the
provisions of this Article VI (a "Conversion Default"), the
Corporation shall issue to the holder (or holders, if more than one
holder submits a Notice of Conversion in respect of the same<PAGE>
<PAGE>
Conversion Date, pro rata based on the ratio that the number of
shares of Series C Preferred Stock then held by each such holder
bears to the aggregate number of such shares held by such holders)
all of the shares of Common Stock which are available to effect
such conversion. The number of shares of Series C Preferred Stock
included in the Notice of Conversion which exceeds the amount which
is then convertible into available shares of Common Stock (the
"Excess Amount") shall, notwithstanding anything to the contrary
contained herein, not be convertible into Common Stock in
accordance with the terms hereof until (and at the holder's option
at any time after) the date additional shares of Common Stock are
authorized by the Corporation to permit such conversion, at which
time the Conversion Price in respect thereof shall be the lesser of
(i) the Conversion Price on the Conversion Default Date (as defined
below) and (ii) the Conversion Price on the Conversion Date elected
by the holder in respect thereof. The Corporation shall use its
best efforts to effect an increase in the authorized number of
shares of Common Stock as soon as possible following a Conversion
Default.
Nothing herein shall limit the holder's right to pursue
actual damages for the Corporation's failure to maintain a
sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law
or in equity (including a decree of specific performance and/or
injunctive relief).
G. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VI,
the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series C Preferred Stock,
furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of
shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of
a share of Series C Preferred Stock.
VII. Mandatory Conversion
So long as the Registration Statement is effective and
there is not then a continuing Default Event, the Corporation may,
at its sole option, on seven (7) Trading Days prior written notice
to the holders of the Series C Preferred Stock, require that, on or
after the first Trading Day following the date which is one hundred<PAGE>
<PAGE>
eighty (180) days after the date on which the Registration
Statement is declared effective (the date set forth in such notice
being hereinafter referred to as the "Mandatory Conversion Date"),
up to one hundred percent (100%) of the shares of Series C
Preferred Stock issued pursuant to the Purchase Agreement be
converted into shares of Common Stock on such date at the then
effective Conversion Price in accordance with, and subject to, the
provisions of Article VI hereof (the "Mandatory Conversion").
Notwithstanding the foregoing, so long as the holders of Series C
Preferred Stock have not participated in any trading in the Common
Stock during the five (5) Trading Days immediately preceding the
Mandatory Conversion Date, the price at which the Mandatory
Conversion will be effected shall be the lower of (i) the
Conversion Price determined in accordance with Article VI.B and
(ii) 100% of the closing bid price of the Common Stock on Nasdaq,
or on the principal securities exchange or other securities market
on which the Common Stock is then being traded, on the Trading Day
immediately preceding the Mandatory Conversion Date. The earliest
date on which the Mandatory Conversion Date can occur shall be
delayed by one (1) Trading Day each for each Trading Day occurring
prior thereto and prior to the full conversion of the Series C
Preferred Stock that (i) conversions are restricted pursuant to
Section 4(l) of the Purchase Agreement, (ii) sales cannot be made
pursuant to the Registration Statement (whether by reason of the
Company's failure to properly supplement or amend the prospectus
included therein in accordance with the terms of the Registration
Rights Agreement or otherwise, including during any Allowed Delay
as described in the Registration Rights Agreement) or (iii) any
Default Event (as defined in Article V.A.) exists, without regard
to whether any cure periods shall have run. The Mandatory
Conversion Date shall be the Conversion Date for purposes of
determining the Conversion Price and the time within which
certificates representing the Common Stock must be delivered to the
holder with respect to the conversion taking place thereon.
VIII. Voting Rights
The holders of the Series C Preferred Stock have no
voting power whatsoever, except as otherwise provided by the
General Corporation Law of the State of Delaware ("DGCL"), in this
Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide
each holder of Series C Preferred Stock with prior notification of
any meeting of the shareholders (and copies of proxy materials and
other information sent to shareholders). In the event of any
taking by the Corporation of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of<PAGE>
<PAGE>
merger, consolidation or recapitalization) any share of any class
or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of
all or substantially all of the assets of the Corporation, or any
proposed liquidation, dissolution or winding up of the Corporation,
the Corporation shall mail a notice to each holder, at least twenty
(20) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time.
To the extent that under the DGCL the vote of the holders
of the Series C Preferred Stock, voting separately as a class or
series as applicable, is required to authorize a given action of
the Corporation, the affirmative vote or consent of the holders of
at least a majority of the shares of the Series C Preferred Stock
represented at a duly held meeting at which a quorum is present or
by written consent of a majority of the shares of Series C
Preferred Stock (except as otherwise may be required under the
DGCL) shall constitute the approval of such action by the class.
To the extent that under the DGCL holders of the Series C Preferred
Stock are entitled to vote on a matter with holders of Common
Stock, voting together as one class, each share of Series C
Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible
using the record date for the taking of such vote of shareholders
as the date as of which the Conversion Price is calculated.
Holders of the Series C Preferred Stock shall be entitled to notice
of all shareholder meetings or written consents (and copies of
proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would
be provided pursuant to the Corporation's bylaws and the DGCL.
IX. Protective Provisions
So long as shares of Series C Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by the DGCL) of
the holders of at least a majority of the then outstanding shares
of Series C Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the Series C Preferred Stock;
(b) create any new class or series of capital stock
having a preference over the Series C Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up
of the Corporation (as previously defined in Article II hereof,<PAGE>
<PAGE>
"Senior Securities") or alter or change the rights, preferences or
privileges of any Senior Securities so as to affect adversely the
Series C Preferred, unless the market capitalization of the
Company's Common Stock exceeds $300,000,000 based on the thirty
(30) Trading Day average ending one (1) day prior to the date on
which the Board of Directors approved the issuance of such class or
series of capital stock;
(c) increase the authorized number of shares of
Series C Preferred Stock; or
(d) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result
in taxation of the holders of shares of the Series C Preferred
Stock under Section 305 of the Internal Revenue Code of 1986, as
amended (or any comparable provision of the Internal Revenue Code
as hereafter from time to time amended).
In the event holders of at least a majority of the then
outstanding shares of Series C Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or
privileges of the shares of Series C Preferred Stock, pursuant to
subsection (a) above, so as to affect the Series C Preferred Stock,
then the Corporation will deliver notice of such approved change to
the holders of the Series C Preferred Stock that did not agree to
such alteration or change (the "Dissenting Holders") and Dissenting
Holders shall have the right for a period of thirty (30) days to
convert pursuant to the terms of this Certificate of Designation as
they exist prior to such alteration or change or continue to hold
their shares of Series C Preferred Stock.
X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount
(including any increases thereto) shall be allocated by the
Corporation pro rata among the holders of Series C Preferred Stock
based on the number of shares of Series C Preferred Stock then held
by each holder relative to the total aggregate number of shares of
Series C Preferred Stock then outstanding.<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 21st day of July, 1997.
MEDICAL RESOURCES, INC.
By: /s/ William D. Farrell
-------------------------------
William D. Farrell
Chief Operating Officer
<PAGE>
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series C Preferred Stock)
The undersigned hereby irrevocably elects to convert
shares of Series C Preferred Stock, represented by stock
certificate No(s). (the "Preferred Stock Certificates")
into shares of common stock ("Common Stock") of Medical Resources,
Inc. (the "Corporation") according to the conditions of the
Certificate of Designation of Series C Preferred Stock, as of the
date written below. If securities are to be issued in the name of
a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates. No fee will be charged to the Holder
for any conversion, except for transfer taxes, if any. A copy of
each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers
and sales by the undersigned of the securities issuable to the
undersigned upon conversion of the Series C Preferred Stock shall
be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "Act"), or pursuant to an
exemption from registration under the Act.
Date of Conversion:
--------------------------------
Applicable Conversion Price:
----------------------
Number of Shares of
Common Stock to be Issued:
---------------------------
Signature:
------------------------------------------
Name:
-----------------------------------------------
Address:
------------------------------------------
*The Corporation is not required to issue shares of Common Stock
until the original Series C Preferred Stock Certificate(s) (or
evidence of loss, theft or destruction thereof) to be converted are
received by the Corporation or its Transfer Agent. The Corporation<PAGE>
<PAGE>
shall issue and deliver shares of Common Stock to an overnight
courier not later than two (2) business days following receipt of
the original Preferred Stock Certificate(s) to be converted, and
shall make payments pursuant to the Certificate of Designation for
the number of business days such issuance and delivery is late.
<PAGE>
<PAGE>
<EX.10a)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
July 21, 1997, by and among Medical Resources, Inc., a Delaware
corporation, with headquarters located at 155 State Street,
Hackensack, New Jersey 07601 ("Company"), and each of the
purchasers set forth on the signature pages hereto (the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Company has authorized a new series of preferred stock,
designated as its Series C Convertible Preferred Stock (the
Preferred Stock [ ]), having the rights, preferences and
privileges set forth in the Certificate of Designations, Rights and
Preferences attached hereto as Exhibit "A" (the "Certificate of
Designation");
C. The Preferred Stock is convertible into shares of Common
Stock, par value $.01 per share, of the Company (the "Common
Stock"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designation;
D. The Buyers desire to purchase and the Company desires to issue
and sell, upon the terms and conditions set forth in this
Agreement, an aggregate of eighteen thousand (18,000) shares of
Preferred Stock, for an aggregate purchase price of Eighteen
Million Dollars ($18,000,000);
E. Each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, the number of shares of Preferred Stock
set forth immediately below its name on the signature pages hereto;
and
F. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as
Exhibit "B" (the "Registration Rights Agreement"), pursuant to
which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws;
<PAGE>
<PAGE>
NOW THEREFORE, the Company and each of the Buyers (severally
and not jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall
issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such number of shares of Series C
Preferred Stock (collectively, together with any Preferred Stock
issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the
"Preferred Shares") and at the aggregate purchase price (the
"Purchase Price") as is set forth immediately below such Buyer's
name on the signature pages hereto. The issuance, sale and
purchase of the Preferred Shares shall take place at the closing
(the "Closing"). Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, at
the Closing, the Company shall issue and sell to each Buyer and
each Buyer shall purchase from the Company the aggregate number of
Preferred Shares which such Buyer is purchasing hereunder for the
Purchase Price. The aggregate number of Preferred Shares to be
issued at the Closing is Eighteen Thousand (18,000) for an
aggregate purchase price of Eighteen Million Dollars ($18,000,000).
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the
Preferred Shares to be issued and sold to it at the applicable
Closing by wire transfer of immediately available funds to the
Company, in accordance with the Company's written wiring
instructions, against delivery of a duly executed certificate(s)
representing the number of Preferred Shares which such Buyer is
purchasing, and (ii) the Company shall deliver such certificate(s)
against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, the date and time of the issuance and sale of the
Preferred Shares pursuant to this Agreement (the "Closing Date")
shall be 12:00 noon Eastern Standard Time on July 21, 1997 or such
other mutually agreed upon time. The Closing shall occur on the
Closing Date at the offices of Werbel & Carnelutti, 711 Fifth
Avenue, New York, New York 10022.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants
to the Company solely as to such Buyer that:
a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Preferred Shares and the shares of Common
Stock issuable upon conversion thereof (the "Conversion Shares"
and, collectively with the Preferred Shares, the "Securities") for<PAGE>
<PAGE>
its own account for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant to
sales registered under the 1933 Act or exempt from the registration
requirements thereof.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility
of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by
the Buyer or its advisors. The Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company
and have received what the Buyer believes to be satisfactory
answers to any such inquiries. Neither such inquiries nor any
other due diligence investigation conducted by Buyer or any of its
advisors or representatives shall modify, amend or affect Buyer's
right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the
Securities have not been and are not being registered under the
1933 Act or any applicable state securities laws, and may not be
transferred unless (a) subsequently included in an effective
registration statement thereunder, or (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall
be reasonably acceptable to the Company) to the effect that the
Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (c) sold
pursuant to Rule 144 promulgated under the 1933 Act (or a successor
rule); (ii) any sale of such Securities made in reliance on Rule
144 may be made only in accordance with the terms of said Rule and<PAGE>
<PAGE>
further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company
nor any other person is under any obligation to register such
Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder
(in each case, other than pursuant to the Registration Rights
Agreement). Except for transfers by a Buyer (i) to its
"affiliates" (as defined under the 1934 Act (as defined herein)) or
(ii) to the holders of interests in Buyer upon a liquidation of
Buyer's assets in accordance with its governing documents, the
Preferred Stock may be transferred by a Buyer to a third party only
with the prior written consent of the Company. Any such transferee
of Preferred Stock shall provide the Company with the information
and notices set forth in Section 9 of the Registration Rights
Agreement.
g. Legends. The Buyer understands that the Preferred
Shares and, until such time as the Conversion Shares have been
registered under the 1933 Act, as contemplated by the Registration
Rights Agreement, the Conversion Shares, may bear a restrictive
legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of
counsel, in form, substance and scope reasonably acceptable to the
Company, that registration is not required under said Act or unless
sold pursuant to Rule 144 under said Act."
The legend set forth above shall be removed and the
Company shall issue a certificate without such legend to the holder
of any Security upon which it is stamped, if, unless otherwise
required by applicable state securities laws, (a) such Security is
registered for sale under an effective registration statement filed
under the 1933 Act, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act and such Security is so sold or transferred or (c)
such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144 under the 1933 Act
(or a successor rule thereto) without any restriction as to the
number of Securities acquired as of a particular date that can then<PAGE>
<PAGE>
be immediately sold. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable securities
laws, including applicable prospectus delivery requirements, if
any.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of the Buyer and are
valid and binding agreements of the Buyer enforceable in accordance
with their terms.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the
signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and
each of its Material Subsidiaries (as defined below), if any, is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated,
with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. Schedule
3(a) sets forth a list of all of the Material Subsidiaries of the
Company and the jurisdiction in which each is incorporated. The
Company and each of its Material Subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material
Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the operations, assets, financial condition or
reasonably foreseeable prospects of the Company or its
Subsidiaries, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in
connection herewith. "Subsidiaries" means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest. "Material Subsidiaries" means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest and which meets the significance test of Regulation S-X of
the 1933 Act.
b. Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to file and perform its
obligations under the Certificate of Designation and to enter into
and perform this Agreement and the Registration Rights Agreement<PAGE>
<PAGE>
and to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof
and thereof, (ii) the execution and delivery of this Agreement and
the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including without limitation the filing of the Certificate
of Designation) the issuance of the Preferred Shares and the
issuance and reservation for issuance of the Conversion Shares
issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or
its shareholders is required, (iii) this Agreement has been duly
executed and delivered and the Certificate of Designation has been
or prior to the Closing will be duly filed by the Company, and (iv)
each of this Agreement and the Certificate of Designation
constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, such instrument will constitute, a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock of which 21,524,493 shares are issued and
outstanding, approximately 3,561,252 shares are reserved for
issuance pursuant to the Company's stock option plans,
approximately 1,592,813 shares are reserved for issuance pursuant
to securities (other than the Preferred Shares) exercisable for, or
convertible into or exchangeable for shares of Common Stock and
2,087,000 shares are reserved for issuance upon conversion of the
Preferred Shares (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); and (ii) 100,000 shares
of preferred stock, approximately 128 of which shares are issued
and outstanding (exclusive of the Preferred Shares). All of such
outstanding shares of capital stock are, or upon issuance will be,
duly authorized, validly issued, fully paid and nonassessable. No
shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in Schedule
3(c) or in the SEC Documents, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock
of the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933<PAGE>
<PAGE>
Act (except the Registration Rights Agreement) and (iii) there are
no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance
of the Preferred Shares or Conversion Shares. The Company has
furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws").
d. Issuance of Shares. The Preferred Shares and
Conversion Shares are duly authorized and, upon issuance in
accordance with the terms of this Agreement (including the issuance
of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the Certificate of Designation, will be validly
issued, fully paid and non-assessable, and free from all taxes,
liens and charges with respect to the issue thereof and shall not
be subject to preemptive rights or other similar rights of
stockholders of the Company. The term Conversion Shares includes
the shares of Common Stock issuable upon conversion of the
Preferred Shares, including without limitation, such additional
shares, if any, as are issuable as a result of the events described
in Section 2(c) of the Registration Rights Agreement. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Conversion Shares upon
conversion of the Preferred Shares. The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this
Agreement and the Certificate of Designation is absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company.
e. No Conflicts. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement
by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without
limitation, the filing of the Certificate of Designation and the
issuance and reservation for issuance of the Conversion Shares)
will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws or (ii)
violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse
of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or<PAGE>
<PAGE>
affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect). Neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its
Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action
that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of
its Subsidiaries is bound or affected, except for possible defaults
as would not, individually or in the aggregate, have a Material
Adverse Effect. The businesses of the Company and its Subsidiaries,
if any, are not being conducted, and shall not be conducted so long
as a Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except where
such violation would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under
the 1933 Act and any applicable state securities laws, the Company
is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it
to execute, deliver or perform any of its obligations under this
Agreement or the Registration Rights Agreement in accordance with
the terms hereof or thereof. Except as disclosed in Schedule 3(e),
all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding
sentence and which the Company is required to obtain prior to the
Closing Date, have been obtained or effected. The Company does not
reasonably anticipate that the Common Stock will be delisted by the
Nasdaq National Market ("Nasdaq") in the foreseeable future. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to such delisting by Nasdaq.
f. SEC Documents, Financial Statements. Since December
31, 1995, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange
Act of 1934, as amended (the "1934 Act") (all of the foregoing
filed prior to the date hereof and as amended by amendments filed
prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other
than exhibits) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). The Company has
informed the Buyer that it has filed a resale registration
statement with the SEC (Reg. No. 333-24865) and in connection with
the review of such registration statement by the SEC, the SEC has<PAGE>
<PAGE>
provided comments to the Company which has required the Company to
amend various SEC Documents. Such review may result in additional
amendments to the SEC Documents. As of their respective dates, the
SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business, including
in connection with acquisitions, subsequent to December 31, 1996
and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company.
g. Absence of Certain Changes. Since December 31,
1996, there has been no material adverse change and no material
adverse development in the assets, liabilities, business,
properties, operations, financial condition or results of
operations of the Company or any of its Subsidiaries.
h. Absence of Litigation. Except as disclosed in the
SEC Documents, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company or any of its Subsidiaries that
could have a Material Adverse Effect.
<PAGE>
<PAGE>
i. Disclosure. No event or circumstance has occurred
or exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed
(assuming for this purposes that the Company's reports filed under
the 1934 Act are being incorporated into an effective registration
statement filed by the Company under the 1933 Act).
j. Acknowledgment Regarding Buyers' Purchase of
Preferred Shares. The Company acknowledges and agrees that the
Buyers are acting solely in the capacity of arm's length purchasers
with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that no Buyer is acting
as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Buyer
or any of their respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is
merely incidental to the Buyers, purchase of the Preferred Shares.
The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
k. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act of
the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other
issuance of the Company's securities (past, current or future)
which requires stockholder approval under the rules of The Nasdaq
Stock Market.
l. No Brokers. The Company has taken no action which
would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby, except for
dealings with Arnhold and S. Bleichroeder, Inc., whose commissions
and fees will be paid for by the Company.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in
Section 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file
a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly<PAGE>
<PAGE>
after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States
(or to obtain an exemption from such qualification), and shall
provide evidence reasonably satisfactory to the Buyers of any such
action so taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the
1934 Act. So long as any Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to
be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company
currently meets, and will take all necessary action to continue to
meet, the "registrant eligibility" requirements set forth in the
general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds
from the sale of the Preferred Shares for acquisitions, working
capital and general corporate purposes.
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company agrees that
during the period beginning on the date hereof and ending one
hundred eighty (180) days after the date the registration statement
to be filed pursuant to Section 2(a) of the Registration Rights
Agreement (the "Registration Statement") is declared effective (the
"Lock-Up Period"), the Company will not, without the prior written
consent of a majority-in-interest of the Buyers, negotiate or
contract with any party to obtain additional equity financing
(including debt financing with an equity component) that (i)
involves the issuance of convertible securities or warrants that
are convertible into or exercisable for an indeterminate number of
shares of Common Stock or the issuance of an indeterminate number
of shares of Common Stock pursuant to any similar contract, right
or a mechanism, in each case, based upon the market price of the
Common Stock at the time of conversion or exercise (a "Floating
Rate Financing") and (ii) provides for the registration under the
1933 Act of public resales of the Common Stock referred to in
clause (i) above within one hundred eighty (180) days of the date
the Registration Statement is declared effective. In addition,
subject to the exceptions described below, the Company will not
conduct any Floating Rate Financing during the period beginning on
the first day of the Lock-Up Period and ending two hundred seventy
(270) days after the date the Registration Statement is declared
effective unless it shall have first delivered to each Buyer, at
least fifteen (15) business days prior to the closing of such<PAGE>
<PAGE>
Floating Rate Financing, written notice describing the proposed
Floating Rate Financing, including the terms and conditions
thereof, and providing each Buyer an option during the ten (10) day
period following delivery of such notice to purchase its pro rata
share (based on the ratio that the number of Preferred Shares
purchased by it hereunder bears to the aggregate number of
Preferred Shares purchased hereunder) of the securities being
offered in the Floating Rate Financing on the same terms as
contemplated by such Future Offering (the limitations referred to
in this and the immediately preceding sentence are collectively
referred to as the "Capital Raising Limitations"). The Capital
Raising Limitations shall apply to any transaction involving an
equity line of credit based on an at-the-market continuous offering
pursuant to Rule 415 under the 1933 Act so long a such equity
issuance is a Floating Rate Financing. The Capital Raising
Limitations shall not apply to the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or to the
grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option or restricted
stock plan approved by a majority of the Company's disinterested
directors.
f. Expenses. The Company shall reimburse Rose Glen
Capital Management, L.P. ("RGC") for all expenses incurred by it in
connection with the negotiation, preparation, execution, delivery
and performance of this Agreement and the other agreements to be
executed in connection herewith, including, without limitation,
reasonable attorneys' and consultants' fees and expenses. The
Company's obligation to reimburse RGC's expenses under this Section
4(f) shall be limited to Thirty-Five Thousand Dollars ($35,000).
g. Financial Information. The Company agrees to send
the following reports to each Buyer so long as such Buyer holds the
Preferred Stock: (i) within twenty (20) days after the filing with
the SEC, a copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
within two (2) days after release, copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other
information the Company makes available or gives to such
stockholders.
h. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full
conversion of the outstanding Preferred Shares and issuance of the
Conversion Shares in connection therewith (based on the Conversion
Price of the Preferred Shares in effect from time to time). The
Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of the Preferred Shares<PAGE>
<PAGE>
without the consent of each Buyer, which consent will not be
unreasonably withheld. The Company shall use its best efforts at
all times to maintain the number of shares of Common Stock so
reserved for issuance at no less than two (2) times the number that
is then actually issuable upon full conversion of the Preferred
Shares (based on the Conversion Price of the Preferred Shares in
effect from time to time). If at any time the number of shares of
Common Stock authorized and reserved for issuance is below the
number of Conversion Shares issued and issuable upon conversion of
the Preferred Shares, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, calling a special meeting of
shareholders to authorize additional shares, in the case of an
insufficient number of authorized shares, and using its best
efforts to obtain shareholder approval of an increase in such
authorized number of shares.
i. Listing. The Company shall promptly secure the
listing of the Conversion Shares (with the Nasdaq filing in respect
thereof to be made no later than five (5) business days after the
filing of the Registration Statement pursuant to Section 2(c) of
the Registration Rights Agreement) upon each national securities
exchange or automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares
from time to time issuable upon conversion or exercise of the
Preferred Shares. The Company will obtain and maintain the listing
and trading of its Common Stock on Nasdaq, the Nasdaq SmallCap
Market ("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE"),
or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company
shall promptly provide to each Buyer copies of any notices it
receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on Nasdaq.
j. Corporate Existence. So long as a Buyer
beneficially owns any Preferred Shares, the Company shall maintain
its corporate existence and shall not sell all or substantially all
of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose Common Stock is listed
for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. Conversion Limitations. If the average closing sale
price of the Common Stock over any ten (10) consecutive Trading Day
period (the "Moving Market Price") is, at any time, less than<PAGE>
<PAGE>
seventy percent (70%) of the closing sale price of the Common Stock
on the Closing Date (the "Closing Date Market Price"), upon written
instruction from the Company (which the Company may limit in
duration or revoke at any time), the Buyer will not, so long as the
Moving Market Price is less than eighty-five percent (85%) of the
Closing Date Market Price (but for no more than thirty (30)
calendar days in the aggregate during the term that the Preferred
Stock is outstanding), convert the Preferred Stock into Common
Stock. If the Moving Market Price is less than seventy percent
(70%) of the Closing Date Market Price for thirty (30) consecutive
calendar days (with the last day of such 30-day period being
referred to as the "Trigger Date"), the Company shall have the
right to redeem (on one occasion only, exercisable by written
notice to the holders of the Preferred Stock (the "Redemption
Notice") within three (3) Trading Days of the Trigger Date), in
whole or in part, the then outstanding Preferred Stock at an amount
per share equal to the sum of (i) one hundred ten percent (110%) of
the Stated Value (as defined in the Certificate of Designation) of
each share to be redeemed plus (ii) three percent (3%) per annum of
such Stated Value for the period beginning on the date of issuance
of such shares and ending on the date of redemption. The term
"Trading Day" shall have the meaning set forth in the Certificate
of Designation. The Redemption Notice shall state (i) that the
Company has irrevocably elected to redeem the number of shares of
Preferred Stock, (ii) the date of redemption, which shall be a date
within five (5) days of the date of the Redemption Notice (the
"Redemption Date") and (iii) a calculation of the redemption price
determined in accordance with this Section 4(b). If less than all
of the shares of Preferred Stock will be redeemed, the redemption
shall be pro rata among the holders thereof based on the number of
shares held. The Preferred Stock shall not be convertible for the
three (3) Trading Days following any Triggering Date and between
the time of receipt of a timely Redemption Notice and the stated
Redemption Date set forth therein.
l. Volume Limitations. The Buyer will not sell in
excess of the greater of (i) twenty-five percent (25%) of the
weekly volume (calculated based on the five (5) consecutive Trading
Day period immediately prior to the date of any sale) in any given
five (5) consecutive Trading Day period and (ii) on any given
Trading Day, twenty-five percent (25%) of the volume on such day.
The foregoing limitations will not apply to sales on Trading Days
on which the Common Stock trades independently at a price equal to
(i) one hundred five percent (105%) or more of the average closing
bid prices over the five (5) Trading Days immediately preceding
such date and (ii) ninety percent (90%) or more of the closing bid
price of the Common Stock on the Closing Date. In order to insure
compliance with the provisions hereof, so long as the Buyer holds
any shares of Preferred Stock, no later than the first Trading Day
following the last Trading Day of the prior week, each Buyer shall<PAGE>
<PAGE>
deliver to the Company a compliance certificate, signed by an
executive officer thereof, certifying that the limitations set
forth herein have not been breached.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of
each Buyer or its nominee, for the Conversion Shares in such
amounts as specified from time to time by each Buyer to the Company
upon proper conversion or exercise of the Preferred Shares (the
"Irrevocable Transfer Agent Instructions"). Prior to registration
of the Conversion Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section
5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares, if the Conversion
Shares are not then registered under the 1933 Act), will be given
by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall
affect in any way the Buyer's obligations and agreement set forth
in Section 2(g) hereof to comply with all applicable securities
laws, if any, upon resale of the Securities. If a Buyer provides
the Company with an opinion of counsel, reasonably satisfactory to
the Company in form, substance and scope, that registration of a
resale by such Buyer of any of the Securities is not required under
the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such
denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares to a Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at
any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the
same to the Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of Delaware.<PAGE>
<PAGE>
d. The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date), and the applicable Buyer shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Buyer at or
prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions,
provided that these conditions are for such Buyer's sole benefit
and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the
Buyer.
b. The Certificate of Designation shall have been
accepted for filing with the Secretary of State of Delaware, and a
copy thereof certified by such Secretary of State shall have been
delivered to such Buyer.
c. The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall
request) representing the Preferred Shares being so purchased in
accordance with Section 1(b) above.
d. The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers,
shall have been delivered to and acknowledged in writing by the
Company's Transfer Agent.
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at such time
(except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed,<PAGE>
<PAGE>
satisfied or complied with by the Company at or prior to the
Closing Date. The Buyer shall have received a certificate or
certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such
Buyer including, but not limited to certificates with respect to
the Company's Certificate of Incorporation, By-laws and Board of
Directors' resolutions relating to the transactions contemplated
hereby.
f. No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.
g. Trading in the Common Stock on Nasdaq shall not have
been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially
the same form as Exhibit "C" attached hereto.
i. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the
Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Delaware without regard to the principles of conflict of laws. The
parties hereto hereby submit to the exclusive jurisdiction of the
United States Federal Courts located in Delaware with respect to
any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby
or thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.
<PAGE>
<PAGE>
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity
or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and
the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein,
neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with
enforcement.
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified
or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after
being placed in the mail, if mailed by regular U.S. mail, or upon
receipt, if delivered personally, by courier (including a
recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications
shall be:
If to the Company:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: William D. Farrell
Chief Executive Officer
Facsimile: (201) 488-8455
With copy to:
Werbel & Carnelutti
A Professional Corporation
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esquire
Facsimile : (212) 832-3353
If to a Buyer: To the address set forth immediately below
such Buyer's name on the signature pages hereto.
<PAGE>
<PAGE>
Each party shall provide notice to the other party of any
change in address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor any Buyer shall
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding
the foregoing, subject to the provisions of Section 2(f), any Buyer
may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Buyer.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.
i. Survival; Enforcement. The representations and
warranties of the Company and the agreements and covenants set
forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on
behalf of the Buyers. The Company acknowledges that a breach by it
of its obligations under Section 5 will cause irreparable harm to
the Buyers, by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under Section 5
will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of Sections,
that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
j. Publicity. The Company and each of the Buyers shall
have the right to review a reasonable period of time before
issuance of any press releases, SEC, Nasdaq or NASD filings, or any
other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of each of the Buyers, to make
any press release or SEC, Nasdaq or NASD filings with respect to
such transactions as is required by applicable law and regulations
(although each of the Buyers shall be consulted by the Company in
connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon).
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and<PAGE>
<PAGE>
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction
will be applied against any party.
IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date first
above written.
MEDICAL RESOURCES, INC.
By: /s/ William D. Farrell
-----------------------
William D. Farrell
President and Chief Operating Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
-----------------------
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
440 E. Swedesford Road
Suite 2025
Wayne, PA 19087
Facsimile: (610) 971-2212
Telephone: (610) 902-0200
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series C Convertible
Preferred Stock: 18,000
Aggregate Purchase Price: $18,000,000<PAGE>
<PAGE>
<EX.10b)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
July 21, 1997, by and among Medical Resources, Inc., a Delaware
corporation, with headquarters located at 155 State Street,
Hackensack, New Jersey 07601 (the "Company"), and each of the
undersigned (together with their respective affiliates and any
assignee or transferee of all of their respective rights hereunder,
the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by
and among the parties hereto of even date herewith (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to
the Initial Investors shares of its Series C Convertible Preferred
Stock (the "Preferred Stock") that are convertible into shares
(the "Conversion Shares") of the Company's common stock (the
"Common Stock"), upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designations,
Preferences and Rights with respect to such Preferred Stock (the
"Certificate of Designation"); and
B. To induce the Initial Investors to execute and deliver
the Securities Purchase Agreement, the Company has agreed to
provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Initial Investors hereby
agree as follows:<PAGE>
<PAGE>
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Investors" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions
of this Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
Registration Statement or Statements in compliance with the 1933
Act and pursuant to Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the
Conversion Shares issued or issuable and any shares of capital
stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to any of the foregoing.
(iv) "Registration Statement" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the
Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare,
and, on or prior to the date which is fifteen (15) days after the
date of the Closing under the Securities Purchase Agreement (the
"Closing Date") (but in no event earlier than ten (10) business
days following the date on which the Company's previously filed
Registration Statement on Form S-3 (File No. 333-24865) is declared
effective by the SEC), file with the SEC a Registration Statement
on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent
of the Initial Investors, which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities
underlying the Preferred Stock issued or issuable pursuant to the
Securities Purchase Agreement, which Registration Statement, to the
extent allowable under the 1933 Act and the Rules promulgated
thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
conversion of the Preferred Stock (i) to prevent dilution resulting<PAGE>
<PAGE>
from stock splits, stock dividends or similar transactions or (ii)
by reason of changes in the Conversion Price of the Preferred Stock
in accordance with the terms of the Certificate of Designation.
The number of shares of Common Stock initially included in such
Registration Statement shall be no less than two (2) times the
number of Conversion Shares that are then issuable upon conversion
of the Preferred Stock without regard to any limitation on the
Investor's ability to convert the Preferred Stock.
b. [Intentionally Omitted]
c. Payments by the Company. The Company shall use its
best efforts to obtain effectiveness of the Registration Statement
as soon as practicable. If (i) the Registration Statement(s)
covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within one hundred (100) days after the Closing Date or
if, after the Registration Statement has been declared effective by
the SEC, sales cannot be made pursuant to the Registration
Statement, but excluding days during an Allowed Delay (as defined
in Section 3(f) below) or (ii) the Common Stock is not listed or
included for quotation on the Nasdaq National Market ("Nasdaq"),
the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX")
after being so listed or included for quotation, then the Company
will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any
such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to
each holder of the Preferred Stock or Registerable Securities an
amount equal to the aggregate Purchase Price (as defined below) of
the outstanding shares of Preferred Stock ("Aggregate Share Price")
multiplied by the Applicable Percentage (as defined below) times
the sum of without duplication: (i) the number of months (prorated
for partial months) after the end of such 100-day period and prior
to the date the Registration Statement is declared effective by the
SEC, provided, however, that there shall be excluded from such
period any delays which are solely attributable to changes required
by the Investors in the Registration Statement with respect to
information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure
of the Investors to conduct their review of the Registration
Statement pursuant to Section 3(h) below in a reasonably prompt
manner; (ii) the number of months (prorated for partial months)
that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective
(including, without limitation, when sales cannot be made by reason
of the Company's failure to properly supplement or amend the
prospectus included therein in accordance with the terms of this<PAGE>
<PAGE>
Agreement, but excluding days during an Allowed Delay (as defined
in Section 3(f) below)); and (iii) the number of months (prorated
for partial months) that the Common Stock is not listed or included
for quotation on Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that
trading thereon is halted after the Registration Statement has been
declared effective. (For example, if the Registration Statement
becomes effective one (1) month after the end of such 100-day
period, the Company would pay $15,000 for each $1,000,000 of
Aggregate Share Price. If thereafter, sales could not be made
pursuant to the Registration Statement for an additional period of
one (1) month, the Company would pay an additional $20,000 for each
$1,000,000 of Aggregate Share Price.) Such amounts shall be paid
in cash or, at each Investor's option, may be convertible into
Common Stock at the "Conversion Price" (as defined in the
Certificate of Designation). Any shares of Common Stock issued
upon conversion of such amounts shall be Registrable Securities.
If the Investor desires to convert the amounts due hereunder into
Registrable Securities, it shall so notify the Company in writing
within two (2) business days of the date on which such amounts are
first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth under Article VI of the
Certificate of Designation), beginning on the last day upon which
the cash amount would otherwise be due in accordance with the
following sentence. Payments of cash pursuant hereto shall be made
within five (5) business days after the end of each period that
gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, interim payments shall be
made for each such thirty (30) day period. The obligations of the
Company to make payments under this Section 2(c) shall terminate
upon the expiration of the Registration Period (as defined below),
except for the obligations which have accrued prior to the
expiration of the Registration Period. The term "Purchase Price"
means the purchase price paid by the Investors for the Preferred
Stock. The term "Applicable Percentage" means one and one-half-
hundredths (.015) with respect to the first thirty (30) days of any
calculation under clause (i) of the sentence in which the term is
used, and two hundredths (.020) for any other purpose.
d. Piggy-Back Registrations. Subject to the last
sentence of this Section 2(d), if at any time prior to the
expiration of the Registration Period (as hereinafter defined) the
Company shall file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under
the 1933 Act of any of its equity securities (other than on Form S-
4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition
of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the
Company shall send to each Investor who is entitled to registration
rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such<PAGE>
<PAGE>
notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered,
except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock
which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution,
then the Company shall be obligated to include in such Registration
Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the
number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded
all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to
inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of
Registrable Securities under this Section 2(d) shall be construed
to limit any registration required under Section 2(a) hereof. If
an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering,
then each Investor whose Registrable Securities are included in
such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an
underwritten offering using the same underwriter or underwriters
and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything to the contrary
set forth herein, the registration rights of the Investors pursuant
to this Section 2(d) shall only be available in the event the
Company fails to timely file, obtain effectiveness or maintain
effectiveness of the Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
e. Eligibility for Form S-3. The Company represents
and warrants that it meets the registrant eligibility and
transaction requirements for the use of Form S-3 for registration
of the sale by the Initial Investors and any other Investors of the
Registrable Securities and the Company shall file all reports
required to be filed by the Company with the SEC in a timely manner
so as to maintain such eligibility for the use of Form S-3.<PAGE>
<PAGE>
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable
Securities, the Company shall have the following obligations:
a. The Company shall prepare promptly, and file with
the SEC not later than fifteen (15) days after the Closing Date
(but in no event earlier than ten (10) business days following the
date on which the Company's previously filed Registration Statement
on Form S-3 (File No. 333-24865) is declared effective by the SEC),
a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best
efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible
after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier
of (i) the date on which all of the Registrable Securities have
been sold and (ii) the date on which the Registrable Securities (in
the opinion of counsel to the Initial Investors) may be immediately
sold without restriction (including without limitation as to volume
by each holder thereof) without registration under the 1933 Act
(the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to
the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the
Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statement. In the event the number of shares
available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Preferred
Stock, the Company shall amend the Registration Statement, or file
a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but
in any event within twenty (20) business days after the necessity
therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as<PAGE>
<PAGE>
soon as practicable following the filing thereof. The provisions
of Section 2(c) above shall be applicable with respect to such
obligation, with the one hundred (100) days running from the day
after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement
and its legal counsel (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by the
Company, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the
Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of
the SEC, and each item of correspondence from the SEC or the staff
of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information
for which the Company has sought confidential treatment), and (ii)
such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by
such Investor. The Company will immediately notify each Investor
by facsimile of the effectiveness of the Registration Statement or
any post-effective amendment.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or "blue sky"
laws of such jurisdictions in the United States as the Investors
who hold a majority in interest of the Registrable Securities being
offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (b) subject itself to general
taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e)
make any change in its charter or bylaws, which in each case the
Board of Directors of the Company determines to be contrary to the
best interests of the Company and its stockholders.
<PAGE>
<PAGE>
e. [Intentionally Omitted]
f. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor of the happening
of any event, of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and use
its best efforts promptly to prepare a supplement or amendment to
the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request;
provided that, for not more than five (5) consecutive trading days
(or a total of not more than twenty (20) trading days during the
time the Preferred Stock is outstanding), the Company may delay the
disclosure of material non-public information concerning the
Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company, in the best
interests of the Company and, in the opinion of counsel to the
Company, otherwise required (an "Allowed Delay"); provided,
further, that the Company shall promptly (i) notify the Investors
in writing of the existence of material non-public information
giving rise to an Allowed Delay and (ii) advise the Investors in
writing to cease all sales under the Registration Statement until
the end of the Allowed Delay. Upon expiration of the Allowed
Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise
thereto.
g. The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of effectiveness
of a Registration Statement, and, if such an order is issued, to
obtain the withdrawal of such order at the earliest possible moment
and to notify each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration
Statement and all amendments and supplements thereto (as well as
all requests for acceleration or effectiveness thereof) a
reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects. The sections of the Registration Statement covering
information with respect to the Investors, the Investor's
beneficial ownership of securities of the Company or the Investors
intended method of disposition of Registrable Securities shall
conform to the information provided to the Company by each of the
Investors.
<PAGE>
<PAGE>
i. The Company shall make generally available to its
security holders as soon as practical, but not later than ninety
(90) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule
158 under the 1933 Act) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
j. [Intentionally Omitted]
k. At the sole cost of the requesting Investor, upon
reasonable advance notice and during normal business hours of the
Company, the Company shall make available for inspection by (i) any
Investor, (ii) one firm of attorneys or other agents retained by
the Initial Investors, and (iii) one firm of attorneys or other
agents retained by all other Investors (collectively, the
"Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise
its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an
Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally
available to the public other than by disclosure in violation of
this or any other agreement. The Company shall not be required to
disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to
the Company) with the Company with respect thereto, substantially
in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor)
shall be deemed to limit the Investor's ability to sell Registrable
Securities in a manner which is otherwise consistent with
applicable laws and regulations.
<PAGE>
<PAGE>
l. The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to
the Company unless (i) disclosure of such information is necessary
to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or
other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice
to such Investor prior to making such disclosure, and allow the
Investor, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such
information.
m. The Company shall (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure the designation and
quotation, of all the Registrable Securities covered by the
Registration Statement on the Nasdaq or, if not eligible for the
Nasdaq on the Nasdaq SmallCap and, without limiting the generality
of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable
Securities not later than the effective date of the Registration
Statement.
o. The Company shall cooperate with the Investors who
hold Registrable Securities being offered to facilitate the timely
preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case
may be, as the Investors may reasonably request and registered in
such names as the Investors may request, and, within three (3)
business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an
instruction in the form attached hereto as Exhibit 1 and an<PAGE>
<PAGE>
authorization of such counsel in the form attached hereto as
Exhibit 2.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. [Intentionally Omitted]
d. Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3(f) or 3(g), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until
such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so
directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any
underwriting arrangements in usual and customary form entered into
by the Company, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess
of those payable by the Company pursuant to Section 5 below.<PAGE>
<PAGE>
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualification fees,
printers and accounting fees, the fees and disbursements of counsel
for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Section 3(h)
hereof (subject, in the case of fees of counsel to the Investors,
to the aggregate cap on expenses set forth in Section 4(f) of the
Securities Purchase Agreement) shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds
such Registrable Securities, and (ii) the directors, officers,
partners, employees, agents and each person who controls any
Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (each,
an "Indemnified Person"), against any joint or several losses,
claims, damages, liabilities or expenses (collectively, together
with actions, proceedings or inquiries by any regulatory or self-
regulatory organization, whether commenced or threatened, in
respect thereof, "Claims") to which any of them may become subject
insofar as such Claims arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to
state therein a material fact required to be stated or necessary to
make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading; or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(c) with respect to the number
of legal counsel, the Company shall reimburse the Indemnified
Person, promptly as such expenses are incurred and are due and<PAGE>
<PAGE>
payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section
6(a): (i) shall not apply to a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified
Person for such Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c)
hereof; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the
untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected
prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the
use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain
in full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees
severally and not jointly to indemnify, hold harmless and defend,
to the same extent and in the same manner set forth in Section
6(a), the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, and
any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any
person who controls such stockholder within the meaning of the 1933
Act or the 1934 Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any
Violation by such Investor, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by
such Investor expressly for use in connection with such
Registration Statement; and subject to Section 6(c) such Investor
will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably incurred
by them in connection with investigating or defending any such<PAGE>
<PAGE>
Claim; provided, however, that the indemnity agreement contained in
this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds
to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and
such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the
approval of a majority-in-interest of the Initial Investors), if
the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder,
as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of<PAGE>
<PAGE>
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that (i) no contribution shall
be made under circumstances where the maker would not have been
liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the
net amount of proceeds received by such seller from the sale of
such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar
rule or regulation of the SEC that may at any time permit the
investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such
requirements (it being understood that nothing herein shall limit
the Company's obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144;
and
c. furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a<PAGE>
<PAGE>
copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be assignable by the
Investors to any transferee of all or any portion of Registrable
Securities, subject to the restrictions on transfer of the
Securities set forth in Section 8(g) of the Securities Purchase
Agreement, and if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time
prior to such assignment, (ii) the Company is, within a reasonable
time prior to such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration
rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of
this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein,
(v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, and
(vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with written
consent of the Company, each of the Initial Investors (to the
extent such Initial Investor still owns Registrable Securities) and
Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the
Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable<PAGE>
<PAGE>
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
b. Any notices required or permitted to be given under
the terms hereof shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile
and shall be effective five days after being placed in the mail, if
mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Chief Executive Officer
Facsimile: (201) 488-8455
With copy to:
Werbel & Carnelutti
A Professional Corporation
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esquire
Facsimile: (212) 832-3353
If to an Investor: to the address set forth immediately below such
Investor's name on the signature pages to the Securities Purchase
Agreement.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof.
d. This Agreement shall be enforced, governed by and
construed in accordance with the laws of Delaware applicable to
agreements made and to be performed entirely within such State. In
the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof. The
parties hereto hereby submit to the exclusive jurisdiction of the<PAGE>
<PAGE>
United States Federal Courts located in Delaware with respect to
any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or
referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject
matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the
meaning hereof.
h. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement,
once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. Except as otherwise provided herein, all consents
and other determinations to be made by the Investors pursuant to
this Agreement shall be made by Investors holding a majority of the
Registrable Securities, determined as if the all of the shares of
Preferred Stock then outstanding have been converted into or
exercised for Registrable Securities.
k. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against
any party.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company and the undersigned Initial
Investors have caused this Agreement to be duly executed as of the
date first above written.
MEDICAL RESOURCES, INC.
By: /s/ William D. Farrell
-----------------------
William D. Farrell
President and Chief Operating Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
------------------
Wayne D. Bloch
Managing Director
<PAGE>
<PAGE>
<EX.99a>
MEDICAL
RESOURCES, INC.
PRESS RELEASE
MEDICAL RESOURCES, INC. ANNOUNCES
CLOSING OF PRIVATE PLACEMENT
Hackensack, New Jersey - July 23, 1997 - Medical Resources, Inc.
(NASDAQ: MRI) announced today it has closed a private placement of
$18,000,000 of a newly designated series of 3% convertible
preferred stock to an institutional investor. The Company intends
to use the net proceeds of the private offering to fund
acquisitions and for working capital and general corporate
purposes.
The shares of preferred stock issued in the private placement have
not been registered under the Securities Act of 1933, as amended,
and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements of such Act.
Medical Resources specializes in the ownership, operation and
management of diagnostic imaging centers. The Company operates 82
imaging centers in the Northeast (55), the Southeast (17), the
Midwest (7) and California (3) and provides network management
services to managed care organizations in these regions. Also,
through its subsidiary StarMed Staffing, the Company provides
temporary healthcare staffing to acute and sub-acute care
facilities nationwide.
x x x x x
Statements in this press release, other than statements of
historical information, are forward-looking statements that are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks which may cause the
Company's actual results in future periods to differ materially
from expected results. Those risks include, among others, risks
associated with the acquisition of existing imaging centers,
management of growth, limitations and delays in reimbursement and
government regulation effects as well as operating risks. Those
and other risks are described in the Company's filings with the
Securities and Exchange Commission (SEC) over the last 12 months,
copies of which are available from the SEC or may be obtained upon
request from the Company.
<PAGE>
<PAGE>
CONTACTS:
William D. Farrell
President and Chief Operating Officer
John P. O'Malley III
Executive Vice President - Finance
and Chief Financial Officer
Medical Resources, Inc.
(201) 488-6230
100905
