<PAGE> 1
PRELIMINARY COPIES
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
MEDICAL IMAGING CENTERS OF AMERICA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
MEDICAL IMAGING CENTERS OF AMERICA, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/X/ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
MEDICAL IMAGING CENTERS OF AMERICA, INC.
9444 FARNHAM STREET, SUITE 100
SAN DIEGO, CALIFORNIA 92123
NOTICE OF SPECIAL MEETING
January , 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Medical Imaging Centers of America, Inc., on [ ], 1996 at [ ] a.m.
PST at The Embassy Suites, 4550 La Jolla Village Drive, San Diego, CA 92122.
Your Board of Directors and management look forward to greeting personally those
shareholders able to be present. However, if you are unable to attend, I urge
you to return the enclosed proxy card as soon as possible.
The meeting will be held for the following purposes:
1. To consider and vote upon a shareholder proposal to remove all
present directors without cause; and
2. If Proposal #1 is approved, to elect directors for the balance of the
terms of the present directors and until their successors are elected
and qualified; and
3. To transact such other business as may be properly presented to the
meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on [ ], 1996 shall
be entitled to notice of and to vote at said meeting or any adjournment thereof.
Regardless of the number of shares you own, your vote is important. Unless
you plan to attend the meeting, please complete, sign, date and return the proxy
card in the enclosed envelope at your earliest convenience. Mailing your
completed proxy will not prevent you from voting in person at the meeting if you
wish to do so.
Sincerely,
Robert S. Muehlberg
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
PRELIMINARY COPY
MEDICAL IMAGING CENTERS OF AMERICA, INC.
9444 FARNHAM STREET, SUITE 100
SAN DIEGO, CALIFORNIA 92123
(619) 560-0110
PROXY STATEMENT
BY BOARD OF DIRECTORS IN
OPPOSITION TO THE PROPOSALS
MADE BY THE STEEL PARTNERS COMMITTEE
SPECIAL MEETING OF SHAREHOLDERS
[ ], 1996
Dear Shareholders:
This Proxy Statement is furnished by the Board of Directors (the "Board")
of Medical Imaging Centers of America, Inc., a California corporation (the
"Company"), to the holders of outstanding shares of the Company's Common Stock,
no par value (the "Common Stock"), in connection with the solicitation of
proxies by the Board for use at a special meeting (the "Meeting") to be held on
[ ], 1996, and at any adjournment or adjournments thereof. The Meeting
was called pursuant to a demand by Steel Partners, II, L.P., a Delaware limited
partnership ("Steel Partners"), and Steel Partners Services, Ltd., a New York
corporation ("Steel Services;" Steel Partners and Steel Services, collectively,
"Steel"). This Proxy Statement and the enclosed GREEN Proxy Card are first being
mailed to shareholders on or about January , 1996.
The purpose of the Meeting is to consider proposals made by Steel, and
opposed by the Board and management of the Company, to remove all of the current
members of the Board without cause and replace the Board with Steel's own
nominees (the "Steel Proposals"). In the Board's opinion, the Steel Proposals
are not in the best interests of all shareholders of the Company, but rather
were made in furtherance of Steel's own interests to take control of the Company
without paying a "control premium" to you and all other shareholders. The Board
vigorously opposes the Steel Proposals and is soliciting proxies in opposition
to the Steel Proposals.
REJECT STEEL'S EFFORTS TO
TAKE CONTROL OF YOUR COMPANY
After careful consideration, your Board recommends that you vote AGAINST
the Steel Proposals. Consider the following in support of the Board's position:
- - The current Board believes it has a successful track record in enhancing
shareholder value. Since implementing its strategic plan in 1994, the
Company's operations have been consistently profitable, shareholders' equity
has increased over $5 million, and the value of your stock has increased from
$3.75 per share (after giving effect to the one for five reverse stock split
which occurred in 1995) to $9.25 per share, clear evidence that the Board is
succeeding in its efforts to benefit all shareholders. See the "PERFORMANCE
GRAPH" for more detailed information regarding the stock price's improvement
over the past year.
- - Your Board has plans for the Company which are intended to benefit ALL
shareholders, not simply Steel. Options being considered by the current Board
include expansion of the Company's regional presence in existing Diagnostic
Medical Center markets through business combinations that would positively
impact
<PAGE> 4
operating results and, in the Board's opinion, may benefit the Company's
stock price over time, redemptions of Common Stock, and other improvements to
the Company's financial position. The Board is continually exploring
alternatives to maximize the value of the Company's Common Stock for the
benefit of all shareholders, but has not presently fixed a deadline by which
any of these actions may be taken.
- - As explained in "INFORMATION CONCERNING THE MEETING -- Background of Meeting"
below, the Board in good faith offered Steel representation on the Board (two
of seven directors or 29% of the Board) in excess of Steel's current
ownership of 19.7% of the Company's Common Stock, but Steel rejected the
offer. Why should Steel, as a minority shareholder without a plan for the
Company and no apparent experience in the Company's industry, have 100%
control of the Board of Directors and the ability to speak for ALL
shareholders?
- - Steel has not proposed a business plan for the operations of the Company
which is different than the business plan of management, or indeed any
business plan at all. At a meeting with management of the Company in late
1995, Mr. Lichtenstein, age 30, and the leading principal of Steel, indicated
to management of the Company that he was satisfied with the performance of
both the Board and management. What are the true intentions of Steel in
requesting the Meeting and presenting the Steel Proposals? THE BOARD BELIEVES
THAT STEEL'S OBJECTIVE IS NOTHING SHORT OF COMPLETE CONTROL OF YOUR BOARD OF
DIRECTORS AND CONTROL OF YOUR COMPANY WITHOUT PAYING YOU AND ALL OTHER
SHAREHOLDERS A "CONTROL PREMIUM;" INDEED WITHOUT OFFERING TO PAY YOU ANYTHING
AT ALL.
- - Steel has stated that its nominees intend to rescind the Shareholder Rights
Plan (the "Rights Plan") adopted by the Board on October 2, 1991. The Rights
Plan was adopted to deter coercive or unfair takeover tactics and to protect
the shareholders against unsolicited attempts to acquire control of the
Company that do not offer shareholders the full value of their investment
(i.e., attempts which fail to pay any "control premium" to the Company's
shareholders). Steel already owns 19.7% of the Company's outstanding Common
Stock. Any rescission of the Rights Plan would permit Steel to acquire
additional shares of Common Stock without Board approval and would thereby
allow Steel to acquire effective control of the Company without paying a
"control premium" to you and all other shareholders.
THE BOARD VIGOROUSLY OPPOSES THE STEEL PROPOSALS. THE BOARD URGES YOU NOT
TO SIGN ANY PROXY CARD SENT TO YOU BY STEEL AND TO SIGN AND RETURN THE ENCLOSED
GREEN PROXY CARD.
IF YOU PREVIOUSLY SIGNED AND RETURNED A PROXY CARD TO STEEL YOU HAVE EVERY
RIGHT TO CHANGE YOUR MIND. WHETHER OR NOT YOU SIGNED THE PROXY CARD SENT TO YOU
BY STEEL, THE BOARD URGES YOU TO REJECT THE STEEL PROPOSALS BY COMPLETING,
SIGNING, DATING AND MAILING THE ENCLOSED GREEN PROXY CARD IN THE POSTAGE-PAID
ENVELOPE PROVIDED. REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR PROXY CARD
IS IMPORTANT. PLEASE ACT TODAY!
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE
URGE YOU TO CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR
HER TO EXECUTE A GREEN PROXY CARD, VOTING YOUR SHARES ON YOUR BEHALF AS
RECOMMENDED BY THE BOARD. YOU SHOULD ALSO COMPLETE, SIGN, DATE AND MAIL YOUR
GREEN PROXY CARD WHEN YOU RECEIVE IT IN THE MAIL. PLEASE DO SO AT ONCE.
If you have any questions about giving your proxy or require assistance,
please call:
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NY 10005
(212) 269-5550 (COLLECT)
OR
CALL TOLL FREE (800) 326-3066
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<PAGE> 5
INFORMATION CONCERNING THE MEETING
BACKGROUND OF MEETING
On January 25, 1995, Steel Partners began accumulating Common Stock of the
Company, and by the time they filed their first Schedule 13D with the Securities
and Exchange Commission (the "SEC") in March 1995, Steel Partners had acquired
5.6% of the Company's outstanding Common Stock.
On May 3, 1995, Mr. Muehlberg, the Company's President and Chief Executive
Officer, met with Mr. Lichtenstein, Chairman and President of Steel Partners.
Mr. Muehlberg told Mr. Lichtenstein that the Company currently had one vacant
seat on its Board and that another current director of the Company did not
intend to stand for re-election at the Company's annual meeting of shareholders
in August 1995. Mr. Muehlberg offered Mr. Lichtenstein and Steel Partners
representation on the Company's Board. Mr. Lichtenstein told Mr. Muehlberg that:
(1) Steel Partners supported the Company's current management; and (2) Steel
Partners had purchased Common Stock to hold as an investment. Mr. Lichtenstein
stated that Steel Partner's investment in the Company was passive and that Steel
Partners had no intent to take an active role on the Company's Board.
On August 23, 1995, following the Company's annual meeting at which Steel
Partners voted in favor of all of the Company's nominees for director, Mr.
Lichtenstein made a presentation to the Company's newly elected Board. After
confirming "support" for the Company's management and Board, Mr. Lichtenstein
told the Board that Steel Partners wanted to own more than 20% of the Company's
Common Stock and urged the Board, among other things, to immediately remove the
Company's Rights Plan. As noted above, the Rights Plan was adopted by the Board
to deter coercive or unfair takeover tactics and to protect the Company's
shareholders. Thus, the Board, determined to protect the interests of ALL
shareholders and not simply those of one large shareholder, refused Steel
Partner's request.
In the weeks following his presentation, Mr. Lichtenstein repeatedly
pressured Mr. Muehlberg to immediately remove the Rights Plan, and began
threatening to remove the Board or to take other action if the Rights Plan was
not removed or substantially altered.
On November 8, 1995, in a meeting with Mr. Muehlberg and other directors of
the Company, Mr. Lichtenstein again demanded that: (1) the Company immediately
remove the Rights Plan; and (2) the Company provide Steel Partners with two
seats on the Company's Board.
On December 14, 1995, Mr. Muehlberg called Mr. Lichtenstein and asked Mr.
Lichtenstein to outline Steel Partner's "plan" for the Company. Mr. Lichtenstein
promised to provide such a plan in writing to Mr. Muehlberg. Instead of a
specific plan about the Company, on December 19, 1995, Mr. Lichtenstein sent to
Mr. Muehlberg a generic description of Steel Partner's investment objectives
which did not include anything specific to the Company.
On December 20, 1995, Mr. Muehlberg sent a letter to Mr. Lichtenstein
repeating the request that Mr. Lichtenstein reveal his plan for the Company to
ensure that the interests of all of the Company's shareholders were protected.
Mr. Lichtenstein's apparent response came on December 29, 1995, when Steel
Partners, through its agent, made a demand upon the Company that a special
meeting of shareholders be called on February 26, 1996 to remove the Company's
current Board and to elect Steel Partners' nominees in their place. This demand
was made despite Steel Partner's repeated public disclosure that they had
purchased shares of Common Stock as an "investment." Also on December 29, 1995,
Steel commenced a proxy solicitation against the Company by filing preliminary
proxy materials with the SEC.
On January 10, 1996, the Board of Directors authorized Mr. Muehlberg to
offer Steel Partners the following: (1) an increase of the number of directors
on the Board by two, with nominees of Steel designated to fill the two new
vacancies; and (2) reimbursement of Steel's expenses incurred in connection with
its proxy solicitation, all in exchange for a standstill agreement pursuant to
which Steel would agree, among other things, not to commence a proxy
solicitation or otherwise attempt to take control of the Company for a period of
two years. Mr. Lichtenstein rejected and countered the Company's offer by
proposing an increase of the number of directors on the Board by three, with
nominees of Steel designated to fill the three new positions;
3
<PAGE> 6
however, Steel would not enter into a standstill agreement as described above.
The Board rejected Mr. Lichtenstein's counter-proposal since it provided no
protection to minority shareholders against Steel's attempt to take control of
the Company without paying a "control premium" to all shareholders.
On January 10, 1996, the Company commenced litigation in the United States
District Court for the Southern District of California against Steel and certain
of its affiliates (the "Steel Defendants") alleging that the Steel Defendants
violated certain federal securities laws and state tort laws in connection with
their acquisition of Common Stock and their proxy solicitation. The Company's
complaint alleges, among other matters, that the Steel Defendants violated
Section 13(d) of the Securities Exchange Act of 1934 by, among other things,
filing false and misleading Schedules 13D that failed to disclose the Steel
Defendants' true ownership of Common Stock and their true intent to attempt to
take control of the Company. The complaint also alleges that the Steel
Defendants tortiously interfered with the Company's economic relations with a
lender of the Company by, among other things, claiming to have enough control of
the Company to have instructed the Company to stop making payments to its
lenders. See "CERTAIN LITIGATION" for additional information regarding the
litigation.
RECORD DATE; VOTING SECURITIES
The Board has established the close of business on [ ], 1996 as the
record date for determining shareholders entitled to notice of and to vote at
the Meeting. At the close of business on that date, the Company had [ ]
shares of Common Stock outstanding.
EFFECT OF THE GREEN PROXY CARD
The Company's Board of Directors is soliciting AGAINST the Steel Proposals.
By executing the GREEN proxy card, shareholders will be voting to retain the
current Board and against the Steel Proposals and will revoke any earlier dated
proxy card solicited by Steel which they may have signed. Shares represented by
the GREEN proxy card will be voted in accordance with the directions indicated
thereon, or, if no direction is indicated, in accordance with the
recommendations of the Board contained in this Proxy Statement, as to all shares
of Common Stock represented by that proxy card.
Any shareholder may revoke a proxy at any time prior to its exercise by
filing a later dated proxy or a written notice of revocation with the Secretary
of the Company, or by voting in person at the Meeting. If a shareholder is not
attending the Meeting, any proxy or notice must be returned in time for receipt
no later than the close of business on the date preceding the Meeting in order
to be effective.
The Board urges you NOT to sign any proxy card sent to you by Steel.
Whether or not you have previously executed a proxy card sent by Steel, the
Board urges you to show your support for the Board by executing and dating the
enclosed GREEN proxy card solicited by the Board and returning it to the Company
in the enclosed postage-prepaid envelope as soon as possible.
MATTERS TO BE VOTED ON AT THE MEETING
Set forth below are two proposals proposed by Steel to be acted upon at the
Meeting. The Board unanimously recommends a vote AGAINST each of the proposals.
1. Proposal #1 -- Removal of Directors
Steel is presenting Proposal #1 to remove from office, without cause, all
of the current members of the Company's Board of Directors and to declare each
such directorship vacant. The Board unanimously recommends a vote AGAINST this
proposal.
2. Proposal #2 -- Election of New Directors
Steel is presenting Proposal #2 to elect a new slate of directors comprised
of five Steel insiders to replace the Company's Board of Directors removed
pursuant to Proposal #1, if Proposal #1 is approved by the shareholders of the
Company. If Proposal #1 is not approved, there will be no election of directors
at the
4
<PAGE> 7
Meeting. The Board unanimously recommends a vote AGAINST this proposal and
Steel's new slate of directors.
If Proposal #1 is approved, none of the current members of the Board will
be candidates for election. Consequently, the Board is not soliciting proxies
for the election of new directors. The Board is instead focusing its efforts on
soliciting proxies AGAINST Proposal #1.
OTHER BUSINESS AT THE MEETING
The Board is not aware of any other items of business to be brought before
the Meeting. However, should any other business properly come before the
Meeting, a validly executed GREEN proxy card will empower the proxies named
therein to vote in their discretion on any such matter.
REQUIRED VOTE; QUORUM
The holders of Common Stock issued and outstanding having a majority of the
votes entitled to be cast at the Meeting must be represented in person or by
proxy in order to constitute a quorum at the Meeting. Under California law and
the By-laws of the Company, an affirmative vote of a majority of the issued and
outstanding Common Stock of the Company is required for the approval of Proposal
#1, the removal of all of the current members of the Company's Board of
Directors without cause. Abstentions and broker non-votes are counted in the
determination of a quorum; however, they have the effect of a vote AGAINST
Proposal #1 and no effect on any other matter to be brought before the Meeting,
including the election of directors.
Each holder of Common Stock issued and outstanding at the Meeting has one
vote for each share with respect to all matters to be considered at the Meeting,
and may have cumulative voting rights with respect to Proposal #2 -- Election of
New Directors. No shareholder may cumulate votes unless a shareholder has
announced at the Meeting his intention to do so, but if any shareholder makes
such an announcement, all shareholders may cumulate votes. Steel has announced
that it plans to make an announcement at the Meeting of its intent to cumulate
votes. Cumulative voting rights entitle a shareholder to give one nominee as
many votes as is equal to the number of directors to be elected, multiplied by
the number of shares owned by him, or to distribute his votes on the same
principle among two or more nominees, as he sees fit. In the event additional
persons are nominated for the position of director, the proxyholders may
cumulate and cast their votes, at their discretion, among all or less than all
of the nominees in such proportions as they see fit. However, a shareholder may
cumulate votes ONLY for a candidate or candidates whose names have been placed
in nomination prior to the voting. If Proposal #1 is approved, none of the
current members of the Board will be candidates for election. Consequently, if
Proposal #1 is approved, it will not be possible to cumulate votes to elect as a
director any of the current members of the Board. The five nominees for director
receiving the highest number of votes at the Meeting will be elected. Further,
if Proposal #1 is approved, it will trigger provisions in certain executive
officer employment contracts allowing them to terminate their service to the
Company with compensation (see "INFORMATION REGARDING THE CURRENT DIRECTORS AND
EXECUTIVE OFFICERS -- Executive Officer Agreements").
INFORMATION REGARDING THE CURRENT DIRECTORS AND
EXECUTIVE OFFICERS
ROBERT S. MUEHLBERG, 41, a Director since 1994, has been Chief Executive
Officer and Chairman of the Board of Directors of the Company since February
1995, and also holds the position of President/Chief Operating Officer. Mr.
Muehlberg has also held the positions of Executive Vice President, Senior Vice
President and Vice President, Operations since joining the Company in February
1985. Prior to joining the Company, Mr. Muehlberg was Operations Manager at
International Imaging, Inc., a provider of mobile and free-standing diagnostic
imaging centers, from 1983 to 1985, and Area Manager for AMI/DSI, a provider of
mobile diagnostic imaging services from 1980 to 1983. Mr. Muehlberg holds a
Bachelor's degree in Health Science from the University of Missouri and a
Master's degree in Business Administration from Nova Southeastern University.
Mr. Muehlberg is currently a member of the International Forum for Corporate
Directors, an organization dedicated to responsible corporate governance.
5
<PAGE> 8
DENISE L. SUNSERI, 36, has been Chief Financial Officer and Secretary since
June 1993 and a Director of the Company since February 1995. She served as Vice
President and Corporate Controller from December 1991 to June 1993 and joined
the Company as Director of Financial Reporting in 1989. Prior to joining the
Company, Ms. Sunseri held various positions between 1981 and 1989 in the
Auditing and Financial Services division of the accounting firm of Arthur
Andersen & Co. Ms. Sunseri is a CPA and holds a Bachelor's degree in Business
Administration from the University of Portland. Ms. Sunseri is currently a
member of the International Forum for Corporate Directors, an organization
dedicated to responsible corporate governance.
KEITH R. BURNETT, M.D., 43, a Director since 1993, has been the Medical
Director of four of the Company's medical centers: Long Beach Medical Imaging
Clinic since 1985; Medical Imaging Center of Huntington Beach since 1988; Laguna
Niguel MRI Center since 1992; and Downey MRI Center since July 1994. He also has
been Medical Director of Medical Imaging Services, a California network of
imaging services, since 1992. Dr. Burnett has been an Assistant Clinical
Professor of Radiology at the University of California at Irvine since 1985 and
a consultant in Nuclear Medicine, Veterans Medical Center since 1988. He is
Chairman of the Examination Committee of the Registry of Magnetic Resonance
Technologists (RMRIT) and a member of the Advisory Council on MRI and
Chiropractic Research at the Los Angeles College of Chiropractic. Dr. Burnett
received his Bachelor of Arts degree in Human Biology from Stanford University
in 1974 and his Doctor of Medicine degree from Creighton University in 1978. Dr.
Burnett is board certified in Radiology and Nuclear Medicine and a Diplomate of
the American Board of Radiology.
ROBERT G. RICCI, D.O., 61, a Director since 1995, has been Director of
Medical Affairs and Education at Park Lane Medical Center, Kansas City,
Missouri, since 1992. He was President of Medical Imaging, Inc., Kansas City,
Missouri, a radiology practice, from 1974 through November 1, 1995. Dr. Ricci
currently serves on the Board of Directors for the following private companies:
Park Lane Medical Center, Preferred Health Professionals and Health Midwest. He
served as Program Chairman of the Missouri Association of Osteopathic
Physicians, as well as Program Chairman of the American Osteopathic College of
Radiology, in 1995. Dr. Ricci attended Temple University in Philadelphia and
received his Doctor Of Osteopathy from the University of Health Sciences of
Osteopathic Medicine in 1968. Dr. Ricci is board certified in Radiology and is a
Fellow of the American Osteopathic College of Radiology.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during the Company's 1995 fiscal
year. In that year, each director attended at least 75% of the aggregate of all
meetings held by the Board of Directors and all meetings held by all committees
of the Board on which such director served.
The Company has a Compensation/Stock Option Committee and an Audit
Committee. The Compensation/Stock Option Committee is responsible for
determining the specific forms and levels of compensation of the Company's
executive officers and administering the Company's stock option plans for
officers, directors, key employees and consultants of the Company. During the
Company's 1995 fiscal year, the Committee met once and all members were present.
Presently, the Committee consists of Messrs. Burnett (Chairman) and Ricci.
The Audit Committee is responsible for meeting with the Company's financial
management and independent auditors to review the work of each and to ensure
that each is properly discharging its responsibilities. The independent auditors
have free access to the Audit Committee, without management representatives
present, to discuss results of their audit and their opinions of the adequacy of
the internal controls and quality of financial reporting. The Audit Committee
recommends to the Board of Directors the election of the firm of independent
auditors to audit the Company's financial statements. During the Company's 1995
fiscal year, the Committee met three times and all members were present.
Presently, the Committee consists of Messrs. Ricci (Chairman) and Burnett.
The Company does not have an executive or nominating or similar committee.
The Board of Directors generally acts in its entirety upon matters which might
otherwise be the responsibility of such committees.
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<PAGE> 9
RESIGNATION OF DIRECTOR
On January 11, 1996, E. Keene Wolcott resigned from the Board of Directors
of the Company citing his opposition to recently filed litigation. See "CERTAIN
LITIGATION" for a description of such litigation. On January 12, 1996, the
Company responded to Mr. Wolcott's resignation citing the unanimous support
among each of the Company's other directors, financial advisors and legal
counsel for the commencement of such litigation. Both letters were subsequently
filed by the Company with the SEC on January 16, 1996 as attachments to a Report
on Form 8-K.
DIRECTORS' COMPENSATION
Directors, except those who are also officers of the Company, are paid
$3,000 for each meeting attended for their services as directors, and are
reimbursed for out-of-pocket expenses of attending meetings. The Chairpersons of
the Compensation/Stock Option Committee and Audit Committee receive an
additional $2,000 and $4,000 per year, respectively.
DIRECTOR AND OFFICER SECURITY REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of the
Company's Common Stock to file reports of ownership and changes in ownership
with the SEC. These reporting persons are also required to furnish the Company
with copies of all reports they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that during its 1995 fiscal year all filing requirements applicable to its
officers, directors and greater than ten percent shareholders were complied
with.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1995, by each director and
executive officer of the Company, and all directors and executive officers as a
group. Under the SEC rules, a person is deemed to be a "beneficial owner" of a
security if he has, or shares, the power to vote or direct the voting of such
security, or the power to dispose or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which that
person has the right to acquire beneficial ownership within 60 days. Unless
otherwise indicated, the address for each of the persons listed below is 9444
Farnham Street, Suite 100, San Diego, CA 92123.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF
OF BENEFICIAL COMMON
NAME OWNERSHIP(1) STOCK
- ------------------------------------- ----------------- ---------
<S> <C> <C>
Robert S. Muehlberg 63,333(2) 3%
Denise L. Sunseri 52,333(3) 2%
Keith R. Burnett, M.D. 37,654(4) 1%
Robert G. Ricci, D.O. 32,000(5) 1%
All Executive Officers and Directors 185,320(6) 7%
as a Group (4 persons)
</TABLE>
- ---------------
(1) Unless otherwise specified in the footnotes, the shareholder has sole voting
and dispositive power.
(2) Includes presently exercisable options to purchase 61,333 shares of Common
Stock at $2.35 to $21.90 per share, issued for service as an officer and
employee.
(3) Includes presently exercisable options to purchase 52,333 shares of Common
Stock at $3.13 to $21.90 per share, issued for service as an officer and
employee.
(4) Includes presently exercisable warrants to purchase 37,000 shares of Common
Stock at $4.05 to $7.81 per share, issued for service as a director.
(5) Includes presently exercisable warrants to purchase 32,000 shares of Common
Stock at $7.50 to $7.81 per share, issued for service as a director.
(6) Includes presently exercisable options and warrants to purchase 182,666
shares of Common Stock at various prices, as described in the footnotes
above.
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<PAGE> 10
COMPENSATION TABLES
The following table provides information on compensation paid by the
Company to the Company's Chief Executive Officer and the Company's only other
executive officer for fiscal year 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- ----------------------------------------- ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Robert S. Muehlberg 1995 167,200 50,000 45,000 5,207(1)
Chairman of the Board, 1994 148,450 25,000 40,000 5,612(1)
President and Chief 1993 148,628 20,000 12,000 6,255(1)
Executive Officer
Denise L. Sunseri 1995 142,200 50,000 45,000 4,271(2)
Vice President, Chief 1994 142,200 25,000 20,000 5,882(2)
Financial Officer and Secretary 1993 135,385 15,000 12,000 5,498(2)
</TABLE>
- ---------------
(1) The amounts disclosed in this column include payments under the Company's
medical reimbursement policy of $483 for 1995, $1,036 for 1994 and $2,474
for 1993; the Company's matching 401(k) employer contribution of $3,527 for
1995, $3,469 for 1994 and $2,752 for 1993; and $1,197 for 1995, $1,107 for
1994 and $1,029 for 1993 in premiums for a personal long-term disability
policy.
(2) The amounts disclosed in this column include payments under the Company's
medical reimbursement policy of $520 for 1995, $1,699 for 1994 and $1,706
for 1993; the Company's matching 401(k) employer contribution of $2,849 for
1995, $3,344 for 1994 and $3,008 for 1993; and $902 for 1995, $839 for 1994
and $784 for 1993 in premiums for a personal long-term disability policy.
The following table provides information on option grants in fiscal 1995 to
the executives named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT POTENTIAL
OF REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE
UNDERLYING TO APPRECIATION FOR
OPTIONS EMPLOYEES OPTION TERM(1)
GRANTED IN FISCAL EXERCISE EXPIRATION ------------------
NAME (#) YEAR (#) PRICE($) DATE 5%($) 10%($)
- ----------------------------- --------- --------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Muehlberg.......... 25,000(2) 21 7.81 12/13/00 53,975 119,225
20,000(3) 16 7.81 12/13/00 43,180 95,380
Denise L. Sunseri............ 25,000(2) 21 7.81 12/13/00 53,975 119,225
20,000(3) 16 7.81 12/13/00 43,180 95,380
</TABLE>
- ---------------
(1) Potential realizable value is based on an assumption that the price of the
Common Stock appreciates above the exercise price at the annual rate shown
(compounded annually) from the date of grant until the end of the five-year
option term. These numbers are calculated based on the requirements
promulgated by the SEC and do not reflect the Company's estimate of future
stock price growth.
(2) Options are immediately exercisable.
(3) Options are exercisable upon the Company meeting certain 1996 performance
goals. In the event that the Company and/or its shareholders enter into a
binding agreement or adopt a plan to implement a dissolution, liquidation,
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving entity,
or upon a sale of substantially all the property of the Company, the
exercise date of any outstanding options shall accelerate and such options
shall become immediately exercisable.
8
<PAGE> 11
The following table provides information on option exercises in fiscal 1995
by the named executive officers and the value of such officers' unexercised
options at December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Muehlberg............ -- -- 61,333 45,667 $ 145,592 $ 149,848
Denise L. Sunseri.............. -- -- 52,333 30,667 $ 116,092 $ 61,348
</TABLE>
EXECUTIVE OFFICER AGREEMENTS. As an incentive for their continued efforts
on behalf of the Company, the Board of Directors has entered into employment
contracts with Mr. Muehlberg and Ms. Sunseri which provide that they will be
paid the equivalent of one year's salary and employee benefits in the event that
their employment by the Company is involuntarily terminated or if there is a
change in the control of the Company and they should elect not to remain
employed after such change in control.
TAX DEFERRED RETIREMENT PLAN. The Company instituted a tax deferred
retirement plan (the "TDRP") under Section 401(k) of the Internal Revenue Code
for the benefit of all domestic employees in October 1989. Under the TDRP, an
employee may defer up to 10% of pre-tax earnings, subject to a maximum deferral
established each year, and contribute it to a trusteed plan. The Company will
match 50% of an employees' contribution to a maximum of 6% of gross pay. All
regular employees working over 1,000 hours per year who have completed six
months employment are eligible to enroll during the months of March, June,
September and December. The Company's matching contributions vest over a five
year period. Benefits under the TDRP are payable on retirement, hardship, death
of the employee or termination of employment. Approximately 245 employees,
including officers, are eligible to participate in the TDRP, and 179 are
presently enrolled. During 1995, the Company contributed $118,339 to match
employee contributions, including $6,376 for all named executive officers as a
group.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, the Compensation/Stock Option Committee of the
Company's Board of Directors initially consisted of Messrs. Burnett (Chairman),
Wolcott and Prosek. In July 1995 and for the remainder of the fiscal year, the
Committee was changed to consist of Messrs. Burnett (Chairman), Wolcott and
Ricci.
Dr. Keith R. Burnett is a principal and officer of Magnetic Imaging Medical
Group ("MIMG"), which provides radiology and other medical services for the
Company's Diagnostic Medical Centers located in Long Beach, Huntington Beach,
Laguna Niguel and Downey, California. MIMG is a Co-General Partner of the center
in Long Beach. Dr. Burnett serves as the Medical Director for the facilities in
Huntington Beach and Laguna Niguel. The Management, Licensing and Facilities
Agreements between the respective Centers and MIMG ("Agreements") provide that
MICA will receive for services rendered: 77.5% of the revenues collected at Long
Beach Medical Imaging Clinic, 80% of the revenues collected at Medical Imaging
Center of Huntington Beach and Laguna Niguel MRI Center, and 82% at Downey MRI
Center. Pursuant to the Agreements, the balance of the amounts collected is
retained by MIMG as their fee. In 1995, the Company's share of revenues
collected from the four centers was $1,669,000, $1,748,000, $783,000 and
$834,000, respectively; MIMG's share of the revenues collected was $452,000,
$413,000, $169,000 and $208,000, respectively. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
9
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of December 31, 1995, the following shareholders are the only
shareholders who are known by the Company to be beneficial owners of more than
five percent (5%) of the Company's voting securities.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK
- ------------------------------------------------------------- ------------ ------------
<S> <C> <C>
General Electric Company..................................... 160,000 6.1%
20825 Swenson, Suite 100
Waukesha, WI 53186
Metropolitan Life Insurance Co............................... 372,727(2) 13.1%
One Madison Avenue
New York, NY 10010
The Steel Partners Committee................................. 487,374(3) 19.7%
750 Lexington Avenue, 27th Floor
New York, NY 10022
</TABLE>
- ---------------
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person has the right to acquire within
60 days after December 31, 1995.
(2) Metropolitan Life Insurance Company holds $5,590,909 in principal amount of
the Company's Convertible Debentures due April 1999. Such Debentures bear
interest at the rate of 6% per annum and are convertible at any time into
one share of Common Stock for each $15.00 of principal amount of Debenture.
The amount and percentage of Common Stock in the table represents beneficial
ownership as if the Debentures had been converted to Common Stock.
(3) The information in the table is taken from a filing with the SEC on Schedule
13D made by The Steel Partners Committee as of December 29, 1995 reporting
beneficial ownership. This figure includes 395,704 shares of Common Stock
beneficially owned by Steel Partners and 91,670 shares of Common Stock
beneficially owned by Steel Services.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total returns
on the Company's Common Stock for the period commencing with the time at which
the current Board of Directors of the Company assumed their responsibilities
through December 31, 1995, to the Dow Jones Equity Market Index, the Dow Jones
Health Care Providers Index, the Nasdaq Stock Market -- US Index and a Peer
Group. The companies in the Peer Group (and their stock symbols) are: Alliance
Imaging, Inc. (SCAN), American Health Services Corp. (AHTS), American Shared
Hospital Services (AMS), Health Images, Inc. (HII), and Medical Diagnostics,
Inc. (MDIX).
COMPARISON OF 12 MONTH CUMULATIVE TOTAL RETURN*
AMONG MEDICAL IMAGING CENTERS OF AMERICA, INC.,
THE DOW JONES EQUITY MARKET INDEX, THE DOW JONES HEALTH CARE PROVIDERS INDEX,
THE NASDAQ STOCK MARKET-US INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
MEDICAL
IMAGING CEN- DOW JONES DOW JONES
MEASUREMENT PERIOD TERS OF EQUITY MAR- HEALTH CARE NASDAQ STOCK
(FISCAL YEAR COVERED) AMERICA, INC. PEER GROUP KET PROVIDERS MARKET-US
<S> <C> <C> <C> <C> <C>
12/94 100 100 100 100 100
3/95 126 102 110 114 109
6/95 209 139 120 102 125
9/95 174 151 130 116 139
11/95 142
12/95 219 161 138 129
</TABLE>
* The graph and table set forth above assume $100 was invested on December 31,
1994 in each of the Company's Common Stock, the Dow Jones Equity Market Index,
the Dow Jones Health Care Providers Index, the Nasdaq Stock Market -- US Index
and the Peer Group, and that all dividends were re-invested. This data was
furnished by Research Data Group.
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Keith R. Burnett, a director of the Company, is a principal and officer
of MIMG, which provides radiology and other medical services for the Company's
Diagnostic Medical Centers located in Long Beach, Huntington Beach, Laguna
Niguel and Downey, California. MIMG is a Co-General Partner of the center in
Long Beach. Dr. Burnett serves as the Medical Director for the facilities in
Huntington Beach and Laguna Niguel. The Management, Licensing and Facilities
Agreements between the respective Centers and MIMG ("Agreements") provide that
MICA will receive for services rendered: 77.5% of the revenues collected at Long
Beach Medical Imaging Clinic, 80% of the revenues collected at Medical Imaging
Center of Huntington Beach and Laguna Niguel MRI Center, and 82% at Downey MRI
Center. Pursuant to the Agreements, the balance of the amounts collected is
retained by MIMG as their fee. In 1995, the Company's share of revenues
collected from the four centers was $1,669,000, $1,748,000, $783,000 and
$834,000, respectively; MIMG's share of the revenues collected was $452,000,
$413,000, $169,000 and $208,000, respectively. See "INFORMATION REGARDING THE
CURRENT DIRECTORS AND EXECUTIVE OFFICERS -- Compensation Committee Interlocks
and Insider Participation."
CERTAIN LITIGATION
On January 10, 1996, the Company commenced litigation in the United States
District Court for the Southern District of California against Steel and certain
of its affiliates (the "Steel Defendants") alleging that the Steel Defendants
violated certain federal securities laws and state tort laws in connection with
their acquisition of Common Stock and their proxy solicitation. The Company's
complaint alleges, among other matters, that the Steel Defendants violated
Section 13(d) of the Securities Exchange Act of 1934 by, among other things,
filing false and misleading Schedules 13D that failed to disclose the Steel
Defendants' true ownership of Common Stock and their true intent to attempt to
take control of the Company. The complaint also alleges that the Steel
Defendants tortiously interfered with the Company's economic relations with a
lender of the Company by, among other things, claiming to have enough control of
the Company to have instructed the Company to stop making payments to its
lenders.
The complaint seeks, among other things, to have the Court preliminarily
and permanently enjoin the Steel Defendants' proxy solicitation and their
acquisition and voting of shares of Common Stock, and damages for the Steel
Defendants' tortious interference with the Company's economic relations. The
complaint further seeks to have the Court require the Steel Defendants to
publicly disclose their beneficial ownership of 20% or more of the Common Stock
and declare that the Steel Defendants have thereby become an "Acquiring Person"
for purposes of the Rights Plan, enabling all of the Company's shareholders
other than the Steel Defendants to purchase shares of Common Stock at bargain
prices, under certain circumstances. The Company has sought expedited treatment
of its lawsuit.
SOLICITATION OF PROXIES
COST AND METHOD
The cost of the proxy solicitation will be borne by the Company. The
Company estimates that the total expenditures for such solicitation (including
the fees and expenses of the Company's attorneys, financial advisors and public
relations firm and advertising, printing, mailing, travel and other costs, but
excluding salaries and wages of officers and employees and the fees and expenses
of D.F. King & Co., Inc. described below) will be approximately $500,000, of
which approximately $200,000 has been spent to date. In addition to solicitation
by mail, directors, officers and other employees of the Company may, without
additional compensation, solicit proxies by mail, in person, by
telecommunication or by other electronic means.
The Company has retained D.F. King & Co., Inc., at an estimated fee of
$25,000, plus reasonable out-of-pocket expenses, to assist in the solicitation
of proxies. Approximately 30 persons will be utilized by such firm in its
efforts. The Company will reimburse brokerage houses, banks, custodians and
other nominees and fiduciaries for out-of-pocket expenses incurred in forwarding
the Company's proxy materials to, and obtaining instructions relating to such
materials from, beneficial owners of Common Stock.
12
<PAGE> 15
The Company has also agreed to indemnify D.F. King & Co., Inc. against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the SEC, each member of the Board may be
deemed to be a "participant" in the Company's solicitation of proxies. The
business address of each participant is as follows:
Robert S. Muehlberg
9444 Farnham Street, Suite 100
San Diego, CA 92123
Denise L. Sunseri
9444 Farnham Street, Suite 100
San Diego, CA 92123
Keith R. Burnett, M.D.
9444 Farnham Street, Suite 100
San Diego, CA 92123
Robert G. Ricci, D.O.
9444 Farnham Street, Suite 100
San Diego, CA 92123
TRANSACTIONS BY PARTICIPANTS
Information about the present Common Stock ownership of the "participants"
referred to above is provided in "INFORMATION REGARDING THE CURRENT DIRECTORS
AND EXECUTIVE OFFICERS -- Security Ownership of Management." None of the
participants purchased or sold any shares of Common Stock within the past two
years. In addition, no part of the purchase price or market value of any of
their shares is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such shares.
Except as set forth in this Proxy Statement, (i) no participant is, or was
within the past year, a party to any contract, arrangement or understanding with
any person with respect to any of the Company's securities, and (ii) neither any
of the participants nor any of their respective associates has any arrangement
or understanding with any person with respect to any future employment by the
Company or its affiliates, or with respect to any future transaction as to which
the Company or any of its affiliates will or may be a party.
SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal to be considered at the
Company's next annual meeting may do so, provided that such shareholder
satisfies the eligibility requirements established by the SEC. To be considered
for submission at the meeting, such proposal must be received by the Company
(addressed to the attention of the Secretary) not later than March 26, 1996. To
be submitted at the meeting, any such proposal must be a proper subject for
shareholder action under the laws of the State of California, and must otherwise
conform to applicable regulations of the SEC.
Robert S. Muehlberg
Chairman of the Board and
Chief Executive Officer
13
<PAGE> 16
PRELIMINARY COPY
[FRONT OF PROXY CARD]
MEDICAL IMAGING CENTERS OF AMERICA, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [ ], 1996
The undersigned shareholder(s) of MEDICAL IMAGING CENTERS OF AMERICA, INC.
(the "Company") hereby constitutes and appoints Robert S. Muehlberg and Denise
L. Sunseri, and each of them, attorneys and proxies of the undersigned, each
with power of substitution, to attend, vote and act for the undersigned at the
Special Meeting of Shareholders of the Company to be held on [ ], 1996,
and at any adjournment or postponement thereof, according to the number of
shares of common stock of the Company which the undersigned may be entitled to
vote, and with all powers which the undersigned would possess if personally
present, as follows:
1. SHAREHOLDER PROPOSAL TO REMOVE ALL PRESENT DIRECTORS WITHOUT CAUSE:
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY WILL BE VOTED AGAINST THE REMOVAL OF ALL PRESENT DIRECTORS
WITHOUT CAUSE, UNLESS THE CONTRARY IS INDICATED IN THE APPROPRIATE PLACE.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued on reverse side)
14
<PAGE> 17
[REVERSE OF PROXY CARD]
The undersigned revokes any prior proxy at such meeting and ratifies all
that said attorneys and proxies, or any of them, may lawfully do by virtue
hereof. Receipt of the Notice of Special Meeting of Shareholders and Proxy
Statement is hereby acknowledged.
Dated: _____________ , 1996
___________________________
___________________________
___________________________
(Signature(s) of
shareholders)
Please sign exactly as name
appears herein. When shares
are held by joint tenants,
both should sign; when
signing as an attorney,
executor, administrator,
trustee or guardian, give
full title as such. If a
corporation, sign in full
corporate name by President
or other authorized
officer. If a partnership,
sign in partnership name by
authorized partner.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MEDICAL IMAGING CENTERS OF AMERICA, INC.
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY
IN THE POSTAGE-PAID ENVELOPE ENCLOSED
