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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE IMAGING CENTER, INC.
(Name of small business issuer in its charter)
<S> <C> <C>
Maryland 8011 52-2167391
- ---------------------------------- --------------------------------- ------------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
715 Williams Street
P. O. Box 1705
Cumberland, MD 21501-1705
Telephone: 301-759-3410
Telecopier: 301 759-3043
(Address and telephone number of principal executive offices)
715 Williams Street
Cumberland, MD 21501-1705
Please send copies of any communications to:
Patrick K. Arey, Esq.
Miles & Stockbridge P.C.
Attorneys at Law
10 Light Street
Baltimore, Maryland 21202-1487
(Address of principal place of business or intended principal place of business)
F. Daniel Jackson, M.D., P.A.
715 Williams Street
Cumberland, MD 21501-1705
301-759-3410
(Name, address and telephone number of agent for service)
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b)under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C> <C> <C>
- --------------------------- ---------------------- ---------------------- ---------------------- --------------------
TITLE OF EACH CLASS OF DOLLAR AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
REGISTERED UNIT PRICE
- --------------------------- ---------------------- ---------------------- ---------------------- --------------------
- --------------------------- ---------------------- ---------------------- ---------------------- --------------------
COMMON STOCK, CLASS B $2,000,000 $2.00 $2,000,000 (1) $ 556.00
NON-VOTING
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(1) Before deducting offering expenses estimated to be $_____ in the
aggregate, comprised of the following: Securities and Exchange Commission
fees($556), State Divisions of Securities fees ($_____), printing fees ($_____),
legal and accounting fees ($_____), and escrow agent fees($_____). If all of the
Shares being offered are not sold, the proceeds to the Company will be reduced
accordingly.
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Disclosure alternative used (check one): Alternative 1 ____ ; Alternative 2
__X__ ITEM 1. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF PROSPECTUS.
<PAGE>
(A redherring appears on the left hand side of this page, rotated 90 degrees.
Text follows.)
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS, SUBJECT TO COMPLETION, DATED OCTOBER __, 1999
THE IMAGING CENTER, INC.
MAXIMUM OF 1,000,000 SHARES
CLASS B NON-VOTING COMMON STOCK
$2.00 PER SHARE
The Imaging Center, Inc.
715 Williams Street
Cumberland, Maryland 21501-1705
Telephone: 301-759-3410
The Offering
PER SHARE TOTAL
Public Price $2.00 $ 2,000,000
Underwriting discounts 0.00 0
Proceeds to Company $2.00 $ 2,000,000
The Shares offered by us may be purchased in minimum lots of 100 and maximum
lots of 1,000 shares.
There is presently no public market for the shares. The offering price may not
reflect the market price of our shares after the offering. The price at which
the shares are being offered to investors has been arbitrarily determined and
bears no relationship to the company's assets, earnings, book value, net
tangible value or other generally accepted criteria for valuation of
investments.
We intend to list the company for trading on a regional securities exchange or
electronic listing service. We cannot assure that we will be able to accomplish
this.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY
IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------------------------------------------
OFFERED BY THE COMPANY
___________, 1999
<PAGE>
Table of Contents
SUMMARY 1
The Company 1
Description of Shares Offered 1
Use of Proceeds 1
Risk Factors 1
Market for the Shares and Liquidity of Investment 2
RISK FACTORS 2
Absence of Operating History; No Prior Operating Experience 2
Dependence on Affiliated Physicians 2
Reliance on Referrals 3
Risks Associated with Business Strategy 3
Potential Need for Additional Capital 4
Risks Relating to Antitrust Laws 4
Leverage 4
Competition 4
Potential Liability and Insurance; Legal Proceedings 4
Dependence on Information Systems 5
Dependence on Key Personnel 5
Shares Eligible For Future Sale 5
Control By Certain Shareholders 6
No Prior Market; Possible Volatility of Stock Price; Liquidity; Possible
Characterization as a Penny Stock 6
RISK FACTORS RELATED TO GOVERNMENT REGULATION 7
State and Federal Fraud and Abuse, Anti-Kickback and Anti-Referral Laws 7
Corporate Practice of Medicine; Fee Splitting 8
Licensing and Certification Laws 8
Compliance 8
Reform Initiatives; Increased Enforcement 9
Insurance Laws and Regulations 9
Reimbursement Trends and Cost Containment 9
Risks Associated With Managed Care Contracts and Capitated Fee Arrangements 11
DILUTION 11
PLAN OF DISTRIBUTION 12
USE OF PROCEEDS OF OFFERING 13
Sources and Uses of Proceeds of Offering 13
Costs and Expenses of Offering 13
THE COMPANY 14
General 14
Capitalization 14
Financial Statements 15
Limitations on Liability of Officers and Directors 15
Investor Suitability 16
Dividend Policy 16
BUSINESS 16
General 16
Market Area - Cumberland, Maryland, and Vicinity 17
Marketing 18
Operating History; Predecessor Entities 18
Contracts and Relationships with Insurance Companies,HMO's and Other Payors 18
Current Debt; Future Capital Requirements 19
Business Strategy 22
Possible Future Expansion of Facilities 22
Information Management 22
Corporate Liability and Insurance 22
FACILITIES AND EMPLOYEES 22
MANAGEMENT OF THE COMPANY 26
Directors, Executive Officers and Senior Management 26
Retirement Plan 27
EXECUTIVE COMPENSATION 27
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS 28
EXISTING AND POTENTIAL CONFLICT OF INTERESTS 28
DESCRIPTION OF COMMON STOCK 28
AFFILIATED PHYSICIANS 31
INDUSTRY BACKGROUND 32
Market Overview 32
Radiology 32
Trends In Radiology 33
GOVERNMENT REGULATION AND SUPERVISION 35
General 35
Licensing and Certification Laws 35
Fee-Splitting; Corporate Practice of Medicine 36
Medicare Physician Payment System 36
Medicare and Medicaid Fraud and Abuse 37
Health Care Reform Initiatives 38
Compliance Program 39
Insurance Laws and Regulation 39
COMPETITION 39
LEGAL PROCEEDINGS 40
REPORTS TO INVESTORS 40
LEGAL MATTERS 40
EXPERTS 40
AVAILABLE INFORMATION ABOUT THE COMPANY 41
APPENDICES
A - PRO FORMA Financial Statements of the Company
B - PRO FORMA Financial Projections of the Company
C - Articles of Incorporation
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY UPON ANY INFORMATION OR
REPRESENTATION NOT CONTAINED IN THE PROSPECTUS OR ASSUME THAT IT HAS BEEN
AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SHARES, AND IS NOT AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SHARES IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
THE INFORMATION CONTAINED IN THIS PROSPECTUS MAY CHANGE AFTER ITS DATE.
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================================================================================
[Outside Back Cover of Prospectus]
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY UPON ANY
INFORMATION OR REPRESENTATION NOT CONTAINED IN THE PROSPECTUS OR ASSUME THAT
THEY HAVE BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS IS NOT AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES,
AND IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SHARES IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE
INFORMATION CONTAINED IN THIS PROSPECTUS MAY CHANGE AFTER ITS DATE.
TABLE OF CONTENTS
APPEARS ON INSIDE FRONT COVER
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL ___________ (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
THE IMAGING CENTER, INC.
715 WILLIAMS STREET
CUMBERLAND, MARYLAND 21501-1705
MINIMUM OF 200,000 SHARES FOR A TOTAL OF $400,000 AND
MAXIMUM OF 1,000,000 SHARES FOR A TOTAL OF $2,000,000 OF
CLASS B NON-VOTING COMMON STOCK
- --------------------------------------------------------------------------------
PROSPECTUS
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_____________, 1999
================================================================================
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ITEM 2. SIGNIFICANT PARTIES
List the full names and business and residential addresses, as applicable, for
the following persons:
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(1) Issuer's Directors:
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<S> <C> <C> <C> <C> <C> <C>
FULL NAME BUSINESS ADDRESS HOME ADDRESS
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F. Daniel Jackson, M.D. The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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Frederick J. Hill Not Applicable (Retired) 822 Buckingham Road
Cumberland, MD 21502
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James F. Scarpelli, Jr. 108 Virginia Avenue 894 Eastgate Court
Cumberland, MD 21501 Cumberland, MD 21501
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(2) Issuer's Officers:
- ---------------------------------------- -------------------------------------- --------------------------------------
FULL NAME BUSINESS ADDRESS HOME ADDRESS
- ---------------------------------------- -------------------------------------- --------------------------------------
F. Daniel Jackson, M.D., President The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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Larry James Taylor, Vice President The Imaging Center, Inc. Route #1, Box 124 D
201 Virginia Avenue Keyser, WV 26726
P. O. Box 1705
Cumberland, MD 21502
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D. Jeanne Starkey, Treasurer The Imaging Center, Inc. 753 Washington Street
201 Virginia Avenue Cumberland, MD 21502
P. O. Box 1705
Cumberland, MD 21502
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Carolyn L. Hott, Corporate Secretary The Imaging Center, Inc. 319 Caroline Street
715 Williams Street Cumberland, MD 21502
P. O. Box 1705
Cumberland, MD 21501-1705
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(3) Issuer's General Partners:
None. Issuer is a corporation.
(4) record owners of 5 percent or more of any class of the issuer's equity
securities:
- ---------------------------------------- -------------------------------------- --------------------------------------
FULL NAME BUSINESS ADDRESS HOME ADDRESS
- ---------------------------------------- -------------------------------------- --------------------------------------
F. Daniel Jackson, M.D. The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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(5) Beneficial Owners Of 5 Percent Or More Of Any Class Of The Issuer's
Equity Securities:
- ---------------------------------------- -------------------------------------- --------------------------------------
FULL NAME BUSINESS ADDRESS HOME ADDRESS
- ---------------------------------------- -------------------------------------- --------------------------------------
F. Daniel Jackson, M.D. The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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(6) Promoters Of The Issuer:
- ---------------------------------------- -------------------------------------- --------------------------------------
FULL NAME BUSINESS ADDRESS HOME ADDRESS
- ---------------------------------------- -------------------------------------- --------------------------------------
F. Daniel Jackson, M.D. The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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(7) Affiliates Of The Issuer:
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FULL NAME BUSINESS ADDRESS HOME ADDRESS
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F. Daniel Jackson, M.D. The Imaging Center, Inc. 726 Washington Street
715 Williams Street Cumberland, MD 21501-2707
P. O. Box 1705
Cumberland, MD 21501-1705
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(8) Counsel To The Issuer With Respect To The Proposed Offering:
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202-1487
(9) Each Underwriter With Respect To The Proposed Offering:
No underwriter is associated with this offering.
(10)The Underwriter's Directors:
No underwriter is associated with this offering.
(11)The Underwriter's Officers:
No underwriter is associated with this offering.
(12)The Underwriter's General Partners:
No underwriter is associated with this offering.
(13)Counsel To The Underwriter.
No underwriter is associated with this offering.
ITEM 3. RELATIONSHIP WITH ISSUER OF EXPERTS NAMED IN REGISTRATION STATEMENT
The Company is independent of all named experts and counsel in this Prospectus.
No expert or counsel has any financial interest in the Company.
ITEM 4. LEGAL PROCEEDINGS Neither the issuer nor its property is presently a
party or subject to any legal proceeding.
ITEM 5. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Since the company commenced operations on July 1, 1999, no principal independent
accountant resigned (or declined to stand for re-election) or was dismissed.
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ITEM 6. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES.
There are no indemnification provisions for directors, officers and controlling
persons of the Company specifically dealing with liability under the Securities
Act.
The following general provisions are applicable to indemnification of directors,
officers and controlling persons:
The Company's Articles of Incorporation and Bylaws authorize the Company to
indemnify its directors and officers to the full extent permitted by Maryland
law.
Sec. 2-418 of the Corporations and Associations Article of the Annotated Code of
Maryland provides the authority to indemnify directors, officers, employees and
agents of the issuer. The statute permits corporations to indemnify an
individual made a party to a proceeding against judgments, penalties, fines,
settlements and reasonable expenses actually incurred (including attorneys'
fees) by reason of service in that capacity unless it is established that: (a)
the act or omission was material to the matter giving rise to the proceeding and
was committed in bad faith or was the result of active and deliberate
dishonesty; or (b) the person received an improper personal benefit in money,
property or services, or (c) in the case of any criminal proceeding, the person
had reasonable cause to believe that the act or omission was unlawful.
Further, Sec. 2-418(d) of the Corporations and Associations Article of the
Annotated Code of Maryland provides for mandatory indemnification for a director
who was successful, on the merits or otherwise, in the defense of any proceeding
shall be indemnified against reasonable expenses incurred by the director in
connection with the proceeding. Sec. 2-418(j) of the Corporations and
Associations Article of the Annotated Code of Maryland provides for certain
mandatory and permissive indemnification for corporate officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to Maryland law and the Company's Articles of
Incorporation and Bylaws, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
PART F/S--FINANCIAL INFORMATION REQUIRED IN PROSPECTUS.
Included in the attached Prospectus.
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SUMMARY
THE COMPANY
The Imaging Center, Inc. is a Maryland corporation formed in May 1999 to
provide radiology and imaging services primarily to F. Daniel Jackson, M.D.,
P.A., a practice group of physicians specializing in radiology located in
Cumberland, Maryland (the "Affiliated Physicians"). Our income will come from
fees paid by patients, their insurance companies or medical service providers
for services provided by us and the Affiliated Physicians. We started operating
on July 1, 1999. See, however, "Business - Operating History; Predecessor
Entities" for a description of the operations of certain predecessor companies
engaged in our business.
DESCRIPTION OF SHARES OFFERED
We are offering up to 1,000,000 shares of our Class B Non-Voting Common
Stock to the public. These shares equal 10% of all Class B Non-Voting Shares
authorized for issuance. Dr. F. Daniel Jackson, President of the Company and its
controlling shareholder, owns or controls 90% of the Class B shares. Following
the Offering, purchasers of shares not affiliated with us are expected to own
10% of the shares and Dr. Jackson is expected to own or control 90% of the
shares. See "Management of the Company - Stock Ownership of Management and
Certain Securities Holders." Dr. Jackson owns all of the shares of our Class A
Voting Common Stock which have been issued.
USE OF PROCEEDS
All proceeds of this offering will be used to pay for new equipment and
organization and offering expenses, or to provide working capital. See "Use of
Proceeds of Offering."
RISK FACTORS
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD NOT BUY THE
SHARES IF YOU MAY NEED TO SELL YOUR SHARES IN THE FUTURE. YOU SHOULD PURCHASE
SHARES ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT.
We have no operating history and our financial success will depend on
income we receive for the use of our facilities and services which we will
provide. We are providing PRO FORMA financial information under "The Company -
Financial Statements" and other information under "Business - Operating History;
Predecessor Entities" which is based upon the operations of our predecessor
entities. We cannot guarantee that we will operate profitably or that you will
receive any return on your investment. There are many other factors and risks
which can affect our financial success. These are described in detail under the
heading "Risk Factors" which begins on page 2.
SPECIAL RISKS FOR PHYSICIANS PURCHASING SHARES. MARYLAND LAWS PROHIBIT
PAYMENTS FOR PATIENT REFERRALS AND REFERRALS BY A PHYSICIAN TO A PROVIDER OF
HEALTH CARE OWNED BY THE PHYSICIAN OR A PROVIDER WHICH PAYS COMPENSATION TO THE
PHYSICIAN. THERE ARE EXCEPTIONS TO THIS PROHIBITION. WE BELIEVE THAT USE OF OUR
SERVICES BY THE AFFILIATED PHYSICIANS WILL NOT VIOLATE THESE LAWS. HOWEVER,
PHYSICIANS WHO REFER PATIENTS TO THE AFFILIATED PHYSICIANS OR TO US SHOULD
OBTAIN LEGAL ADVICE REGARDING THESE PROHIBITIONS BEFORE PURCHASING OUR SHARES. A
more detailed discussion of this issue appears under the heading "Government
Regulation and Supervision - Medicare and Medicaid Fraud and Abuse" below.
YOU SHOULD READ THIS PROSPECTUS IN ITS ENTIRETY, ESPECIALLY INFORMATION
UNDER THE HEADINGS "THE COMPANY," "BUSINESS," FACILITIES AND EMPLOYEES,"
MANAGEMENT OF THE COMPANY," "EXISTING AND POTENTIAL CONFLICT OF INTERESTS,"
"RISK FACTORS," AND "RISK FACTORS RELATED TO GOVERNMENT REGULATION" FOR A
COMPLETE DESCRIPTION OF US, OUR BUSINESS, AND THE RISKS INHERENT IN OUR
OPERATIONS.
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MARKET FOR THE SHARES AND LIQUIDITY OF INVESTMENT
Presently no public trading market for the shares exists. After the
offering, there may be no active trading market for the shares. The relatively
small number of shares available to the public may limit the market in which the
shares are traded and your ability to sell your shares to other investors. See
"Risk Factors - No Prior Market; Possible Volatility of Stock Price; Liquidity."
RISK FACTORS
You should consider carefully the factors described below in determining
whether to buy the shares, in addition to the other information contained in
this prospectus. This prospectus contains forward-looking statements that
include risks and uncertainties. These statements describe our future business
plans, use of proceeds of this offering, projected capital expenditures,
liquidity, possible third-party payor arrangements, arrangements between the
Company and referring physicians, possible effects of changes in government
regulation and managed care and availability of insurance. These statements may
be found under the following headings: "Summary," "The Company," "Use of
Proceeds of Offering," "Business," "Industry Background," "Risk Factors" and
"Risk Factors Related to Government Regulation" and elsewhere in this
Prospectus. Actual events or results may differ materially from those discussed
in these forward-looking statements. Such differences may be caused by the risk
factors described below and other factors described in this prospectus.
ABSENCE OF OPERATING HISTORY; NO PRIOR OPERATING EXPERIENCE
We commenced operations on July 1, 1999, and our revenues and operations
reflect this short period. We will derive almost all of our revenue from fees
and charges for technical and imaging services provided to the Affiliated
Physicians. Our success will depend in large part on usage by the Affiliated
Physicians and referrals to the Affiliated Physicians from other referring
physicians, and our ability, together with the Affiliated Physicians, to
implement practices, cost controls and systems to maintain and enhance our
revenue and profitability. We cannot assure that we will be profitable on a
quarterly or annual basis in the future.
See "Business - Operating History; Predecessor Entities" and "Affiliated
Physicians" for a discussion of the operations of certain predecessor companies
and the Affiliated Physicians engaged in the business of which the Company is a
part.
DEPENDENCE ON AFFILIATED PHYSICIANS
Our operations are entirely dependent on our continued affiliation with and
use of our facilities and services by the Affiliated Physicians. Based upon
previous operations of companies controlled by Dr. Jackson, the Affiliated
Physicians are expected to generate approximately 99% of the our revenues.
The death, retirement or disability of Dr. Jackson could impair or limit
referrals from the Affiliated Physicians and have an adverse impact upon our
revenues and operations. We do not maintain insurance on the life of Dr.
Jackson.
2
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RELIANCE ON REFERRALS
We depend almost exclusively on business generated by the Affiliated
Physicians. The Affiliated Physicians rely almost exclusively upon referrals
from unaffiliated physicians, physician practice groups or other healthcare
providers within the Cumberland, Maryland, area. Our facilities and the
practices of the Affiliated Physicians compete with local radiologists and
imaging services, including non-profit hospitals and health systems. We expect
to generate substantially all of our revenue from fees charged for services
provided to the Affiliated Physicians. If a sufficiently large number of
unaffiliated physicians, physician practice groups or other healthcare providers
discontinue referring patients to the Affiliated Physicians, our business and
financial condition would be materially adversely affected. See "Risk Factors -
Competition."
In an effort to control costs, non-governmental health care payors such as
insurance companies have implemented cost containment programs which could limit
the ability of physicians to refer patients to the Company's facilities. For
example, persons enrolled in prepaid health care plans, such as health
maintenance organizations ("HMOs"), often are not free to choose where they
obtain diagnostic imaging, interventional radiology or radiation oncology
services. Rather, the health plan provides these services directly or contracts
with providers and requires its enrollees to obtain such services only from such
providers. Some insurance companies and self-insured employers also limit such
services to contracted providers. Such "closed panel" systems are now common in
the managed care environment. Other systems create an economic disincentive for
referrals to providers outside of the plan's designated panel of providers.
While we and the Affiliated Physicians intend to seek managed care contracts in
competition with other providers of similar services, there can be no assurance
that either of us will obtain managed care contracts.
RISKS ASSOCIATED WITH BUSINESS STRATEGY
See information under the heading "Business - Business Strategy" for a
description of the Company's proposed business strategy.
We are not certain we will be able to implement our business strategy
successfully. Our Company's ability to implement our business strategy or to
maintain or expand our operations or services is dependent upon our ability,
together with the Affiliated Physicians, to
o attract future referrals from unaffiliated physicians
o adapt our structure to comply with legal requirements which
presently or in the future affect relationships with physicians,
including prohibitions on fee-splitting and referrals to facilities
in which physicians have a financial interest (see "Risk Factors
Related to Government Regulation")
o obtain regulatory approvals necessary for acquisition of additional
equipment or provision of additional services
o comply with applicable licensing requirements (see "Risk Factors
Related to Government Regulation")
o expand our facilities
3
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POTENTIAL NEED FOR ADDITIONAL CAPITAL
We may finance future expansion or replacement facilities by issuing
additional stock. If we cannot finance future expansion or acquisitions by
issuing new stock, we may be required to use our cash or to borrow. Our growth
or ability to replace or acquire new facilities or equipment could be limited
and our existing operations impaired if we cannot obtain additional capital by
borrowing or issuing additional stock. We cannot assure that we will be able to
obtain additional financing or that such financing will be on acceptable terms.
As a result, we cannot be certain there we can implement future expansion or
acquisition plans successfully.
RISKS RELATING TO ANTITRUST LAWS
While we will attempt to comply with applicable antitrust laws,
governmental authorities may view the Company as being dominant in our market
and, therefore, cause us to sell or terminate any particular practice or service
and related assets. These laws could also prevent future acquisitions of
practices that substantially lessen competition or tend to create a monopoly.
LEVERAGE
After the offering, our debt will be significant in relation to
stockholders' equity. Such debt will account for approximately 66.5% of our
total capitalization as of July 1, 1999. See "The Company - Capitalization."
COMPETITION
The Affiliated Physicians and the company will compete with other local
radiology and imaging service providers. We believe that changes in governmental
and private reimbursement policies and other factors have increased competition
in providing medical services to consumers. We are uncertain whether the
Affiliated Physicians and the company will be able to compete effectively in
their markets. This inability could materially and adversely affect our business
and financial condition. See "Competition."
Further, all physicians making referrals to us will compete with other
similar providers for managed care contracts. We believe that trends toward
managed care have resulted, and will continue to result, in increased
competition for these contracts. We cannot assure you that we or the Affiliated
Physicians will be able to obtain future business from managed care companies on
terms which will allow us to compete effectively with similar radiology and
imaging service providers. This inability to compete could materially and
adversely affect our business and financial condition.
POTENTIAL LIABILITY AND INSURANCE; LEGAL PROCEEDINGS
Professional malpractice and other similar claims are an inherent risk of
providing medical services. Although we intend to structure our relationships
with referring physicians in a manner that will not constitute the practice of
medicine, we cannot assure you that no claims, suits or complaints of medical
malpractice relating to services or products provided by the Affiliated
Physicians or other referring physicians will made against us. Because we
operate and manage the Imaging Center, professional liability claims may b e
made against us. No malpractice or other claims have been made against us. One
malpractice claim was filed against Dr. Jackson. This claim went to trial in
1997, resulting in a verdict in favor of Dr. Jackson. In addition to
professional malpractice claims, another source of potential liability are
claims based upon improper usage or
4
<PAGE>
calibration of equipment used in our business. No such claims have been filed
against us or any of our predecessor entities.
The availability and cost of professional liability insurance has been
affected by various factors, many of which are beyond the control of the company
and the Affiliated Physicians. We cannot assure you that adequate liability
insurance will be available in the future at acceptable costs or that the future
cost of such insurance will not have a material adverse effect on our business
or financial condition.
DEPENDENCE ON INFORMATION SYSTEMS
In order to manage operations effectively, compete for managed care
contracts and achieve standardization and economies of scale, we employ a
company-wide computer system. This system includes patient demographic
information, registration, transcription and electronic filing, and is
integrated with the systems used by the Affiliated Physicians. Our computer
system may require modifications or replacements as we expand or as new
technology is adopted. These modifications or replacements may require
substantial expenditures and may interrupt operations as they are put into
effect. We cannot know whether we will be able to operate new computer systems
effectively or whether new systems will produce the expected benefits. Our
failure to operate and maintain our computer systems successfully could prevent
us from efficiently accumulating, storing and managing data and providing
billing and other accounting services to the Affiliated Physicians, which could
have a material adverse effect on our business and financial condition.
DEPENDENCE ON KEY PERSONNEL
We believe that we are not dependent upon Dr. Jackson's ability and
experience in providing professional services in connection with our operations,
managing the company and implementing our business strategy. However, the loss
of his services or our inability to attract and retain qualified and capable
management and other key personnel could have a material adverse effect on our
business and financial condition. We do not maintain key man life or disability
insurance with respect to Dr. Jackson.
SHARES ELIGIBLE FOR FUTURE SALE
The price of our shares could be adversely affected by the sale of
substantial amounts of shares following this offering. If the offering is
successfully completed, we will have 100 shares of Class A Voting Common Stock
and 9,999,000 shares of Class B Non-Voting Common Stock outstanding. These
shares will consist of 100 shares of Class A Voting Common Stock issued to Dr.
Jackson, our controlling shareholder, 8,999,000 shares of Class B Non-Voting
Common Stock issued to (or for the benefit of) Dr. Jackson, and 1,000,000 shares
of Class B Non-Voting Common Stock sold in this offering. Of these 1,000,000
shares, _____ are expected to be sold to officers and directors of the Company
(other than Dr. Jackson) and _____ are expected to be sold to unaffiliated
shareholders. See also "The Company - Description of Common Stock- OWNERSHIP OF
SHARES UPON COMPLETION OF OFFERING" and "The Company - Dilution"
All shares sold in this offering will be freely tradable. Any other shares
purchased by "affiliates" of the Company (which includes Dr. Jackson and
entities controlled by him) may generally only be sold in compliance with
applicable federal and state securities laws. These laws require that shares
acquired by affiliates of the Company must either be registered for sale or sold
in transactions which are exempt from registration under the Securities Act of
1933. Dr.
5
<PAGE>
Jackson expects to offer and sell shares of Class B Non-Voting Common Stock of
the Company owned by him or entities controlled by him from time to time in
accordance with the limitations of applicable law, including Rule 144 of the
Securities and Exchange Commission.
See also "The Company - Description of Common Stock- AUTHORIZED AND
UNISSUED SHARES; DILUTION."
CONTROL BY CERTAIN SHAREHOLDERS
Dr. Jackson, the President and a director of the Company, will be the sole
owner of all shares of Class A Voting Common Stock. As such, he controls the
election of the directors of the Company, and all decisions regarding its
operations, facilities and future development will be made solely by Dr.
Jackson. See "Management of the Company - Existing and Potential Conflict of
Interests."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; LIQUIDITY; POSSIBLE
CHARACTERIZATION AS A PENNY STOCK
There has been no public market for the shares, and we cannot assure you
there will be an active public market for the shares after this offering. We
determined the initial public offering price of the shares arbitrarily and such
price bears no relationship to our assets, earnings, book value, net tangible
value or other generally accepted criteria for valuation of investments. The
price for the shares may not reflect their market price after this offering. See
"Plan of Distribution" for factors considered in determining the initial public
offering price. The market price for the shares may decline below the initial
market price after the offering is completed. Significant changes in the market
price for the shares may occur from time to time. For example, the trading price
of the shares could change upwards or downwards in response to variations in our
quarterly operating results, general trends in our industry, developments
affecting regulation of our industry or reimbursement practices, changes in
earnings estimates by securities analysts and other factors affecting our
industry or the securities market as a whole.
The small number of shares available to the public may limit the market in
which our shares are traded and your ability to sell your shares to other
investors. We intend eventually to list the shares on a national or regional
securities exchange or in some other market which will provide easily accessible
pricing information. In order to be listed on a securities exchange or other
accessible market, our stock must trade at certain volume levels and prices
(depending upon the exchange or market). As a result, while we desire to list
our shares on a national or regional exchange or other accessible market, we
cannot assure that we will be able to satisfy applicable listing criteria.
In addition, our stock may be a "penny stock" under applicable law and the
rules and regulations of the SEC if:
> its price is less than $5.00 per share
> it is not traded on a national securities exchange or the
NASDQ, or
> the Company has less that $5,000,000 in net tangible assets,
and
> has been in business less than three years or
> has under $2,000,000 in net tangible assets and has been
in business for at least three years, or
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<PAGE>
> has revenues of $6,000,000 for three years.
Although we are not subject to any special reporting requirements because our
stock may be a "penny stock", brokers and dealers trading such stocks are
subject to special regulation by the SEC. These regulations impose additional
sales practice requirements, including the requirement that purchasers of penny
stocks be provided specific information regarding investment in penny stocks as
described on SEC Schedule 15G and acknowledge receipt of this information. The
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
shares. Finally, monthly statements must be sent disclosing recent price
information for the penny stocks held in the customer's account.
If our shares are characterized as a penny stock, your ability to sell them
could be severely affected. The regulations relating to penny stocks could limit
the ability of broker-dealers to sell our shares and, concurrently, your ability
to sell your shares in the secondary market.
RISK FACTORS RELATED TO GOVERNMENT REGULATION
STATE AND FEDERAL FRAUD AND ABUSE, ANTI-KICKBACK AND ANTI-REFERRAL LAWS
Various federal and state laws regulate the relationships between providers
of health care services, physicians and other clinicians. See "Government
Regulation and Supervision." These laws include the fraud and abuse provisions
of the Social Security Act, which include the federal "anti-kickback" and Stark
or anti-referral laws. The "anti-kickback" laws prohibit the offering, payment,
solicitation or receipt of any direct or indirect remuneration for the referral
of Medicare, Medicaid or other governmental program patients or for the
recommending, leasing, arranging, purchasing, ordering or providing of Medicare
or Medicaid covered services, items or equipment. Violations of the
"anti-kickback" laws may result in substantial civil or criminal penalties for
individuals or entities, including large civil monetary penalties and exclusion
from participation in Medicare, Medicaid and other governmental programs.
The Balanced Budget Act of 1997 ("BBA97") contains certain reform
provisions relating to Medicare, Medicaid and other governmental programs, that
are intended to assist the government in its efforts to enforce the
"anti-kickback" laws, including adding a civil money penalty and broadening the
scope of circumstances under which mandatory or permissive exclusion from the
programs may apply. Such exclusion and penalties, if applied to the Company's
facilities, the Affiliated Physicians or unaffiliated physicians, could result
in significant loss of reimbursement to the Company or affected individuals and
entities. A determination of liability under any such laws could have a material
adverse effect on our business or financial condition.
Certain provisions contained in the Omnibus Budget Reconciliation Act of
1989 ("Stark I") and the Omnibus Budget Reconciliation Act of 1993 ("Stark II"),
and subsequent amendments, prohibit physician referrals for certain "designated
health services," including radiology services to entities with which a
physician or an immediate family member has a financial relationship
(collectively, the "Stark Law"). The Stark Law also prohibits entities from
presenting or causing to be presented a claim or bill to any individual,
third-party payor, or other entity for designated health services furnished
under a prohibited referral. A violation of the Stark Law by the Company, an
Affiliated Physician or unaffiliated physicians, may result in significant civil
penalties, which may include exclusion or suspension of the physician or entity
from future participation in the Medicare and Medicaid programs and substantial
fines. Maryland law similarly prohibits referrals
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<PAGE>
by a practitioner to an entity in some cases in which the practitioner has a
beneficial interest in or a compensation arrangement with the entity. A
determination of violation under any such federal or state law by any of these
persons or entities could have a material adverse effect on our business or
financial condition.
CORPORATE PRACTICE OF MEDICINE; FEE SPLITTING
The laws of many states, including Maryland, prohibit business
corporations, such as the Company, from exercising control over the medical
judgments or decisions of physicians and from engaging in certain financial
arrangements, such as fee- splitting, with physicians. These laws and their
interpretations vary from state to state and are enforced by both the courts and
regulatory authorities, each with broad discretion. In the state of Maryland
there is no explicit prohibition against sharing fees with non-physicians, as
such, or against the corporate practice of medicine, but there are laws
prohibiting payments for bringing or referring a patient, and prohibiting
referrals by a practitioner to a health care entity in which the practitioner
directly or indirectly owns a beneficial interest or has a compensation
arrangement, subject to certain exceptions. (See also the discussion above of
medicare and medicaid fraud and abuse.) WHILE THE COMPANY BELIEVES THAT THE USE
OF ITS SERVICES BY THE AFFILIATED PHYSICIANS WILL NOT VIOLATE THESE LAWS, THERE
ARE LEGAL ISSUES ASSOCIATED WITH THE OWNERSHIP OF SHARES IN THE COMPANY BY
PHYSICIANS WHO REFER PATIENTS TO THE AFFILIATED PHYSICIANS. THESE PHYSICIANS
SHOULD OBTAIN LEGAL ADVICE ON THAT SUBJECT BEFORE PURCHASING THE COMPANY'S
STOCK.
We cannot represent whether regulatory authorities or other parties will
assert that the Company is engaged in the corporate practice of medicine or that
the payment of service fees to the Company by the Affiliated Physicians
constitutes fee-splitting or prohibited payment for referrals. If such a claim
was successfully asserted, the Company could be subject to civil and criminal
penalties and could be required to restructure or terminate its contractual
arrangements. Such results or the inability of the Company to successfully
restructure its relationships to comply with such statutes could have a material
adverse effect on our business or financial condition.
LICENSING AND CERTIFICATION LAWS
The ownership, construction, operation, expansion and acquisition of
facilities similar to the Imaging Center are subject to various federal and
state laws, regulations and approvals concerning the licensing of facilities,
personnel, certificates of need and other required certificates for certain
types of health care facilities and major medical equipment. While the Imaging
Center does not require a certificate of need, Maryland law requires a license
to operate certain freestanding ambulatory care facilities, including
freestanding facilities operating major medical equipment. "Major medical
equipment" includes the following equipment which we use in our business:
computed tomography (CT) scanners and magnetic resonance imagers (MRI).
COMPLIANCE
While we intend to operate in compliance with applicable federal and state
laws, our current and anticipated business operations have not been reviewed or
audited by any judicial or regulatory agency for compliance with such
requirements. A review of our business by courts or regulatory authorities could
result in determinations adversely affecting our operations. In addition, the
health care regulatory environment could change in a manner which restricts our
operations. Maryland law may require us to modify our operational structure in
order to continue
8
<PAGE>
or expand our operations within Maryland. Any limitation on our ability to
expand or offer additional services could have a material adverse effect on our
business or financial condition.
REFORM INITIATIVES; INCREASED ENFORCEMENT
In addition to existing government health care regulations, there have been
numerous initiatives at the federal and state levels for comprehensive reforms
affecting the payment for and availability of health care services. We believe
that such initiatives will continue for the foreseeable future. Certain of these
reforms proposed in the past, such as further reductions in Medicare and
Medicaid payments, if adopted, could materially and adversely affect our
business or financial condition.
Federal regulatory and law enforcement authorities have recently increased
enforcement activities with respect to Medicare and Medicaid fraud and abuse
regulations and other reimbursement laws and rules, including laws and
regulations that govern our activities and the activity of referring physicians.
In the future, we may be investigated, claims may be made against us or
increased enforcement activities may directly or indirectly adversely affect our
business or financial condition or the market price of our shares.
INSURANCE LAWS AND REGULATIONS
Certain states have enacted statutes or adopted regulations affecting risk
assumption in the health care industry, including statutes and regulations that
subject any physician or physician network engaged in risk-based contracting to
applicable insurance laws and regulations. These laws and regulations may
include minimum capital requirements and other safety and soundness
requirements. Maryland insurance law has been interpreted to impose similar
requirements. In the event we undertake risk-based contracts, failure to comply
with these statutes and regulations could materially adversely affect our
business or financial condition. In addition, additional regulations or
compliance requirements could result in substantial costs to the Company.
However, we do not intend at this time to enter into capitation arrangements or
risk-based contracts which would subject us to regulation as an insurer.
REIMBURSEMENT TRENDS AND COST CONTAINMENT
We will derive our revenues from service fees paid to the Company by the
Affiliated Physicians or by referrals from unaffiliated physicians or practices,
and through our ownership, operation and management of the Imaging Center.
Substantially all of the revenue of the Affiliated Physicians and the Imaging
Center is currently derived from government sponsored health care programs
(principally, Medicare and Medicaid) and private third-party payors. During the
12-month period ended December 31, 1998, combined medical service revenues of
the Affiliated Physicians and The Imaging Center was derived from the following
sources in the approximate proportions:
government approved health care programs 25.16%
private third-party payors 65.3%
self-pay 9.5%.
The health care industry is experiencing a trend toward cost containment as
government and private third-party payors seek to impose lower reimbursement and
utilization rates and negotiate reduced payment schedules with service
providers. We believe that these trends will continue to result in a reduction
from historical levels in per-patient service fees and that the results of our
operations are likely to continue to be affected by lower reimbursement levels.
Further reductions
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<PAGE>
in payments or other changes in reimbursement for health care services could
have a material adverse effect on our business or financial condition unless we
are otherwise able to offset such payment reductions.
Rates paid by private third-party payors are based on established physician
and hospital charges and are generally higher than Medicare reimbursement rates.
Any decrease in the relative number of patients covered by private insurance
could materially adversely affect our business or financial condition.
The federal government has implemented, through the Medicare program, a
resource-based relative value scale ("RBRVS") payment methodology for physician
services. The RBRVS is a fee schedule that, except for certain geographical and
other adjustments, pays similarly-situated physicians the same amount for the
same services. The RBRVS is adjusted each year and may increase or decrease at
the discretion of Congress. To date, the implementation of the RBRVS has reduced
payment rates for certain of the procedures historically provided by the
Affiliated Physicians. BBA 97 provides for reductions in the rate of growth of
payments for physician services, including services historically provided by the
Affiliated Physicians, in the amount of $5.3 billion over a five-year period
ending in 2002. In addition, BBA 97 mandates a resource-based methodology for
payment of physician practice expenses over a four-year period beginning in
fiscal year 1999. THIS METHODOLOGY IS EXPECTED TO REDUCE PAYMENTS FOR SERVICES
HISTORICALLY PROVIDED BY THE AFFILIATED PHYSICIANS.
Most radiology services provided to medicare patients have been reimbursed
under a separate radiology relative value system for a number of years. The
radiology relative value system has been integrated into RBRVS, but has been
"rescaled," to be consistent with RBRVS. Some components of reimbursement for
portable x-ray services (for the transport and set-up of equipment) continue to
be reimbursed separately from the professional and technical components.
Regulations were adopted in 1996 to limit separate payment for transportation of
diagnostic equipment in most circumstances to certain approved suppliers.
RBRVS-type payment systems also have been adopted by certain private
third-party payors and the Company believes that it is likely that other private
third-party payors will adopt this payment methodology in the future.
Wider-spread implementation of these programs could reduce payments by private
third-party payors and could indirectly reduce our operating margins to the
extent that the costs of providing administrative, technical and non-medical
services related to such procedures could not be proportionately reduced. These
cost reduction efforts by governmental or private third-party payors may
materially adversely affect our business or financial condition. See "Risk
Factors Related to Government Regulation and Supervision."
Private third-party payors and Medicare and Medicaid have increased their
use of managed care as a means of cost containment. Increasingly, private
third-party payors negotiate discounts from established physician and hospital
charges or require capitation or other risk sharing arrangements as a condition
of patient referral to physician groups such as the Affiliated Physicians. BBA
97 also includes provisions designed to increase the enrollment of Medicare and
Medicaid participants in managed care programs. Our inability to negotiate
satisfactory arrangements with managed care companies could materially adversely
affect our business or financial condition.
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<PAGE>
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS AND CAPITATED FEE
ARRANGEMENTS
During the 12-month period ended December 31, 1998, 99% of the combined
medical service revenues of the Affiliated Physicians and The Imaging Center was
derived from payments made on a fee-for-service basis by patients and
third-party payors (including government programs) and less than 1% of such
combined medical service revenues was derived from capitated arrangements.
During 1997, approximately 15% of combined medical service revenues was derived
from capitated arrangements. Under capitated or other risk-sharing arrangements,
the health care provider typically is paid a pre-determined amount per-patient
per-month from the payor in exchange for providing all necessary covered
services to patients covered under the arrangement. Such contracts pass much of
the financial risk of providing care, including the risk of over-utilization,
from the payor to the provider.
Risk-sharing arrangements result in greater predictability of revenue but
greater unpredictability of expenses and, consequently, profitability. We offer
no assurance that the Company or the Affiliated Physicians will be able to
negotiate satisfactory arrangements on a capitated or other risk-sharing basis.
To the extent that patients or enrollees covered by such contracts require more
frequent or extensive care than is anticipated, we would incur unanticipated
costs not offset by additional revenue, which would reduce operating margins. In
the worst case, the revenue derived from such contracts may be insufficient to
cover the costs of the services provided. Any such reduction or elimination of
earnings could materially adversely affect our business or financial condition.
We currently have no capitated or other risk-sharing arrangements and do
not intend to enter into any such arrangements in the future.
Various quality assurance programs and organizations have been created to
scrutinize managed care organizations and their providers. In response to these
programs, managed care organizations and providers have developed their own
quality assurance programs to address a variety of areas, including patient
access to services, patient satisfaction, outcomes and performance measures and
utilization of services. These quality assurance measures involve various costs
associated with their implementation and operation and depend, in part, upon the
sophistication and compatibility of existing systems and operations of the
Affiliated Physicians and the Company, and their ability to integrate those
systems and operations. The Company's or Affiliated Physicians' inability to
develop strong quality assurance measures could place them at a competitive
disadvantage and have a material adverse effect on our business or financial
condition.
DILUTION
As of July 1, 1999, and prior to the Offering of the shares of Class B
Non-Voting Common Stock under this Prospectus, the Company had a net tangible
book value of $180,000 or $.02 per share of the 100 authorized and issued shares
of Class A Voting Common Stock and the 8,999,000 authorized and issued shares of
Class B Non-Voting Common Stock. For purposes of this discussion, "net tangible
book value" means total assets (exclusive of copyrights, patents, goodwill,
research and development costs and similar intangible items) minus total
liabilities and is based upon the forecasted balance sheets of the Company as of
June 30, 1999, contained in Appendix B. After giving effect to the sale of the
shares offered by this Prospectus and the application of the proceeds from such
sale, the net tangible book value per share of all authorized and issued shares
of Class A Voting Common Stock and Class B Non-Voting Common Stock as
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<PAGE>
of July 1, 1999, would have been $.218, representing an immediate increase of
$.198 per share to stockholders and an immediate dilution of $1.782 per share to
persons purchasing the shares offered by this Prospectus at the offering price
(the "New Investors"). The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C>
Offering price per share $ 2.00
Net tangible book value per share before Offering $ .020
Increase per share attributable to payments by New Investors* $ .198
Pro forma net tangible book value per share after Offering $ .2180
Dilution to Investors $ 1.7820
* Before payment of fees and expenses of offering.
</TABLE>
The following table sets forth as of July 1, 1999, the number of shares of
Class B Non-Voting Common Stock purchased from the Company, the total
consideration received by the Company and the average price per share paid to
the Company by existing shareholders and by the New Investors purchasing shares
pursuant to this prospectus.
<TABLE>
<CAPTION>
- ------------------------------------------ -------------------------- ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
PRICE PER
SHARE
- ------------------------------------------ ------------ ------------- ------------- ----------- ------------
NUMBER PERCENT AMOUNT PERCENT
- ------------------------------------------ ------------ ------------- ------------- ----------- ------------
Existing Shareholders 8,999,000 90% $ 179,980 8.26% $ 0.02
- ------------------------------------------ ------------ ------------- ------------- ----------- ------------
New Investors 1,000,000 10% 2,000,000 91.74 $ 2.00
- ------------------------------------------ ------------ ------------- ------------- ----------- ------------
Total 9,999,000 100.0% $2,179,980 100.00%
- ------------------------------------------ ------------ ------------- ------------- ----------- ------------
</TABLE>
After completion of this Offering, the Company will have 900 unissued
shares of Class A Voting Common Stock and no unissued shares of Class B
Non-Voting Common Stock available for future issue and sale (assuming that all
shares offered under this prospectus are purchased). While the Company presently
has no plans to issue additional shares of its common stock, it may in the
future offer additional shares of its common stock in either private placements
or public offerings for cash, property or other consideration or as a dividend
or in the form of a stock split. Any such offer of additional shares would
require an amendment to our Articles of Incorporation. The offer and sale of
additional shares of our common stock may result in a dilution of the public
offering price of the shares offered under this Prospectus or a decrease in the
net tangible book value of shares, depending upon the offering price or
consideration received for such shares.
PLAN OF DISTRIBUTION
We are selling the shares on a "best efforts" basis on behalf of the
Company by our President or other Company officers, who will receive no
commission or other compensation for these sales. Since there is no underwriting
agreement with any licensed broker dealer, the success of the offering will
depend upon the efforts of our President or other Company officers who may be
engaged in selling the shares.
The shares will be offered in minimum lots of 100 shares, subject to a
maximum of 1,000 shares for each investor in order to maximize the number of
shareholders and satisfy requirements for listing upon a securities exchange or
other listing service. We may, however, waive the maximum limit.
The Offering will commence upon the date of this prospectus and will
continue until ________, 2000 (the first anniversary of the commencement of this
offering), unless we
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<PAGE>
terminate it sooner or extend it in our sole discretion. This offering is
contingent upon acceptance of subscriptions for at least 200,000 shares by such
date. Until at least that many shares have been subscribed, all funds tendered
by prospective investors will be deposited and held in a non-interest bearing
escrow account with F&M Bank, Cumberland, Maryland. If subscriptions to purchase
at least 200,000 shares have not been accepted by ________, 2000, the Company
will terminate the Offering and all funds tendered by prospective investors will
be returned without accrued interest and all subscriptions received will be
cancelled. If at least 200,000 shares are sold by or before that date, the
Company may conduct an interim closing and, at its option, may attempt to sell
the remaining unsold shares by ________, 2000. The Company reserves the right to
withdraw or amend this Offering before it accepts any subscriptions. We also
reserve the right to reject any subscription in whole or in part.
USE OF PROCEEDS OF OFFERING
SOURCES AND USES OF PROCEEDS OF OFFERING
All of the Class B Shares offered by the Company under this Prospectus will
be sold to the public at the price of $2.00 per share. The net cash proceeds
from the sale of Class B Shares offered to the public are described in the
following table.
- ------------------------- ---------------- ------------ ---------------------
NUMBER OF PRICE TO PROCEEDS TO COMPANY
SHARES SOLD PUBLIC (1) (2)
- ------------------------- ---------------- ------------ ---------------------
Per Share................ 1 $2.00 $2.00
- ------------------------- ---------------- ------------ ---------------------
Minimum Offering......... 200,000 $2.00 $400,000
- ------------------------- ---------------- ------------ ---------------------
Maximum Offering......... 1,000,000 $2.00 $2,000,000
- ------------------------- ---------------- ------------ ---------------------
(1) No commissions or other compensation will be paid in connection with the
offer or sale of the Shares. See "Plan of Distribution."
(2) Before deducting costs and expenses of offering to be paid by the Company.
See "Costs and Expenses of Offering" below.
The amounts to be received by the Company from the sale of the shares under
this Prospectus (assuming all of the offered shares are sold) are summarized as
follows:
<TABLE>
<CAPTION>
TYPE OF NUMBER OF PRICE PER TOTAL
PURCHASERS CONSIDERATION SHARES SHARE CONSIDERATION
<S> <C> <C> <C>
Officers, Directors and Affiliates Cash (1) $2.00 $___________
Unaffiliated Shareholders Cash $2.00
TOTAL $___________
</TABLE>
(1) Officers, directors and affiliates have not determined whether they will
purchase any of the shares.
The Company plans to use approximately $207,700 of the net proceeds of the
Offering to pay certain costs of acquiring new mammography equipment,
organizational costs and to provide working capital.
COSTS AND EXPENSES OF OFFERING
The costs and expenses of the Offering are set forth in the following
table:
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<PAGE>
DESCRIPTION AMOUNT
Commissions and Fees $ 0
Legal, Accounting and Professional Fees
Copying, Printing, Advertising
Other
TOTAL $___________
THE COMPANY
GENERAL
The Company was incorporated in May 1999 to provide technical radiology and
imaging services primarily to the Affiliated Physicians and commenced operations
on July 1, 1999. The Company will manage and operate radiology and imaging
equipment at the facility of the Affiliated Physicians located at 715 Williams
Street in Cumberland, Maryland. The Company will derive substantially all of its
revenue from the technical component of service fees paid by patients or their
insurance companies or medical service providers for professional and technical
radiology and imaging services provided by the Company and the Affiliated
Physicians. The Affiliated Physicians will retain the professional component of
such fees, as determined by agreement between the Company and Affiliated
Physicians. See "Business - Description of Agreement Between Company and
Affiliated Physicians." The Company has not conducted any significant operations
prior to this Offering.
The Company will lease its radiology and imaging equipment from Value
Healthcare, Inc., Imaging Associates of Cumberland, Inc. and General Electric
Medical Systems. The Company will rent space for its equipment and operations in
a building located at 715 Williams Street, Cumberland, Maryland, known as "The
Imaging Center", which is owned by Imaging Associates of Cumberland, Inc., a
Maryland corporation. Value Healthcare, Inc. and Imaging Associates of
Cumberland, Inc. are controlled by Dr. Jackson, the controlling shareholder,
President and a director of the Company. See "Business - Current Debt; Future
Capital Requirements - TERMS OF EQUIPMENT LEASES; TERMS OF BUILDING LEASE" for a
discussion of the terms of such leases.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
1, 1999, and as adjusted to reflect the issuance and sale of the shares offered
hereby and the application of the net proceeds thereof.
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<PAGE>
<TABLE>
<CAPTION>
JULY 1, 1999
ACTUAL AS ADJUSTED
<S> <C> <C>
Short-term debt:
Short-term debt
Current portion of long-term debt and capital
lease obligations $ 577,857 $ 577,857
Total short-term debt 577,857 577,857
Long-term debt and capital lease obligations (net
of current maturities)* 3,747,676 3,747,676
Shares 180,000 2,180,000
Additional paid-in capital
Retained earnings (deficit) 0 0
Total Stockholders' equity (deficit) 180,000 2,180,000
Total Capitalization $4,505,533 $6,505,533
Number of Shares authorized: 10,000,000.
</TABLE>
* Reflects leases entered into as of July 1, 1999.
FINANCIAL STATEMENTS
Attached as Appendix A are PRO FORMA financial statements of the Company
for calendar year 1998 and interim six month statements for the period January
1, 1999 through June 30, 1999, which were prepared based upon historical
financial information provided by the Affiliated Physicians. The various items
of expense, income and other items have been retroactively allocated between the
Company and the Affiliated Physicians in a manner which the Company believes
accurately reflects the information for the periods indicated had the present
business arrangements between the Company and the Affiliated Physicians existed
for such periods.
Attached as Appendix B are forecasted financial statements for the current
and next two fiscal years of the Company, which are based upon the PRO FORMA
statements described in the preceding paragraph. Such financial projections
constitute forward-looking statements which represent our current estimate of
future performance, but which should not be considered a guaranty of future
performance or operating results. Actual events or results may differ materially
from those discussed in such forward-looking statements as a result of various
factors, including, without limitation, general economic conditions, changes in
policies and practices of insurance companies, medical service providers and
other third-party payors for professional and technical services provided by the
Company and the Affiliated Physicians, and other factors discussed under the
heading "Risk Factors" below and elsewhere in this Prospectus.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
Our Articles of Incorporation provide for mandatory indemnification of the
officers and directors of the Company to the fullest extent permitted by
Maryland law, including some instances in which indemnification is otherwise
discretionary under Maryland law. The Articles of Incorporation contain
provisions that eliminate the personal liability of our directors for monetary
damages resulting from breaches of their fiduciary duty as directors other than
for acts or omissions which involve intentional misconduct or a knowing
violation of law, payment of unlawful distributions, or for any transaction from
which the director derived an improper personal benefit. The Company believes
that these provisions are essential to attracting and retaining qualified
persons as directors.
15
<PAGE>
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, and the
Company is not aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
INVESTOR SUITABILITY
AN INVESTMENT IN THE COMPANY BY PURCHASE OF THE SHARES INVOLVES A HIGH
DEGREE OF RISK SUITABLE ONLY FOR PERSONS WHO HAVE NO NEED FOR LIQUIDITY IN THEIR
INVESTMENT AND WHO REALIZE THERE IS A RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX AND FINANCIAL COUNSEL
BEFORE INVESTING IN THE COMPANY. IN ADDITION TO THE GENERAL INVESTMENT RISKS
DESCRIBED THROUGHOUT THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE RISK FACTORS DESCRIBED IN THIS PROSPECTUS. THIS SUMMARY DOES NOT
PURPORT TO BE A FULL DISCUSSION OF THE RISKS INVOLVED IN AN INVESTMENT IN THE
COMPANY.
DIVIDEND POLICY
As a newly formed corporation, the Company has never declared or paid
dividends on its Common Stock. The Company expects that future earnings, if any,
will be retained to finance the growth and development of our business and,
accordingly, does not intend to declare or pay any dividends on the Common Stock
for the foreseeable future. The declaration, payment and amount of dividends, if
any, will be subject to the discretion of our Board of Directors and will depend
upon the future earnings, results of operations, financial condition and capital
requirements of the Company, among other factors. Credit Facilities with our
lenders may in the future prohibit the Company from paying or restrict its
ability to pay dividends while amounts are outstanding under such facilities.
BUSINESS
GENERAL
The Company was incorporated in May 1999 to provide technical radiology and
imaging services primarily to the Affiliated Physicians. The Company will manage
and operate leased radiology and imaging equipment at the facility it leases
from Imaging Associates of Cumberland, Inc., a corporation controlled by Dr.
Jackson located at 715 Williams Street in Cumberland, Maryland. The Company
commenced operations on July 1, 1999, and will derive substantially all of its
revenue from the technical component of service fees paid by patients or their
insurance companies or medical service providers for professional and technical
radiology and imaging services provided by the Company and the Affiliated
Physicians. The Affiliated Physicians will retain the professional component of
such fees. The Company has not conducted any significant operations prior to
this Offering.
The Company will provide technical services primarily to the Affiliated
Physicians in their diagnostic and treatment practices, including x-ray and
fluoroscopy, magnetic resonance imaging, computed tomography, mammography,
ultrasound, and nuclear medicine. Patients in need of such services are
typically referred to a diagnosing or treating physician by other referring
physicians or medical service providers or, on occasion, by means of a patient's
self referral. The Company will provide the technical component of such services
provided by a diagnosing or treating physician using our facilities and
equipment, such as, for example, an x-ray or an image produced by ultrasound,
magnetic resonance imaging or other like means. Such images will then be
analyzed by the diagnosing physician and a report prepared by the physician
16
<PAGE>
for use by other physicians or medical facilities. The Company will also provide
certain treatment of hyperthyroidism, drainage of cysts and abscesses, or
biopsies of various organs under the supervision of a physician in connection
with its imaging services.
The fees for such diagnostic, imaging or treatment services are generally
divided into two components, a professional component (to compensate for
diagnostic, treatment or supervisory services provided by a physician) and a
technical component, representing the cost of facilities, equipment and
nonprofessional personnel used in such procedures. See "Industry Background -
Market Overview." The Company has established a schedule of its fees for such
technical services, which schedule is based upon the Medicare physician's fee
schedule, which is adjusted for local economic conditions on an annual basis.
These technical service fees may be modified from time to time as necessary to
reflect the cost of new or replacement equipment, changes in reimbursement
payments from insurers or medical care providers, or other changes in economic
circumstances or requirements of law.
DESCRIPTION OF AGREEMENT BETWEEN COMPANY AND AFFILIATED PHYSICIANS.
Initially, billing and collections for all services will be performed by the
Affiliated Physicians, including global, professional, and technical components.
At least seventy per cent ( 70% ) of all collections will be paid to The Imaging
Center, Inc., as the technical component for services performed. Payments will
be made within 30 days after collections occur. Contracts with other entities
may be initiated by The Imaging Center, Inc., but no other agreements exist at
the time of this offering.
The Company expects that approximately 99% of its business will be
generated by the Affiliated Physicians. Our facilities will also be available to
provide the same technical services to other diagnosing or treating physicians
within its market area under the same or a similar fee arrangement, but usage of
these facilities by such physicians is expected to be minimal.
Our purpose is to provide technical radiology and imaging services
primarily to the Affiliated Physicians; in addition, such services may also be
provided to unaffiliated physician practice groups using our services, but this
is expected to be minimal. Our business strategy is to emphasize quality service
and maintain operating efficiencies.
The Company was incorporated under the laws of Maryland in May 1999,
commenced operations on July 1, 1999, and has not conducted any significant
operations prior to this Offering. The Company leases the facilities it occupies
and its radiology and imaging equipment from Value Healthcare, Inc., Imaging
Associates of Cumberland, Inc. and General Electric Medical Systems. The Company
expects to provide technical radiology and imaging services in a manner and to
the extent such services were previously provided at The Imaging Center, a
facility providing substantially identical services for the Affiliated
Physicians prior to the formation of the Company.
MARKET AREA - CUMBERLAND, MARYLAND, AND VICINITY
The Company expects to provide its technical services to patients located
in the city of Cumberland and Allegany County, and parts of Garrett and
Washington Counties in western Maryland, as well as parts of Mineral, Hampshire
and Grant Counties, West Virginia, and parts of Bedford and Somerset Counties,
Pennsylvania, who are referred to the Affiliated Physicians primarily by
physicians, physician practice groups or medical service providers. The Company
does not expect to significantly expand its existing market area in the future.
17
<PAGE>
MARKETING
The Company does not use extensive marketing programs to publicize its
services. The experience of our predecessors with mass marketing efforts
indicated that such programs were not very successful. Accordingly, the Company
has no plans to undertake any mass marketing or similar advertising programs.
OPERATING HISTORY; PREDECESSOR ENTITIES
The Company has no significant operating history, since it was incorporated
in May 1999, and commenced operations on July 1, 1999. The Company leases
certain of its radiology and imaging equipment from Value Healthcare, Inc. and
Imaging Associates of Cumberland, Inc., companies controlled by Dr. Jackson, the
controlling stockholder of the Company, and from General Electric Medical
Services. The building in which our equipment and facilities are located is
leased from Imaging Associates of Cumberland, Inc., a corporation controlled by
Dr. Jackson. The building, facilities and equipment currently used by the
Company are substantially identical to the facilities and equipment previously
operated under the trade name of "The Imaging Center" at the same location. See
"Business - Current Debt; Future Capital Requirements - TERMS OF EQUIPMENT
LEASES; TERMS OF BUILDING LEASE" for a discussion of the terms of such leases.
For a description of the facilities and operations of our predecessor
entities, see "Affiliated Physicians" below.
PRO FORMA FINANCIAL STATEMENTS. Attached as Appendix A are PRO FORMA
historical financial statements of the Company for calendar year 1998, which
were prepared based upon historical financial information provided by the
Affiliated Physicians. Attached as Appendix B are PRO FORMA financial
projections for the current and next three fiscal years of the Company, which
are based upon the PRO FORMA statements described in the preceding sentence. The
various items of expense, income and other items described in Appendix A have
been retroactively allocated between the Company and the Affiliated Physicians
in a manner which the Company believes accurately reflects the information for
the periods indicated had the present business arrangements between the Company
and the Affiliated Physicians existed for such periods. See the additional
information and disclaimers under the headings: "The Company - Financial
Statements."
CONTRACTS AND RELATIONSHIPS WITH INSURANCE COMPANIES, HMO'S AND OTHER PAYORS
Most of our business is dependent on contracts with third-party payors
(including Medicare and Blue Cross/Blue Shield) and provider networks. The
contracting provider in most cases is F. Daniel Jackson, M.D., P.A. Many of
these contracts have one-year terms and are renewed automatically unless
terminated by one of the parties. The following is a list of the major contracts
with third-party payors, with a summary of the contract term and termination
provisions for each (other than terminations for cause):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PAYOR/NETWORK TERM TERMINATION
Allegany County Health Dept. (early detection of 1 year (subject to renewal 14 days' notice
breast and cervical cancer for low-income women) up to 5 times)
America's Health Plan, Inc. 90 days' notice prior to end of
term
18
<PAGE>
Anthem Health Plan of West Virginia, Inc., 1 year (renewed annually) 90 days' written notice
(PrimeONE)
Blue Cross Blue Shield of Maryland 1 year (renewed annually) 60 days' written notice
Comprehensive Health Services, Inc. (disability N/A N/A
reviews for US Railroad Retirement Board)
CIGNA Health Care Mid-Atlantic, Inc. Year to Year 60 days' written notice
CIGNA Healthplan Mid-Atlantic, Inc. 1 year (renewed annually) 90 days' written notice
Cardio Metrix (disability reviews for US Railroad N/A N/A
Retirement Board)
Potomac Physicians, P.A. 1 year (renewed annually) 90 days' written notice
CHAMPUS N/A N/A
CHIR/CHMC Valley Community Healthcare Network 1 year (renewed annually) 60 days' notice prior to
expiration of term
Beverly Enterprises - Maryland, Inc. 1 year (renewable by 30 days' written notice
agreement)
Garrett County Local Health Dept. (early 1 year (subject to renewal 14 days' written notice
detection of breast and cervical cancer for up to 4 times)
low-income women)
Health Care and Retirement Corporation of America 1 year (renewed annually) 30 days' written notice
Physicians Health Plan of Maryland, Inc. 1 year (renewed annually) 90 days' written notice
Medicaid Open-ended 30 days' written notice
Comprehensive Medical Imaging, Inc. 1 year 90 days' written notice
Med-Eval, Inc. 2 years (renewed 90 days' written notice
automatically for one-year
terms)
Medicare 1 year (renewed annually) By provider by end of term; by
Medicare after notice and
opportunity for hearing (for
breach of agreement only)
Midatlantic Cardiovascular Associates, P.A. 1 year 90 days' written notice
Network Medical Services, Inc. 6/1/98 - 12/31/2001 90 days' written notice prior
(thereafter renewed to expiration of term
annually)
Primary One, Inc. 1 year (renewed annually) 90 days' written notice
United Health Care of the Mid-Atlantic, Inc. 1 year (renewed annually) 90 days' written notice (60
days for Virginia)
West Virginia Workers' Compensation Division N/A N/A
West Virginia Medicaid N/A 30 days' written notice
</TABLE>
CURRENT DEBT; FUTURE CAPITAL REQUIREMENTS
Most of our facilities and equipment are leased or financed under
arrangements with the sellers of equipment or with Imaging Associates of
Cumberland, Inc. and Value Healthcare, Inc., both of which are controlled by Dr.
Jackson. See "Management of the Company - Existing and
19
<PAGE>
Potential Conflict of Interests". Current lease and financing arrangements for
the building occupied by us and our major equipment are described in the
following table.
<TABLE>
<CAPTION>
FINANCING/LEASING
DESCRIPTION TERMS LENDER/LESSOR
<S> <C> <C> <C>
Mammography Machine To be paid from net proceeds of Offering. (1) Not Applicable
MRI Machine 5 year term. Monthly lease payments are $ 34,622.70 General Electric Medical Systems
for 12 months, then $ 46,020.45 for months 13 through
60. A buyout provision is available after 57 months
for $ 778,730.00.
Trailer for MRI 5 year term. Monthly lease payments will be $ General Electric Medical Systems
Equipment 5,665.80, which includes service the first year. A
service contract will be signed for years 2 through 5,
is estimated to cost about $20,000.00 per year.
Nuclear 5 year term. Monthly lease payments General Electric Medical Systems
Medicine Machine are $ 9,910.95 for 12 months, then $ 14,635.95
for months 13 through 60. A buyout provision is
available after 57 months for $161,126.00.
Treadmill and Cardiac None (2) Not Applicable
Monitoring System
Building, 715 Williams 5 year term with right to renew for an additional 5 Imaging Associates
of Street, Cumberland, years. Monthly lease payments are $5,835 per month for Cumberland, Inc.
MD the first 5 year term and $7,440 for any renewal term.
Ultrasound, Tomography, 5 year term, subject to renegotiation by mutual Imaging Associates of
Fluoroscopy and X-Ray consent at any time (but no more than once each year). Cumberland, Inc.
Equipment Monthly lease payments are $8,175 per month.
GE Synergy CT Machine 5 year term. Monthly lease payments are $14,500 per Value Healthcare, Inc.
and Medrad CT Injector month.
</TABLE>
NOTES:
1. Expected to cost approximately $207,720.
2. Original cost was $23,300.
FINANCING ON CERTAIN LEASED EQUIPMENT. There is no debt owed upon any of
the equipment and property leased from Imaging Associates of Cumberland, Inc.
and Value Healthcare, Inc. However, such equipment and property, together with
other property owned by related or affiliated companies, is pledged to The
American Trust Bank as security for a debt of approximately $1,400,000 to that
bank. Rents under the leases with such companies was calculated as a monthly
amount sufficient to pay the original purchase price of such property over a
term of five years (in the case of equipment) or ten years (in the case of the
building), plus any taxes on such property.
TERMS OF EQUIPMENT LEASES. The equipment leases with Imaging Associates of
Cumberland, Inc. and Value Healthcare, Inc. require the Company to pledge all
collectible accounts receivable as security for full payment of rent throughout
the term of the lease. These leases require the Company to comply with and
conform to all national, state, municipal, police and other laws, ordinances and
regulations in any way relating to the possession, use or maintenance of the
leased equipment. The lessors disclaim any warranties regarding such equipment,
express or implied. The Company is obligated to maintain the leased equipment in
good repair, condition and working order at its own cost and to bear the risk of
any loss or damage to the equipment, repairing or replacing the same upon loss
or damage. The Company is required under the leases to maintain insurance
against loss of and damage to the Equipment for not less than its full
replacement value and combined public liability and property damage insurance
with limits as approved by the lessor,
20
<PAGE>
in both cases naming the lessor as loss payee. The leases require the Company to
keep the equipment free and clear of all levies, liens and encumbrances, paying
when due all license and registration fees, assessments and taxes arising from
the use or operation of the Equipment. The Company shall indemnify the lessor
against, and hold lessor harmless from, any and all claims, actions, suits,
proceedings, costs, expenses, damages and liabilities, including reasonable
attorney's fees and costs, arising out of, connected with, or resulting from our
use of the leased equipment.
TERMS OF BUILDING LEASE. The leased premises may be used and occupied by
the Company for any lawful purpose which complies with applicable zoning
ordinances. Except for assignment to related entities or a purchaser of
substantially all our assets, the Company shall not sublease all or any part of
the leased premises, or assign the lease in whole or in part without lessor's
consent. The Company shall make, at its expense, all necessary repairs to the
leased premises and such repairs, additions, improvements and replacements of
and to all or any part of the Leased premises from time to time as the Company
may deem desirable. The lessor shall pay all general real estate taxes and
special assessments coming due during the lease term and all personal property
taxes with respect to lessor's personal property, if any, on the leased
premises. The Company is responsible for paying all personal property taxes with
respect to its personal property at the leased premises.
If the leased premises or any other part of the building is damaged by fire
or other casualty resulting from any act or negligence of the Company or any of
our agents, employees or invitees, rent shall not be diminished or abated while
such damages are under repair, and the Company shall be responsible for the
costs of repair not covered by insurance. The Company shall maintain fire and
extended coverage insurance on the building and the leased premises in such
amounts as approved by lessor. The Company is responsible, at its expense, for
fire and extended coverage insurance on all of its personal property, including
removable trade fixtures, located in the Leased premises. The Company shall, at
its own expense, maintain a policy or policies of comprehensive general
liability insurance with respect to the activities in the building, such
insurance to afford minimum protection of not less than $1,000,000 combined
single limit coverage of bodily injury, property damage or combination thereof.
The lessor shall be listed as an additional insured on our policy or policies of
comprehensive general liability insurance.
The Company shall pay all charges for water, sewer, gas, electricity,
telephone and other services and utilities used by the Company on the leased
premises during the term of the lease.
The Company will comply with the rules of the building adopted and altered
by lessor from time to time.
If all or any part of the leased premises is damaged by fire, casualty or
structural defects such that it cannot be used for our purposes, the Company
shall have the responsibility to repair the damage promptly, at its expense. The
Company shall not be relieved from paying rent and other charges during any
portion of the lease term during which the leased premises are inoperable or
unfit for occupancy, or use, in whole or in part, for our purposes.
The lease is subject and subordinate to any mortgage, deed of trust or
other lien presently existing or hereafter arising upon the leased premises, or
upon the building and to any renewals, refinancing and extensions thereof. The
lessor has full power and authority to subordinate the lease to any mortgage,
deed of trust or other lien now existing or hereafter placed upon the leased
premises or the building
21
<PAGE>
See "The Company - Capitalization" for a description of aggregate debt and
capital lease obligations of the Company.
The ability of the Company to acquire or lease new or replacement equipment
in the future is dependent upon the availability of financing on reasonable
terms. See "Risk Factors - Potential Need for Additional Capital."
BUSINESS STRATEGY
Our purpose is to provide technical radiology and imaging services to the
Affiliated Physicians and to unaffiliated physicians and practices using our
services. Our primary business strategy is to emphasize quality service, making
patient service and referring physician satisfaction a key element of its
strategy, and to maintain operating efficiencies that will enable the Affiliated
Physicians and any unaffiliated referring physicians to enhance quality of care,
increase revenue and more effectively control costs.
POSSIBLE FUTURE EXPANSION OF FACILITIES
The Affiliated Physicians and the Company are investigating the feasibility
of expanding the facilities currently occupied and services offered by them,
including the construction of a larger building. Any such expansion is dependent
upon the growth of the Company's and Affiliated Physicians' business sufficient
to justify the proposed expansion.
INFORMATION MANAGEMENT; YEAR 2000 COMPLIANCE
The Company believes that all of its hardware, software and dependent
equipment are year 2000 compliant.
CORPORATE LIABILITY AND INSURANCE
The provision of medical services entails an inherent risk of professional
malpractice and other similar claims. The Company's intent is to not influence
or control the practice of medicine by physicians or have responsibility for
compliance with certain regulatory and other requirements directly applicable to
physicians and physician groups, but to provide technical equipment and services
to physicians. As a result of the relationship between the Company and the
Affiliated Physicians or other referring physicians, however, the Company may
become subject to legal actions under various theories. There can be no
assurance that claims, suits or complaints relating to services provided by
Affiliated Physicians or other referring physicians will not be asserted against
the Company in the future. The Company maintains insurance coverage that it
believes will be adequate. The availability and cost of such insurance is
affected by various factors, many of which are beyond the control of the Company
and Affiliated Physicians. The cost of such insurance to the Company and the
Affiliated Physicians may have an adverse effect on our operations. In addition,
successful malpractice or other claims asserted against Affiliated Physicians
other referring physicians or the Company that exceed applicable policy limits
could have a material adverse effect on the Company.
FACILITIES AND EMPLOYEES
Our facilities are located in a building located at 715 Williams Street,
Cumberland, Maryland, which is leased from Imaging Associates of Cumberland,
Inc., a corporation controlled by Dr. Jackson. Our principal technical services
are described in the following table. A more detailed explanation of the method
and nature of such technical services is contained under "Industry Background -
Radiology."
22
<PAGE>
TECHNICAL SERVICES DESCRIPTION
X-RAY Roentgen rays penetrate the body and record
images of organs and bone structures on film.
The Company leases a GE Radiographic/Tomography
machine and a GE Radiographic/Fluoroscopy
machine from Imaging Associates of Cumberland,
Inc. The terms of the lease are discussed below
under the heading "Current Debt; Future Capital
Requirements."
MAMMOGRAPHY Low dosage x-rays used to visualize breast
tissue. The primary screening tool for breast
cancer. Mammography procedures also include
biopsy of cells to assist in the diagnosis of
breast cancer. The Company currently leases from
Imaging Associates of Cumberland, Inc. a GE 600T
Mammography System.
The Company will purchase a second mammography
system from General Electric, a Senographe DMR
Mammography System, with SenoVision Digital Spot
and Stereotactic Biopsy System. This system
provides improved image quality, giving superior
images in patients with dense breasts, while
improving contrast and decreasing patient
exposure dose by up to 40%, accompanied by
shorter exposure times. Patient comfort is an
important factor in encouraging women to obtain
mammograms at regular recommended intervals. The
Senographe DMR is designed to enhance patient
relaxation and cooperation. The system's open
configuration and low profile allows for
constant patient/technologist eye contact. This
system also uses digital spot film images to
enhance visualization of small calcifications
which may indicate the first stages of breast
malignancy and permit better evaluation of the
nature of mass lesions, especially in dense
breasts. A single digital image can be
manipulated to adjust density and contrast
without subjecting patients to additional
compression or dose.
The Stereotactic Biopsy System allows actual
breast biopsy to be performed on site,
decreasing costs to the patients and their
insurance companies. The unit rotates around the
patient, allowing access to hard-to-reach spots
and enhancing patient comfort.
The Imaging Center, Inc. will purchase the new
equipment for a price of $207,718.18, which will
include a one-year warranty and service
agreement. A long-term service contract will
begin after the first year of operation. The new
system should be installed in the Fall of 1999.
MAGNETIC RESONANCE Strong magnetic field in conjunction
with low energy electromagnetic waves are
IMAGING ("MRI") processed by a computer to
produce high-resolution images of body tissue
including the brain, spine, abdomen, heart and
extremities.
The Company leases a new MRI machine from
General Electric Medical Systems, consisting of
a Signa Horizon Echospeed 1.5 Tesla. This is the
most up-to-date and state-of-the-art MRI unit
available, featuring a short magnet with flared
ends, so that only a short segment of the
patient is enclosed, thereby markedly decreasing
any feelings of claustrophobia. A sound system
is incorporated for further patient comfort. The
magnet incorporated into this system is a more
powerful magnet than the magnets found on
typical "open" MRI units, and is marketed by GE
as a "Wide Open High-Field MR System". An Invivo
4500 MRI Pulse Oximeter is included in this
system to augment patient safety by monitoring
patient blood oxygenation and pulse and
analyzing EKG waveform, as well as providing EKG
gating for higher quality vascular studies. The
system includes fast acquisition imaging
software to assist in imaging uncooperative or
sedated patients, using abdominal breath
hold-images, and for use in evaluating
obstructions of the bile ducts, kidney
examinations, and conducting magnetic resonance
mammograms. Additional enhancements facilitate
angiography of the brain, carotid arteries,
aorta, renal arteries, and peripheral vessels,
enable improved imaging to differentiate between
old or recent strokes, and provide detailed
23
<PAGE>
analysis of cardiac chambers, pumping action of
the heart, spinal cord, joints and other body
parts. This new MRI system was installed and
began operating in June, 1999.
The new MRI equipment is housed in a mobile van,
leased from General Electric. The van is
manufactured by the Calumet Coach Company and is
connected directly to the existing building. The
van is customized and shielded to provide high
quality MRI images and maximum patient safety.
The mobile van arrived with the MRI
pre-installed in June, 1999.
COMPUTED TOMOGRAPHY Computer directed movement of an x-ray tube to
produce multiple cross sectional ("CT") images
of a particular organ or area of the body. Used
to detect tumors and other conditions affecting
bones and internal organs. Also used to detect
the occurrence of strokes, hemorrhages and
infections.
The Company uses the following CT equipment:
General Electric Synergy Helical CT System,
Model # 2137298; a Medrad MCT Injector System
with a 5-year Service Contract; and CT
Workstation Upgrade to perform three dimensional
Analysis and QCT Bone Mineral Density for
osteoporosis. All of this equipment is leased
from Value Healthcare, Inc.
NUCLEAR IMAGING Short-lived radioactive isotopes which release
small amounts of radiation are recorded by a
gamma camera and processed by a computer to
produce an image of various anatomical
structures or to assess the function of various
organs such as the heart, kidneys, thyroid and
bones. Nuclear medicine is used primarily to
study anatomic and metabolic functions.
A new nuclear medicine machine has also been
leased from General Electric Medical Systems.
The Millenium MG(Multi-Geometry) Dual
Rectangular Head Camera represents
state-of-the-art equipment. Dual cameras provide
for much faster acquisition of data, increasing
the quality of images by decreasing patient
motion and increasing spatial resolution, thus
enhancing cardiac imaging associated with
treadmill or pharmaceutical stress testing and
quantification of cardiac function. Scans of the
bones, thyroid gland, gallbladder, kidneys, and
other body parts, will also be enhanced. The
system features GENIE Acquisition, a
multitasking computer, which features true
simultaneous operation of its reconstruction,
display, analysis, networking, filming, and
archiving functions, to enhance productivity.
Included with the nuclear camera are two
"dry-view" laser cameras, which are interfaced
with nuclear medicine, magnetic resonance
imaging, CT, and three ultrasound machines.
Traditional chemicals and water baths are not
used with these cameras, supplied by Imation, a
company associated with Kodak. This equipment
was installed and began operating in May, 1999.
ELECTROCARDIOGRAM AND Measures heart function under static and stress
conditions using a treadmill.
HEART STRESS TESTING A new treadmill and cardiac-monitoring system,
The Quinton Q4500 Stress Test System, was
installed in March, 1999. The system is highly
mobile, computerized, and programmable to
accommodate variable programs for different
users performing cardiac stress tests. Automatic
blood pressure readings are obtained by a
self-inflating sphygmomanometer cuff. The
purchase price for this equipment includes 13
months of service under warranty.
ULTRASOUND High-frequency sound waves develop images of
internal organs, unborn fetuses and the vascular
system. Ultrasound has widespread applications,
including procedures in obstetrics, gynecology
and cardiology.
The company uses three Acuson 128XP Ultrasound
systems to provide this service. This equipment
is leased from Imaging Associates of Cumberland,
Inc. The terms of the lease are discussed below
under the heading "Current Debt; Future Capital
Requirements."
24
<PAGE>
In addition to the foregoing equipment, the company has additional EKG
equipment, vehicles and medical, office, and professional equipment which it
uses in providing technical services.
Professional diagnostic, treatment, and supervisory services will be
provided by the Affiliated Physicians.
The Company employs approximately 50 persons in the following professional,
administrative and technical capacities.
<TABLE>
<CAPTION>
NO. FULL NO. PART
POSITION TIME TIME DESCRIPTION OF DUTIES
<S> <C> <C>
Professional Medical 1 1 Licensed physician and surgeon, Board Certified, specializing
in radiology and related diagnostic and treatment aspects of
medicine. Supervises technical employees.
Chief Operating Officer 1 Responsible for all operational activities of the business of
Company at its various locations. Operational activities
include, but are not limited to, property management,
personnel, purchasing, accounts payable, accounts receivable,
reception, transcription, and payroll. Also undertakes such
projects as Company may determine which require the expertise
of this officer.
Chief Financial Officer 1 Responsible for contracting, negotiating and filing
applications with insurance companies to become a provider
(governmental and commercial). Supervises accounts receivable
(billing Supervisor, billing and collections). Billing
Software applications. Credentials for medical
professional. Acquiring outside business with facilities and
organizations such as federal, state, and county prisons,
nursing homes, and free-standing medical clinics. Agreements
for special programs and grants, such as with State and
County Health Departments.
Radiologic Technologist 14 Licensed technologists certified in specific modalities to
perform diagnostic radiological procedures ordered by primary
care physicians and other medical specialists on patients of
all ages.
Billing Staff 7 Codes diagnoses and procedures to submit to insurance
carriers for payment (electronic and hard copy claims).
Bills self-pay patients and collecting balances not covered
by insurance. Applies receipts and adjustments to proper
patient accounts. Prepares month-end reports for receivables.
Clerical, Reception and 26 Obtains physician orders, health insurance information and
Maintenance Staff personal demographics from patients and schedule procedures.
Has proper release forms and assignments signed. Transcribes
the radiologist's reports and findings on performed procedures.
Distributes reports and films to ordering physicians (fax or
courier). Maintains files of patient records (films, charts and
reports). Maintains quality assurance and compliance records,
employee orientation of policies/procedures and peer review.
Purchases supplies (medical, office and maintenance). Maintains
buildings and grounds.
Executive Secretary 1 Documents and maintains pertinent records for corporations.
Maintains physician's credentials and Continuing Medical
Education files. Responsible for follow-up on patient quality
assurance records required by MQSA (Mammography Quality
Standards Act). Accountable to all departments of the
Company for secretarial duties. Calculates employee time
cards for payroll. Responsible for advertising, public
relations and community activities for the business.
</TABLE>
Members of the professional medical staff are required to hold licenses to
practice medicine in Maryland. Dr. Jackson is the full time professional medical
staff and holds medical licenses
25
<PAGE>
from the States of Maryland, West Virginia and Pennsylvania. He also holds
permits to dispense controlled dangerous substances from the Drug Enforcement
Administration and the states of Maryland and West Virginia. Dr. Alicia M.
Cartagena is the part time professional medical staff, and holds licenses from
the states of Maryland and Virginia and the District of Columbia. She also is
registered with the Drug Enforcement Administration to dispense controlled
dangerous substances. Both of them are certified by the American Board of
Radiology and under the Mammography Quality Standards Act, which requires the
interpretation of 960 mammography studies within a 36 month period and teaching
or completing at least 15 continuing medical education credits in mammography
within a 36 month period, including six credits in each mammography modality
used by them. The State of Maryland requires each of them also to obtain at
least 50 credit hours of continuing medical education every two years.
All of the radiologic technologists employed by the Company are licensed by
the State of Maryland, certified by the American Registry of Radiologic
Technologists and hold cardiopulmonary resuscitation certifications, except for
two recent hires, one of whom is preparing for certification examinations.
Certain of the radiologic technologists also hold certifications from the
American Registry of Diagnostic Medical Sonographers. One of the radiologic
technologists is also certified by the Nuclear Medicine Technology Certification
Board. In order to maintain such certifications, radiologic technologists are
required to obtain continuing education credits every two or three years.
Certain of our facilities are also required to be licensed, including
licensing of equipment (including nuclear equipment) by the State of Maryland,
and by the U. S. Food and Drug Administration. Our mammography facilities are
accredited by the American College of Radiology and the Company has applied for
similar accreditations for its MRI and ultrasound facilities.
MANAGEMENT OF THE COMPANY
DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
F. Daniel Jackson, M.D. is the President, a director, and the controlling
shareholder of the Company. As the Company is new, he has not held any other
office or position with the Company. During the past five years, Dr. Jackson has
been employed by F. Daniel Jackson, M.D., P.A., of which he is the sole
stockholder and officer. He holds licenses to practice medicine in the States of
Maryland, Pennsylvania and West Virginia, and was certified by the American
Board of Radiology in 1977. He holds an M.D. degree from the School of Medicine
at the University of North Carolina, Chapel Hill, and graduated in 1973. He
received postgraduate training in diagnostic radiology from Rochester General
Hospital, Rochester New York. Since 1977, Dr. Jackson has practiced diagnostic
radiology in the Cumberland, Maryland, area, and has been affiliated at various
times with Frostburg Community Hospital, Frostburg, Maryland; Potomac Valley
Hospital, Keyser, West Virginia; Memorial Hospital and Medical Center,
Cumberland, Maryland; and Garrett County Memorial Hospital, Oakland, Maryland.
He is a member of the following professional associations: American Medical
Association, American College of Radiology, Maryland Medical and Chirurgical
Faculty, Radiological Society of North America, Maryland Radiological Society,
and Allegany County Medical Society. He has been a board member of the Allegany
County Chapter of the American Cancer Society.
26
<PAGE>
The other executive officers, directors and significant employees of the
Company and certain information about such persons are described below.
<TABLE>
<CAPTION>
- ------------------------------ ----------------- -------------------------------------------------------------------
<S> <C>
NAME AND AGE TITLE BUSINESS EXPERIENCE/EMPLOYMENT DURING LAST 5 YEARS
- ------------------------------ ----------------- -------------------------------------------------------------------
Frederick J. Hill, 64 Director Retired since 1995. Formerly Senior Vice President, Beall,
Garner, Screen and Geare, Inc., Cumberland, MD
- ------------------------------ ----------------- -------------------------------------------------------------------
James F. Scarpelli, Jr., 46 Director Vice President, Scarpelli Funeral Home, PA, Cumberland, MD
- ------------------------------ ----------------- -------------------------------------------------------------------
Larry James Taylor, 50 Vice President Chief Operating Officer, The Imaging Center, Cumberland, MD,
1996 - present
Interim Plant Manager, Anchor Glass container, Keyser, WV,
1995 - 1997
- ------------------------------ ----------------- -------------------------------------------------------------------
D. Jeanne Starkey, 50 Treasurer Chief Financial Officer, The Imaging Center, Cumberland, MD,
1996 - present
Business Manager, The Imaging Center, Cumberland, MD, 1992 - 1996
- ------------------------------ ----------------- -------------------------------------------------------------------
Carolyn L. Hott, 56 Corporate Secretary, The Imaging Center, Cumberland, MD, 1990 - present
Secretary
- ------------------------------ ----------------- -------------------------------------------------------------------
</TABLE>
None of the above names directors or officers of the Company either is
related to any of the others by blood or marriage or has been involved in any
material legal proceedings during the past five years, including bankruptcy and
significant or material criminal offenses.
As of __________, 1999, Dr. Jackson owned all outstanding shares of the
Company's Class A Voting Common Stock. He owns directly or beneficially
8,999,000 shares of Class B Non-Voting Common Stock, which represents 90% of all
outstanding and issued shares of Class B Non-voting Common Stock, assuming all
shares offered by the Company under this Prospectus are sold. See "Existing and
Potential Conflict of Interests" below.
RETIREMENT PLAN
The Company has chosen to adopt a retirement plan that is sponsored by the
Affiliated Physicians. The retirement plan is a 401(k) profit-sharing plan in
which each employee that has attained age 21 and completed 12 months of service
during which the employee has completed 1,000 hours of service is eligible to
participate. The Company does not match any portion of the elective deferral of
the employee; however, the Company can make a discretionary contribution of up
to 15% of eligible compensation annually. Any employer contributions are vested
20% each year with each employee full vested after five years.
EXECUTIVE COMPENSATION
Because the Company began operations on July 1, 1999, no compensation or
other remuneration was paid to its officers or directors before that date. They
did, however, receive compensation from the Affiliated Physicians and related
entities, our predecessors.
Each Company officer will receive compensation from the Company in the
amount of $20,000 annually. Company officers are also officers or employees of
the Affiliated Physicians and related companies and receive compensation from
them.
Directors of the Company will receive $500 for each meeting of the Board of
Directors they attend.
No company officer has an employment agreement with the Company.
27
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
Dr. Jackson is the sole owner of all issued and outstanding shares of Class
A Voting Common Stock of the Company.
The following table sets forth the expected respective ownership interests
in shares of Class B Non-Voting Common Stock of the Company of each executive
officer and director upon completion of the Offering.
NUMBER OF PERCENTAGE
CLASS B OF ALL
NAME SHARES CLASS B SHARES
F. Daniel Jackson, M.D. 8,999,000 90%
Frederick J. Hill, Director 0%*
James F. Scarpelli, Jr., Director 0%*
Larry James Taylor, Vice President 0%*
D. Jeanne Starkey, Treasurer 0%*
Carolyn L. Hott, Corporate Secretary 0%*
Others 0%*
* Has not determined whether to purchase the offered Shares.
EXISTING AND POTENTIAL CONFLICT OF INTERESTS
Dr. Jackson is the President and a director of the Company and the sole
owner of all outstanding shares of Class A Voting Common Stock of the Company.
As such, all decisions regarding the operations, facilities and future
development of the Company and its facilities will be made solely by Dr.
Jackson. Dr. Jackson owns the majority of or significant interests in Value
Healthcare, Inc. and Imaging Associates of Cumberland, Inc., the companies which
leased various items of equipment to the Company. Such transactions were
intended to be for fair market value of such equipment, but were not negotiated
at arm's length. Dr. Jackson also controls the real estate and building in which
the facilities and equipment of the Company are located. Such facilities were
leased by the Company under terms it believes to be fair, but not necessarily
the same as would have been obtained through arm's length negotiations. For
further information about the terms of such leases, see "Business Current Debt;
Future Capital Requirements - TERMS OF EQUIPMENT LEASES; TERMS OF BUILDING
LEASE."
The Company leases certain of its equipment and its building from Value
Healthcare, Inc. and Imaging Associates of Cumberland, Inc., both of which
corporations are controlled by Dr. Jackson. For a description of the terms of
such leases, see "Business - Current Debt; Future Capital Requirements - TERMS
OF EQUIPMENT LEASES; TERMS OF BUILDING LEASE."
DESCRIPTION OF COMMON STOCK
GENERAL. The Company is authorized to issue two classes of Common Stock,
consisting of 1,000 shares of Class A Voting Common Stock $1.00 par value per
share (the "Class A Shares"), which are NOT being offered under this Prospectus,
and 9,999,000 shares of Class B Non-Voting Common Stock $1.00 par value per
share, which latter class is being offered under this Prospectus. Upon
completion of the Offering, the Company will have 100 Class A Shares and
9,999,000 Class B Shares of Common Stock outstanding (assuming that all Shares
offered under this prospectus are purchased). The following description of
Common Stock of the Company is qualified in its entirety by reference to our
Articles of Incorporation, a copy of which is attached to this Prospectus as
Appendix C.
28
<PAGE>
The Company will act as transfer agent for its Class B Non-Voting Common
Stock.
VOTING AND OTHER RIGHTS OF CLASSES OF COMMON STOCK. Holders of Class A
Voting Common Stock are entitled to one vote per share on all matters on which
shareholders are entitled to vote generally. The holders of Class A Voting
Common Stock shall have the exclusive right to vote for any and all matters for
which the stockholders of the Corporation shall have the right to vote.
Shareholders have no right to cumulate their votes in the election of directors.
Accordingly, holders of a majority of the outstanding shares of Class A Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election.
THE HOLDERS OF THE SHARES OF THE CLASS B NON-VOTING COMMON STOCK SHALL NOT
HAVE ANY RIGHT TO VOTE FOR OR ELECT THE DIRECTORS OF THE COMPANY NOR SHALL THE
HOLDERS OF THE SHARES OF THE CLASS B NON-VOTING COMMON STOCK HAVE THE RIGHT TO
VOTE ON ANY OTHER MATTER SUBMITTED TO A VOTE AT ANY MEETING OF THE STOCKHOLDERS,
UNLESS OTHERWISE REQUIRED BY THE MARYLAND GENERAL CORPORATION LAW, AND IN SUCH
CASE, ONLY TO THE EXTENT SUCH REQUIREMENT IS NOT MODIFIED OR WAIVED BY OUR
ARTICLES OF INCORPORATION. THE HOLDERS OF THE SHARES OF CLASS B NON-VOTING
COMMON STOCK SHALL BE ENTITLED TO RECEIVE NOTICE OF THE MEETINGS OF THE
STOCKHOLDERS BUT SHALL NOT BE ENTITLED TO VOTE ON ANY MATTERS SUBMITTED AT SUCH
MEETINGS. SEE "CONTROL OF COMPANY BY CERTAIN SHAREHOLDERS AND AFFILIATES" UNDER
THIS HEADING BELOW AND "RISK FACTORS - CONTROL BY CERTAIN SHAREHOLDERS."
All classes of stock of the Company are identical in all other respects.
With respect to every class of Common Stock of the Company (Class A Voting
Common Stock and Class B Non-Voting Common Stock), the stockholders of the
Company shall have no preemptive rights with respect to sale by the Company of
any additional shares of Common Stock whether in the class of stock in which the
stockholder owns stock, or otherwise, and regardless of the purpose for sale of
such Common Stock. All outstanding shares of Common Stock and any shares
acquired present to this Offering, when paid for by the purchasers thereof, will
not be subject to any calls or assessments by the Company.
Holders of Common Stock may receive dividends and other distributions when,
as and if declared from time to time by the Board of Directors out of funds
legally available therefor. The Company does not intend to declare or pay any
dividends on the shares of its Common Stock in the near future. See "The Company
- - Dividend Policy."
LIQUIDATION RIGHTS. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Company, after distribution of any preferential
amounts required to be distributed to any other class or series of stock having
a preference over the outstanding Common Stock, the holders of Common Stock are
entitled to share ratably in proportion to the number of shares held by each
holder in all assets remaining after payment of liabilities. Our Articles of
Incorporation state that no holder of any class or series of stock of the
Company shall have any preemptive rights. The Company may, in its sole
discretion, purchase or redeem certain of the shares of our stock in accordance
with Maryland Law. All outstanding shares of Common Stock are, and the shares
offered hereby will be, when issued and paid for, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are subject
to, and may become subordinate, to the rights of holders of shares of any other
class of stock or series of Preferred Stock which the Company may designate and
issue in the future from time to time.
29
<PAGE>
OWNERSHIP OF SHARES UPON COMPLETION OF OFFERING. The following table sets
forth each person who owns of record as of _______, 1999, 10% or more of the
outstanding shares of Common Stock, and the expected respective ownership
interests (expressed as a percentage of total ownership interests), upon
completion of the Offering of shares under this Prospectus.
<TABLE>
<CAPTION>
- ---------------------------------- -------------------------------------------------------
OWNERSHIP INTEREST*
-------------------------------------------------------
CLASS A SHARES CLASS B SHARES
- ---------------------------------- --------------------------- ---------------------------
OWNER UPON UPON
PRIOR TO COMPLETION PRIOR TO COMPLETION
OFFERING OF OFFERING OFFERING OF OFFERING
- ---------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
F. Daniel Jackson, M.D.** 100% 100% 100% 90%
- ---------------------------------- ------------- ------------- ------------- -------------
Other Shareholders*** 0% 10%
- ---------------------------------- ------------- ------------- ------------- -------------
* Expressed as a percentage of all issued and outstanding shares of each class.
** Includes shares held in his profit sharing plan.
*** Includes all purchasers of shares offered by this Prospectus (assuming all offered
shares are sold).
</TABLE>
CONTROL OF COMPANY BY CERTAIN SHAREHOLDERS AND AFFILIATES. Dr. Jackson will
be the sole owner of all Class A Shares and is the President and a director of
the Company. As such, he controls the election of the directors of the Company
and all decisions regarding the operations, facilities and future development of
the Company and its facilities will be made solely by Dr. Jackson. See
"Management of the Company - Existing and Potential Conflict of Interests"
below.
AUTHORIZED AND UNISSUED SHARES. Prior to the Offering, there has been no
public market for the Common Stock. Sales of substantial amounts of Common Stock
into the public market after the Offering, or the perception that such sales
could occur, could adversely affect the prevailing market price for the Common
Stock and the ability of the Company to raise equity capital. The Company can
make no prediction as to the effect, if any, that the sale or availability for
future sale of shares of additional Common Stock will have on the market price
of the Common Stock prevailing from time to time.
Upon completion of the Offering, the Company will have 100 shares of Class
A Voting Common Stock and 9,999,000 shares of Class B Non-Voting Common Stock
outstanding (assuming that all shares offered under this prospectus are
purchased). These shares will consist of 100 shares of Class A Voting Common
Stock and 8,999,000 shares of Class B Non-Voting Common Stock issued to Dr.
Jackson, the controlling shareholder of the Company, or his profit sharing plan,
and 1,000,000 shares of Class B Non-Voting Common Stock issuable in the Offering
and expected to be sold to unaffiliated shareholders (assuming that all shares
offered under this prospectus are purchased). See also "The Company -
Description of Common Stock- OWNERSHIP OF SHARES UPON COMPLETION OF OFFERING."
All shares of Class B Non-Voting Common Stock sold in the Offering will be
freely tradable, except that any shares purchased by "affiliates" of the Company
(which includes officers and directors of the Company, Dr. Jackson and entities
controlled by him) must be sold in compliance with the requirements of
applicable state and federal securities laws. Shares acquired by affiliates may
be sold from time to time either under a registration statement filed with the
U. S. Securities and Exchange Commission under the Securities Act of 1933 or in
transactions exempt from registration under such Act.
30
<PAGE>
MANAGEMENT AND OPERATION OF COMPANY. Ownership of the shares offered by
this Prospectus does not entitle the holders of such shares to participate in
the management or operation of the Company, except for such rights as are
granted by Maryland law.
AFFILIATED PHYSICIANS
The following information is based upon data provided by the various
entities which previously owned and operated the facilities and equipment of the
Company, including Dr. Jackson and the Affiliated Physicians. All of such
entities are controlled by Dr. Jackson. While the Company believes that this
information is accurate with respect to prior operations of The Imaging Center,
The Company cannot make any assurance that this information is accurate as to
future performance or results of operations of the Company.
The Imaging Center is the trade name of F. Daniel Jackson, M.D., P.A., a
medical practice specializing in Diagnostic Radiology and herein referred to as
the Affiliated Physicians.
The Imaging Center opened its doors to patients on October 1, 1990, at 50
Pershing Street in downtown Cumberland, Maryland. Original services offered were
film-screen mammography, diagnostic X-rays, and 2 machines for ultrasound
examinations. Services were offered from 8 A.M. to 6 P.M., Monday through
Friday. The business remained at this site only fifteen months. Patient volume
quickly expanded, and more floor space was needed.
The center moved to a much larger, newly renovated site at 715 Williams
Street in Cumberland on December 26, 1991. Two new X-ray rooms were added, one
with tomography for intravenous pyelograms, the other room with fluoroscopy for
arthrograms, upper gastrointestinal series, barium enemas, and other real-time
examinations. A computerized tomography (CT) machine was added for examination
of the brain, chest, abdomen, and pelvis, as well as other body parts. Nuclear
medicine was also added for scans of the bones, thyroid gland, gallbladder, and
other organs. A treadmill stress test room was incorporated, monitored by a
cardiologist, followed by a nuclear SPECT scan of the heart, screening for
coronary artery disease. Hours of operation were expanded from 7 A.M. to 9 P.M.,
Monday thru Friday, and 8 A.M. to 5 P.M., Saturday and Sunday.
Another addition to the building was completed in November, 1992, to house
a new magnetic resonance (MRI) machine. This has been used extensively for
examination of the brain; spinal cord and spine; knees, shoulders, hips, and
other joints; as well as virtually all other body parts and organ systems. MR
angiography has been performed routinely in examinations of the brain, to screen
for aneurysms and blockage of major vessels (ischemia and occlusions).
The hours of operation were contracted in September, 1995, since very few
patients requested evening and Sunday hours. The office was then open 7 A.M. to
6 P.M., Monday thru Friday, and 8 A.M. to 1 P.M. on Saturday.
In January, 1997, the CT machine was replaced with a new Synergy Spiral CT
by GE, which performed examinations much faster, virtually eliminating artefacts
due to breathing and patient motion, making diagnosis more accurate.
From the beginning, The Imaging Center has offered EKG's, with the current
machine printing a computer-generated interpretation, to assure prompt diagnosis
and treatment. Laboratory examinations are performed by an independent clinical
laboratory, with blood drawing and specimen collections offered in our office.
In February, 1998, the office began to open at 6 A.M., to draw blood for early
risers and patients on their way to work.
31
<PAGE>
The facilities, employees and operations of, and services offered by, the
Affiliated Physicians and related companies are substantially identical to the
facilities, employees and operations of, and services to be provided by the
Company as described in this Prospectus. See the information provided under the
headings "The Company" and Business" in this Prospectus.
The following table describes the examinations made by the procedures
indicated below at The Imaging Center during the years 1993 through 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
Ultrasound 3448 3331 3257 3676 4168 4715
Mammograms 4011 4289 4476 4648 4809 5285
X-Ray/IVP 4284 4664 5241 5473 5617 5789
Fluoroscopy 548 504 553 540 551 582
Nuclear 852 794 741 919 1176 1334
CT 1802 1717 1848 2072 2265 2660
MRI 1597 1729 2108 2142 2335 2456
TOTAL 16,542 17,028 18,224 19,470 20,921 22,421
</TABLE>
INDUSTRY BACKGROUND
MARKET OVERVIEW
The Health Care Financing Administration estimates that national health
care spending in 1997 was approximately $1.1 trillion, including approximately
$217 billion for physician services, and that for 1999 these amounts will be
approximately $1.228 trillion and $241 billion, respectively. According to the
American College of Radiology, an estimated 347 million radiological procedures
were performed in the United States during 1997, excluding procedures performed
by HMO's. Total spending on radiology services including diagnostic imaging,
interventional radiology and radiation oncology was estimated at $56 to $70
billion according to a 1995 report prepared by SMG Marketing Group. Diagnostic
imaging, including interventional radiology procedures, accounted for
approximately 82% of the aggregate amount spent on radiological services
performed in the United States.
Fees charged for diagnostic imaging, interventional radiology and radiation
oncology procedures consist generally of a technical component relating to
facilities, equipment and non-physician personnel and a professional component
consisting of fees paid to physicians for the interpretation of diagnostic
images, the performance of interventional radiology procedures and the treatment
of radiation oncology patients. Technical facilities are located within
hospitals and in outpatient centers (such as our facilities) throughout the
United States. Professional radiology services are provided by board certified
radiologists and other specialists.
RADIOLOGY
In general, radiology includes diagnostic imaging, interventional radiology
and radiation oncology. Imaging procedures use energy waves to penetrate human
tissue and generate images of the body, which can be recorded on film or
digitized for display on a video monitor. Diagnostic imaging procedures are used
to diagnose diseases and physical injuries and are performed in hospitals,
physicians' offices, outpatient centers and imaging centers. Interventional
radiology procedures include the use of radiological methods to monitor and
guide catheters, stents, drains and needles to open clogged vessels, relieve
obstructed kidneys, perform biopsies of mass lesions, drain abscess collections
and lower pressure in certain vessels. Generally, these interventional
32
<PAGE>
procedures are more time efficient, more cost-effective and less invasive than
surgical alternatives and have historically been performed in a hospital setting
to enable utilization of hospital support services. Radiation oncology
procedures use a variety of radiation sources to treat cancer and/or relieve
pain caused by certain tumors and are performed in hospitals and free-standing
outpatient centers. AT THE PRESENT TIME, THE COMPANY DOES NOT OFFER TECHNICAL
SERVICES RELATED TO COMPLEX INTERVENTIONAL RADIOLOGY AND RADIATION ONCOLOGY.
The principal diagnostic imaging techniques include the following, all of
which are non-invasive:
> GENERAL RADIOLOGY: X-RAY AND FLUOROSCOPY. X-rays utilize roentgen
rays to penetrate the body and record images of organs and structures
on film. Fluoroscopy utilizes ionizing radiation combined with a video
viewing system for real time monitoring of organs. X-ray and
fluoroscopy are the most frequently used imaging techniques.
> COMPUTED TOMOGRAPHY ("CT"). CT utilizes a computer to direct the
movement of an x-ray tube to produce multiple cross sectional images of
a particular organ or area of the body. CT is used to detect tumors and
other conditions affecting bones and internal organs. It is also used
to detect the occurrence of strokes, hemorrhages and infections. CT
provides higher resolution images than conventional x-rays, but soft
tissue swelling and edema are not as well defined as those produced by
magnetic resonance.
> MAGNETIC RESONANCE IMAGING ("MRI"). MRI utilizes a strong magnetic
field in conjunction with low energy electromagnetic waves which are
processed by a computer to produce high-resolution images of body
tissue including the brain, spine, abdomen, heart and extremities.
Unlike CT and conventional x-rays, MRI does not utilize ionizing
radiation, which can cause tissue damage in high doses.
> MAMMOGRAPHY. Mammography is a specialized form of radiology
utilizing low dosage x-rays to visualize breast tissue and is the
primary screening tool for breast cancer. Mammography procedures also
include the biopsy of cells to assist in the diagnosis of breast
cancer. New digital mammography techniques are even more sensitive in
detecting abnormalities of breast tissue.
> ULTRASOUND. Ultrasound imaging utilizes high-frequency sound waves
to develop images of internal organs, unborn fetuses and the vascular
system. Ultrasound has widespread applications, including procedures in
obstetrics, gynecology and cardiology.
> NUCLEAR MEDICINE. Nuclear medicine utilizes short-lived radioactive
isotopes which release small amounts of radiation that can be recorded
by a gamma camera and processed by a computer to produce an image of
various anatomical structures or to assess the function of various
organs such as the heart, kidneys, thyroid and bones. Nuclear medicine
is used primarily to study anatomic and metabolic functions.
TRENDS IN RADIOLOGY
TECHNOLOGICAL ADVANCEMENTS. The Company believes that advances in
technology, including the development and continued enhancements of MRI, CT,
nuclear medicine, ultrasound and interventional radiology have contributed to
the growth of the diagnostic imaging industry. These technological advances have
resulted in increased professional and technical utilization and have produced
diagnostic procedures that are safer, more accurate and less-invasive than
33
<PAGE>
techniques previously utilized. While traditional x-rays continue to be the
primary imaging technique based on the number of procedures performed, the use
of advanced diagnostic imaging techniques such as MRI and CT has increased
rapidly in recent years because these techniques allow physicians to diagnose a
wide variety of diseases and injuries quickly and accurately without exploratory
surgery or other surgical or invasive procedures, which are usually more
expensive, involve greater risk to the patient and result in longer
rehabilitation time. As a result, hospital days are shortened or eliminated and
time lost from work is significantly reduced. In addition, diagnostic imaging is
increasingly used as a screening tool for preventive care. The Company believes
that future technological advances will enhance the ability of radiologists to
diagnose and direct treatment, thereby lowering overall health care costs.
Recent technological advancements include: magnetic resonance spectroscopy,
which can differentiate malignant from benign lesions; magnetic resonance
angiography, which can produce three-dimensional images of body parts and assess
the status of blood vessels; spiral computed tomography, which permits three-
dimensional images of body parts; monoclonal antibody studies utilizing nuclear
medicine to localize certain cancers that would otherwise be difficult to detect
or treat; and the development of teleradiology, which digitally transmits
radiological images from one location to another for interpretation. The Company
believes that the utilization of both the diagnostic and therapeutic
capabilities of radiology will continue to increase because of its
cost-effective, time-efficient and risk/benefit advantages over alternative
procedures (including surgery) and that newer technologies and future
technological advancements will result in further sub-specialization and
increased utilization of professional and technical radiological services.
REIMBURSEMENT PATTERNS. Payment for radiology services comes primarily from
third-party payors such as private insurers (including traditional indemnity
insurance plans), managed care plans (including HMOs and PPOs) and governmental
payors (including Medicare and Medicaid). Historically, radiologists and other
physicians generally provided medical services on a fee-for-service basis. As
managed care entities and other payors have focused on providing care in a more
cost-effective manner, they have demanded and received significant discounts
from fee-for-service rates charged for radiological procedures. As a result,
physicians have seen a decrease in per procedure reimbursements from managed
care and governmental entities for such procedures. More recently, payors have
sought to control the utilization of services by devices such as utilization
review and capitation arrangements. Significant changes of this type will
require the Company, the Affiliated Physicians and other referring physicians to
develop practice guidelines and appropriateness criteria and to manage the
utilization of radiological procedures.
The Company believes that the shift in financial risk from payors to
providers decreases the attractiveness of under-utilized imaging equipment
within a general practitioner's office and will accelerate the centralization of
resources to high-volume centers. The Company believes that the general
diagnostic imaging services performed by non-radiologists may be directed to
radiologists by managed care entities seeking to have services performed at the
lowest overall cost. As a result, the Company believes that managed care
entities, provided with utilization reports, will focus on reducing costs by
shifting radiological procedures performed by non-radiologists to radiologists.
DEVELOPMENT OF INDEPENDENT RADIOLOGY SERVICES. Concurrent with the growth
of managed care and strict controls on Medicare reimbursement for inpatient
costs, diagnostic imaging services began to shift from hospital settings to
independent radiology facilities in the early 1980s. Subsequent changes in
federal law restricted the referral of patients by a physician to a facility in
which the physician maintained an ownership interest. As a result, many
physicians sold their
34
<PAGE>
interests in such facilities to hospitals, radiologists and companies engaged
exclusively in the ownership, operation and management of radiology and imaging
centers.
REFERRAL SOURCES. Non-radiologists, including specialists and primary care
physicians, direct the utilization of radiology services. Most industry
marketing has been focused on developing relationships with these referring
physicians. As more patients move to managed care plans, the Company believes
physicians will have fewer referral options for diagnostic imaging procedures.
As the choices for radiology referrals decrease, the Company believes that
quality of care, subspecialty expertise and patient and referring physician
satisfaction will be important factors in determining referral patterns.
TRENDS IN RADIOLOGY ORGANIZATIONS. The trends toward managed care, cost
containment and health care consolidation have combined to limit the number of
positions available and the salaries paid to radiologists. In addition, small
independent physician groups and individual practices are typically at a
competitive disadvantage to larger associations or networks of physicians
because they lack the capital necessary to (i) expand the geographic coverage of
the practice and the imaging techniques offered, (ii) develop state-of-the-art
information systems and (iii) purchase costly new imaging technologies, each of
which can improve quality of care and reduce costs. Generally, they also lack
the cost accounting and quality management systems necessary to allow physicians
to price and monitor complex risk-sharing arrangements with third-party payors.
Additionally, small to medium-sized groups and individual practices often do not
have contractual ties with other providers nor do they have the ability to offer
a broad range of subspecialty imaging services. Small practices often have
higher operating costs (since overhead must be spread over a relatively small
revenue base) and minimal vendor purchasing power. In order to remain
competitive in the changing medical service environment, radiologists are
beginning to affiliate with or create larger organizations by adding
radiologists to their groups, creating or joining a network or an independent
physician association or affiliating with a physician practice management
entity.
GOVERNMENT REGULATION AND SUPERVISION
GENERAL
The health care industry is highly regulated, and there can be no assurance
that the regulatory environment in which the Company operates will not change
significantly in the future. The ability of the Company to operate profitably
will depend in part upon the Company, the Affiliated Physicians and affiliated
referring physicians obtaining and maintaining all necessary licenses,
certificates of need and other approvals and operating in compliance with
applicable health care regulations. The Company believes that health care
regulations will continue to change and, therefore, intends to monitor
developments in health care law and modify its operations from time to time as
the business and regulatory environment changes. There can be no assurance that
the Company will be able to modify its operations so as to address changes in
the regulatory environment.
LICENSING AND CERTIFICATION LAWS
Every state imposes licensing requirements on individual physicians and on
facilities operated, or services performed, by physicians and others. In
addition, federal and state laws regulate HMOs and other managed care
organizations with which Affiliated Physicians or unaffiliated referring
physicians may have contracts. Many states require regulatory approval,
including certificates of
35
<PAGE>
need and/or licensing, before establishing or expanding certain types of health
care facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities or programs. In
connection with the expansion of existing operations and entry into new markets,
the Company may become subject to additional regulation.
The State of Maryland requires a license to operate certain freestanding
ambulatory care facilities, including freestanding facilities operating major
medical equipment. "Major medical equipment" is defined by law to include a
computed tomography (CT) scanner and a magnetic resonance imager (MRI). The
State of Maryland does not currently require a certificate of need for the
acquisition or operation of major medical equipment.
FEE-SPLITTING; CORPORATE PRACTICE OF MEDICINE; PAYMENTS FOR REFERRALS.
The laws of some states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion. In the State of Maryland there is
no explicit prohibition against sharing fees with non-physicians, as such, or
against the corporate practice of medicine, but there are laws prohibiting
payments for bringing or referring a patient, and prohibiting referrals by a
practitioner to a health care entity in which the practitioner directly or
indirectly owns a beneficial interest or has a compensation arrangement, subject
to certain exceptions. (See also the discussion below of Medicare and Medicaid
Fraud and Abuse.) While the Company believes that the use of our services by the
Affiliated Physicians will not violate these laws, there are legal issues
associated with the ownership of shares in the Company by physicians who refer
patients to the Affiliated Physicians, and any such referring physicians should
obtain legal advice on that subject prior to purchasing shares of the Company.
Although the Company intends to structure its proposed operating structures
and methods as described in this Prospectus so as to comply with existing
applicable laws, our business operations have not been the subject of judicial
or regulatory review or audit. There can be no assurance that a review of our
business by courts or regulatory authorities will not result in determinations
that could adversely affect the operations of the Company or that the health
care regulatory environment will not change so as to restrict our planned
operations and expansion.
MEDICARE PHYSICIAN PAYMENT SYSTEM
The Company believes that regulatory trends in cost containment will
continue to result in a reduction from historical levels in per-patient revenue
for medical practices. The federal government has implemented, through the
Medicare program, the RBRVS payment methodology for physician services. The
RBRVS is a fee schedule that, except for certain geographical and other
adjustments, pays similarly situated physicians the same amount for the same
services. The RBRVS is adjusted each year and is subject to increases or
decreases at the discretion of Congress. To date, the implementation of the
RBRVS has reduced payment rates for certain of the procedures historically
provided by the Affiliated Physicians. BBA 97 provides for reductions in the
rate of growth of payments for physician services, including services
historically provided by the Affiliated Physicians, in the amount of $5.3
billion over a five-year period ending in 2002. In addition, BBA 97 provides for
the implementation of a resource-based methodology for payment of physician
practice expenses under the physician fee schedule over a four-year period
beginning in 1999. Adoption of this methodology is expected to reduce
36
<PAGE>
payments for services historically provided by the Affiliated Physicians. There
can be no assurance that any reduced operating margins could be offset by the
Company through cost reductions, increased volume, the introduction of
additional procedures or otherwise.
Private third-party payors and Medicare and Medicaid have increased their
use of managed care as a means of cost containment. Increasingly, private
third-party payors negotiate discounts from established physician and hospital
charges or require capitation or other risk sharing arrangements as a condition
of patient referral to physician groups such as the Affiliated Physicians. BBA
97 also includes provisions designed to increase the enrollment of Medicare and
Medicaid participants in managed care programs. The inability of the Affiliated
Physicians to negotiate satisfactory arrangements with managed care companies
would have a material adverse effect on our business or financial condition.
Rates paid by non-governmental insurers, including those that provide
Medicare supplemental insurance, are based on established physician and hospital
charges and are generally higher than Medicare payment rates. A change in the
makeup of the patient mix of the medical practices that results in a decrease in
patients covered by private insurance plans could adversely affect our revenue
and income.
Medicare and Medicaid have increased their use of managed care as a means
of cost containment. As with private third party payors, Medicare and Medicaid
managed care contractors negotiate discounts from established physician and
hospital charges or require capitation or other risk sharing arrangements as a
condition of patient referral to physician groups such as the Affiliated
Physicians. BBA 97 includes provisions designed to increase the enrollment of
Medicare and Medicaid participants in managed care programs. The inability of
the Company to negotiate satisfactory arrangements with Medicare and Medicaid
managed care contractors could have a material adverse effect on our business,
financial condition and results of operation.
MEDICARE AND MEDICAID FRAUD AND ABUSE
Federal law prohibits the offer, payment, solicitation or receipt of any
form of remuneration in return for, or in order to induce, (i) the referral of a
person, (ii) the furnishing or arranging for the furnishing of items or services
reimbursable under the Medicare, Medicaid or other governmental programs or
(iii) the purchase, lease or order or arranging or recommending purchasing,
leasing or ordering of any item or service reimbursable under the Medicare,
Medicaid or other governmental programs. Pursuant to this anti-kickback law, the
federal government has recently announced a policy of increased scrutiny of
joint ventures and other transactions among health care providers in an effort
to reduce potential fraud and abuse relating to Medicare costs. The
applicability of these provisions to many business transactions in the health
care industry has not yet been subject to judicial and regulatory
interpretation. Noncompliance with the federal anti-kickback legislation can
result in exclusion from the Medicare, Medicaid, or other governmental programs
and civil and criminal penalties. Maryland law similarly prohibits referrals by
a practitioner to an entity in some cases in which the practitioner has a
beneficial interest in or a compensation arrangement with the entity.
The Company believes that although it will receive fees for technical
radiology and imaging services, it is not in a position to make or influence
referrals of patients or services reimbursed under the Medicare, Medicaid or
other governmental programs to Affiliated Physicians or unaffiliated referring
physicians, or to receive such referrals. Such service fees are intended by
37
<PAGE>
the Company to be consistent with fair market value in arms' length transactions
for the nature and amount of technical services rendered. Moreover, due to the
high degree of integration between the technical services offered by the Company
and the professional services offered by the Affiliated Physicians, it is
doubtful whether there are or will be any "referrals" between the Company and
the Affiliated Physicians in the sense contemplated by the anti-kickback laws.
For these reasons, the Company does not believe that fees payable to it should
be viewed as remuneration for referring or influencing referrals of patients or
services covered by such programs as prohibited by statute. If, however, the
Company is deemed to be in a position to make, influence or receive referrals
from or to physicians, or the Company is deemed to be a provider under the
Medicare or Medicaid programs, the operations of the Company could be subject to
scrutiny under federal and state anti-kickback and anti-referral laws and our
operations could be materially and adversely affected.
Significant prohibitions against physician referrals have been enacted by
Congress. These prohibitions, commonly known as "Stark II," amended prior
physician self-referral legislation known as "Stark I" by dramatically enlarging
the field of physician-owned or physician-interested entities to which the
referral prohibitions apply. Stark II prohibits a physician from referring
Medicare or Medicaid patients to an entity providing "designated health
services", including without limitation radiology services, in which the
physician has an ownership or investment interest, or with which the physician
has entered into a compensation arrangement. The penalties for violating Stark
II include a prohibition on payment by these government programs and civil
penalties of as much as $15,000 for each violating referral and $100,000 for
participation in a "circumvention scheme." The Company believes that although it
will receive fees for technical services, it is not in a position to make or
influence referrals of patients. While the Company believes that the use of our
services by the Affiliated Physicians will not violate these laws, there are
legal issues associated with the ownership of shares in the Company by
physicians who refer patients to the Affiliated Physicians, and any such
referring physicians should obtain legal advice on that subject prior to
purchasing shares of the Company.
Federal regulatory and law enforcement authorities have recently increased
enforcement activities with respect to Medicare and Medicaid fraud and abuse
regulations and other reimbursement laws and rules, including laws and
regulations that govern our contemplated activities. There can be no assurance
that our contemplated activities will not be investigated, that claims will not
be made against the Company or that these increased enforcement activities will
not directly or indirectly have an adverse effect on our business, financial
condition and results of operation.
HEALTH CARE REFORM INITIATIVES
In addition to existing government health care regulation, there have been
numerous initiatives on the federal and state levels for comprehensive reforms
affecting the payment for and availability of health care services. The Company
believes that such initiatives will continue during the foreseeable future.
Certain aspects of these reforms as proposed in the past, such as further
reductions in Medicare and Medicaid payments and additional prohibitions on
physician ownership, directly or indirectly, of facilities to which they refer
patients, if adopted, could adversely affect the Company. Concern about the
potential effects of such reform measures has contributed to the volatility of
stock prices of many companies in health care and related industries and may
similarly affect the market price of the Common Stock.
38
<PAGE>
COMPLIANCE PROGRAM
With the assistance of our special health care regulatory counsel, the
Company intends to monitor compliance with federal and state laws and
regulations applicable to health care entities. The Company intends to conduct
or have its special health care regulatory counsel conduct periodic audits of
various aspects of its operations for compliance with such requirements.
INSURANCE LAWS AND REGULATION
Certain states have enacted statutes or adopted regulations affecting risk
assumption in the health care industry, including statutes and regulations that
subject any physician or physician network engaged in risk-based contracting to
applicable insurance laws and regulations, which may include, among other
things, laws and regulations providing for minimum capital requirements and
other safety and soundness requirements. The Company believes that it and the
Affiliated Physicians are currently in compliance with such insurance laws and
regulations. However, implementation of additional regulations or compliance
requirements could result in substantial costs to the Company and the Affiliated
Physicians. The inability to enter into capitated or other risk-sharing
arrangements or the cost of complying with certain applicable laws that would
permit expansion of our risk-based contracting activities could have a material
adverse effect on our business or financial condition.
COMPETITION
The Company's facilities will compete with other local radiology and
technical imaging service providers, including for profit and non-profit
hospitals and health systems, in the market served by the Company. The Company
believes that changes in governmental and private reimbursement policies and
other factors have resulted in increased competition among providers of medical
services to consumers and that cost, accessibility, quality and scope of
services provided are the principal factors that affect competition. There can
be no assurance that the Affiliated Physicians and the Company's facilities will
be able to compete effectively in the markets that they serve, which inability
to compete could adversely affect the Company.
The Imaging Center draws most of its patients from an area within an
approximately 50 mile radius from its office at 715 Williams Street in
Cumberland, Maryland. This drawing area includes Allegany County and parts of
Garrett and Washington counties in Western Maryland; parts of Bedford and
Somerset Counties in Southwestern Pennsylvania; and parts of Mineral, Hampshire,
and Grant counties in Northeastern West Virginia.
Numerous hospitals and physicians' offices in the area perform some or many
of the same imaging studies as The Imaging Center, but none performs as
comprehensive a set of examinations under one roof. Competition for imaging
studies is widespread.
The Western Maryland Health System is composed of two hospitals in
Cumberland, Maryland, a Sacred Heart Hospital Campus and a Memorial Hospital
Campus. The two hospitals merged over the past two years, and there is currently
a redistribution taking place of various clinical departments being centered at
each facility. Both hospitals currently have duplication of diagnostic imaging
services, including CT, angiography, interventional procedures, ultrasound,
nuclear medicine, mammography, x-rays, and fluoroscopy. Sacred Heart has the
only radiation therapy unit in the area.
Both hospitals have several walk-in clinics in the surrounding area,
several of which perform diagnostic x-rays on-site. In addition, Sacred Heart
operates The Seton Diagnostic Center
39
<PAGE>
adjacent to the hospital. This is an outpatient imaging clinic which performs
mammograms, x-rays, ultrasound and nuclear medicine examinations.
Many local physicians' offices perform examinations in their offices,
particularly Orthopedists who have x-ray machines, and obstetric-gynecology
physicians who have ultrasound machines.
A number of smaller hospitals are located in our drawing area, including
Memorial Hospital of Bedford County, Pennsylvania; Somerset Memorial Hospital in
Somerset, Pennsylvania; Meyersdale Community Hospital in Meyersdale,
Pennsylvania; Potomac Valley Hospital in Keyser, West Virginia; Hampshire
Memorial Hospital in Romney, West Virginia; Grant Memorial Hospital in
Petersburg, West Virginia; and Garrett Memorial Hospital in Oakland, Maryland.
These facilities offer x-rays, ultrasound, nuclear medicine, mammograms, and CT.
Somerset also has MRI capability.
The only other MRI facility in the immediate Cumberland area is The
Cumberland Regional MRI Center, on Winchester Road in LaVale, Maryland. This
center has a contract with the local hospitals, so virtually all inpatient MRI
examinations are sent to this outpatient facility.
A Federal Prison and a Maryland State Prison are located in Cumberland.
Each has its own x-ray facility for inmates.
The Imaging Center Mobile X-Ray service is the only mobile service
operating directly from the immediate area. Precision X-Ray, located outside the
area, services several local nursing homes with a locally-based technologist.
LEGAL PROCEEDINGS
The Company is not a party to any suits or complaints relating to services
provided by the Company or the Affiliated Physicians, although there can be no
assurances that claims will not be asserted against the Company in the future.
REPORTS TO INVESTORS
Under Maryland law, the Company is required to prepare annually and submit
to the annual meeting of stockholders a full and complete statement of affairs
of the Company, including a balance sheet and a financial statement of
operations for the preceding fiscal year. Such statement is also required by law
to be available to all stockholders of the Company for inspection and copying.
Under Maryland law, stockholders are entitled to inspect and copy during usual
business hours our by-laws, minutes of the meetings of stockholders, annual
statements of affairs and voting trust agreements on file at our principal
office. Our shareholders are also entitled to obtain from the Company a
statement of each class of stock or other securities issued by the Company
during a specified period of not more than 12 months before the date of the
request, the consideration received per share, and the value of any
consideration other than money as set in a resolution of our board of directors.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Class B
Non-Voting Common Stock are being passed upon for the Company by Richard G.
McAlee, P.A.. Crofton, Maryland.
EXPERTS
40
<PAGE>
The PRO FORMA financial information concerning the Company contained in
this Prospectus has been prepared by management of the Company with the
assistance of Huber, Michaels & Company, Certified Public Accountants, based
upon past operations of F. Daniel Jackson, M.D., P.A. and related companies.
Such historical information was recalculated to take into account the creation
of the Company and the services it will perform for the Affiliated Physicians.
The PRO FORMA projections for the Company were prepared by management of the
Company with the assistance of Huber, Michaels & Company, Certified Public
Accountants, based upon management's estimates of future operations of the
Company. Such projections are strictly estimates and there is no assurance that
such projections constitute accurate predictions of future performance.
AVAILABLE INFORMATION ABOUT THE COMPANY
The Company has filed with the United States Securities and Exchange
Commission a registration statement on Form SB-1 under the Regulation SB issued
under the Securities Act of 1933 with respect to the shares offered under this
Prospectus. The Company has also filed with the Securities Commissioners of each
state in which the shares are offered for sale a Registration Statement on Form
U-1 under the Securities Act of each such state with respect to the shares
offered hereby. This Prospectus, which is a part of the Registration Statement,
does not contain all of the information set forth therein and the exhibits and
schedules filed with the Registration Statement. Prospective investors should
refer to the Registration Statement and the exhibits and schedules filed with it
for further information with respect to the Company and the shares. This
Prospectus contains summaries of the provisions of certain contracts, agreements
or any other documents which are not necessarily complete. Certain of these
contracts, agreements or documents may be filed as an exhibit to the
Registration Statement and prospective investors should refer to such exhibits
for a more complete description of those items.
A copy of the Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the following Regional Offices of the SEC: New York Regional
Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the Registration Statement and the exhibits and schedules thereto can
be obtained from the Public Reference Section of the SEC upon payment of
prescribed fees. The Commission maintains an Internet web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission.
Prior to filing the Registration Statement of which this Prospectus is a
part, the Company was not subject to any reporting requirements under the
Securities Exchange Act of 1934 or any state securities act. Following
effectiveness of the Registration Statement, the Company will not become subject
to the informational and periodic reporting requirements of the Exchange Act
until such time as it has more than 300 shareholders of record or becomes
eligible for listing on a securities exchange or other system for reporting
pricing information of securities, such as the over-the-counter bulletin board.
Until the Company becomes subject to these reporting requirements, information
which is required to be available to stockholders of the Company under Maryland
law is described under the heading "Reports to Investors."
41
<PAGE>
At the time the Company has more than 300 shareholders of record or
complies with the listing requirements of certain securities exchanges or
reporting services, it will be required to file informational and periodic
reports with the Securities and Exchange Commission. Such reports will be
available for inspection and copying at the public reference facilities and
other regional offices described above, as well as from the Commission's
website.
APPENDICES
A - PRO FORMA Financial Statements of the Company
B - PRO FORMA Financial Projections of the Company
C - Articles of Incorporation
42
<PAGE>
APPENDIX A
THE IMAGING CENTER, INC.
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1998 & JUNE 30, 1999
A-1
<PAGE>
TABLE OF CONTENTS
Page Number
ACCOUNTANTS' COMPILATION REPORT .................................... 1
PRO FORMA BALANCE SHEETS ........................................... 2
PRO FORMA STATEMENTS OF INCOME ..................................... 3
SELECTED NOTES TO FINANCIAL STATEMENTS.............................. 4-5
A-2
<PAGE>
Huber, Michaels & Company
Certified Public Accountants
110 S. Centre Street
Cumberland, MD 21502
PH (301) 722-4455 FAX (301) 722-5004
Board of Directors
The Imaging Center, Inc.
715 Williams Street
Cumberland, MD 21502
We have compiled the accompanying pro forma balance sheets of The Imaging
Center, Inc., as of December 31, 1998 and June 30, 1999 and the related pro
forma statements of income for the year and six months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them. Furthermore, even if the
Company had been operating the technical component of F. Daniel Jackson, MD, PA
independently, there will usually be differences between the pro forma and
actual results, because events and circumstances frequently do not occur as
expected, and those differences may be material. We have no responsibility to
update this report for events and circumstances occurring after the date of this
report.
Management has elected to omit selected disclosures and the statements of cash
flows and retained earnings required by generally accepted accounting
principles. If the omitted disclosures and statements of cash flows and retained
earnings were included in the financial statements, they might influence the
user's conclusions about the Company's financial position, results of
operations, and cash flows. Accordingly, these financial statements are not
designed for those who are not informed about such matters.
The accompanying compilation restates the historical compiled financial
statements of F. Daniel Jackson, MD, PA for the year ending December 31, 1998
and six months ending June 30, 1999 to reflect a scenario where the technical
component of F. Daniel Jackson, MD, PA is operating independently of all other
associated operations as will be done for the entity The Imaging Center, Inc.
Huber, Michaels & Company
Cumberland, Maryland
October 7, 1999
A-3
<PAGE>
<TABLE>
<CAPTION>
THE IMAGING CENTER, INC.
PRO FORMA BALANCE SHEETS
DECEMBER 31, 1998 & JUNE 30, 1999
Dec. 31,1998 June 30, 1999
----------------- ------------------
ASSETS
------
<S> <C> <C>
Current Assets
Cash $1,121,922 $1,384,168
Accounts Receivable 1,577,968 1,648,053
----------------- ------------------
Total Current Assets 2,699,890 3,032,221
----------------- ------------------
Property, Plant, & Equipment
Office Furniture and Equipment 74,004 78,651
Equipment 176,354 198,769
Vehicles 20,709 20,709
----------------- ------------------
271,067 298,129
Less Accumulated Depreciation (259,096) (263,702)
----------------- ------------------
Total P,P,&E 11,971 34,427
----------------- ------------------
Total Assets $2,711,861 $3,066,648
----------------- ------------------
LIABILITIES AND EQUITY
----------------------
Current Liabilities
Accounts Payable $22,868 $53,170
Accrued Liabilities 20,406 39,187
----------------- ------------------
Total Current Liabilities 43,274 92,357
Long-Term Debt
Deferred Income Taxes 629,225 637,835
----------------- ------------------
Total Liabilities 672,499 730,192
----------------- ------------------
Equity
Common Stock 180,000 180,000
Retained Earnings 1,859,362 2,156,456
----------------- ------------------
Total Equity 2,039,362 2,336,456
----------------- ------------------
Total Liabilities and Equity $2,711,861 $3,066,648
================= ==================
See the selected notes to the financial statements and the accountants' report.
A-4
<PAGE>
THE IMAGING CENTER, INC.
PRO FORMA STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998 & SIX MONTHS ENDED JUNE 30, 1999
Year Six Mo.
Ended Ended
1998 June 30, 1999
------------ -----------------
Total Revenue $3,008,835 $1,572,394
Total Operating Expenses 2,152,268 1,125,167
------------ -----------------
Operating Income 856,567 447,227
------------ -----------------
Other Income (Expenses)
Interest Income 10,994 3,895
Misc Income 2,350 326
Interest Expense (2,674) (1,305)
------------ -----------------
Total Other Income (Expense) 10,670 2,916
------------ -----------------
Income Before Inc. Taxes 867,237 450,143
Provision for Income Taxes (294,861) (153,049)
------------ -----------------
Net Income $572,376 $297,094
============ =================
See the selected notes to the financial statements and the accountants' report.
</TABLE>
A-5
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
The Imaging Center, Inc. will provide the technical component
of diagnostic medical services. The historical financial statements for
December 31, 1998 and the year then ended and June 30, 1999 and the six
months then ended have been restated to reflect a scenario in which the
technical component of F. Daniel Jackson, MD, PA is operating
independently of all other associated operations, as will be done for
the entity The Imaging Center, Inc. Revenues are restated to include
only the technical component of the original fees and expenses are
restated to exclude the professional component of the original expenses
(ex: physicians' fees and related expenditures). The professional
component of the services will continue to be provided in the future by
F. Daniel Jackson, MD, PA.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
--------------------
The Company utilizes the accrual method for financial
reporting purposes and the cash method for tax purposes. Under the
accrual method, revenues are recognized when earned and expenses are
recorded when incurred. The cash method recognizes revenues and
expenses when received or paid. This difference in reporting revenue
and expenses has resulted in the recognition of deferred income taxes
on the balance sheets presented.
Use of Estimates
----------------
Preparation of financial statements in accordance with
Generally Accepted Accounting Principles requires the use of estimates.
Management uses estimates to determine the value of receivables and the
useful lives of property and equipment. There will be differences in
the estimated and actual results, these differences could be material.
(See Accountants' Compilation Report)
-4-
A-6
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
Depreciation
------------
Fixed assets are recorded at cost and depreciated using
accelerated methods in accordance with Internal Revenue Service
regulations. The differences between the depreciation calculated using
Generally Accepted Accounting Principles and Internal Revenue Service
regulations is not material.
Depreciable lives within each classification are as follows:
Office furniture and equipment 5-7 years
Equipment 5-7 years
Vehicles. 3-5 years
Leasehold improvements 31.5 years
Other current assets
--------------------
Accounts receivable arise in the normal course of business.
These receivables are not collateralized.
NOTE 3 - OTHER LIABILITIES
Accrued liabilities represent items such as accrued salaries
and payroll taxes payable.
NOTE 4 - INCOME TAXES
Provisions for income taxes on pro forma pretax income have
been included using the graduated rates currently in effect for
corporations.
NOTE 5 - CONTINGENT LIABILITIES
The Company is aware of the possibilities of the "Year 2000"
issue and does use computer operated equipment in the daily activity of
the business. The Company has upgraded its equipment and software to
avoid this problem, however, there could be significant "Year 2000"
issues arise of which the Company is not aware or over which the
Company has no control, and these issues could have a serious effect on
the Company. The amount of any potential liability has not been
recorded and can not be reasonably determined.
(See Accountants' Compilation Report)
-5-
A-7
<PAGE>
APPENDIX B
THE IMAGING CENTER, INC.
FORECASTED FINANCIAL STATEMENTS
FOR THE NEXT THREE YEARS
JUNE 30, 2000, TO JUNE 30, 2002
B-1
<PAGE>
TABLE OF CONTENTS
Page No.
ACCOUNTANTS' REPORT
....................................................................... 1
FORECASTED BALANCE SHEETS ............................................. 2
STATEMENTS OF FORECASTED OPERATIONS ................................... 3
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING
POLICIES............................................................... 4-6
B-2
<PAGE>
Board of Directors
The Imaging Center, Inc.
715 Williams Street
Cumberland, MD 21502
We have compiled the accompanying forecasted balance sheets and related
statements of forecasted operations of The Imaging Center, Inc. for the three
years, June 30, 2000, to June 30, 2002, in accordance with standards established
by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of a forecast information
that is the representation of management and does not include evaluation of the
support for the assumptions underlying the forecast. We have not examined the
forecasts and, accordingly, do not express an opinion or any other form of
assurance on the accompanying statements or assumptions. Furthermore, there will
usually be differences between the forecasted and actual results, because events
and circumstances frequently do not occur as expected, and those differences may
be material. We have no responsibility to update this report for events and
circumstances occurring after the date of this report.
Management has elected to omit the statement of cash flows required by generally
accepted accounting principles. If the omitted statement was included in the
financial statements, it might influence the user's conclusions about our
financial position, results of operations, and cash flows. Accordingly, these
financial statements are not designed for those who are not informed about such
matters.
Cumberland, Maryland
June 29, 1999
B-3
<PAGE>
<TABLE>
<CAPTION>
THE IMAGING CENTER, INC.
FORECASTED BALANCE SHEETS
JUNE 30, 2000, TO 2002
2000 2001 2002
------------------ ------------------ ------------------
<S> <C> <C> <C>
ASSETS
------
Current Assets
Cash $2,111,640 $3,491,712 $4,337,820
Accounts Receivable 1,781,020 1,905,691 2,039,089
------------------ ------------------ ------------------
Total Current Assets 3,892,660 5,397,403 6,376,909
------------------ ------------------ ------------------
Property, Plant, & Equipment
Office Furniture and Equipment 4,015,919 4,015,919 4,015,919
Less Accumulated Depreciation (803,184) (2,088,278) (2,859,335)
------------------ ------------------ ------------------
Total P,P,&E 3,212,735 1,927,641 1,156,584
------------------ ------------------ ------------------
Total Assets $7,105,395 $7,325,044 $7,533,493
------------------ ------------------ ------------------
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $50,000 $28,945 $29,813
Accrued Liabilities 55,000 49,216 50,692
Accrued Pension 59,111 88,666 132,999
Current Portion of Lease 619,230 780,168 853,354
------------------ ------------------ ------------------
Total Current Liabilities 783,341 946,995 1,066,858
------------------ ------------------ ------------------
Long-Term Debt
Deferred Income Taxes 344,627 406,746 460,478
Lease Payable 3,128,446 2,348,278 1,494,924
------------------ ------------------ ------------------
Total Long-Term Debt 3,473,073 2,755,024 1,955,402
------------------ ------------------ ------------------
Total Liabilities 4,256,414 3,702,019 3,022,260
------------------ ------------------ ------------------
Equity
Common Stock 2,180,000 2,180,000 2,180,000
Retained Earnings 668,981 1,443,025 2,331,233
------------------ ------------------ ------------------
Total Equity 2,848,981 3,623,025 4,511,233
------------------ ------------------ ------------------
Total Liabilities and Equity $7,105,395 $7,325,044 $7,533,493
------------------ ------------------ ------------------
See the notes to the financial statements and the accountants' report.
B-4
<PAGE>
THE IMAGING CENTER, INC.
STATEMENTS OF FORECASTED OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000, TO 2002
2000 2001 2002
---------------- ---------------- ----------------
Total Revenue $3,219,453 $3,444,815 $3,685,952
Total Operating Expenses 1,905,382 2,036,278 2,178,050
---------------- ---------------- ----------------
Operating Income 1,314,071 1,408,537 1,507,902
---------------- ---------------- ----------------
Other Income (Expenses)
Interest Income 11,324 11,664 12,013
Misc Income 2,421 2,493 2,568
Interest Expense (314,208) (249,900) (176,713)
---------------- ---------------- ----------------
Total Other Income (Expense) (300,463) (235,743) (162,132)
---------------- ---------------- ----------------
Income Before Inc. Taxes 1,013,608 1,172,794 1,345,770
Provision for Income Taxes (344,627) (398,750) (457,562)
---------------- ---------------- ----------------
Net Income 668,981 774,044 888,208
Beginning Retained Earnings 0 668,981 1,443,025
---------------- ---------------- ----------------
Ending Retained Earnings $668,981 $1,443,025 $2,331,233
---------------- ---------------- ----------------
</TABLE>
See the notes to the financial statements and the accountants' report.
B-5
<PAGE>
THE IMAGING CENTER, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING
POLICIES
NOTE A - NATURE OF THE FORECASTS
These financial forecasts present, to the best of management's
knowledge and belief, the Company's expected financial position and
result of operations for the forecasted periods. Accordingly, the
forecasts reflect its judgement as of June 29, 1999, the date of these
forecasts, of the expected conditions and its expected course of
action. The assumptions disclosed herein are those that management
believes are significant to the forecasts. There will usually be
differences between the forecasted and actual results, because events
and circumstances frequently do not occur as expected, and those
differences may be material.
NOTE B - NATURE OF OPERATIONS DURING THE FORECAST PERIOD
Operations are forecasted to reflect the technical component
of the diagnostic medical services previously provided by F. Daniel
Jackson, MD, PA. The forecast anticipates 1,000,000 shares of
non-voting common stock will be sold in the first year at $2.00 per
share through a public offering.
NOTE C - REVENUES
The accompanying forecasts are based on 70% of the total fees
charged representing the technical component of the diagnostic services
to be provided. The total fees charged are based on the numbers of
studies previously provided by F. Daniel Jackson, MD, PA. The revenues
are forecasted to increase 7% a year.
NOTE D - EXPENSES
The accompanying forecasts base expenses on those previously
incurred by F. Daniel Jackson, MD, PA, which had been providing both
the technical and professional components for the services provided.
The Imaging Center, Inc. will be providing the technical component,
with F. Daniel Jackson, MD, PA continuing to provide the professional
component. The expenses forecast include only those associated with the
technical component. Expenses are forecast to increase 3% annually.
( See Accountants' Report)
-4-
B-6
<PAGE>
THE IMAGING CENTER, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES
NOTE E - EQUIPMENT LEASES
The Company will lease equipment and vehicles from three
sources : GE Healthcare Services, Imaging Associates of Cumberland,
Inc.(a related party), and Value Healthcare, Inc (a related party).
These leases have been recorded as capital leases and each have a term
of 60 months. The lease with GE Healthcare for equipment has an early
purchase option after 57 months for 33% of the original equipment cost
of the equipment or $939,856. The leases for equipment with Imaging
Associates of Cumberland, Inc. and Value Healthcare, Inc. may be
renegotiated at any time, but not more than once in any calendar year.
The Company also leases a building from Imaging Associates of
Cumberland, Inc.(a related party) with a 60 month term for $70,020 a
year. The lease is automatically renewed unless written notice is given
to end the lease. Rent on the building will be increased to $89,280 per
year if the lease is renewed after the initial five years.
All leases with related parties will not exceed market rates
that would be obtained with unrelated entities. The lease payments to
the related parties total $342,120 annually.
The following is a schedule of future minimum lease payments
required under the above leases as of July 1, 1999.
Year ending, June 30, Amount
--------------------- ------
2000 $ 915,828
2001 915,828
2002 915,828
2003 915,828
2004 915,828
-------
$4,579,140
The following is a schedule of the long-term debt under the
capital leases for the equipment and vehicles under the above leases as
of July 1, 1999.
Year ending, June 30, Amount
--------------------- ------
2000 $ 619,230
2001 780,168
2002 853,354
2003 933,405
2004 561,519
-------
$3,747,676
(See Accountants' Report)
-5-
B-7
<PAGE>
THE IMAGING CENTER, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS AND ACCOUNTING POLICIES
NOTE F - INCOME TAXES
Provisions for income taxes on forecasted pretax income have
been included using the graduated rates currently in effect for
corporations. The Company utilizes the accrual method for financial
reporting purposes and the cash method for tax purposes. Under the
accrual method, revenues are recognized when earned and expenses are
recorded when incurred. The cash method recognizes revenues and
expenses when received or paid. This difference in reporting revenues
and expenses has resulted in the recognition of deferred income taxes
on the balance sheets presented.
NOTE G - CONTINGENT LIABILITIES
The Company is aware of the possibilities of the "Year 2000"
issue and does use computer operated equipment in the daily activity of
the business. The Company has upgraded its equipment and software to
avoid this problem, however, there could be significant "Year 2000"
issues arise of which the Company is not aware or over which the
Company has no control, and these issues could have a serious effect on
the Company. The amount of any potential liability has not been
recorded and can not be reasonably determined.
(See Accountants' Report)
B-8
<PAGE>
APPENDIX C
ARTICLES OF INCORPORATION
ARTICLES OF INCORPORATION
THE IMAGING CENTER, INC.
------------------------
THIS IS TO CERTIFY THAT:
FIRST: I, the undersigned, F. Daniel Jackson, M.D., 715 Williams Street,
Post Office Box 1692, Cumberland, Maryland 21502, being at least eighteen (18)
years of age, do hereby form a corporation under the general laws of the State
of Maryland by the execution and filing of these Articles of Incorporation.
SECOND: The name of the Corporation is The Imaging Center, Inc.
THIRD: The purposes for which the Corporation is formed are as follows:
(a) To purchase, lease or otherwise acquire, hold, develop, improve,
mortgage, sell, exchange, let or in any manner encumber or dispose of property
of every nature and description, including real, personal, mixed and/or
intangible, wherever situated.
(b) To generally engage in the business of operating a medical imaging
center and medical office building, as well as to generally engage in any and
all other activities incidental thereto or which may be necessary or convenient
in connection therewith.
(c) To apply for, obtain, purchase or otherwise acquire, any licenses,
copyrights, patents, permissions and the like which might be used for any of the
purposes of the Corporation, and to use, exercise and develop such licenses, and
to sell and otherwise deal with such licenses.
(d) To loan, or advance money with or without security, without limits as
to amount; to borrow or raise money for any purposes of the Corporation and to
issue bonds, debentures, notes, securities or other obligations of any nature
and in any manner permitted by law, for money so borrowed in payment for
property purchased, or for any other lawful consideration, and to secure the
payment thereof and the interest thereon, by mortgage upon or pledge or
conveyance or assignment in trust of, the whole or any part of the property of
the Corporation real, personal, mixed and/or intangible, including contract
rights, whether at the time owned or thereafter acquired; and to sell, pledge,
or otherwise dispose of such bonds, notes, or other obligations of the
Corporation for its corporate purposes.
(e) To carry on any of the businesses herein enumerated for itself, or for
account of others, or through others for its own account, and to carry on any
other business which may be deemed by it to be calculated, directly or
indirectly, to effectuate or facilitate the
C-1
<PAGE>
transaction of the objects or businesses stated herein, or any of them, or any
part thereof, or to enhance the value of its property, business or rights.
The foregoing enumeration of the purposes, objects and business of the
Corporation is made in furtherance, and not in limitation, of the powers
conferred upon the Corporation by law, and is not intended, by the mention of
any particular purposes, object or business, in any manner to limit or restrict
the generality of any other purpose, object or business mentioned, or to limit
or restrict any of the powers of the Corporation.
The Corporation is hereby authorized to engage in any other lawful activity
for which corporations may be organized under the Corporations and Associations
Article of the Annotated Code of Maryland, as amended from time to time, and
under any successor and/or replacement to said Law.
FOURTH: The address of the principal office of the Corporation in Maryland
is 715 Williams Street, Post Office Box 1692, Cumberland, Maryland 21502. The
name and address of the resident agent of the Corporation in Maryland is F.
Daniel Jackson, M.D., 715 Williams Street, Post Office Box 1692, Cumberland,
Maryland 21502. Said resident agent is an adult citizen of Maryland and
presently resides therein.
FIFTH: The total number of shares of capital stock that the Corporation has
authority to issue is TEN MILLION (10,000,000) shares, all having a par value of
$1.00 per share, which shall be divided into ONE THOUSAND (1,000) shares of
Class A Voting Common Stock with a par value of $1.00 per share and NINE
MILLION, NINE HUNDRED NINETY-NINE THOUSAND (9,999,000) shares of Class B
Non-Voting Common Stock with a par value of $1.00 per share. The aggregate par
value of all the shares of all classes is ten million dollars ($10,000,000).
The following is a description of each class of stock of the Corporation
including the voting powers of each class:
(a) Each outstanding share of Class A Voting Common Stock shall
be entitled to one (1) vote on each matter submitted to a vote at a meeting of
the stockholders. The holders of the shares of the Class A Voting Common Stock
shall have the exclusive right to vote on any and all matters for which the
stockholders of the Corporation shall have the right to vote.
(b) THE HOLDERS OF THE SHARES OF THE CLASS B NON-VOTING COMMON
STOCK SHALL NOT HAVE ANY RIGHT TO VOTE FOR OR ELECT THE DIRECTORS OF THE
CORPORATION NOR SHALL THE HOLDERS OF THE SHARES OF THE CLASS B NON-VOTING COMMON
STOCK HAVE THE RIGHT TO VOTE ON ANY OTHER MATTER SUBMITTED TO A VOTE AT ANY
MEETING OF THE STOCKHOLDERS, UNLESS OTHERWISE REQUIRED BY THE MARYLAND GENERAL
CORPORATION LAW, AND IN SUCH CASE, ONLY TO THE EXTENT SUCH REQUIREMENT IS
UNMODIFIABLE OR UNWAIVERABLE BY THESE ARTICLES OF INCORPORATION. The holders of
the shares of the Class B Non-
C-2
<PAGE>
Voting Common Stock shall be entitled to receive notice of the meetings of the
stockholders but shall not be entitled to vote on any matters submitted at such
meetings.
All classes of stock of the Corporation are identical in all other
respects.
WITH RESPECT TO EVERY CLASS OF COMMON STOCK OF THE CORPORATION (CLASS A
VOTING COMMON STOCK AND CLASS B NON-VOTING COMMON STOCK), THE STOCKHOLDERS OF
THE CORPORATION SHALL HAVE NO PREEMPTIVE RIGHTS WITH RESPECT TO SALE BY THE
CORPORATION OF ANY ADDITIONAL SHARES OF COMMON STOCK WHETHER IN THE CLASS OF
STOCK IN WHICH THE STOCKHOLDER OWNS STOCK, OR OTHERWISE, AND REGARDLESS OF THE
PURPOSE FOR SALE OF SUCH COMMON STOCK.
SIXTH: The total number of directors of the Corporation may be fixed and
thereafter increased or decreased pursuant to the By-Laws of the Corporation,
but shall never be less than the number of stockholders of the Corporation if
there are less than three (3) stockholders, and the names of the director who
shall act until the First Annual Meeting of the Stockholders, or until his
successors are duly chosen (and qualified) by the holders of the Class A Voting
Common Stock is F. Daniel Jackson.
SEVENTH: The duration of the Corporation shall be perpetual.
EIGHTH: The following provisions are hereby adopted for the purposes of
defining, limiting, and regulating the powers of the Corporation and of the
directors and stockholders thereof:
(a) The Board of Directors of the Corporation is hereby empowered to direct
issuance from time to time of shares of its stock of any class, and convertible
securities, whether now or hereafter authorized by the stockholders, for such
consideration as may be deemed advisable by the Board of Directors and without
any further authorization other than initial authorization in these Articles of
Incorporation and without any further action by the stockholders.
(b) The Board of Directors may classify or reclassify any unissued shares
by fixing or altering in any one or more respects, from time to time before
issuance of such shares, the preferences, rights, voting powers, restrictions
and qualifications of, the dividends on, the times and prices of redemption, and
the conversion rights, of such shares. The Board of Directors may further
promulgate any rules, regulations and/or restrictions which the Board of
Directors may deem appropriate or necessary from time to time with respect to
the administration of any meeting of the Corporation, including, by way of
example and not by way of limitation, the right to limit the periods of
discussion on any matter by any stockholder.
(c) Any director, individually, or any firm of which any director may be a
member, or any partnership, corporation or association of which any director may
be a partner,
C-3
<PAGE>
officer or director or in which any director may be interested as an owner or
holder of any amount of its capital stock, partnership interests or otherwise,
may be a party to, or may be pecuniarily or otherwise interested in, any
contracts or transactions of the Corporation, and in the absence of fraud no
contract or other transaction shall be thereby affected or invalidated;
PROVIDED, HOWEVER, that in the event that a director or any firm of which a
director is a member, or any partnership, corporation or association of which a
director may be a partner, officer or director or have a pecuniary interest is
so interested, such fact shall be disclosed to or shall have been known by the
Board of Directors of the Corporation or a majority thereof, and any director of
the Corporation who is also a partner, director or officer of or interested in
such other partnership, corporation or association, or who, or the firm of which
he is a member, is so interested, may be counted in determining the existence of
a quorum at the meeting of the Board of Directors of the Corporation which shall
authorize, ratify, or confirm any such contract or transaction, and may vote
thereat to authorize, ratify, or confirm any such contract or transaction; AND
FURTHER, PROVIDED, HOWEVER, in such event such contract or transaction must also
be approved by a majority vote of the disinterested directors even if the
disinterested directors shall constitute less than a quorum.
(d) The Corporation reserves the right to amend its Articles of
Incorporation so that such amendment may alter the contract rights, as expressly
set forth in the Articles of Incorporation, of any outstanding stock, even
though such rights are substantially adversely affected, and any objecting
stockholder whose rights may or shall be thereby substantially adversely
affected shall not be entitled to the same rights as an objecting stockholder in
the case of a consolidation or merger; and, as long as all stockholders of a
class are treated equally, then even though an amendment may substantially
adversely affect them, no cause of action at law or equity shall accrue on
account of such amendment.
The enumeration and definition of a particular power of the Board of
Directors, the stockholders and/or the Corporation included in the foregoing
shall in no way be limited or restricted by reference to or inference from the
terms of any other clause of this or any other article of the charter of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit any powers otherwise conferred under the General Laws of the
State of Maryland now or hereafter in force.
NINTH: In each case where the Corporations and Associations Article of the
Annotated Code of Maryland, as hereafter amended from time to time, requires an
affirmative vote of the stockholders in excess of a simple majority of such
stockholders before a particular action may be taken by the Corporation, such
affirmative stockholder vote requirement shall be lowered to an affirmative vote
of a majority of the stockholders of the Class A Voting Common Stock of the
Corporation. This provision in the Articles is meant to reduce such stockholder
voting requirement to a simple majority for each of the following corporate
actions (but shall not be limited to): charter amendments, consolidation,
merger, transfer of assets, partial liquidation, and dissolution.
C-4
<PAGE>
TENTH: To the fullest extent permitted by Maryland General Corporation
Law, as applicable from time to time, no person who at any time was or is a
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages. No amendment of these
Articles of Incorporation or repeal of any of its provisions shall limit or
eliminate any of the benefits provided to the directors and officers under this
Article with respect to any act or omission that occurred prior to such
amendment or repeal.
ELEVENTH: The Corporation shall indemnify, to the fullest extent
permitted by Maryland General Corporation Law, as applicable from time to time,
all persons who at any time were or are directors or officers of the Corporation
for any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administration or investigative) related to any action alleged
to have been taken or omitted in such capacity as a director or an officer. The
Corporation shall pay or reimburse all reasonable expenses incurred by a present
or former director or officer of the Corporation in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in which the present or former
director or officer is a party, in advance of the final disposition of the
proceeding, to the fullest extent permitted by, and in accordance with the
applicable requirements of, Maryland General Corporation Law, as applicable from
time to time. The Corporation may indemnify any other persons permitted but not
required to be indemnified by Maryland General Corporation Law, as applicable
from time to time, if to the extent indemnification is authorized and determined
to be appropriate in each case in accordance with the applicable law by the
Board of Directors, the stockholders or special legal counsel appointed by the
Board of Directors. The Corporation shall not be required to purchase or
maintain insurance on behalf of any present or former directors or officers or
other persons required or permitted to be indemnified. No amendment of these
Articles of Incorporation or repeal of any of its provisions shall limit or
eliminate any of the benefits provided to the directors or officers under this
Article with respect to any act or omission that occurred prior to such
amendment or repeal.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledge the same to be my act on this 23rd day of April, 1999.
WITNESS:
/s/ Richard G. McAlee /s/ F. Daniel Jackson, M.D. (SEAL)
F. Daniel Jackson, M.D.
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<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.
ITEM 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
There are no indemnification provisions for directors, officers and controlling
persons of the Company specifically dealing with liability under the Securities
Act.
The following general provisions are applicable to indemnification of directors,
officers and controlling persons:
The Company's Articles of Incorporation and Bylaws authorize the Company to
indemnify its directors and officers to the full extent permitted by Maryland
law.
Sec. 2-418 of the Corporations and Associations Article of the Annotated Code of
Maryland provides the authority to indemnify directors, officers, employees and
agents of the issuer. The statute permits corporations to indemnify an
individual made a party to a proceeding against judgments, penalties, fines,
settlements and reasonable expenses actually incurred (including attorneys'
fees) by reason of service in that capacity unless it is established that: (a)
the act or omission was material to the matter giving rise to the proceeding and
was committed in bad faith or was the result of active and deliberate
dishonesty; or (b) the person received an improper personal benefit in money,
property or services, or (c) in the case of any criminal proceeding, the person
had reasonable cause to believe that the act or omission was unlawful.
Further, Sec. 2-418(d) of the Corporations and Associations Article of the
Annotated Code of Maryland provides for mandatory indemnification for a director
who was successful, on the merits or otherwise, in the defense of any proceeding
shall be indemnified against reasonable expenses incurred by the director in
connection with the proceeding. Sec. 2-418(j) of the Corporations and
Associations Article of the Annotated Code of Maryland provides for certain
mandatory and permissive indemnification for corporate officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to Maryland law and the Company's Articles of
Incorporation and Bylaws, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
- ------------------------------------------------------ ----------------------
Securities and Exchange Commission Fees $556.00
- ------------------------------------------------------ ----------------------
State Securities Filing Fees
- ------------------------------------------------------ ----------------------
Printing Fees
- ------------------------------------------------------ ----------------------
Legal and Accounting Fees
- ------------------------------------------------------ ----------------------
Escrow Agent Fees
- ------------------------------------------------------ ----------------------
TOTAL $
- ------------------------------------------------------ ----------------------
* All amounts are estimated other than the Securities and Exchange Commission
filing fee.
ITEM 3. UNDERTAKINGS.
Rule 415 Offering. The issuer is registering securities under Rule 415 of the
Securities Act; accordingly, the issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
6
<PAGE>
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR
At the time of its incorporation, the Company sold to its President and
controlling shareholder, F. Daniel Jackson, M.D., 100 shares of its Class A
Voting Common Stock and 8,999,000 shares of its Class B Non-Voting Common Stock
at the price of $0.02 per share for an aggregate cost of $179,982. The company
believes that such transaction qualified as a transaction by an issuer not
involving a public offering pursuant to Section 4(2) of the Securities Act of
1933.
<TABLE>
<CAPTION>
ITEM 5. INDEX TO EXHIBITS
<S> <C>
Exhibit 2.1 Issuer's Articles of Incorporation
Exhibit 2.1 Bylaws of Issuer
Exhibit 4 Subscription Agreement
Exhibit 6.1 Commercial Lease Agreement, dated July 1, 1999, between Imaging
Associates of Cumberland, Inc. and The Imaging Center, Inc.
Exhibit 6.2 Equipment Lease, dated July 1, 1999, between Imaging Associates of Cumberland, Inc. and The
Imaging Center, Inc.
Exhibit 6.3 Equipment Lease, dated July 1, 1999, between Value Healthcare, Inc. and The Imaging Center, Inc.
Exhibit 6.4 Agreement for Technical Services, dated October 14, 1999, between The Imaging Center, Inc. and
F. Daniel Jackson, MD., P.A.
Exhibit 9 Escrow Agreement
Exhibit 10.1 Consent of Huber, Michaels & Company, Certified Public Accountants
Exhibit 11 Opinion of Richard G. McAlee P.A.
ITEM 6. DESCRIPTION OF EXHIBITS
Exhibit 2.1 Issuer's Articles of Incorporation
Exhibit 2.1 Bylaws of Issuer
Exhibit 4 Subscription Agreement
Exhibit 6.1 Commercial Lease Agreement, dated July 1, 1999, between Imaging Associates of Cumberland, Inc.
and The Imaging Center, Inc.
7
<PAGE>
Exhibit 6.2 Equipment Lease, dated July 1, 1999, between Imaging Associates of Cumberland, Inc. and The
Imaging Center, Inc.
Exhibit 6.3 Equipment Lease, dated July 1, 1999, between Value Healthcare, Inc. and The Imaging Center, Inc.
Exhibit 6.4 Agreement for Technical Services, dated October 14, 1999, between The Imaging Center, Inc. and
F. Daniel Jackson, MD., P.A.
Exhibit 9 Escrow Agreement
Exhibit 10.1 Consent of Huber, Michaels & Company, Certified Public Accountants
EXHIBIT 11 Opinion of Richard G. McAlee P.A.
</TABLE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Cumberland, State of Maryland, on October 14, 1999.
The Imaging Center, Inc.
By: /s/ F. Daniel Jackson, M.D.
F. Daniel Jackson, M.D., President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
OFFICERS DIRECTORS
/s/ F. Daniel Jackson, M.D. /s/ F. Daniel Jackson, M.D.
F. Daniel Jackson, M.D., President F. Daniel Jackson, M.D.
Date: October 14, 1999 Date: October 14, 1999
/s/ Larry James Taylor /s/ Frederick J. Hill
Larry James Taylor, Vice President Frederick J. Hill
Date: October 14, 1999 Date: October 14, 1999
/s/ D. Jeanne Starkey /s/ James F. Scarpelli, Jr.
D. Jeanne Starkey, Treasurer James F. Scarpelli, Jr
Date: October 14, 1999 Date: October 14, 1999
/s/ Carolyn L. Hott
Carolyn L. Hott, Corporate Secretary
Date: October 14, 1999
8
<PAGE>
9
Exhibit 2.1 Issuer's Articles of Incorporation
Included as Appendix C to the Prospectus
10
Exhibit 2.1 Bylaws of Issuer
THE IMAGING CENTER, INC.
BYLAWS
------
ARTICLE I
---------
OFFICES
-------
Section 1. PRINCIPAL OFFICE. The principal office of the
corporation in the State of Maryland shall be located in 715 Williams Street,
Cumberland, Maryland 21502 or at any other place or places as the board of
directors may designate.
Section 2. ADDITIONAL OFFICES. The corporation may have
additional offices at such places as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held
at the principal office of the corporation or at such other place within the
United States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the
stockholders for the election of directors and the transaction of any business
within the powers of the corporation shall be held during the month of July in
each year on a date and at a time set by the board of directors, beginning with
the year 1999.
Section 3. SPECIAL MEETINGS. The president or board of
directors may call special meetings of the stockholders. Special meetings of
stockholders shall also be called by the secretary upon the written request of
the holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Such request shall state the purpose of
such meeting and the matters proposed to be acted on at such meeting. The
secretary shall inform such stockholders of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the corporation
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting. Unless requested by stockholders entitled to cast a
majority of all the votes entitled to be cast at such meeting, a special meeting
need not be called to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding twelve months.
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Section 4. NOTICE. Not less than ten nor more then 90 days
before each meeting of stockholders, the secretary shall give to each
stockholder entitled to vote at such meeting and to each stockholder not
entitled to vote who is entitled to notice of the meeting, written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by statute, the purpose for which the
meeting is called, either by mail or by presenting it to such stockholder
personally or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. No business shall be transacted at
a special meeting of stockholders except that specifically designated in the
notice. Any business of the corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business as is
required by statute to be stated in such notice.
Section 6. QUORUM. At any meeting of stockholders, the
presence in person or by proxy of stockholders entitled to cast a majority of
all the votes entitled to be cast at such meeting shall constitute a quorum; but
this section shall not affect any requirement under any statute or the charter
for the vote necessary for the adoption of any measure. If, however, such quorum
shall not be present at any meeting of the stockholders, the stockholders
entitled to vote at such meeting, present in person or by proxy, shall have
power to adjourn the meeting from time to time to a date not m ore than 120 days
after the original record date without notice other than announcement at the
meeting until such quorum shall be present. At such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 7. VOTING. A plurality of all votes cast at a meeting
of stockholders duly called and at which a quorum is present shall be sufficient
to elect a director. Each share of stock may be voted for as many individuals as
there are directors to be elected and for whose election the share is entitled
to be voted. A majority of the votes cast at a meeting of stockholders duly
called and at which a quorum is present shall be sufficient to approve any other
matter which may properly come before the meeting, unless more than a majority
of the votes cast is required by statute or by the charter. Unless otherwise
provided in the charter, each outstanding share of stock, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
Section 8. PROXIES.A stockholder may vote the shares of stock
owned of record by him, either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 9. VOTING OF SHARES BY CERTAIN HOLDERS. Shares
registered in the name of another corporation, if entitled to be voted, may be
voted by the president, a vice president or a proxy appointed by the president
or a vice president of such other corporation, unless some other person who has
been appointed to vote such shares pursuant to a bylaw or a resolution of the
board of directors of such other
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corporation presents a certified copy of such bylaw or resolution, in which case
such person may vote such shares. Any fiduciary may vote shares registered in
his name as such fiduciary, either in person or by proxy.
Shares of its own stock directly or indirectly owned by this
corporation shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding shares entitled to be voted at any
given time, unless they are held by it in a fiduciary capacity, in which case
they may be voted and shall be counted in determining the total number of
outstanding shares at any given time.
The board of directors may adopt by resolution a procedure by
which a stockholder may certify in writing to the corporation that any shares of
stock registered in the name of the stockholder are held for the account of a
specified person other than the stockholder who is eligible to be a stockholder
of the corporation. The resolution shall set forth the class of stockholders who
make the certification, the purpose for which the certification may be made, the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the stock transfer
books, the time after the record date or closing of the stock transfer books
within which the certification must be received by the corporation; and any
other provisions with respect to the procedure which the board of directors
considers necessary or desirable. On receipt of such certification, the person
specified in the certification shall be regarded as, for the purposes set forth
in the certification, the stockholder of record of the specified stock in place
of the stockholder who makes the certification.
Section 10. INSPECTORS. At any meeting of stockholders, the
chairman of the meeting may, or upon the request of any stockholder shall,
appoint one or more persons as inspectors for such meeting. Such inspectors
shall ascertain and report the number of shares represented at the meeting based
upon their determination of the validity and effect of proxies, count all votes,
report the results and perform such other acts as are proper to conduct the
election and voting with impartiality and fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by
him or by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be p rima facie evidence thereof.
Section 11. INFORMAL ACTION BY STOCKHOLDERS. Any action
required or permitted to be taken at a meeting of stockholders may be taken
without a meeting if a consent in writing, setting forth such action, is signed
by each stockholder entitled to vote on the matter and any other stockholder
entitled to notice of a meeting of stockholders (but not to vote there at) has
waived in writing any right to dissent from such action, and such consent and
waiver are filed with the minutes of proceedings of the stockholders.
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Section 12. VOTING BY BALLOT. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed under the direction of its board of directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be not less than the minimum number required
by the applicable provisions of the Maryland General Corporation Law and shall
not be more than 15. At any regular meeting or at any special meeting called for
that purpose, a majority of the entire board of directors may establish,
increase or decrease the number of directors, provided that the number thereof
shall never be less than the minimum number required by the Maryland General
Corporation Law, nor more than 15, and further provided that the tenure of
office of a director shall not be affected by any decrease in the number of
directors. Each director shall hold office until the next annual meeting of
stockholders and until his successor is elected and qualifies.
Section 3. ANNUAL AND REGULAR MEETINGS. The annual meeting of
the board of directors shall be held immediately after and at the same place as
the annual meeting of stockholders, no notice other than this bylaw being
necessary. The board of directors may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the board of directors without other notice than such
resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the president or by a majority
of the directors then in office. The person or persons authorized to call
special meetings of the board of directors may fix any place, either within or
without the State of Maryland, as the place for holding any special meeting of
the board of directors called by them.
Section 5. NOTICE. Notice of any special meeting shall be
given by written notice delivered personally, telecopied or mailed to each
director at his business or residence address. Personally delivered or telecopy
notices shall be given at least two days prior to the meeting. Notice by mail
shall be given at least five days prior to the meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail properly
addressed, with postage thereon prepaid. If given by telecopy, such notice shall
be deemed to be given when the telecopy is transmitted. Neither the business to
be transacted at, nor the purpose of, any annual, regular or special meeting of
the board of directors need be specified in the notice, unless specifically
required by statute.
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Section 6. QUORUM. A majority of the entire board of directors
shall constitute a quorum for transaction of business at any meeting of the
board of directors, provided that, if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
The directors present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors present at a
meeting at which a quorum is present shall be the action of the board of
directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. TELEPHONE MEETINGS. Members of the board of
directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required
or permitted to be taken at any meeting of the board of directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the board of directors.
Section 10. VACANCIES. Any vacancy on the board of directors
for any cause other than an increase in the number of directors may be filled by
a majority of the remaining directors, although such majority is less than a
quorum. Any vacancy on the board of directors by reason of an increase in the
number of directors may be filled by a majority vote of the entire board of
directors. A director elected by the board of directors to fill a vacancy shall
serve until the next annual meeting of stockholders and until his successor is
elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any
stated salary for their services as directors but, by resolution of the board of
directors, a fixed sum and expenses of attendance, if any, may be allowed to
directors for attendance at each annual, regular or special meeting of the board
of directors or of any committee thereof; but nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 12. REMOVAL OF DIRECTORS. The stockholders may, at any
time, remove any director, with or without cause, by the affirmative vote of a
majority of all the votes entitled to be cast on the matter and may elect a
successor to fill any resulting vacancy for the balance of the term of the
removed director.
ARTICLE IV
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COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The board of
directors may appoint from among its members an Executive Committee and other
committees, composed of two or more directors, to serve at the pleasure of the
board of directors.
Section 2. POWERS. The board of directors may delegate to
committees appointed under Section 1 of this Article any of the powers of the
board of directors, except as prohibited by law.
Section 3. MEETINGS. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a director to act in the place of such absent
member.
Section 4. TELEPHONE MEETINGS. Members of a committee of the
board of directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Participation in a meeting by
these means shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEE. Any action required
or permitted to be taken at any meeting of a committee of the board of directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the corporation
may consist of a chairman of the board, a vice chairman of the board, a
president, one or more vice presidents, a treasurer, one or more assistant
treasurers, a secretary, and one or more assistant secretaries. The officers of
the corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until his successor is elected and qualifies or until
his death, resignation or removal in the manner hereinafter provided. Any two or
more offices may be held by the same person. In its discretion, the board of
directors may leave unfilled any office except that of president, treasurer and
secretary. An individual who holds more than one office in a professional
corporation may act in more than one capacity to execute, acknowledge, or verify
any instrument required to be executed, acknowledged or
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verified by more than one officer. Election or appointment of an officer or
agent shall not of itself create contract rights between the corporation and
such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of
the corporation may be removed by the board of directors if in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the corporation may resign at any time by giving written
notice of his resignation to the board of directors, the chairman of the board,
the president or the secretary. Any resignation shall take effect at the time
specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. The acceptance of a resignation
shall not be necessary to make it effective unless otherwise stated in the
resignation.
Section 3. VACANCIES. A vacancy in any office may be filled by
the board of directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The board of directors may
designate a chief executive officer from among the elected officers who are
directors. The chief executive officer shall have responsibility for
implementation of the policies of the corporation, as determined by the board of
directors, and for the administration of the business affairs of the
corporation.
Section 5. CHIEF OPERATING OFFICER. The board of directors may
designate a chief operating officer from among the elected officers who are
directors. Said officer will have the responsibility and duties as set forth by
the board of directors or the chief executive officer.
Section 6. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The
chairman of the board shall preside over the meetings of the board of directors
and of the stockholders at which he shall be present. In the absence of the
chairman of the board, the vice chairman of the board shall preside at such
meetings at which he shall be present. The chairman of the board and the vice
chairman of the board shall, respectively, perform such other duties as may be
assigned to him or them by the board of directors.
Section 7. PRESIDENT. The president shall in general supervise
and control all of the business and affairs of the corporation. Unless the
president is not a member of the board of directors, in the absence of both the
chairman and vice chairman of the board, he shall preside at all meetings of the
board of directors and of the stockholders at which he shall be present. In the
absence of a designation of a chief executive officer by the board of directors,
the president shall be the chief executive officer and shall be ex officio a
member of all committees that may, from time to time, be constituted by the
board of directors. He may execute any deed, mortgage, bond, contract or other
instrument which the board of directors has authorized to be executed, except in
cases where the execution thereof shall be expressly delegated by the board of
directors or by these bylaws to some other officer or agent of the corporation
or shall be required by law to be otherwise executed; and in general shall
perform all duties incident to the
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office of president and such other duties as may be prescribed by the board of
directors from time to time.
Section 8. VICE PRESIDENTS. In the absence of the president or
in the event of a vacancy in such office, the vice president (or in the event
there be more than one vice p resident, the vice-presidents in the order
designated at the time of their election or, in the absence of any designation,
then in the order of their election) shall perform the duties of the president
and when so acting shall have all the powers of and be subject to all the
restrictions upon the president; and shall perform such other duties as from
time to time may be assigned to him by the president or by the board of
directors. The board of directors may designate one or more vice presidents as
executive vice president or as vice president for particular areas of
responsibility.
Section 9. SECRETARY. The secretary shall (a) keep the minutes
of the proceedings of the stockholders, the board of directors and committees of
the board of directors in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of these
bylaws or as required by law; (c) be custodian of the corporate records and of
the seal of the corporation; (d) keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such stockholder;
(e) have general charge of the stock transfer books of the corporation; and (f)
in general perform such other duties as from time to time may be assigned to him
by the president or by the board of directors.
Section 10. TREASURER. The treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and board of directors, at the
regular meetings of the board of directors or whenever they may require it, an
account of all his transactions as treasurer and of the financial condition of
the corporation.
If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, all books, papers,
vouchers, moneys and other property of whatever kind in h is possession or under
his control belonging to the corporation.
Section 11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president
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or the board of directors. The assistant treasurers shall, if required by the
board of directors, give bonds for the faithful performance of their duties in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors.
Section 12. ANNUAL REPORT. The president or other executive
officer of the corporation shall prepare or cause to be prepared annually a full
and correct statement of the affairs of the corporation, including a balance
sheet and a statement of the results of operations for the preceding fiscal
year, which shall be submitted at the annual meeting of the stockholders and
filed within 20 days thereafter at the principal office of the corporation in
the State of Maryland.
Section 13. SALARIES. The salaries of the officers shall be
fixed from time to time by the board of directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The board of directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the corporation and such authority
may be general or confined to specific instances.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time to time
be determined by the board of directors.
Section 3. DEPOSITS. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the board of
directors may designate.
ARTICLE VII
SHARES OF STOCK
Section 1. CERTIFICATES OF STOCK. Each stockholder shall be
entitled to a certificate or certificates which shall represent and certify the
number of shares of each class of stock held by him in the corporation. Each
certificate shall be signed by the president or a vice president and
countersigned by the secretary or an assistant secretary or the treasurer or an
assistant treasurer and may be sealed with the corporate seal. The signatures
may be either manual or facsimile. Certificates shall be consecutively numbered;
and if the corporation shall,
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from time to time, issue several classes of stock, each class may have its own
number series. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. Each certificate
representing stock which is restricted as to its transferability or voting
powers, which is preferred or limited as to its dividends or as to its share of
the assets upon liquidation or which is redeemable at the option of the
corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. In lieu of such statement or summary, the corporation may set forth
upon the face or back of the certificate a statement that the corporation will
furnish to any stockholder, upon request and without charge, a full statement of
such information.
Section 2. TRANSFERS OF STOCK. A stockholder of a professional
corporation may not sell or transfer his stock in the corporation except to the
corporation or to another individual eligible to be a stockholder of the
corporation. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate of stock duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Maryland.
Section 3. LOST CERTIFICATE. The board of directors may direct
a new certificate to be issued in place of any certificate previously issued by
the corporation alleged to have been lost, stolen or destroyed upon the marking
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing the issuance of a new
certificate, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or his legal representative to advertise the same in such
manner as it shall require and/or to give bond, with sufficient surety, to the
corporation to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
The board of directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days, and in the case of a meeting of stockholders not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders is to be held or taken.
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In lieu of fixing a record date, the board of directors may
provide that the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are
not closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the board of directors, declaring the dividend or allotment of rights, is
adopted.
When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 5. STOCK LEDGER. The corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate stock ledger containing the name and address of each
stockholder and the number of shares of stock of each class held by such
stockholder.
ARTICLE VIII
ACCOUNTING YEAR
The board of directors shall have the power, from time to
time, to fix the accounting year of the corporation by a duly adopted
resolution.
ARTICLE IX
DIVIDENDS
Section 1. DECLARATION. Dividends upon the shares of stock of
the corporation may be declared by the board of directors, subject to the
provisions of law and the charter. Dividends may be paid in cash, property or
shares of the corporation, subject to the provisions of law and the charter.
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Section 2. CONTINGENCIES. Before payment of any dividends,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the board of directors may from time to time, in
its absolute discretion, think proper as a reserve fund for contingencies, for
equalizing dividends, for repairing or maintaining any property of the
corporation or for such other purpose as the board of directors shall determine
to be in the best interest of the corporation, and the board of directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
SEAL
Section 1. SEAL. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the words
"Incorporated Maryland." The board of directors may authorize one or more
duplicate seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the corporation is required
to place its corporate seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place the word "(SEAL)" adjacent to the signature of the person authorized to
execute the document on behalf of the corporation.
ARTICLE XI
INDEMNIFICATION
To the maximum extent permitted by Maryland law in effect from
time to time, the corporation shall indemnify, and shall pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to, (i) any
individual who is a present or former director or officer of the corporation or
(ii) any individual who serves or has served another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director or officer of such corporation or as a partner or trustee of such
partnership, joint venture, trust or employee benefit plan at the request of the
corporation. The corporation may, with the approval of its board of directors,
provide such indemnification and advancement of expenses to a person who served
a predecessor of the corporation in any of the capacities described in (i) or
(ii) above and to any employee or agent of the corporation or a predecessor of
the corporation.
Neither the amendment nor repeal of this Section, nor the
adoption or amendment of any other provision of the bylaws or charter of the
corporation i inconsistent with this Section, shall apply to or affect in any
respect the applicability of the preceding paragraph with respect to any act or
failure to act which occurred prior to such amendment, repeal or adoption.
ARTICLE XII
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WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
charter or bylaws of the corporation or pursuant to applicable law, a waiver
thereof in writing, signed by the person or per sons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE XIII
AMENDMENT OF BYLAWS
Section 1. BY DIRECTORS. The board of directors shall have the
power to adopt, alter or repeal any bylaws of the corporation and to make new
bylaws, except that the board of directors shall not alter or repeal this
Section or any bylaws made by the stockholders.
Section 2. BY STOCKHOLDERS. The stockholders shall have the
power to adopt, alter or repeal any bylaws of the corporation and to make new
bylaws.
The foregoing are certified as the bylaws of the corporation
adopted by the board of directors on July 8, 1999.
------------------------
Carolyn Hott, Secretary
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Exhibit 4 Subscription Agreement
THE IMAGING CENTER, INC.
715 WILLIAMS STREET
P. O. BOX 1705
CUMBERLAND, MD 21501-1705
TELEPHONE: 301-759-3410
SUBSCRIPTION AGREEMENT
INSTRUCTIONS
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1. PLEASE PROVIDE ALL REQUESTED INFORMATION AND SIGN THIS AGREEMENT IN THE
SPACE PROVIDED BELOW. ANY OMISSION MAY RESULT IN THIS FORM BEING RETURNED
TO YOU FOR COMPLETION.
2. RETURN THIS SUBSCRIPTION AGREEMENT AND YOUR CHECK (OR A CERTIFIED OR
CASHIER'S CHECK) FOR THE TOTAL PURCHASE PRICE FOR THE SHARES BEING
PURCHASED BY YOU TO THE IMAGING CENTER, INC. AT THE ABOVE ADDRESS. YOUR
CHECK SHOULD BE PAYABLE TO "THE IMAGING CENTER, INC."
3. ANY QUESTIONS SHOULD BE DIRECTED TO F. DANIEL JACKSON, M.D. AT THE ABOVE
ADDRESS OR TELEPHONE NUMBER. 4. THIS IS A LEGAL DOCUMENT AND ONCE EXECUTED
AND DELIVERED BY YOU TO THE COMPANY WILL BE BINDING UPON YOU. IF YOU HAVE
ANY QUESTIONS ABOUT THE LEGAL EFFECT OR NATURE OF THIS DOCUMENT, YOU
SHOULD CONSULT A QUALIFIED ATTORNEY.
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PLEASE COMPLETE ALL OF THE FOLLOWING:
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PURCHASER INFORMATION (COMPLETE ALL UNSHADED BLANKS)
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Name: NAME(S) IN WHICH SHARES
ARE TO BE REGISTERED.
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Address:
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Telephone:
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State of Residence:
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Social Security or Employer Identification Number:
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Number of Shares I Want (NOT LESS THAN 100 NOR
to Purchase: MORE THAN 1,000 SHARES.)
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Price Per Share: x $2.00
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Total Purchase Price (No.
Shares x Price)
$-----------
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PURCHASE OF COMMON STOCK. I agree to purchase shares of the Class B
Non-Voting Common Stock, $1.00 par value (the "Shares") of The Imaging Center,
Inc. (the "Company" or "you") in the amount and for the price described above.
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Attached to this agreement is my check (or a certified or cashier's check)
for the Total Purchase Price for the Shares being purchased by me, made payable
to "The Imaging Center, Inc." The Company will promptly deposit these funds into
the Escrow Account maintained at ______________.
I understand that:
o The Company may, in its sole and absolute discretion, accept or
reject this subscription and the subscription will not be binding
until accepted by the Company in writing.
o The Shares I am purchasing will only be issued upon acceptance by
the Company and upon satisfaction of the terms and conditions of
this letter.
o My subscription may be cancelled and my funds will be returned
without interest in the event the Company does not accept my
subscription on or before ______, 1999 (unless the offering is
extended).
MY REPRESENTATIONS. I understand that the offering and sale of the Shares
is registered under the Securities Act of 1933 and various state securities laws
and that the Company and its advisors will rely on my representations in this
letter to comply with these laws. Accordingly, I represent and warrant to the
Company and agree as follows:
o All information about me in this letter is true and correct.
o I have received and have reviewed the Company's Prospectus dated
________, 1999.
o I have had a reasonable opportunity to ask questions of and
receive answers from a person or persons acting on behalf of the
Company concerning this investment, including the terms and
conditions of this offering, and all such questions have been
answered to my full satisfaction.
o I have reached the age of majority, have adequate means of
providing for my current needs and personal contingencies, am able
to bear the substantial economic risks of an investment in the
Shares for an indefinite period of time, have no need for
liquidity in such an investment and, at the present time, could
afford a complete loss of such investment.
o Within 5 days after receipt of a request from you, I will provide
additional information and execute any documents as you may
require to comply with any and all laws applicable to the Company.
o All representations or statements made by me to the Company in
connection with my purchase of the Shares shall be true and
correct in all respects on and as of the date of delivery of the
Shares to me and will continue in effect after delivery of the
Shares to me.
o If this agreement is executed by a corporation, partnership,
limited liability entity, trust, unincorporated association or
other legal entity (the "Entity"), the Entity represents, warrants
and agrees that:
> all references in this agreement to "I" or "me" and any
similar references are to the Entity;
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> the person signing this agreement on behalf of the Entity has
full power and authority to bind the Entity;
> the Entity full legal power and authority to enter into this
agreement and to purchase the Shares; and
> this agreement has been duly authorized, executed and
delivered by the Entity and is binding upon the Entity.
INDEMNIFICATION. I will indemnify and hold harmless the Company and it
officers, directors, agents, employees and affiliates against any and all loss,
liability, claim or damage, (including attorney's fees and disbursements)
together with all costs and expenses which may arise from or be based upon any
false representation or warranty made by me or my failure to comply with any
representation, warranty, covenant or agreement made by me in connection with my
purchase of the Shares.
I hereby acknowledge and agree that:
o IRREVOCABILITY. My purchase of the shares is irrevocable and I may
not cancel, terminate or revoke this subscription or any of my
agreements made in this letter.
o BINDING EFFECT. My obligations under this agreement shall survive
my death or disability and shall bind my heirs, executor,
administrators, successors, legal representatives and assigns.
o MULTIPLE PURCHASERS. If this Subscription Agreement is signed by
more than one person, their obligations shall be joint and
several, and their agreements, representations, warranties and
acknowledgments contained in this agreement are binding upon each
of them and their heirs, executors, administrators, successors,
legal representatives and assigns.
o MODIFICATION. Neither this Agreement nor any of its provisions may
be waived, modified, discharged or terminated other than by a
further written agreement signed by the party granting any waiver,
modification, discharge or termination.
o NOTICES. Any notice or other communication between the Company and
me shall be sent by mail or delivered to the address appearing in
this agreement for the person to whom the notice or communication
is sent.
o COUNTERPARTS. This Subscription Agreement may be executed on
separate signature pages or in any number of counterparts, and
this agreement, so signed, shall be binding on all of us,
notwithstanding that all signatures do not appear on one
agreement.
o ENTIRE AGREEMENT. This agreement contains all agreements between
us regarding the purchase of the Shares, except as otherwise
stated in this agreement.
o SEVERABILITY. Each provision of this agreement is intended to be
severable from every other provision, and if any portion of this
agreement is invalid or illegal, the rest of this agreement will
remain in effect and binding upon us.
o ASSIGNMENT. This agreement may not be transferred assigned by me
except as may be provided above.
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o APPLICABLE LAW. This agreement shall be governed by and construed
under laws of the State of Maryland.
Dated: ______________________
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INDIVIDUAL SUBSCRIBER(S): ENTITY SUBSCRIBER:
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[Entity Name]
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Signature of Purchaser By: __________________________________
Name:________________________________
Title:_________________________________
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Signature of Purchaser
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PURCHASE ACCEPTED FOR _________ SHARES:
THE IMAGING CENTER, INC.
By: ________________________________
F. Daniel Jackson, M.D., President
Date: ___________________________
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Exhibit 6.1 Commercial Lease Agreement, dated July 1, 1999, between Imaging
Associates of Cumberland, Inc. and The Imaging Center, Inc.
COMMERCIAL LEASE AGREEMENT
This Commercial Lease Agreement ("Lease") is made and effective JULY 1, 1999, by
and between IMAGING ASSOCIATES OF CUMBERLAND, INC., a Maryland Corporation
("Landlord") and THE IMAGING CENTER, INC., A MARYLAND CORPORATION ("Tenant").
Landlord is the owner of land and improvements commonly known and numbered as
715 Williams Street, Cumberland, MD and legally described as follows (the
"Building"): The legal description of the building on Exhibit A attached hereto
is incorporated herein by this reference.
Landlord makes available for lease the Building housing The Imaging Center, Inc.
(the "Leased Premises").
Landlord desires to lease the Leased Premises to Tenant, and Tenant desires to
lease the Leased Premises from Landlord for the term, at the rental and upon the
covenants, conditions and provisions herein set forth.
THEREFORE, in consideration of the mutual promises herein, contained and other
good and valuable consideration, it is agreed:
1. TERM.
A. Landlord hereby leases the Leased Premises to Tenant, and Tenant hereby
leases the same from Landlord, for an "Initial Term" beginning JULY 1, 1999 and
ending JUNE 30, 2004. This lease can be renegotiated at any time, by mutual
consent of both parties, but no more than once in each calendar year.
B. Tenant may renew the Lease for one extended term of five ( 5 ) years. The
lease shall automatically renew for a second five ( 5 ) year term unless Tenant
gives written notice to Landlord not less than ninety (90) days prior to the
expiration of the Initial Term. The renewal term shall be at the rental set
forth below and otherwise upon the same convenants, conditions and provisions as
provided in this Lease.
2. RENTAL.
A. Tenant shall pay to Landlord during the Initial Term rental of seventy
thousand twenty dollars ( $ 70,020.00 ) per year, payable in installments of
five thousand eight hundred thirty-five dollars ( $ 5,835.00 ) per month. Each
installment payment shall be due in advance on the first day of each calendar
month during the lease term to Landlord at P.O. Box 818, Cumberland, MD 21502 or
at such other place designated by written notice from Landlord or Tenant. In the
event of any late payment, Landlord may elect to allow interest to accrue at the
rate of one percent ( 1% ) per month. Tenant shall also pledge to Landlord as a
"Security Deposit" all collectible accounts receivable of The Imaging
Center,Inc., before any other expenses of The Corporation are paid, on demand by
Landlord.
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B. The rental for any renewal lease term, if created as permitted under this
Lease, shall be eighty-nine thousand two hundred eighty dollars ( $ 89,280.00 )
per year payable in installments of seven thousand four hundred forty dollars (
$ 7,440.00 ) per month.
3. USE
The Leased Premises may be used and occupied by Tenant for any lawful purpose
which complies with applicable zoning ordinances. Notwithstanding the forgoing,
Tenant shall not use the Leased Premises for the purposes of storing,
manufacturing or selling any explosives, flammables or other inherently
dangerous substance, chemical, thing or device.
4. SUBLEASE AND ASSIGNMENT.
Tenant shall have the right without Landlord's consent, to assign this Lease to
a corporation with which Tenant may merge or consolidate, to any subsidiary of
Tenant, to any corporation under common control with Tenant, or to a purchaser
of substantially all of Tenant's assets. Except as set forth above, Tenant shall
not sublease all or any part of the Leased Premises, or assign this Lease in
whole or in part without Landlord's consent, such consent not to be unreasonably
withheld or delayed.
5. REPAIRS.
During the Lease term, Tenant shall make, at Tenant's expense, all necessary
repairs to the Leased Premises. Repairs shall include such items as routine
repairs of floors, walls, ceilings, and other parts of the Leased Premises
damaged or worn through normal occupancy, including major mechanical systems or
the roof.
6. ALTERATIONS AND IMPROVEMENTS.
Tenant, at Tenant's expense, shall have the right following Landlord's consent
to remodel, redecorate, and make additions, improvements and replacements of and
to all or any part of the Leased Premises from time to time as Tenant may deem
desirable, provided the same are made in a workmanlike manner and utilizing good
quality materials. Tenant shall have the right to place and install personal
property, trade fixtures, equipment and other temporary installations in and
upon the Leased Premises, and fasten the same to the premises. All personal
property, equipment, machinery, trade fixtures and temporary installations,
whether acquired by Tenant at the commencement of the Lease term or placed or
installed on the Leased Premises by Tenant thereafter, shall remain Tenant's
property free and clear of any claim by Landlord. Tenant shall have the right to
remove the same at any time during the term of this Lease provided that all
damage to the Leased Premises caused by such removal shall be repaired by Tenant
at Tenant's expense.
7. PROPERTY TAXES.
Landlord shall pay, prior to delinquency, all general real estate taxes and
installments of special assessments coming due during the Lease term on the
Leased Premises, and all personal property taxes with respect to Landlord's
personal property, if any, on the Leased Premises. Tenant shall be responsible
for paying all personal property taxes with respect to Tenant's personal
property at the Leased Premises.
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8. INSURANCE.
A. If the Leased Premises or any other party of the Building is damaged by fire
or other casualty resulting from any act or negligence of Tenant or any of
Tenant's agents, employees or invitees, rent shall not be diminished or abated
while such damages are under repair, and Tenant shall be responsible for the
costs of repair not covered by insurance.
B. Tenant shall maintain fire and extended coverage insurance on the Building
and the Leased Premises in such amounts as approved by Landlord. Tenant shall be
responsible, at its expense, for fire and extended coverage insurance on all of
its personal property, including removable trade fixtures, located in the Leased
Premises.
C. Tenant shall, at its own expense, maintain a policy or policies of
comprehensive general liability insurance with respect to the activities in the
Building with the premiums thereon fully paid on or before due date, issued by
and binding upon some insurance company approved by Landlord, such insurance to
afford minimum protection of not less than $1,000,000 combined single limit
coverage of bodily injury, property damage or combination thereof. Landlord
shall be listed as an additional insured on Tenant's policy or policies of
comprehensive general liability insurance, and Tenant shall provide Landlord
with current Certificates of Insurance evidencing Tenant's compliance with this
Paragraph. Tenant shall obtain the agreement of Tenant's insurers to notify
Landlord that a policy is due to expire at least (10) days prior to such
expiration. Landlord shall not be required to maintain insurance against thefts
within the Leased Premises or the Building. Landlord will not be liable for any
adverse occurrence within, surrounding, or related to the property. All
liability for any such occurrence is solely the responsibility of Tenant.
9. UTILITIES.
Tenant shall pay all charges for water, sewer, gas, electricity, telephone and
other services and utilities used by Tenant on the Leased Premises during the
term of this Lease unless otherwise expressly agreed in writing by Landlord. In
the event that any utility or service provided to the Leased Premises is not
separately metered, Landlord shall submit the bill to Tenant, who shall pay such
amounts within fifteen (15) days of invoice. Tenant acknowledges that the Leased
Premises are designed to provide standard office use electrical facilities and
standard office lighting. Tenant shall not use any equipment or devices that
utilizes excessive electrical energy or which may, in Landlord's reasonable
opinion, overload the wiring or interfere with electrical services to other
tenants.
10. SIGNS.
Following Landlord's consent, Tenant shall have the right to place on the Leased
Premises, at locations selected by Tenant, any signs which are permitted by
applicable zoning ordinances and private restrictions. Landlord may refuse
consent to any proposed signage that is in Landlord's opinion too large,
deceptive, unattractive or otherwise inconsistent with or inappropriate to the
Leased Premises or use of any other tenant. Landlord shall assist and cooperate
with Tenant in obtaining any necessary permission from governmental authorities
or adjoining owners and occupants for Tenant to place or construct the foregoing
signs. Tenant shall repair all damage to
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the Leased Premises resulting from the removal of signs installed by Tenant.
11. ENTRY.
Landlord shall have the right to enter upon the Leased Premises at reasonable
hours to inspect the same, provided Landlord shall not thereby unreasonably
interfere with Tenant's business on the Leased Premises.
12. PARKING.
During the term of this Lease, Tenant shall have the non-exclusive use in common
with Landlord, other tenants of the Building, their guests and invitees, of the
non-reserved common automobile parking areas, driveways, and footways, subject
to rules and regulations for the use thereof as prescribed from time to time by
Landlord. Landlord reserves the right to designate parking areas within the
Building or in reasonable proximity thereto, for Tenant and Tenant's agents and
employees. Tenant shall provide Landlord with a list of all license numbers for
the cars owned by Tenant, its agents and employees. Separated structured
parking, if any, located about the Building is reserved for tenants of the
Building who rent such parking spaces. Tenant hereby leases from Landlord all
spaces in such structural parking area, such spaces to be on a first come-first
served basis. In consideration of the leasing to Tenant of such spaces, Tenant
shall pay a monthly rental of no charge per space throughout the term of the
Lease. Such rental shall be due and payable each month without demand at the
time herein set for the payment of other monthly rentals, in addition to such
other rentals.
13. BUILDING RULES.
Tenant will comply with the rules of the Building adopted and altered by
Landlord from time to time and will cause all of its agents, employees, invitees
and visitors to do so; all changes to such rules will be sent by Landlord to
Tenant in writing.
14. DAMAGE AND DESTRUCTION.
Subject to Section 8 A. above, if the Leased Premises or any part thereof or any
appurtenance thereto is so damaged by fire, casualty or structural defects that
the same cannot be used for Tenant's purposes, then Tenant shall have the
responsibility to repair the damage promptly, at Tenant's expense. In the event
of minor damage to any part of the Leased Premises, and if such damage does not
render the Leased Premises unusable for Tenant's purposes, Tenant shall promptly
repair such damage. Landlord shall not be liable for any adverse occurrences
resulting from strikes, governmental restrictions, inability to obtain necessary
materials or labor or other matters which are beyond the reasonable control of
Landlord. Tenant shall not be relieved from paying rent and other charges during
any portion of the Lease term that the Leased Premises are inoperable or unfit
for occupancy, or use, in whole or in part, for Tenant's purposes. The
provisions of this paragraph extend not only to the matters aforesaid, but also
to any occurrence which is beyond Tenant's reasonable control and which renders
the Leased Premises, or any appurtenance thereto, inoperable or unfit for
occupancy or use, in whole or in part, for Tenant's purposes.
15. DEFAULT.
If default shall at any time be made by Tenant in the payment of rent when due
to Landlord as
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herein provided, and if said default shall continue for fifteen (15) days, or if
default shall be made in any of the other covenants or conditions to be kept,
observed and performed by Tenant, and such default shall continue for thirty
(30) days without correction thereof then having been commenced and thereafter
diligently prosecuted, Landlord may declare the term of this Lease ended and
terminated by giving Tenant written notice of such intention, and if possession
of the Leased Premises is not surrendered, Landlord may reenter said premises.
Landlord shall have, in addition to the remedy above provided, any other right
or remedy available to Landlord on account of any Tenant default, either in law
or equity.
16. QUIET POSSESSION.
Landlord covenants and warrants that upon performance by Tenant of its
obligations hereunder, Landlord will keep and maintain Tenant in exclusive,
quiet, peaceable and undisturbed and uninterrupted possession of the Leased
Premises during the term of this Lease.
17. CONDEMNATION.
If any legally, constituted authority condemns the Building or such part thereof
which shall make the Leased Premises unsuitable for leasing, this Lease shall
cease when the public authority takes possession, and Landlord and Tenant shall
account for rental as of that date. Such termination shall be without prejudice
to the rights of either party to recover compensation from the condemning
authority for any loss or damage caused by the condemnation. Neither party shall
have any rights in or to any award made to the other by the condemning
authority.
18. SUBORDINATION.
Tenant accepts this Lease subject and subordinate to any mortgage, deed of trust
or other lien presently existing or hereafter arising upon the Leased Premises,
or upon the Building and to any renewals, refinancing and extensions thereof,
but Tenant agrees that any such mortgagee shall have the right at any time to
subordinate such mortgage, deed of trust or other lien to this Lease on such
terms and subject to such conditions as such mortgagee may deem appropriate in
its discretion. Landlord is hereby irrevocably vested with full power and
authority to subordinate this Lease to any mortgage, deed of trust or other lien
now existing or hereafter placed upon the Leased Premises of the Building, and
Tenant agrees upon demand to execute such further instruments subordinating this
Lease or attorning to the holder of any such liens as Landlord may request. In
the event that Tenant should fail to execute any instrument of subordination
herein required to be executed by Tenant promptly as requested, Tenant hereby
irrevocably constitutes Landlord as its attorney-in-fact to execute such
instrument in Tenant's name, place and stead, it being agreed that such power is
one coupled with an interest. Tenant agrees that it will from time to time upon
request by Landlord execute and deliver to such persons as Landlord shall
request a statement in recordable form certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as so modified), stating the dates to which rent and
other charges payable under this Lease have been paid, stating that Landlord is
not in default hereunder (or if Tenant alleges a default stating the nature of
such alleged default) and further stating such other matters as Landlord shall
reasonably require.
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19. SECURITY DEPOSIT.
The Security Deposit equal to one month's rent shall be held by Landlord without
liability for interest and as security for the performance by Tenant of Tenant's
covenants and obligations under this Lease, it being expressly understood that
the Security Deposit shall not be considered an advance payment of rental or a
measure of Landlord's damages in case of default by Tenant. Unless otherwise
provided by mandatory non-waivable law or regulation, Landlord may commingle the
Security Deposit with Landlord's other funds. Landlord may, from time to time,
without prejudice to any other remedy, use the Security Deposit to the extent
necessary to make good any arrearages of rent or to satisfy any other covenant
or obligation of Tenant hereunder. Following any such application of the
Security Deposit, Tenant shall pay to Landlord on demand the amount so applied
in order to restore the Security Deposit to its original amount. If Landlord
transfers its interest in the Premises during the term of this Lease, Landlord
may assign the Security Deposit to the transferee and thereafter shall have no
further liability for the return of such Security Deposit.
20. NOTICE.
Any notice required or permitted under this Lease shall be deemed sufficiently
given or served if sent by United States certified mail, return receipt
requested, addressed as follows:
If to Landlord to:
Imaging Associates of Cumberland, Inc.
P.O. Box 818
Cumberland, MD 21502
If to Tenant to:
The Imaging Center, Inc.
715 WILLIAMS ST.
Cumberland, MD 21502
Landlord and Tenant shall each have the right from time to time to change the
place notice is to be given under this paragraph by written notice thereof to
the other party.
21. BROKERS.
Tenant represents that Tenant was not shown the Premises by any real estate
broker or agent and that Tenant has not otherwise engaged in, any activity which
could form the basis for a claim for real estate commission, brokerage fee,
finder's fee or other similar charge, in connection with this Lease.
22. WAIVER.
No waiver of any default of Landlord or Tenant hereunder shall be implied from
any omission to take any action on account of such default if such default
persists or is repeated, and no express waiver shall affect any default other
than the default specified in the express waiver and that only
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for the time and to the extent therein stated. One or more waivers by Landlord
or Tenant shall not be construed as a waiver of a subsequent breach of the same
covenant, term or condition.
23. MEMORANDUM OF LEASE.
The parties hereto contemplate that this Lease should not and shall not be filed
for record, but in lieu thereof, at the request of Landlord, Landlord and Tenant
shall execute a Memorandum of Lease to be recorded for the purpose of giving
record notice of the appropriate provisions of this Lease.
24. HEADINGS.
The headings used in this Lease are for convenience of the parties only and
shall not be considered in interpreting the meaning of any provision of this
Lease.
25. SUCCESSORS.
The provisions of this Lease shall extend to and be binding upon Landlord and
Tenant and their respective legal representatives, successors and assigns.
26. CONSENT.
Landlord shall not unreasonably withhold or delay its consent with respect to
any matter for which Landlord's consent is required or desirable under this
Lease.
27. COMPLIANCE WITH LAW.
Tenant shall comply with all laws, orders, ordinances and other public
requirements now or hereafter pertaining to Tenant's use of the Leased Premises.
Landlord shall comply with all laws, orders, ordinances and other public
requirements now or hereafter affecting the Leased Premises.
28. FINAL AGREEMENT.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year
first above written.
Imaging Associates of Cumberland, Inc. The Imaging Center, Inc.
By: ______________________________ By: _________________
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
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Exhibit 6.2 Equipment Lease, dated July 1, 1999, between Imaging Associates
of Cumberland, Inc. and The Imaging Center, Inc.
EQUIPMENT LEASE
THIS EQUIPMENT LEASE ("Lease") is made and effective July 1, 1999, by and
between IMAGING ASSOCIATES OF CUMBERLAND, INC., a Maryland Corporation,
("Lessor") and THE IMAGING CENTER,INC., A MARYLAND CORPORATION ("Lessee").
Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor,
certain tangible personal property.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereto agree as follows:
1. LEASE.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
following described equipment (the "Equipment"), located at 715 Williams Street,
Cumberland, Maryland.
A. ACUSON 128XP COLOR DOPPLER ULTRASOUND SYSTEM- SERIAL # 18681
B. ACUSON 128XP COLOR DOPPLER ULTRASOUND SYSTEM- SERIAL # 10372
C. ACUSON 128XP COLOR DOPPLER ULTRASOUND SYSTEM-SERIAL # 18676
D. 12-CHANNEL FUKUDA DENSHI EKG E. MEDFAX TRANSCRIPTION SYSTEM
F. IBM/LEXMARK OPTRA 4049 LASER PRINTER, 8MB RAM
G. 3 GEO TRACKERS
SERIAL # 2CNBJ136XT6921709
SERIAL # 2CNBJ1366T6916734
SERIAL # 2CNBJ1367T6916743
H. GE RADIOGRAPHIC/TOMOGRAPHY MACHINE
I. GE RADIOGRAPHIC/FLUOROSCOPY MACHINE
2. TERM.
The term of this Lease shall commence on JULY 1, 1999 and shall expire SIXTY (
60 ) MONTHS thereafter. This lease may be renegotiated at any time, by mutual
consent of both parties, but no more than once in any calendar year.
3. SHIPPING.
Lessee shall be responsible for shipping the Equipment to Lessee's premises.
4. RENT AND DEPOSIT.
A. The monthly rent for the Equipment shall be paid in advance in installments
of EIGHT THOUSAND ONE HUNDRED SEVENTY-FIVE DOLLARS ( $ 8,175.00 ) each month,
beginning on JULY 1, 1999 and on the first day of each succeeding month
throughout the term hereof, at P.O. Box 818 Cumberland, MD 21502, or at such
other place as Lessor may designate from time to time. Any
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installment payment not made by the tenth (10th) day of the month shall be
considered overdue and in addition to Lessor's other remedies, Lessor may levy a
late payment charge equal to one percent (1%) per month on any overdue amount.
Rent for any partial month shall be prorated.
B. Lessee shall pledge all collectible accounts receivable of The Imaging
Center, Inc. as security for full payment throughout the term of this lease.
5. USE.
Lessee shall use the Equipment in a careful and proper manner and shall comply
with and conform to all national, state, municipal, police and other laws,
ordinances and regulations in any way relating to the possession, use or
maintenance of the Equipment.
6. Limited Warranty.
Lessor warrants that the Equipment shall, at the commencement of the Lease term,
operate properly when used in routine circumstances for the purposes for which
it was designed. In the event of any breach of this warranty, Lessee's sole
remedy and Lessor's sole obligation shall be to repair the Equipment or to
replace the Equipment with a similar working item, at Lessor's option and
expense. LESSOR DISCLAIMS ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, EXCEPT THAT LESSOR WARRANTS THAT LESSOR HAS THE RIGHT
TO LEASE THE EQUIPMENT, AS PROVIDED IN THIS LEASE.
7. REPAIRS.
Lessee, at its own cost and expense, shall keep the Equipment in good repair,
condition and working order and shall furnish any and all service contracts,
parts, mechanisms and devices required to keep the Equipment in good mechanical
working order.
8. LOSS AND DAMAGE.
A. Lessee hereby assumes and shall bear the entire risk of loss and damage to
the Equipment from any and every cause whatsoever. No loss or damage to the
Equipment or any part thereof shall impair any obligation of Lessee under this
Lease which shall continue in full force and effect through the term of the
Lease.
B. In the event of loss or damage of any kind whatever to the Equipment, Lessee
shall, at Lessor's option: (i) Place the same in good repair, condition and
working order; or (ii) Replace the same with like equipment in good repair,
condition and working order; or (iii) Pay to Lessor the replacement cost of the
Equipment.
9. SURRENDER.
Upon the expiration or earlier termination of this Lease, Lessee shall return
the Equipment to Lessor in good repair, condition and working order, ordinary
wear and tear resulting from proper use thereof alone excepted, by delivering
the Equipment at Lessee's cost and expense to such place as Lessor shall specify
within the city or county in which the same was delivered to Lessee.
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10. INSURANCE.
Lessee shall procure and continuously maintain and pay for:
A. All risk insurance against loss of and damage to the Equipment for not less
than the full replacement value of the Equipment, naming Lessor as loss payee,
and;
B. Combined public liability and property damage insurance with limits as
approved by Lessor, naming Lessor as additionally named insured and a loss
payee.
The insurance shall be in such form and with such company or companies as shall
be reasonably acceptable to Lessor, shall provide at least thirty (30) days
advance written notice to Lessor of any cancellation, change or modification,
and shall provide primary coverage for the protection of Lessee and Lessor
without regard to any other coverage carried by Lessee or Lessor protecting
against similar risks. Lessee shall provide Lessor with an original policy or
certificate evidencing such insurance. Lessee hereby appoints Lessor as Lessee's
attorney in fact with power and authority to do all things, including, but not
limited to, making claims, receiving payments and endorsing documents, checks or
drafts necessary or advisable to secure payments due under any policy of
insurance required under this Agreement.
11. TAXES.
Lessee shall keep the Equipment free and clear of all levies, liens and
encumbrances. Lessee, or Lessor at Lessee's expense, shall report, pay and
discharge when due all license and registration fees, assessments, sales, use
and property taxes, gross receipts, taxes arising out of receipts from use or
operation of the Equipment, and other taxes, fees and governmental charges
similar or dissimilar to the foregoing, together with any penalties or interest
thereon, imposed by any state, federal or local government or any agency, or
department thereof, upon the Equipment or the purchase, use, operation or
leasing of the Equipment or otherwise in any manner with respect thereto and
whether or not the same shall be assessed against or in the name of Lessor or
Lessee. However, Lessee shall not be required to pay or discharge any such tax
or assessment so long as it shall, in good faith and by appropriate legal
proceedings, contest the validity thereof in any reasonable manner which will
not affect or endanger the title and interest of Lessor to the Equipment;
provided, Lessee shall reimburse Lessor for any damages or expenses resulting
from such failure to pay or discharge.
12. LESSOR'S PAYMENT.
In case of failure of Lessee to procure or maintain said insurance or to pay
fees, assessments, charges and taxes, all as specified in this Lease, Lessor
shall have the right, but shall not be obligated, to effect such insurance, or
pay said fees, assignments, charges and taxes, as the case may be. In that
event, the cost thereof shall be repayable to Lessor with the next installment
of rent, and failure to repay the same shall carry with it the same
consequences, including interest at ten percent (10%) per annum, as failure to
pay any installment of rent.
13. INDEMNITY.
Lessee shall indemnify Lessor against, and hold Lessor harmless from, any and
all claims,
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actions, suits, proceedings, costs, expenses, damages and liabilities, including
reasonable attorney's fees and costs, arising out of, connected with, or
resulting from Lessee's use of the Equipment, including without limitation the
manufacture, selection, delivery, possession, use, operation, or return of the
Equipment.
14. DEFAULT.
If Lessee fails to pay any rent or other amount herein provided within ten (10)
days after the same is due and payable, or if Lessee fails to observe, keep or
perform any other provision of this Lease required to be observed, kept or
performed by Lessee, Lessor shall have the right to exercise any one or more of
the following remedies:
A. To declare the entire amount of rent hereunder immediately due and payable
without notice or demand to Lessee.
B. To sue for and recover all rents, and other payments, then accrued or
thereafter accruing.
C. To take possession of the Equipment, without demand or notice, wherever same
may be located, without any court order or other process of law. Lessee hereby
waives any and all damages occasioned by such taking of possession.
D. To terminate this Lease.
E. To pursue any other remedy at law or in equity.
Notwithstanding any repossession or any other action which Lessor may take,
Lessee shall be and remain liable for the full performance of all obligations on
the part of the Lessee to be performed under this Lease. All of Lessor's
remedies are cumulative, and may be exercised concurrently or separately.
15. BANKRUPTCY.
Neither this Lease nor any interest therein is assignable or transferable by
operation of law. If any proceeding under the Bankruptcy Act, as amended, is
commenced by or against the Lessee, or if the Lessee is adjudged insolvent, or
if Lessee makes any assignment for the benefit of his creditors, or if a writ of
attachment or execution is levied on the Equipment and is not released or
satisfied within ten (10) days thereafter, or if a receiver is appointed in any
proceeding or action to which the Lessee is a party with authority to take
possession or control of the Equipment, Lessor shall have and may exercise any
one or more of the remedies set forth in Section 14 hereof; and this Lease
shall, at the option of the Lessor, without notice, immediately terminate and
shall not be treated as an asset of Lessee after the exercise of said option.
16. OWNERSHIP.
The Equipment is, and shall at all times be and remain, the sole and exclusive
property of Lessor; and the Lessee shall have no right, title or interest
therein or thereto except as expressly set forth in this Lease.
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17. ADDITIONAL DOCUMENTS.
If Lessor shall so request, Lessee shall execute and deliver to Lessor such
documents as Lessor shall deem necessary or desirable for purposes of recording
or filing to protect the interest of Lessor in the Equipment including, but not
limited to a UCC financing statement.
18. ENTIRE AGREEMENT.
This instrument constitutes the entire agreement between the parties on the
subject matter hereof and it shall not be amended, altered or changed except by
a further writing signed by the parties hereto.
19. NOTICES.
Service of all notices under this Agreement shall be sufficient if given
personally or mailed certified, return receipt requested, postage prepaid, at
the address hereinafter set forth, or to such address as such party may provide
in writing from time to time.
If to Lessor:
Imaging Associates, Inc.
P.O. Box 818
Cumberland, MD 21502
If to Lessee:
The Imaging Center, Inc.
715 Williams St.
Cumberland, MD 21502
20. ASSIGNMENT.
Lessee shall not assign this Lease or its interest in the Equipment without the
prior written consent of Lessor.
21. GOVERNING LAW.
This Lease shall be construed and enforced according to laws of the State of
Maryland.
22. HEADINGS.
Headings used in this Lease are provided for convenience only and shall not be
used to construe meaning or intent.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
Imaging Associates of Cumberland, Inc. The Imaging Center, Inc.
By: ______________________________ By: _______________________
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
39
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40
Exhibit 6.3 Equipment Lease, dated July 1, 1999, between Value Healthcare,
Inc. and The Imaging Center, Inc.
EQUIPMENT LEASE
THIS EQUIPMENT LEASE ("Lease") is made and effective JULY 1, 1999, by and
between VALUE HEALTHCARE, INC., a Maryland Corporation, ("Lessor") and THE
IMAGING CENTER, INC., a Maryland Corporation ("Lessee").
Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor,
certain tangible personal property.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereto agree as follows:
1. LEASE.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
following described equipment (the "Equipment"), located at 715 Williams Street,
Cumberland, Maryland :
GENERAL ELECTRIC SYNERGY HELICAL CT SYSTEM-SERIAL # 346847YM7 MEDRAD CT
INJECTOR.
2. TERM.
The term of this Lease shall commence on JULY 1, 1999 and shall expire SIXTY (
60 ) months thereafter.
3. SHIPPING.
Lessee shall be responsible for shipping the Equipment to Lessee's premises.
4. RENT AND DEPOSIT.
A. The monthly rent for the Equipment shall be paid in advance in installments
of FOURTEEN thousand five hundred dollars ( $ 14,500.00 ) each month, beginning
on July 1, 1999 and on the first day of each succeeding month throughout the
term hereof, at P.O. Box 717, Cumberland, MD 21502, or at such other place as
Lessor may designate from time to time. Any installment payment not made by the
tenth (10th) day of the month shall be considered overdue and in addition to
Lessor's other remedies, Lessor may levy a late payment charge equal to one
percent (1%) per month on any overdue amount. Rent for any partial month shall
be prorated.
B. Lessee shall pledge all collectible Accounts Receivable of The Imaging
Center,Inc. as security for full payment throughout the term of this lease.
5. USE.
Lessee shall use the Equipment in a careful and proper manner and shall comply
with and conform to all national, state, municipal, police and other laws,
ordinances and regulations in any way relating to the possession, use or
maintenance of the Equipment.
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6. Limited Warranty.
Lessor warrants that the Equipment shall, at the commencement of the Lease term,
operate properly when used in routine circumstances for the purposes for which
it was designed. In the event of any breach of this warranty, Lessee's sole
remedy and Lessor's sole obligation shall be to repair the Equipment or to
replace the Equipment with a similar working item, at Lessor's option and
expense. LESSOR DISCLAIMS ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, EXCEPT THAT LESSOR WARRANTS THAT LESSOR HAS THE RIGHT
TO LEASE THE EQUIPMENT, AS PROVIDED IN THIS LEASE.
7. REPAIRS.
Lessee, at its own cost and expense, shall keep the Equipment in good repair,
condition and working order and shall furnish any and all service contracts,
parts, mechanisms and devices required to keep the Equipment in good mechanical
working order.
8. LOSS AND DAMAGE.
A. Lessee hereby assumes and shall bear the entire risk of loss and damage to
the Equipment from any and every cause whatsoever. No loss or damage to the
Equipment or any part thereof shall impair any obligation of Lessee under this
Lease which shall continue in full force and effect through the term of the
Lease.
B. In the event of loss or damage of any kind whatever to the Equipment, Lessee
shall, at Lessor's option: (i) Place the same in good repair, condition and
working order; or (ii) Replace the same with like equipment in good repair,
condition and working order; or (iii) Pay to Lessor the replacement cost of the
Equipment.
9. SURRENDER.
Upon the expiration or earlier termination of this Lease, Lessee shall return
the Equipment to Lessor in good repair, condition and working order, ordinary
wear and tear resulting from proper use thereof alone excepted, by delivering
the Equipment at Lessee's cost and expense to such place as Lessor shall specify
within the city or county in which the same was delivered to Lessee.
10. INSURANCE.
Lessee shall procure and continuously maintain and pay for:
A. All risk insurance against loss of and damage to the Equipment for not less
than the full replacement value of the Equipment, naming Lessor as loss payee,
and;
B. Combined public liability and property damage insurance with limits as
approved by Lessor, naming Lessor as additionally named insured and a loss
payee.
The insurance shall be in such form and with such company or companies as shall
be reasonably acceptable to Lessor, shall provide at least thirty (30) days
advance written notice to Lessor of
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any cancellation, change or modification, and shall provide primary coverage for
the protection of Lessee and Lessor without regard to any other coverage carried
by Lessee or Lessor protecting against similar risks. Lessee shall provide
Lessor with an original policy or certificate evidencing such insurance. Lessee
hereby appoints Lessor as Lessee's attorney in fact with power and authority to
do all things, including, but not limited to, making claims, receiving payments
and endorsing documents, checks or drafts necessary or advisable to secure
payments due under any policy of insurance required under this Agreement.
11. TAXES.
Lessee shall keep the Equipment free and clear of all levies, liens and
encumbrances. Lessee, or Lessor at Lessee's expense, shall report, pay and
discharge when due all license and registration fees, assessments, sales, use
and property taxes, gross receipts, taxes arising out of receipts from use or
operation of the Equipment, and other taxes, fees and governmental charges
similar or dissimilar to the foregoing, together with any penalties or interest
thereon, imposed by any state, federal or local government or any agency, or
department thereof, upon the Equipment or the purchase, use, operation or
leasing of the Equipment or otherwise in any manner with respect thereto and
whether or not the same shall be assessed against or in the name of Lessor or
Lessee. However, Lessee shall not be required to pay or discharge any such tax
or assessment so long as it shall, in good faith and by appropriate legal
proceedings, contest the validity thereof in any reasonable manner which will
not affect or endanger the title and interest of Lessor to the Equipment;
provided, Lessee shall reimburse Lessor for any damages or expenses resulting
from such failure to pay or discharge.
12. LESSOR'S PAYMENT.
In case of failure of Lessee to procure or maintain said insurance or to pay
fees, assessments, charges and taxes, all as specified in this Lease, Lessor
shall have the right, but shall not be obligated, to effect such insurance, or
pay said fees, assignments, charges and taxes, as the case may be. In that
event, the cost thereof shall be repayable to Lessor with the next installment
of rent, and failure to repay the same shall carry with it the same
consequences, including interest at ten percent (10%) per annum, as failure to
pay any installment of rent.
13. INDEMNITY.
Lessee shall indemnify Lessor against, and hold Lessor harmless from, any and
all claims, actions, suits, proceedings, costs, expenses, damages and
liabilities, including reasonable attorney's fees and costs, arising out of,
connected with, or resulting from Lessee's use of the Equipment, including
without limitation the manufacture, selection, delivery, possession, use,
operation, or return of the Equipment.
14. DEFAULT.
If Lessee fails to pay any rent or other amount herein provided within ten (10)
days after the same is due and payable, or if Lessee fails to observe, keep or
perform any other provision of this Lease required to be observed, kept or
performed by Lessee, Lessor shall have the right to exercise any one or more of
the following remedies:
A. To declare the entire amount of rent hereunder immediately due and payable
without notice
43
<PAGE>
or demand to Lessee.
B. To sue for and recover all rents, and other payments, then accrued or
thereafter accruing.
C. To take possession of the Equipment, without demand or notice, wherever same
may be located, without any court order or other process of law. Lessee hereby
waives any and all damages occasioned by such taking of possession.
D. To terminate this Lease.
E. To pursue any other remedy at law or in equity.
Notwithstanding any repossession or any other action which Lessor may take,
Lessee shall be and remain liable for the full performance of all obligations on
the part of the Lessee to be performed under this Lease. All of Lessor's
remedies are cumulative, and may be exercised concurrently or separately.
15. BANKRUPTCY.
Neither this Lease nor any interest therein is assignable or transferable by
operation of law. If any proceeding under the Bankruptcy Act, as amended, is
commenced by or against the Lessee, or if the Lessee is adjudged insolvent, or
if Lessee makes any assignment for the benefit of his creditors, or if a writ of
attachment or execution is levied on the Equipment and is not released or
satisfied within ten (10) days thereafter, or if a receiver is appointed in any
proceeding or action to which the Lessee is a party with authority to take
possession or control of the Equipment, Lessor shall have and may exercise any
one or more of the remedies set forth in Section 14 hereof; and this Lease
shall, at the option of the Lessor, without notice, immediately terminate and
shall not be treated as an asset of Lessee after the exercise of said option.
16. OWNERSHIP.
The Equipment is, and shall at all times be and remain, the sole and exclusive
property of Lessor; and the Lessee shall have no right, title or interest
therein or thereto except as expressly set forth in this Lease.
17. ADDITIONAL DOCUMENTS.
If Lessor shall so request, Lessee shall execute and deliver to Lessor such
documents as Lessor shall deem necessary or desirable for purposes of recording
or filing to protect the interest of Lessor in the Equipment including, but not
limited to a UCC financing statement.
18. ENTIRE AGREEMENT.
This instrument constitutes the entire agreement between the parties on the
subject matter hereof and it shall not be amended, altered or changed except by
a further writing signed by the parties hereto.
19. NOTICES.
Service of all notices under this Agreement shall be sufficient if given
personally or mailed
44
<PAGE>
certified, return receipt requested, postage prepaid, at the address hereinafter
set forth, or to such address as such party may provide in writing from time to
time.
If to Lessor:
Value Healthcare, Inc.
201 Virginia Avenue, P.O. Box 717
Cumberland,MD 21502
If to Lessee:
The Imaging Center, Inc.
715 Williams St.
Cumberland, MD 21502
20. ASSIGNMENT.
Lessee shall not assign this Lease or its interest in the Equipment without the
prior written consent of Lessor.
21. GOVERNING LAW.
This Lease shall be construed and enforced according to laws of the State of
Maryland.
22. HEADINGS.
Headings used in this Lease are provided for convenience only and shall not be
used to construe meaning or intent.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.
Value Healthcare, Inc. The Imaging Center, Inc.
By: ______________________________ By: _____________________________
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
45
Exhibit 6.4 Agreement for Technical Services, dated October 14, 1999,
between The Imaging Center, Inc. and F. Daniel Jackson, MD.,
P.A.
AGREEMENT FOR TECHNICAL SERVICES
This Agreement, dated 14 October 1999, between THE IMAGING CENTER,
INC. ("TIC"), a Maryland corporation, and F. DANIEL JACKSON, M.D., P.A. ("PA"),
a Maryland professional corporation, provides:
BACKGROUND: PA is a professional corporation providing medical
diagnostic imaging services in Cumberland, Maryland. TIC is a recently-organized
corporation which is affiliated with PA by common ownership of a majority of its
stock. TIC will provide the technical component of imaging services and PA will
provide the professional component of imaging services.
1. Technical Services. TIC agrees to provide the necessary technical
component of diagnostic imaging services for patients of PA, including the
provision of all necessary imaging equipment, supplies, and technical personnel.
TIC shall be responsible for the cost of any office space and associated
overhead expenses entailed in the provision of the technical component of the
services. TIC will not provide professional medical services.
2. Professional Services. PA will be responsible for all professional
medical services for its patients, including the reading and interpretation of
diagnostic images. PA may also continue to provide the technical component of
certain imaging services for its patients.
3. Term. The term of this Agreement is five (5) years, commencing on
the date first above written. At the expiration of the term the Agreement will
automatically renew for an additional five (5) years, and for successive
five-year periods thereafter, unless TIC or PA provides written notice at least
ninety (90) days in advance of the expiration of the term of its intention not
to renew the Agreement.
4. Billing and Compensation. PA shall be responsible for billing for
all technical and professional imaging services provided by TIC and PA to PA's
patients under this Agreement. TIC shall be compensated for its services under
this Agreement by the payment of seventy percent (70%) of the fees received by
PA for the technical and imaging services provided to patients under this
Agreement. PA shall pay this compensation to TIC within thirty (30) days of the
receipt of the fees received by PA.
5. Medical Records. All medical records relating to PA's patients
remain the property of PA. TIC shall have access to such records as required to
perform its duties under this Agreement, but TIC shall maintain the
confidentiality of such records.
6. Access to Books and Records. TIC acknowledges that applicable
portions of the Social Security Act require PA to include in this Agreement a
provision requiring TIC to allow the Secretary of the Department of Health and
Human Services ("HHS") and other authorized
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<PAGE>
federal officials access to TIC's books and records as they relate to services
provided pursuant to this Agreement. Therefore, if the value or cost of services
rendered to PA pursuant to this Agreement is Ten Thousand Dollars ($10,000) or
more over a twelve (12) month period, TIC agrees as follows:
A. Until the expiration of four (4) years after the furnishing
of such services, TIC shall, upon written request, make available to the
Secretary of the Department of Health and Human Services (the "Secretary"), the
Secretary's duly authorized representatives, the Comptroller General, or the
Comptroller General's duly authorized representatives, such books, documents and
records as may be necessary to certify the nature and extent of the costs of
such services; and
B. If any such services are performed by way of subcontract
with another organization and the value or cost of such subcontracted services
is $10,000 or more over a twelve month period such subcontract shall contain and
TIC shall enforce a clause to the same effect as Section 6 hereof.
The availability of TIC's books, documents and records shall
be subject at all times to all applicable legal requirements, including without
limitation such criteria and procedures for seeking and obtaining access as may
be promulgated by the Secretary by regulation.
7. Miscellaneous.
A. Notices. Notices, payments and any other communications
required to be in writing shall be given either in person or by registered or
certified mail, return receipt requested, U.S. postage prepaid, addressed to the
president of the receiving party or his designee.
B. Governing Law. This Agreement shall be governed by the laws
of the State of Maryland as to interpretation, construction and performance.
C. Waiver. Waiver by either party of a breach of any provision
of this Agreement shall not operate as a waiver of any subsequent or other
breach thereof.
D. Assignment. This Agreement may not be assigned to a third
party without the written consent of both PA and TIC.
E. Amendments. This Agreement may be amended or changed only
by written amendment executed by PA and TIC.
F. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
assigns, subject to the restriction on assignment set forth above. The
individual executing the Agreement on behalf of PA is authorized to do so and to
bind the PA to the terms of the Agreement, and the individual executing the
Agreement on behalf of TIC is authorized to do so and to bind the TIC and its
individual members, partners, and employees to the terms of the Agreement.
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<PAGE>
G. Headings. Headings are for reference purposes only and
shall not affect the meaning of this Agreement.
H. Entire Agreement. This Agreement constitutes the entire
understanding between the Parties and supersedes all prior agreements, either
oral or in writing, with respect to the subject matter hereof.
I. Cooperation Regarding Claims and Litigation. PA and TIC
agree that they shall fully cooperate in assisting each other and their duly
authorized employees, agents, representatives, and attorneys, in investigating,
defending or prosecuting incidents involving potential claims, claims for
injuries and lawsuits. TIC and PA also agree to make all unprivileged documents
and relevant medical records, subject to any necessary consents having been
obtained, available for inspection by the other or their duly authorized
employees, agents, representatives, and attorneys in conjunction with any
incidents, claim or lawsuit arising out of or related to this Agreement,
involving circumstances which occur during the term of this Agreement. This
paragraph shall be without prejudice to the prosecution of any claims which PA
or TIC may have against each other and shall not require cooperation in the
event of such claims.
IN WITNESS WHEREOF, the Parties have caused the due execution
of this Agreement as of the day and year first written above.
ATTEST: THE IMAGING CENTER, INC.
______________________ By:_______________________________
F. Daniel Jackson, M.D., President
ATTEST: F. DANIEL JACKSON, M.D., PA.
______________________ By:_______________________________
F. Daniel Jackson, M.D., President
48
Exhibit 9 Escrow Agreement
ESCROW AGREEMENT (this "Agreement") entered into as of ________, 1999, by
and between THE IMAGING CENTER, INC. a Maryland corporation ("Issuer") and [NAME
OF ESCROW AGENT] ("Escrow Agent").
RECITALS:
A. Issuer proposes to offer for sale to subscribers an aggregate of up to
1,000,000 shares (the "Shares") at a price of $2.00 per Share, payable at the
time of subscribing for a Share. The payment will be paid into the escrow
created by this Agreement.
B. Issuer intends to sell the Shares on a best-efforts "minimum or none"
basis in a registered offering (the "Offering") by delivering to each subscriber
a Prospectus (the "Prospectus") describing the Offering.
C. Issuer desires to establish an escrow account in which funds received
from subscribers would be deposited from time to time until completion of the
Escrow Period (as defined below). The Escrow Agent agrees to serve in that
capacity in accordance with the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY
OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. APPOINTMENT OF ESCROW AGENT. Issuer hereby appoints the Escrow Agent
designated above as Escrow Agent. The Escrow Agent shall establish an escrow
account (the "Escrow Account") on its books named "Imaging Center 1999 Public
Offering Escrow Account." Commencing upon the execution of this Agreement,
Escrow Agent shall act as Escrow Agent and hereby agrees to receive and disburse
the proceeds from the offering of the Shares in accordance with the terms
herewith. Issuer agrees to notify the Escrow Agent promptly of the closing of
the offering and sale of the Shares.
2. PAYMENTS INTO ESCROW. Issuer shall cause all checks received from
subscribers for Shares to be promptly deposited into the Escrow Account. Issuer
shall deliver to the Escrow Agent checks of the subscribers made payable to the
order of "The Imaging Center, Inc." or similarly payable. Issuer shall furnish
to the Escrow Agent at the time of each deposit of the above-mentioned funds a
list containing the name of each subscriber, the subscriber's address, the
number of Shares purchased, and the amount of the check being delivered to the
Escrow Agent (see Exhibit A for the form to be used). Prior to the receipt of
the Minimum (as described below), the Issuer is aware and understands that it is
not entitled to any proceeds from subscriptions deposited into the Escrow
Account and no amounts deposited in the Escrow Account during the Escrow Period
shall become the property of the Issuer or any other entity, or be subject to
the debts of the Issuer or any other entity.
3. TERMINATION OF ESCROW. THE ESCROW PERIOD SHALL COMMENCE ON THE DATE HEREOF
AND SHALL TERMINATE TEN (10) BUSINESS DAYS FOLLOWING ANY OF THE FOLLOWING DATES:
(a) The date designated by the Issuer following the Escrow Agent's
confirmation pursuant to Section 5(a) that it has received into the Escrow
Account and collected gross subscription proceeds from the sale of at least
200,000 Shares, aggregating in deposited funds the total amount of at least
$400,000.00 (the "Minimum"); or
(b) __________, 2000 (the "Termination Date"); or
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<PAGE>
(c) The date upon which a determination is made by the Issuer to
terminate the Offering prior to the sale of the Minimum, as communicated to
Escrow Agent in writing.
Notwithstanding anything to the contrary contained herein, the termination date
is intended to signify the date of the termination of the offering as provided
in the prospectus, and not the termination of the escrow period of this
agreement; and upon the occurrence of any of the events described in (a), (b) or
(c) above, the escrow period shall continue for such ten (10) business-day
period solely for the limited purposes of collecting subscribers' checks that
have been deposited prior to such event and disbursing funds from the escrow
account as provided herein. Escrow agent will not accept deposits of
subscribers' checks after notice that any of the events described in
subparagraphs (a), (b) and (c) has occurred.
4. DUTIES OF ESCROW AGENT. The Escrow Agent will deposit the subscribers'
checks for collection and credit the proceeds to the Escrow Account to be held
by it under the terms of this Agreement. Notwithstanding anything to the
contrary contained herein, Escrow Agent is under no duty or responsibility to
enforce collection of any checks delivered to Escrow Agent hereunder. The Escrow
Agent hereby is authorized to forward each check for collection and deposit the
proceeds in the Escrow Account. As an alternative, the Escrow Agent may
telephone the bank on which the check is drawn to confirm that the check has
been paid. Additionally, to insure that such funds have cleared normal banking
channels for collection, Escrow Agent is authorized to hold for ten (10)
business days funds to be released. Issuer shall immediately reimburse Escrow
Agent any monies paid to it if thereafter the subscriber's check is returned
unpaid. Any item returned unpaid to the Escrow Agent on its first presentation
for payment shall be returned to Issuer and need not be again presented by the
Escrow Agent for collection. Issuer agrees to reimburse Escrow Agent for the
cost incurred with any returned check. For purposes of this Agreement, the term
"collected funds" or the term "collected" when referring to the proceeds of
subscribers' checks shall mean all funds received by Escrow Agent that have
cleared normal banking channels and are in the form of cash. The Escrow Agent
shall invest the funds deposited in the Escrow Account as instructed in writing
by Issuer, and shall in no event be liable for any investment loss. Upon
termination of the escrow, all earnings shall belong to and be paid to Issuer.
5. PROCEDURE FOR DISBURSEMENT OF FUND FROM AND TERMINATION OF ESCROW.
(a) DISBURSEMENT UPON ACHIEVING MINIMUM. If prior to the Termination
Date, subscriber's checks in an amount of at least the Minimum have been
deposited in the Escrow Account, upon request from Issuer, Escrow Agent
will confirm the amounts collected by it from subscriber's checks. If such
amount is at least equal to the Minimum, the Issuer may send Escrow Agent a
written notice providing a list of all accepted subscribers, specifying the
total amount of their subscription to be remitted to Issuer, less any fees
or other amounts then owing from Issuer to Escrow Agent hereunder, to the
Issuer as promptly as possible, but in no event later than ten (10)
business days after such termination, by issuing its bank check payable to
the Issuer or by depositing such amount directly into the account of Issuer
maintained with the Escrow Agent, as designated in writing by Issuer to
Escrow Agent.
(b) DISBURSEMENTS AFTER MINIMUM ACHIEVED. Following achievement of the
Minimum and the initial disbursement of moneys from the Escrow Account, the
Issuer may from time to time send Escrow Agent a written notice providing a
list of all accepted additional subscribers, specifying the total amount of
their subscription to be remitted to
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Issuer, and Escrow Agent shall remit such amounts to the Issuer in
accordance with the procedures described in subsection (a) above.
(c) TERMINATION OF ESCROW ACCOUNT BEFORE TERMINATION DATE. The Issuer
may at its option request the Escrow Agent to terminate the Escrow Period
and remit any amounts then in the Escrow Account, less any fees or other
amounts then owing from Issuer to Escrow Agent hereunder, to the Issuer as
promptly as possible, but in no event later than ten (10) business days
after such termination, in accordance with the procedures described in
subsection (a) above. If moneys are to be disbursed to the Issuer from the
Escrow Account, the Issuer shall comply with the procedures described in
subsection (a) or (b) above. The Escrow Period shall not terminate upon
receipt by Escrow Agent of such notice, but shall continue for such (10)
business-day period solely for the limited purposes of collecting
subscribers' checks that have been deposited prior to Escrow Agent's
receipt of such notice and disbursing funds from the Escrow Account as
provided herein. Escrow Agent will not accept deposits of subscriber's
checks after receipt of such notice.
(d) REJECTION OF SUBSCRIPTION. In the event the Issuer notifies the
Escrow Agent that it is rejecting a subscription, the Escrow Agent shall
promptly issue a check in the amount of the collected funds from the
subscriber's check to the rejected subscriber after the Escrow Agent has
cleared such funds. If Escrow Agent has not yet submitted a rejected
subscriber's check for collection, the Escrow Agent shall promptly remit
the subscriber's check directly to the subscriber.
(e) FAILURE TO ACHIEVE MINIMUM. If, on the Termination Date, the
Minimum Amount has not been deposited with the Escrow Agent and collected,
or if Issuer notifies the Escrow Agent in writing that Issuer elects to
terminate the Offering as provided in paragraph 3(c) above, the Escrow
Agent shall then issue and mail its bank checks to the subscribers in the
amount of the subscribers' respective checks, without deduction, penalty or
expense to the subscriber, and shall, for this purpose, be authorized to
rely upon the names and addresses of subscribers furnished it as
contemplated above. No subscriber shall be paid interest with respect to
such deposited funds. The purchase money returned to each subscriber shall
be free and clear of any and all claims of the Issuer and any of its
creditors. For each subscription for which the Escrow Agent has not
collected funds but has submitted the subscriber's check for collection,
the Escrow Agent shall promptly issue a check to such subscriber in the
amount of the collected funds from such subscriber's check after the Escrow
Agent has collected such funds. If Escrow Agent has not yet submitted such
subscriber's check for collection, the Escrow Agent shall promptly remit
the subscriber's check directly to such subscriber.
(f) DISCHARGE OF ESCROW AGENT. At such time as Escrow Agent shall have
made the payments and remittances provided in the Agreement, the Escrow
Agent shall be completely discharged and released of any and all further
liabilities and responsibilities hereunder.
6. FEES TO ESCROW AGENT. As consideration for its agreement to act as
Escrow Agent as herein described, Issuer agrees to pay the Escrow Agent its
reasonable fees and disbursements and advances incurred or made by the Escrow
Agent in performance of its duties hereunder, including reasonable fees,
expenses and disbursements of its counsel, as described in a separate agreement
between the Issuer and the Escrow Agent. No such fees or reimbursements
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shall be paid out of or chargeable to the funds on deposit in the Escrow Account
until such time as the Minimum has been collected.
7. TERMINATION OF THIS AGREEMENT. This Agreement shall automatically
terminate upon the earlier of (i) twenty (20) days after the Termination Date or
(ii) twenty (20) days after the date upon which the Escrow Agent has delivered
the final portion of Escrow Account funds pursuant to the terms of this
Agreement.
8. RESIGNATION BY ESCROW AGENT. Escrow Agent reserves the right to resign
hereunder, upon ten (10) days prior written notice to Issuer. In the event of
said resignation, and prior to the effective date thereof, Issuer, by written
notice to Escrow Agent, shall designate a successor escrow agent to assume the
responsibilities of Escrow Agent under this Agreement, and Escrow Agent
immediately shall deliver any undisbursed Escrow Account funds to such successor
escrow agent. If Issuer shall fail to designate such a successor escrow agent
within such time period, the Escrow Agent may deliver any undisbursed funds into
the registry of any court having jurisdiction.
9. RIGHTS, ETC. OF ESCROW AGENT. The parties hereto agree that the
following provisions shall control with respect to the rights, duties,
liabilities, privileges and immunities of the Escrow Agent:
(a) Escrow Agent shall have no obligation to invest the Escrow Account
without the written direction of Issuer.
(b) The Escrow Agent shall have no responsibility except for the
safekeeping and delivery of the amounts deposited in the Escrow
Account in accordance with this Agreement. The Escrow Agent shall
not be liable for any act done or omitted to be done under this
Agreement or in connection with the amounts deposited in the Escrow
Account, except as a result of the Escrow Agent's gross negligence
or willful misconduct. The Escrow Agent is not a party to, nor is
it bound by, nor need it give consideration to, the terms or
provisions of, even though it may have knowledge of, (i) any
agreement or undertaking by, between or among the Issuer and any
other party, except this Agreement, (ii) any agreement or
undertaking that may be evidenced by this Agreement, (iii) any
other agreements that may now or in the future be deposited with
the Escrow Agent in connection with this Agreement.
The Escrow Agent is not a party to, is not responsible for, and makes
no representation with respect to the offer, sale or distribution
of the Shares including, but not limited to, matters set forth in
any offering documents prepared and distributed in connection with
the offer, sale and distribution of the Shares.
The Issuer covenants that it will not commence any action against the
Escrow Agent at law, in equity, or otherwise as a result of any
action taken or thing done by the Escrow Agent pursuant to this
Agreement, or for any disbursement made as authorized herein upon
failure of the Issuer to give the notice within the times herein
prescribed. The Escrow Agent has no duty to determine or inquire
into any happening or occurrence of or of any performance or
failure of performance of the Issuer or of any other party with
respect to agreements or arrangements with any other party.
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If any question, dispute or disagreement arises among the parties
hereto and/or any other party with respect to the funds deposited
in the Escrow Account or the proper interpretation of this
Agreement, the Escrow Agent shall not be required to act and shall
not be held liable for refusal to act until the question or dispute
is settled, and the Escrow Agent has the absolute right at its
discretion to do either or both of the following:
(i).withhold and/or stop all further performance under this
Agreement until the Escrow Agent is satisfied, by receipt of a
written document in form and substance satisfactory to the
Escrow Agent and executed and binding upon all interested
parties hereto (who may include the subscribers), that the
question, dispute, or disagreement had been resolved; or
(ii) file a suit in interpleader and obtain by final judgment,
rendered by a court of competent jurisdiction, an order binding
all parties interested in the matter. In any such suit, or
should the Escrow Agent become involved in litigation in any
manner whatsoever on account of this Agreement or the Escrow
Account, the Escrow Agent shall be entitled to recover from the
Issuer its attorneys' fees and costs.
The Escrow Agent shall never be required to post a bond in connection
with any services hereunder. The Escrow Agent may consult with counsel of
its own choice and shall have full and complete authorization and
protection for and shall not be liable for any action taken or suffered by
it hereunder in good faith and believed by it to be authorized hereby, nor
for action taken or omitted by it in accordance with the advice of such
counsel (who shall not be counsel for the Issuer).
(c) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth in this Agreement and may rely
and shall be protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed by it
to be genuine and to have been signed or presented by the proper party or
parties and to take statements made therein as authorized and correct
without any affirmative duty of investigation.
(d) The Issuer hereby agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss, liability, or expense
(including, without limitation, all legal expenses incurred in
enforcing any of the provisions of this Agreement or otherwise in
connection herewith) incurred without gross negligence or willful
misconduct on the part of the Escrow Agent, arising out of or in
connection with its entering into this Agreement and carrying out
its duties hereunder, including the costs and expenses of defending
itself against any claim of liability hereunder or arising out of
or in connection with the sale of the Shares. This covenant shall
survive the termination of this Agreement.
(e) The Escrow Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of this Agreement
unless the same shall be in writing and signed by all of the other parties
hereto and, if its duties as Escrow Agent hereunder are affected thereby,
unless it shall have given prior written consent thereto.
10. NOTICES. Notices required to be sent hereunder shall be delivered by hand,
sent by an express mail service or sent via united states mail, postage prepaid,
certified, return receipt requested, to the following address:
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If to the Issuer: If to the Escrow Agent:
The Imaging Center, Inc.
715 Williams Street
P. O. Box 1705
Cumberland, MD 21501-1705
Telephone: 301-759-3410
Telecopier: 301 759-3043
NO NOTICE TO THE ESCROW AGENT SHALL BE DEEMED TO BE DELIVERED UNTIL ACTUALLY
RECEIVED BY THE ESCROW AGENT. FROM TIME TO TIME ANY PARTY HERETO MAY DESIGNATE
AN ADDRESS OTHER THAN THE ADDRESS LISTED ABOVE BY GIVING THE OTHER PARTIES
HERETO NOT LESS THAN FIVE (5) DAYS ADVANCE NOTICE OF SUCH CHANGE IN ADDRESS IN
ACCORDANCE WITH THE PROVISIONS HEREOF.
11. GOVERNING LAWS. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Maryland.
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EXECUTED on the date first written above.
Issuer: Escrow Agent:
THE IMAGING CENTER, INC _________________________
By: _______________________________ By: _____________________
F. Daniel Jackson, M.D., President
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<TABLE>
<CAPTION>
EXHIBIT A
FORM TO ACCOMPANY SUBSCRIBERS' CHECKS
IMAGING CENTER 1999 PUBLIC OFFERING
- -------------------------------------------------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
NAME AND ADDRESS OF SUBSCRIBER AMOUNT OF CHECK NUMBER OF SHARES
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
- -------------------------------------------------------- ----------------------- ------------------
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<PAGE>
- -------------------------------------------------------- ----------------------- ------------------
</TABLE>
57
Exhibit 10.1 Consent of Huber, Michaels & Company, Certified Public
Accountants
CONSENT OF INDEPENDENT AUDITORS
WE CONSENT TO THE REFERENCE TO OUR FIRM UNDER THE CAPTION "EXPERTS" AND TO
THE USE OF OUR REPORTS DATED OCTOBER 7 AND JUNE 29, 1999, IN THE REGISTRATION
STATEMENT (FORM SB-1) AND THE RELATED PROSPECTUS OF THE IMAGING CENTER, INC. FOR
THE REGISTRATION OF 1,000,000 SHARES OF ITS CLASS B NON-VOTING COMMON STOCK.
HUBER, MICHAELS & COMPANY, Certified
Public Accountants
By: /s/ Edward N. Huber___________
Edward N. Huber, CPA
Cumberland, Maryland
October 15, 1999
58
EXHIBIT 11 OPINION OF RICHARD G. MCALEE P.A. AS TO THE LEGALITY OF THE
SECURITIES COVERED BY THIS REGISTRATION STATEMENT
RICHARD G. MCALEE, P.A.
LAW OFFICES
RICHARDSON BUILDING
2127 ESPEY COURT, SUITE 220
CROFTON, MD 21114
RICHARD G. MCALEE ANNAPOLIS AREA: (410) 451-0224
-------------- WASHINGTON AREA: (301) 261-3616
OF COUNSEL BALTIMORE AREA: (410) 793-0639
KEVIN V. BELL FACSIMILE: (410) 451-0225
A. TERRY WALMAN, M.D., J.D. E-MAIL: [email protected]
October 13, 1999
THE IMAGING CENTER, INC.
715 Williams Street
P. O. Box 1705
Cumberland, MD 21501-1705
We have acted as counsel to The Imaging Center, Inc. (the "Company") in
connection with the offering of 999,000 shares of Class B Non-Voting Common
Stock, pursuant to the Amendment to the Registration Statement (Form SB-1) and
the related Prospectus dated October ___ , 1999 (the "Prospectus").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate or
similar records and other instruments as we have deemed necessary or appropriate
for the purposes of this opinion. In such examinations we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies or facsimiles.
Based upon the foregoing, we are of opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Maryland.
2. Upon receipt of the consideration stated in the Prospectus (I.E.,
$2.00 in cash per share), and upon subsequent issuance of the shares, each share
of the Company's Class B Non-Voting Common Stock will, in our opinion, be
legally issued, fully paid and nonassessable.
We are admitted to practice only in the State of Maryland and express
no opinion as to matters governed by any laws other than the laws of the State
of Maryland and the federal laws of the United States of America, and we express
no opinion as to the effect on the matters covered by this letter of the laws of
any other jurisdiction.
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Very truly yours,
RICHARD G. MCALEE, P.A.
By: /s/ Richard G. McAlee
Richard G. McAlee
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