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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): April 6, 1998
MEDICAL RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12461 13-3584552
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(State of other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
15 State Street, Hackensack, NJ 07601
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (201) 488-6230
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Item 5.
On April 6, 1998, Medical Resources, Inc. (the "Company") announced
that its board of directors (the "Board") voted to adopt the recommendations
contained in the report of a Special Committee of two outside directors elected
to the Board last December and appointed to investigate certain events and
review the Company's policies regarding related party transactions. A copy of
the Press Release issued by the Company is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Item 7. Financial Statements and Exhibits
99.1 Press Release, dated April 6, 1998, issued by Medical Resources, Inc.
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SIGNATURES
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.
Dated: April 6, 1998 By: /s/ Geoffrey A. Whynot
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Name: Geoffrey A. Whynot
Title: Chief Financial Officer
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FROM: MEDICAL RESOURCES, INC.
Hackensack, N.J.
Rubenstein Associates, Inc.
Public Relations - Tel. 212 843-8030
Contact: Peter Rosenthal
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MEDICAL RESOURCES' BOARD ACCEPTS RECOMMENDATIONS OF
SPECIAL COMMITTEE REGARDING RELATED PARTY TRANSACTIONS
HACKENSACK, N.J., April 6, 1998 -- Medical Resources, Inc. (NASDAQ: MRII) today
announced that its board of directors has voted to adopt the recommendations
contained in the report of a Special Committee of two outside directors elected
to the board last December and appointed to investigate certain events and
review the company's policies regarding related party transactions. The two
directors are Peter J. Powers, Chairman of High View Capital, a New York based
investment fund, and former First Deputy Mayor of New York City, and D. Gordon
Strickland, who recently served as President and Chief Executive Officer of Kerr
Group.
The Special Committee found no evidence of any federal or
state crimes or securities law violations in connection with the transactions in
question. In addition, it concluded that all related-party matters were
disclosed in public filings.
Nonetheless, the Committee recommended and the MRI board has
adopted a number of measures to improve corporate governance, including new
procedures that sharply limit the
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circumstances in which related party transactions are permissible, and expand
the chief executive officer's role in selecting outside advisors. In addition,
the Special Committee recommended and the MRI board has determined to endeavor
to reconfigure the board to give outside directors a majority of its seats and
select a new chairman from the outside directors.
The Board also accepted the Committee's recommendations
concerning 712 Advisory Services, a financial advisory firm that is owned by
Gary N. Siegler, chairman of the MRI board, and that employs another board
member, Neil H. Koffler. Mr. Siegler had agreed prior to the Special Committee's
investigation that he and 712 would abide by the results of its review.
With respect to the fees paid to 712 concerning 1997
acquisitions, about which questions were raised, the Special Committee
determined that 712 performed acquisition advisory services fully consistent
with the expectations and understanding of the committee of outside directors
that approved 712's acquisition fees. The Special Committee further confirmed
that the acquisition advisory fees paid to 712 on 1997 acquisitions were within
the range of customary acquisition advisory fees paid to investment bankers on
transactions of similar size.
The Committee understood that in late 1996, the board had
turned to 712 to supervise an extensive acquisition program of some 59
diagnostic imaging centers and one staffing company because of the board's
perceptions that management was still relatively inexperienced and did not yet
have the formal training
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and necessary skills to manage an extensive acquisition program, former senior
management was not directly supervising and providing sufficient input with
respect to the acquisition program, and there was a limited window of time
within which the acquisition program could take place, given the increasingly
competitive marketplace. The Committee expressed their view that given the
board's perceptions, the board should have acted sooner, i.e., within six
months, to bring any additional needed skills in-house, rather than continue to
rely upon, and pay fees to, 712 to provide such services.
Accordingly, the Special Committee recommended and 712 agreed
that it will reimburse MRI approximately $1.4 million in fees for transactions
completed after June 1, 1997, will repay $112,500 of 712's 1997 retainer, will
waive payment of an additional $112,500 of fees accrued by MRI for the third and
fourth quarters of 1997, and will pay a substantial amount of the expenses
associated with the Special Committee's investigation. In addition, in light of
the subsequent hiring of Duane C. Montopoli as President and CEO, Geoffrey
Whynot as CFO and SBC Warburg Dillon Read as Financial Advisor, the Committee
recommended and 712 agreed to allow MRI to terminate its relationship with 712.
Mr. Siegler has also agreed voluntarily to relinquish 750,000
stock options that were granted to him in May 1997 and permit the Board's
Compensation Committee, with the assistance of
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compensation experts, to determine the appropriate director compensation for
1997.
"We are pleased that the board and Mr. Siegler have acted so
promptly to accept our recommendations," said Mr. Powers. "The company is now
positioned to put this situation behind it and go forward in pursuit of its
strategic business objectives."
The Special Committee was formed in response to a memorandum
delivered to the board last October and signed by several members of MRI's
senior management. The documents cited and expressed concern over the
appropriateness of several related party transactions and whether they had been
properly scrutinized. The Special Committee not only reviewed services provided
by and fees paid to 712 Advisory Services, but also investigated several other
related party situations, including MRI's engagement of an investment banking
firm of which a board member is a director. The Committee found that no
irregularities had occurred with respect to the investment banking firm. The
Committee worked with outside advisors headed by Jane W. Parver of Kaye,
Scholer, Fierman, Hays & Handler, LLP, who was assisted by forensic accountants,
corporate finance specialists, and compensation experts from the consulting firm
of Ernst & Young LLP.
The Special Committee's report also endorsed a number of
actions that the company has taken to strengthen management
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and the board since the memorandum was submitted in October. Among these steps
were the appointment of Duane C. Montopoli as President and CEO and a member of
the board and Geoffrey A. Whynot as Senior Vice President - Finance and Chief
Financial Officer; the formation of Executive, Compensation, and Nominating
Committees consisting of outside directors; the institution of monthly board
meetings; and the retention of SBC Warburg Dillon Read and Willkie Farr &
Gallagher, firms with which no MRI officer or director has any affiliation, as,
respectively, exclusive investment banker and general corporate counsel. The
Nominating Committee is currently conducting a search for two independent
directors.
"Medical Resources, since October 1997, has considerably
strengthened its management with persons whose skills are appropriate for the
tasks before them and has brought to the board, and will continue to seek to
bring, persons with independence from a variety of business backgrounds and
experience," said Mr. Strickland. "In addition, we believe the Special Committee
recommendations and measures, which the board has accepted in full, will prevent
even the appearance of conflicts of interest from arising in the future."
Medical Resources Inc. specializes in the ownership, operation
and management of diagnostic imaging centers. The company operates 101 imaging
centers throughout the U.S. and provides network management services to managed
care organizations in those regions. Through its subsidiary, StarMed
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Staffing, the company provides temporary healthcare staffing to acute and
sub-acute care facilities nationwide.
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