U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-1
(AMENDMENT NO. 1)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE IMAGING CENTER, INC.
(Name of small business issuer in its charter)
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Maryland 8011 52-2167391
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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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)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
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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. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
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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
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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 $178,340 in the
aggregate, comprised of the following: Securities and Exchange Commission
fees($556), State Divisions of Securities fees ($2,285), printing fees
($15,000), legal and accounting fees ($160,000), and escrow agent
FEES($500). 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.
PART I. NARRATIVE INFORMATION REQUIRED IN PROSPECTUS.
Disclosure alternative used (check one): Alternative 1 [ ]; Alternative 2 [X]
ALL OF THE INFORMATION REQUIRED BY ITEMS 1 THROUGH 6 IS INCLUDED IN THE ATTACHED
PROSPECTUS.
PART F/S--FINANCIAL INFORMATION REQUIRED IN PROSPECTUS.
INCLUDED IN THE ATTACHED Prospectus.
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[REDHERRING APPEARS ON THE LEFT SIDE OF PAGE WITH THE FOLLOWING INFORMATION:]
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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.
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THE IMAGING CENTER, INC.
715 WILLIAMS STREET
CUMBERLAND, MARYLAND 21501-1705
TELEPHONE: 301-759-3410
MAXIMUM OF 1,000,000 SHARES
CLASS B NON-VOTING COMMON STOCK
$2.00 PER SHARE
INFORMATION ABOUT THIS OFFERING:
WE ARE SELLING THE SHARES THROUGH OUR OFFICERS AS A DIRECT PARTICIPATION
OFFERING.
THE SHARES may be purchased in minimum lots of 100 and maximum lots of 1,000
shares.
THIS OFFERING WILL COMMENCE UPON THE DATE OF THIS PROSPECTUS AND WILL CONTINUE
UNTIL DECEMBER 31, 2000. WE MAY TERMINATE THIS OFFERING EARLIER.
THIS OFFERING IS CONTINGENT UPON SALE OF AT LEAST 200,000 SHARES.
UNTIL WE SELL THE MINIMUM NUMBER OF SHARES, ALL FUNDS TENDERED BY PROSPECTIVE
INVESTORS WILL BE DEPOSITED AND HELD IN A NON-INTEREST BEARING ESCROW ACCOUNT.
IF WE TERMINATE THIS OFFERING WITHOUT SELLING THE MINIMUM NUMBER OF SHARES,
INVESTOR FUNDS TENDERED WILL BE RETURNED WITHOUT ACCRUED INTEREST OR THE
DEDUCTION OF OTHER FEES.
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PRICING INFORMATION
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PROCEEDS TO US
NUMBER OF UNDERWRITING PRICE TO (BEFORE DEDUCTING
SHARES SOLD DISCOUNTS PUBLIC COSTS AND EXPENSES)
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PER SHARE......................... 1 $0.00 $2.00 $2.00
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MINIMUM OFFERING.............. 200,000 $0.00 $2.00 $400,000
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MAXIMUM OFFERING.............. 1,000,000 $0.00 $2.00 $2,000,000
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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.
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MARCH 1, 2000
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Table of Contents
SUMMARY......................................................1
Who We Are................................................1
Description of Shares We Are Offering.....................1
How We Expect to Use the Proceeds of this Offering........1
Factors Which Affect the Risk of Your Investment..........1
RISK FACTORS.................................................2
Our Success Depends Upon Referrals from Dr.
Jackson's Practice Group and Other Referral Sources.......2
Our Ability to Make a Profit Also Depends Upon
Contracts with HMOs and Other Healthcare Providers........2
Our Business is Heavily Regulated and This Regulation
Could Affect Our Ability to Implement Our Business
Strategy and Our Profitability............................3
Upon Completion of This Offering, Our Ratio of
Debt to Stockholder's Equity Will Be Significant..........3
Professional Liability Is an Inherent Risk of
Our Business; Our Ability to Obtain Liability
Insurance at Reasonable Cost Affects Our Ability
to Manage This Risk.......................................3
Our Success Depends Upon Our Computer Systems.............4
Our Success Depends Upon Our Ability to Hire
and Retain Qualified and Licensed Employees...............4
The Sale of Shares In the Future by Dr. Jackson
Could Adversely Affect the Price of Our Stock.............4
Dr. Jackson Owns or Controls All Voting Shares
and Thereby Controls the Election of Directors and All
Decisions Regarding Our Operations and Facilities.........5
There Is No Prior Market for the Shares...................5
The Price of the Offered Shares Was
Determined Arbitrarily....................................5
The Number of Shares We Are Offering and
Future Price and Trading Levels May Make
Resale of the Shares More Difficult.......................5
Our Stock May Be a "Penny Stock", Which
May Make It Difficult for Investors to
Sell Their Shares.........................................5
DILUTION.....................................................7
PLAN OF DISTRIBUTION.........................................8
USE OF PROCEEDS OF OFFERING..................................9
Sources and Uses of Proceeds of Offering..................9
Costs and Expenses of Offering...........................10
THE IMAGING CENTER, INC.....................................10
General..................................................10
Capitalization...........................................11
Financial Statements.....................................11
Limitations on Liability of Officers and Directors.......12
Investor Suitability.....................................12
Dividend Policy..........................................13
BUSINESS....................................................13
General..................................................13
Market Area - Cumberland, Maryland, and Vicinity.........14
Competition..............................................15
Marketing................................................16
Operating History; Predecessor Entities..................16
Contracts and Relationships with Insurance
Companies, HMO's and Other Payors........................19
THIRD PARTY PAYORS....................................19
RISKS ASSOCIATED WITH MANAGED CARE
CONTRACTS AND CAPITATED FEE ARRANGEMENTS.................20
Current Debt; Future Capital Requirements................21
Business Strategy........................................21
Possible Future Expansion of Facilities..................21
Information Management; Year 2000 Compliance.............22
Corporate Liability and Insurance........................22
Industry Background......................................22
RADIOLOGY.............................................22
TRENDS IN RADIOLOGY...................................24
Government Regulation and Supervision....................25
LICENSING AND CERTIFICATION LAWS......................26
FEE-SPLITTING; CORPORATE PRACTICE OF MEDICINE.........26
PHYSICIAN PAYMENT SYSTEMS.............................26
MEDICARE AND MEDICAID FRAUD AND ABUSE.................27
HEALTH CARE REFORM INITIATIVES........................29
COMPLIANCE PROGRAM....................................29
INSURANCE LAWS AND REGULATIONS
APPLICABLE TO RISK-SHARING ARRANGEMENTS...............30
Quality Assurance Programs...............................30
FACILITIES AND EMPLOYEES....................................31
OUR MANAGEMENT..............................................35
Directors, Executive Officers and Senior Management......35
Retirement Plan..........................................36
EXECUTIVE COMPENSATION......................................36
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS......36
EXISTING AND POTENTIAL CONFLICT OF INTERESTS................37
DESCRIPTION OF COMMON STOCK.................................39
LEGAL PROCEEDINGS...........................................41
REPORTS TO INVESTORS........................................41
LEGAL MATTERS...............................................42
EXPERTS.....................................................42
AVAILABLE INFORMATION ABOUT THE COMPANY.....................42
APPENDICES
A - PRO FORMA Financial Statements of the Company
B - PRO FORMA Financial Projections of the Company
C - Interim Financial Statements for Three Months Ended September 30, 1999
D - Articles of Incorporation
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SUMMARY
WHO WE ARE
The Imaging Center, Inc. is a Maryland corporation formed in May 1999 to
provide radiology and imaging services primarily to a practice group of
physicians specializing in radiology located in Cumberland, Maryland, which is
controlled by F. Daniel Jackson, M.D., our President and controlling
shareholder. Our income will come from fees paid by patients, their insurance
companies or medical service providers for services provided by Dr. Jackson's
practice group and us. We started operating on July 1, 1999. However, our
facilities and services are substantially identical to the facilities used and
services provided in connection with Dr. Jackson's practice group under the
trade name "The Imaging Center."
DESCRIPTION OF SHARES WE ARE OFFERING
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 authorized Class B Non-Voting
shares. Dr. Jackson, our President and 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. Dr. Jackson owns all of the shares
of our Class A Voting common stock which have been issued.
HOW WE EXPECT TO USE THE PROCEEDS OF THIS OFFERING
All proceeds of this offering will be used to pay for new equipment and
organization and offering expenses, or to provide working capital.
FACTORS WHICH AFFECT THE RISK OF YOUR INVESTMENT
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 that we will
provide. Our success is largely dependent upon usage of our facilities by Dr.
Jackson's practice group and that group's ability to attract and retain
patients. We cannot guarantee that you will receive any return on your
investment.
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SPECIAL NOTE TO PHYSICIANS CONTEMPLATING 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. PHYSICIANS WHO REFER PATIENTS TO DR.
JACKSON'S PRACTICE GROUP OR TO US SHOULD OBTAIN LEGAL ADVICE REGARDING THESE
PROHIBITIONS BEFORE PURCHASING OUR SHARES.
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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.
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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.
OUR SUCCESS DEPENDS UPON REFERRALS FROM DR. JACKSON'S PRACTICE GROUP AND
OTHER REFERRAL SOURCES
Our success will depend in large part on continued usage of our services
and facilities by Dr. Jackson's practice group and referrals to Dr. Jackson's
practice group from other physicians, practice groups or healthcare providers
within the Cumberland, Maryland, area. Based upon previous substantially
identical operations of companies controlled by Dr. Jackson, his practice group
is expected to generate approximately 99% of our revenues. If other physicians,
physician practice groups or healthcare providers discontinue referring patients
to Dr. Jackson's practice group, our ability to make a profit would be adversely
affected.
The death, retirement or disability of Dr. Jackson could adversely affect
referrals from his practice group and have an adverse impact upon our revenues
and operations. We do not maintain key man life or disability insurance with
respect to Dr. Jackson.
OUR ABILITY TO MAKE A PROFIT ALSO DEPENDS UPON CONTRACTS WITH HMOS AND
OTHER HEALTHCARE PROVIDERS
Our success depends upon the ability of Dr. Jackson's practice group to
maintain contracts with third-party payors, such as HMOs, insurance companies,
Medicare and other healthcare providers. While we and Dr. Jackson's practice
group intend to seek managed care contracts in competition with other physicians
or practice groups providing of similar services, we cannot assure investors
that either of us will obtain or retain these contracts.
Obtaining and retaining these contracts is important to our success
because, in an effort to control costs, non-governmental health care payors such
as insurance companies have implemented cost containment programs which may
limit the ability of physicians to refer patients to our facilities. For
example, persons enrolled in prepaid health care plans, such as health
maintenance organizations, also known as HMOs, often are not free to choose
where they obtain medical care or services. Medical care or services may be
provided directly by the health plan or only through physicians or practice
groups under contract with the provider. Similarly, some insurance companies and
self-insured employers also require the use of specific physicians or practice
groups by those they insure. These "closed panel" systems are now common in the
managed healthcare environment. HMOs and other healthcare providers or insurers
may also create economic disincentives for referrals to physicians or practice
groups outside of the plan's designated panel of providers. Our failure to
obtain or retain these contracts may reduce the amount of services we provide
and our revenues could be reduced accordingly.
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OUR BUSINESS IS HEAVILY REGULATED AND THIS REGULATION COULD AFFECT OUR
ABILITY TO IMPLEMENT OUR BUSINESS STRATEGY AND OUR PROFITABILITY
Our operations and services are heavily regulated on the federal and state
level and this regulation may limit our ability to maintain or expand our
operations or services or to implement our business strategy successfully. In
particular, these regulations may limit our ability to
o adapt our operating or business structure to comply with legal
requirements which presently or may in the future affect
relationships with physicians, including prohibitions on fee
splitting and referrals to facilities in which physicians have a
financial interest
o obtain regulatory approvals necessary for acquisition of
additional facilities and equipment or provision of additional
services
o comply with applicable licensing requirements
o expand our facilities
UPON COMPLETION OF THIS OFFERING, OUR RATIO OF DEBT TO STOCKHOLDER'S
EQUITY WILL BE SIGNIFICANT
Upon completing this 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.
PROFESSIONAL LIABILITY IS AN INHERENT RISK OF OUR BUSINESS; OUR ABILITY
TO OBTAIN LIABILITY INSURANCE AT REASONABLE COST AFFECTS OUR ABILITY TO
MANAGE THIS RISK
Professional malpractice and other similar claims are an inherent risk of
providing medical services. While 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 Dr. Jackson's practice
group or other referring physicians will made against us. Because we operate and
manage the Imaging Center, professional liability claims may be 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. Another source of potential liability is claims
based upon improper usage or calibration of equipment used in our business. No
such claims have been filed against us or any of our predecessor entities.
Various factors affect the availability and cost of professional liability
insurance. Many of these factors are beyond our control. We cannot assure you
that adequate liability insurance will be available in the future at acceptable
cost. Increased insurance premiums may lead us to self-insure or use a higher
deductible. Such higher insurance costs or claims not covered by insurance could
affect our profitability.
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OUR SUCCESS DEPENDS UPON OUR COMPUTER SYSTEMS
We depend upon a company-wide computer system to manage our operations
effectively, compete for managed care contracts and achieve standardization and
economies of scale. This system includes patient demographic information,
registration, transcription and electronic filing, and is integrated with the
systems used by Dr. Jackson's practice group. Our computer system may require
modifications or replacements as we expand or adopt new technology. 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 Dr.
Jackson's practice group, which could adversely affect our business and
financial condition.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO HIRE AND RETAIN QUALIFIED AND
LICENSED EMPLOYEES
Many of our technicians require special training and certification. Our
success is dependent upon our ability to attract and retain qualified and
capable personnel to operate our equipment or provide related services to our
customers. Our inability to attract and retain qualified employees could
adversely affect our business and financial condition. Similarly, we could be
adversely affected by the inability of Dr. Jackson's practice group to retain
qualified medical professionals who use our services.
THE SALE OF SHARES IN THE FUTURE BY DR. JACKSON COULD ADVERSELY AFFECT
THE PRICE OF OUR STOCK
Upon completion of this offering, Dr. Jackson, our controlling shareholder,
will own or control 8,999,000, or 90%, of our total outstanding shares of Class
B Non-Voting common stock. Dr. Jackson expects to offer and sell his shares of
Class B Non-Voting common stock from time to time in accordance with the
limitations of applicable federal and state securities laws, including Rule 144
of the Securities and Exchange Commission. These sales could cause the price of
the Class B shares to decline.
DR. JACKSON OWNS OR CONTROLS ALL VOTING SHARES AND THEREBY CONTROLS THE
ELECTION OF DIRECTORS AND ALL DECISIONS REGARDING OUR OPERATIONS AND
FACILITIES
Dr. Jackson, our President and one of our directors, will own all our
shares of Class A Voting common stock. As such, he controls the election of our
directors, and all decisions regarding our operations, facilities and future
development will be made solely by Dr. Jackson.
THERE IS NO PRIOR MARKET FOR THE SHARES
There has been no public market for the shares before this offering. We
cannot assure you there will be an active public market for the shares after
this offering.
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THE PRICE OF THE OFFERED SHARES WAS DETERMINED ARBITRARILY
We determined the initial public offering price of the offered shares
arbitrarily. This price bears no relationship to our assets, earnings, book
value, net tangible value or other generally accepted criteria for valuation of
investments. For this and other reasons, the market price for our shares may
decline below the initial market price after this offering is completed.
THE NUMBER OF SHARES WE ARE OFFERING AND FUTURE PRICE AND TRADING LEVELS
MAY MAKE RESALE OF THE SHARES MORE DIFFICULT
The small number of shares being offered to the public may limit the market
in which our shares are traded and your ability to sell your shares to other
investors. We may not be able to achieve our intention eventually to list the
shares on a national or regional securities exchange or in some other market
which will provide easily accessible pricing information, if our stock fails to
trade at certain volume levels and prices, depending upon the exchange or
market. As a result, it may be difficult for you to sell your shares to other
investors.
OUR STOCK MAY BE A "PENNY STOCK", WHICH MAY MAKE IT DIFFICULT FOR
INVESTORS TO SELL THEIR SHARES
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.
Our stock will 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
> we have:
> less than $5,000,000 in net tangible assets and have been in
business less than three years, or
> under $2,000,000 in net tangible assets and have been in
business for at least three years, or
> average revenues of less than $6,000,000 for the last three
years.
Based upon the offering price of our stock and our present financial
condition, we expect that our stock will be a "penny stock" upon completion of
this offering.
Although we are not subject to any special reporting requirements if our
stock is a "penny stock", brokers and dealers trading "penny 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 must reasonably determine that transactions in penny
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stocks are suitable for the investor and must secure the investor's written
agreement to purchase the security, including its name and the amount of shares
to be purchased. 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.
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 us 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. Any differences may be caused by
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the risk factors and other factors described in this prospectus. The "safe
harbor" for forward-looking statements provided by the Litigation Reform Act
does not apply to initial public offerings.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD RELY ONLY UPON THE INFORMATION
CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT ASSUME THAT WE HAVE AUTHORIZED ANY
OTHER INFORMATION OR REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES. IT 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.
DILUTION
As of July 1, 1999, and before the offering of the shares of Class B
Non-Voting common stock under this prospectus, our stock 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, excluding copyrights, patents, goodwill,
research and development costs and similar intangible items, minus total
liabilities and is based upon our forecasted balance sheets 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 and Class B Non-Voting common stock as 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 following table illustrates the per share dilution:
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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.
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The following table sets forth as of July 1, 1999, the number of shares of
Class A Voting and Class B Non-Voting common stock purchased from us, the total
consideration we received and the average price per share paid by existing
shareholders and by the new investors purchasing shares offered by this
prospectus.
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SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
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NUMBER PERCENT AMOUNT PERCENT SHARE
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Existing Shareholders - Class A Shares 100 100% $2 100.0% $ 0.02
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Existing Shareholders - Class B Shares 8,999,000 90% 179,980 8.26% $ 0.02
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New Investors - Class B Shares 1,000,000 10% 2,000,000 91.74 $ 2.00
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Total - Class B Shares 9,999,000 100% $2,179,980 100.00%
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After completion of this offering, we 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 of the offered
shares are purchased. While we presently have no plans to issue additional
shares of common stock, we may in the future offer additional shares 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 as a direct participation offering by our
President or other 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 and officers who may be engaged in selling the shares.
Our shares are being registered with the Securities and Exchange Commission
and the securities commissioners of the states of Maryland, West Virginia and
Pennsylvania. Our shares will be offered only to residents of those states. We
may also sell to residents of other states, but these sales must comply the
legal requirements of those states where the potential purchasers reside.
We may solicit interested investors through meetings with potential
investors, personal contact, notices, circulars, advertisements and letters
which comply with applicable law. All potential investors must receive a copy of
this prospectus and a copy of the Subscription Agreement. Investors wishing to
purchase shares must submit a completed Subscription Agreement to us at our
offices. Copies of this prospectus and the Subscription Agreement are available
at our offices at 715 Williams Street, Cumberland, Maryland 21501-1705,
telephone: 301-759-3410.
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 December 31, 2000, which is the first anniversary of the
commencement of this offering, unless we terminate it sooner. This offering is
contingent upon acceptance of subscriptions
8
<PAGE>
for at least 200,000 shares by this 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 Farmers & Merchants Bank
and Trust, Cumberland, Maryland.
If subscriptions to purchase at least 200,000 shares have not been accepted
by December 31, 2000, we will terminate the offering and all funds tendered by
prospective investors will be promptly returned without accrued interest or the
deduction of other fees and all subscriptions received will be cancelled. If at
least 200,000 shares are sold by or before that date, we may conduct an interim
closing and, at our option, attempt to sell the remaining unsold shares by
December 31, 2000.
We reserve the right to withdraw or amend this offering before we accept
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 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.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF PRICE TO PROCEEDS TO COMPANY
SHARES SOLD PUBLIC (1) (2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) No commissions or other compensation will be paid in connection with
the offer or sale of the shares.
(2) Before deducting costs and expenses of offering to be paid by us.
The amounts to be received from the sale of the shares to officers,
directors and persons affiliated with us and to persons not affiliated with us,
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 5,000 $2.00 $10,000
Unaffiliated Shareholders Cash 995,000 $2.00 1,990,000
======= ==========
TOTAL $2,000,000
==========
</TABLE>
We expect to use all of the proceeds of the offering to provide working
capital for our future operations and possible expansion of our business. These
uses may include, for example, acquisition of new facilities and equipment,
expansion of existing facilities, and operating contingencies.
COSTS AND EXPENSES OF OFFERING
The estimated costs and expenses of the offering are set forth in the
following table. These amounts will be paid from our general revenues and not
from proceeds of this offering.
9
<PAGE>
DESCRIPTION AMOUNT
Commissions and Fees $ 0
Legal, Accounting and Professional Fees 160,000
Printing, Advertising (Estimated) 15,000
SEC and State Securities Commission Fees 2,840
Escrow Fees (Annual) 500
===============
TOTAL $ 178,340
THE IMAGING CENTER, INC.
GENERAL
We incorporated in May 1999 to provide technical radiology and imaging
services primarily to Dr. Jackson's practice group and commenced operations on
July 1, 1999. We manage and operate radiology and imaging equipment at the
facility of Dr. Jackson's practice group located at 715 Williams Street in
Cumberland, Maryland. We will derive substantially all of our 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 us and Dr. Jackson's practice group. Dr.
Jackson's practice group will retain the professional component of these fees,
as determined by an agreement between us and Dr. Jackson's practice group.
We lease our radiology and imaging equipment from Value Healthcare, Inc.,
Imaging Associates of Cumberland, Inc. and General Electric Medical Systems.
Value Healthcare, Inc. and Imaging Associates of Cumberland, Inc. are controlled
by Dr. Jackson, our controlling shareholder, President and director. Our
equipment and operations are located in a building located at 715 Williams
Street, Cumberland, Maryland, known as "The Imaging Center", which we lease from
Imaging Associates of Cumberland, Inc., a corporation controlled by Dr. Jackson.
The building, facilities and equipment we currently lease are substantially
identical to the facilities and equipment previously operated in association
with Dr. Jackson's practice group under the trade name of "The Imaging Center"
at the same location. This building was renovated and opened in 1991 for use by
Dr. Jackson's practice group, and following additional renovations is now
approximately 11,000 square feet. This building includes a patient waiting area,
administrative offices, record storage space, examination and testing rooms, and
laboratory, darkroom and storage facilities. Under our leasing arrangement, we
occupy the entire building together with Dr. Jackson's practice group.
CAPITALIZATION
The following table describes our capitalization as of July 1, 1999, and as
adjusted to reflect the issuance and sale of the offered shares and application
of the net proceeds from sale of the shares.
10
<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
We have attached to this prospectus the following financial statements:
o PRO FORMA FINANCIAL STATEMENTS FOR CALENDAR YEAR 1998
AND SIX MONTH STATEMENTS FOR JANUARY 1, 1999 THROUGH JUNE 30, 1999
(ATTACHED AS APPENDIX A).
These statements were prepared based upon historical financial
information provided to us by Dr. Jackson. The various items of
expense, income and other items have been retroactively allocated
between Dr. Jackson's practice group and us and do not represent actual
revenues, expenses or results of operations. However, we believe these
statements accurately reflect this information had the present business
arrangements between Dr. Jackson's practice group and us existed during
these periods.
o FORECASTED FINANCIAL STATEMENTS FOR OUR CURRENT FISCAL YEAR (ATTACHED
AS APPENDIX B).
These statements are based upon the PRO FORMA statements described
above. These financial projections are forward-looking statements that
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 these statements as a result of various factors, such as
general economic conditions, changes in policies and practices of
insurance companies, medical service providers and other third-party
payors for the professional and technical services provided by Dr.
Jackson's practice group and us.
Other factors discussed elsewhere in this prospectus may also affect
actual events or results. The "safe harbor" for forward-looking
statements provided by the Litigation Reform Act does not apply to
initial public offerings.
o AUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(ATTACHED AS APPENDIX C).
11
<PAGE>
These statements are based upon our operations since we commenced
business on July 1, 1999, through then end of that year.
WE DID NOT MEET OUR EARNINGS PROJECTIONS CONTAINED IN OUR INITIAL
FORECASTED FINANCIAL STATEMENTS. WE BELIEVE WE DID NOT MEET THESE
PROJECTIONS DUE TO THE TIME SPENT IN OUR CREATION AND ORGANIZATION. WE
HAVE COMPLETED OUR ORGANIZATION AND STARTUP EFFORTS AND BELIEVE OUR
FINANCIAL RESULTS FOR THE NEXT SIX MONTHS SHOULD BE CLOSER TO OUR
ORIGINAL PROJECTIONS.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
Our Articles of Incorporation provide for mandatory indemnification of our
officers and directors 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. There are no indemnification
provisions for our directors, officers and controlling persons specifically
dealing with liability under the federal securities laws. We believe that these
provisions are essential to attracting and retaining qualified persons as
directors.
Under Maryland law, a director who successfully defends any proceeding is
entitled to recover his or her reasonable expenses incurred in connection with
the proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to this law or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission indemnification for these liabilities is
against public policy as expressed in this law and is, therefore, unenforceable.
There is no pending litigation or proceeding involving any of our directors
or officers as to which indemnification is being sought, and we are not aware of
any threatened litigation that may result in claims for indemnification by any
officer or director.
INVESTOR SUITABILITY
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 LOSING THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR OWN TAX AND FINANCIAL COUNSEL BEFORE PURCHASING OUR SHARES. IN
ADDITION TO THE GENERAL INVESTMENT RISKS DESCRIBED THROUGHOUT THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED IN
THIS PROSPECTUS.
DIVIDEND POLICY
We have never declared or paid dividends on our common stock. We expect
that future earnings, if any, will be retained to finance the growth and
development of our business and, accordingly, do not intend to declare or pay
any dividends on our 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 our future earnings,
12
<PAGE>
results of operations, financial condition and capital requirements, among other
factors. If we borrow money in the future or enter into other financial
arrangements, our lenders may prohibit us from paying or restrict our ability to
pay dividends.
BUSINESS
GENERAL
We provide technical services primarily to the two physicians who comprise
Dr. Jackson's practice group in their diagnostic and treatment practices,
including x-ray and fluoroscopy, magnetic resonance imaging, computed
tomography, mammography, ultrasound, and nuclear medicine, all of which are
described below in greater detail. Patients in need of these services are
typically referred to a diagnosing or treating physician by other referring
physicians or medical service providers or, on occasion, by the patient's self
referral. We provide the technical component of these services, such as, for
example, an x-ray or an image produced by ultrasound, magnetic resonance imaging
or other similar means. The diagnosing physician then analyzes these images and
a report prepared for use by other physicians or medical facilities. We also
provide the technical component of certain medical care rendered by and under
the supervision of a physician, such as treatment of hyperthyroidism, drainage
of cysts and abscesses, or biopsies of various organs. An agreement between Dr.
Jackson's practice group and us governs the extent and nature of the technical
services we provide. Under the terms of this agreement, we are precluded from
providing professional medical services.
The fees for diagnostic, imaging or treatment services are generally
divided into two components, a professional component, which compensates a
physician for diagnostic, treatment or supervisory services, and a technical
component which represents the cost of facilities, equipment and nonprofessional
personnel used in various procedures. We have established a schedule of fees for
such technical services based upon the Medicare physician's fee schedule. The
Medicare fee schedule is also 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.
ALLOCATION OF FEES BETWEEN THE IMAGING CENTER, INC. AND DR. JACKSON'S
PRACTICE GROUP. Although the professional and technical components of diagnostic
imaging services are sometimes billed and reimbursed separately, most
third-party payors reimburse these services as a single fee which includes both
professional and technical components. In most cases fee schedules are
determined unilaterally by the third-party payor (and, in the case of Medicare,
are set by regulation), and the provider of services has little opportunity, in
practice, to negotiate such fees. Professional fees (and single fee payments
which include both professional and technical components) are normally be billed
solely through the professional provider, which, in our case, is Dr. Jackson's
practice group. Hence, we depend upon the contractual agreement with Dr.
Jackson's practice group for most of our revenue. If a particular payor requires
that we bill it directly for the technical component of services, we will do so
and will be reimbursed separately by that payor.
13
<PAGE>
Normally, Dr. Jackson's practice group will perform billing and collections
for all services, including professional and technical components. Under this
agreement, we will be paid 70% of all fees received by Dr. Jackson's practice
group for our technical and imaging services provided to their patients under
the agreement. Payments will be made within 30 days after collections occur. We
are responsible for payment of the cost of all necessary imaging equipment,
supplies, technical personnel, office space and overhead expenses related to
provision of our services under the agreement. The agreement is for a term of
five years and is automatically renewable for successive five-year terms unless
terminated by either party at least 90 days before the expiration date. We may
enter into contracts with other entities in the future, but no other agreements
exist at the time of this offering.
We expect that Dr. Jackson's practice group and referrals to that group by
other physicians or healthcare providers will generate approximately 99% of our
business. Our facilities will also be available to provide the same technical
services to other diagnosing or treating physicians within our market area under
the same or a similar fee arrangement, but usage of these facilities by other
physicians is expected to be minimal. Since we receive a fixed percentage of the
collections of Dr. Jackson's practice group, any event that could adversely
affect Dr. Jackson's practice group would also adversely affect our revenues and
business.
Our business strategy is to emphasize quality service and maintain
operating efficiencies. Our ability to be profitable depends substantially upon
our ability to operate efficiently and in a cost-effective manner, because the
payments we receive for our technical services represent a fixed percentage of
the fees to be billed by Dr. Jackson's practice group. Our revenues are
dependent upon the ability of Dr. Jackson's practice group to attract and retain
patients, to obtain and maintain contracts with insurance companies and
healthcare providers to provide services to their clients, and generally to
manage their professional practice. We have no right to control any of these
factors as they relate to Dr. Jackson's practice group. Since Dr. Jackson
controls both his practice group and us, he may renegotiate the terms of the fee
agreement at any time in a manner which could adversely affect our revenues and
business.
MARKET AREA - CUMBERLAND, MARYLAND, AND VICINITY
We currently provide technical services to patients who live within
approximately 50 miles from our office in Cumberland, Maryland. Our market area
includes the City of Cumberland and Allegany County, Maryland, and parts of
Garrett and Washington Counties in western Maryland, parts of Mineral, Hampshire
and Grant Counties in northeastern West Virginia, and parts of Bedford and
Somerset Counties in southwestern Pennsylvania. Our business depends upon the
referral of patients in this area to Dr. Jackson's practice group primarily by
other physicians, physician practice groups or medical service providers. We do
not expect to significantly expand our existing market area in the future.
COMPETITION
Our facilities compete with other local radiology and technical imaging
service providers, including for profit and non-profit hospitals and health
systems, in the market we serve. We believe that changes in governmental and
private reimbursement policies and
14
<PAGE>
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. We cannot
assure you that Dr. Jackson's practice group and our facilities will be able to
compete effectively in the markets we serve. Our inability to compete in our
market could adversely affect us.
Numerous hospitals and physicians' offices in our market 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 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 market 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 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.
MARKETING
We do not use extensive marketing programs to publicize our services. The
experience of our predecessors with mass marketing efforts indicated that such
programs were not very successful. Accordingly, We have no plans to undertake
any mass marketing or similar advertising programs.
15
<PAGE>
OPERATING HISTORY; PREDECESSOR ENTITIES
Because we commenced operations on July 1, 1999, we have no significant
operating history. We have, however, prepared and attached as Appendix A PRO
FORMA historical financial statements for calendar year 1998 and the first six
months of 1999, and as Appendix B PRO FORMA financial projections for our
current fiscal year. We have also attached as Appendix C audited financial
statements for the six months ended December 31, 1999.
Our facilities and services are substantially identical to the facilities
used and services provided in connection with Dr. Jackson's practice group under
the trade name "The Imaging Center" since 1991. "The Imaging Center" is the
trade name of F. Daniel Jackson, M.D., P.A., a medical practice group
specializing in diagnostic radiology.
16
<PAGE>
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 two 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, or 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 through 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 machine. This is 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. Magnetic resonance
angiography has been performed routinely in
17
<PAGE>
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 through 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 General Electric, 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. It also provided blood drawing and specimen collections, with
laboratory examinations performed by an independent clinical laboratory. 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.
The facilities, employees and operations of, and services previously
offered by, Dr. Jackson's practice group and related companies continue to be
provided by Dr. Jackson's practice group and us as described in this prospectus.
The following table describes the examinations made by the procedures
indicated below at The Imaging Center during the years 1993 through 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998 1999
Ultrasound 3448 3331 3257 3676 4168 4715 4305
Mammograms 4011 4289 4476 4648 4809 5285 5158
X-Ray/IVP 4284 4664 5241 5473 5617 5789 4580
Fluoroscopy 548 504 553 540 551 582 315
Nuclear 852 794 741 919 1176 1334 1003
CT 1802 1717 1848 2072 2265 2660 2542
MRI 1597 1729 2108 2142 2335 2456 2375
====== ====== ====== ====== ====== ====== ======
TOTAL 16,542 17,028 18,224 19,470 20,921 22,421 20,278
</TABLE>
The decline in examinations undertaken during 1999, when compared to the
years 1997 and 1998, occurred due to Dr. Jackson's withdrawal from an
association with two family practice physicians who previously shares facilities
with The Imaging Center. When these doctors moved out of The Imaging Center, a
significant number of patient referrals were lost, resulting in a decrease in
the number of examinations conducted in 1999.
The foregoing information is based upon data provided by the various
entities that previously owned and operated our facilities and equipment,
including Dr. Jackson and his practice group. While we believe that this
information is accurate with respect to prior operations of The Imaging Center,
we cannot assure you that this information is indicative as to our future
performance or results of operations.
CONTRACTS AND RELATIONSHIPS WITH INSURANCE COMPANIES, HMO'S AND OTHER PAYORS
THIRD PARTY PAYORS.
We derive our revenues from service fees paid to us by Dr. Jackson's
practice group or by referrals from unaffiliated physicians or practices for the
services we provide at The Imaging Center. Substantially all of the revenue of
Dr. Jackson's practice group and The
18
<PAGE>
Imaging Center is currently derived from government sponsored health care
programs, principally Medicare and Medicaid, and private third-party payors,
such as Blue Cross/Blue Shield, and similar 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>
PAYOR/NETWORK TERM TERMINATION
<S> <C> <C>
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
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
19
<PAGE>
PAYOR/NETWORK TERM TERMINATION
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>
For calendar years 1998 and 1999, combined medical service revenues of Dr.
Jackson's practice group and The Imaging Center were derived from the following
sources in the approximate proportions:
Source 1998 1999
Government approved health care programs 25.16% 23.64%
Private third-party payors 65.3% 57.28%
Self-pay 9.5% 19.08%
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 in payments or other changes in reimbursement for health care
services could have a significantly adverse effect on our business or
profitability unless we are otherwise able to offset such payment reductions.
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS AND CAPITATED FEE
ARRANGEMENTS
During the 12-month period ended December 31, 1998, Dr. Jackson's practice
group and The Imaging Center derived 99% of their combined medical service
revenues of from payments made on a fee-for-service basis by patients and
third-party payors, including government programs. Capitated arrangements
accounted for less than 1% of these combined medical service revenues. During
1997, capitated arrangements accounted for approximately 15% of combined medical
service revenues. 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.
These types of risk-sharing arrangements result in greater predictability
of revenue but greater unpredictability of expenses and, consequently,
profitability. We offer no assurance that Dr. Jackson's practice group or we
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
20
<PAGE>
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.
Neither Dr. Jackson nor we currently have any capitated or other
risk-sharing arrangements. Neither of us intends to enter into any such
arrangements in the future. If Dr. Jackson's practice group or we enter into
capitation arrangements in the future, payments under these contracts would be
allocated 70% to us and 30% to Dr. Jackson's group under the Agreement for
Technical Services. This would present some financial risk to us, because there
is no guarantee that the capitation payments would adequately cover the costs of
the services we provide.
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. These leasing arrangements are described in detail below under the
heading "Existing and Potential Conflict of Interests".
Our future ability to acquire or lease new or replacement equipment depends
upon our ability to obtain financing on reasonable terms.
BUSINESS STRATEGY
Our purpose is to provide technical radiology and imaging services to Dr.
Jackson's practice group and to other 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 our
strategy. We also intend to maintain operating efficiencies that will enable Dr.
Jackson's practice group and any other referring physicians to enhance quality
of care, increase revenue and more effectively control costs.
POSSIBLE FUTURE EXPANSION OF FACILITIES
Together with Dr. Jackson's practice group, we are investigating the
feasibility of expanding the facilities currently occupied and services offered
by both of us, including the construction of a larger building. Any such
expansion is dependent upon the growth of both of our businesses sufficient to
justify the proposed expansion.
INFORMATION MANAGEMENT; YEAR 2000 COMPLIANCE
We believe that all of our 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. Our intent is not to 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. However, as a result of the relationship between Dr. Jackson's
practice group or other referring physicians and us, we may become
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subject to legal actions under various theories. Claims, suits or complaints
relating to services provided by Dr. Jackson's practice group or other referring
physicians may be asserted against us in the future. We maintain insurance
coverage that we believe will be adequate. The availability and cost of this
insurance is affected by various factors, many of which are beyond our control
or the control of Dr. Jackson's practice group. Increases in the cost of this
insurance to us and to Dr. Jackson's practice group may have an adverse effect
on our operations. In addition, successful malpractice or other claims asserted
against Dr. Jackson's practice group, other referring physicians or us that
exceed applicable policy limits could adversely affect us.
INDUSTRY BACKGROUND
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.
Fees charged for diagnostic imaging, interventional radiology and radiation
oncology procedures consist generally of two components. One is a technical
component relating to facilities, equipment and non-physician personnel. The
other is 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
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 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, WE DO 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
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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. We believe 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. Increased professional and technical
utilization is a result of these technological advances, which have also
produced safer, more accurate and less invasive diagnostic procedures than
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. 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. We believe that
future technological advances will enhance the ability of radiologists to
diagnose and direct treatment, thereby lowering overall health care costs.
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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. We believe
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. In addition, we believe 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 us, Dr. Jackson's practice group and other referring physicians to
develop practice guidelines and appropriateness criteria and to manage the
utilization of radiological procedures.
We believe 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. We believe 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, we believe 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 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, we believe physicians
will have fewer referral options for diagnostic imaging procedures. As the
choices for radiology referrals decrease, we believe that quality of care,
subspecialty
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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, such as Dr. Jackson's
practice group and us, are typically at a competitive disadvantage to larger
associations or networks of physicians. Among the reasons for this disadvantage
are the lack of capital necessary to expand geographic practice areas and the
imaging techniques offered, to develop state-of-the-art information systems, and
to purchase costly new imaging technologies, each of which can improve quality
of care and reduce costs. They may also lack the cost accounting and quality
management systems necessary to allow them 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
As a provider of healthcare services, we are subject to extensive federal
and state laws which regulate the relationships between providers of health care
services, physicians and other clinicians. Our ability to operate profitably
will depend in part upon our ability and the ability of Dr. Jackson's practice
group and affiliated referring physicians to obtain and maintain all necessary
licenses, certificates of need and other approvals and to operate in compliance
with present and future applicable health care laws and regulations and
requirements of insurance companies and other health care providers.
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,
medical personnel and technicians, certificates of need, and other required
certificates for certain types of health care facilities and major medical
equipment. The Imaging Center does not require a certificate of need. However,
Maryland law requires that we obtain and maintain a license to operate certain
major medical equipment which we use in our business, such as computed
tomography, also referred to as CT, and scanners and magnetic resonance imagers,
also known as MRI.
FEE-SPLITTING; CORPORATE PRACTICE OF MEDICINE; PAYMENTS FOR REFERRALS
The laws of many states, including Maryland, prohibit business
corporations, such as us, 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
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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. However,
Maryland law prohibits payments for bringing or referring a patient and
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. These laws are subject to certain exceptions. These issues are
discussed in greater detail below under the discussion of Medicare and Medicaid
fraud and abuse.) WHILE WE BELIEVE THAT THE USE OF OUR SERVICES BY DR. JACKSON'S
PRACTICE GROUP WILL NOT VIOLATE THESE LAWS, THERE ARE LEGAL ISSUES ASSOCIATED
WITH THE OWNERSHIP OF OUR SHARES BY PHYSICIANS WHO REFER PATIENTS TO DR.
JACKSON'S PRACTICE GROUP. THESE PHYSICIANS SHOULD OBTAIN LEGAL ADVICE ON THAT
SUBJECT BEFORE PURCHASING OUR STOCK.
We cannot represent whether regulatory authorities or other parties will
assert that we are engaged in the corporate practice of medicine or that the
payment of service fees to us by Dr. Jackson's practice group constitutes fee
splitting or prohibited payment for referrals. If such a claim was successfully
asserted, we could be subject to civil and criminal penalties and could be
required to restructure or terminate our contractual arrangements. Such results
or our inability to successfully restructure our relationships to comply with
these laws could significantly affect our profitably.
PHYSICIAN PAYMENT SYSTEMS
Approximately 25% of our expected revenues are anticipated to be derived
from government approved healthcare programs, such as Medicare and Medicaid. The
federal government has implemented, through the Medicare program, a
resource-based relative value scale payment methodology for physician services.
This methodology is a fee schedule that, except for certain geographical and
other adjustments, pays similarly situated physicians the same amount for the
same services. This schedule is adjusted each year and may increase or decrease
at the discretion of Congress. To date, the implementation of this methodology
has reduced payment rates for certain of the procedures historically provided by
Dr. Jackson's practice group. Federal law also provides for reductions in the
rate of growth of payments for physician services, including services
historically provided by Dr. Jackson's practice group, in the amount of $5.3
billion over a five-year period ending in 2002. In addition, this law 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 DR. JACKSON'S PRACTICE
GROUP.
For a number of years, Medicare has reimbursed most radiology services
provided to Medicare patients under a separate radiology relative value system.
This radiology relative value system has been integrated into payment
methodology described above, but has been "rescaled," to be consistent with that
methodology. Some components of reimbursement for portable x-ray services
relating to 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.
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Similar type payment systems also have been adopted by certain private
third-party payors and we believe 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
significantly adversely affect our business or profitability.
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 Dr. Jackson's practice group.
Federal law 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
significantly adversely affect our business or profitability.
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 FRAUD AND ABUSE
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.
Federal law, including the Balanced Budget Act of 1997, contains reform
provisions relating to Medicare, Medicaid and other governmental programs. These
provisions are intended to assist the government in its efforts to enforce the
"anti-kickback" laws. Changes included adding a civil money penalty and
broadening the scope of circumstances under which mandatory or permissive
exclusion from these programs may apply.
Similarly, provisions contained in the Stark law 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. The Stark law also prohibits entities from billing for these
designated health services which are furnished under a prohibited referral. A
violation of the Stark law by us, any member of Dr. Jackson's practice group or
unaffiliated physicians, may result in significant civil penalties of as much as
$15,000 for each violating referral and $100,000 for participation in a
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"circumvention scheme". Violations may also cause the exclusion or suspension of
the physician or entity from future participation in the Medicare and Medicaid
programs.
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. A determination of violation under any
of these laws by Dr. Jackson's practice group or us could have a significant
adverse effect on our business or profitability.
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.
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.
We believe that although we will receive fees for technical radiology and
imaging services, we are not in a position to make or influence referrals of
patients or services reimbursed under these governmental programs to Dr.
Jackson's practice group or unaffiliated referring physicians, or to receive
such referrals. These service fees are intended by us 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 us and the professional services offered by Dr.
Jackson's practice group, it is doubtful whether there are or will be any
"referrals" between Dr. Jackson's practice group and us in the sense
contemplated by the anti-kickback laws. For these reasons, we do not believe
that fees payable to us should be viewed as remuneration for referring or
influencing referrals of patients or services covered by such programs as
prohibited by statute. If, however, we are deemed to be in a position to make,
influence or receive referrals from or to physicians, or we are deemed to be a
provider under the Medicare or Medicaid programs, our operations could be
subject to scrutiny under federal and state anti-kickback and anti-referral laws
and could be materially and adversely affected.
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SPECIAL NOTE TO PHYSICIANS CONTEMPLATING PURCHASING SHARES
- --------------------------------------------------------------------------------
WE BELIEVE THAT ALTHOUGH WE WILL RECEIVE FEES FOR TECHNICAL SERVICES, WE ARE NOT
IN A POSITION TO MAKE OR INFLUENCE REFERRALS OF PATIENTS. WHILE WE BELIEVE THAT
THE USE OF OUR SERVICES BY DR. JACKSON'S PRACTICE GROUP WILL NOT VIOLATE THESE
LAWS, THERE ARE LEGAL ISSUES ASSOCIATED WITH THE OWNERSHIP OF OUR SHARES BY
PHYSICIANS WHO REFER PATIENTS TO DR. JACKSON'S PRACTICE GROUP, AND ANY SUCH
REFERRING PHYSICIANS SHOULD OBTAIN LEGAL ADVICE ON THAT SUBJECT BEFORE
PURCHASING OUR SHARES.
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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. We believe
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 us. The proposal of these sorts of reforms
may affect the price of the stock of many companies in health care and related
industries and may similarly affect the market price of our stock.
COMPLIANCE PROGRAM
With the assistance of our special health care regulatory counsel, we
intend to monitor compliance with federal and state laws and regulations
applicable to health care entities. We intend to conduct or have our special
health care regulatory counsel conduct periodic audits of various aspects of its
operations for compliance with such requirements.
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 that restricts our
operations. Maryland law may require us to modify our operational structure in
order to continue
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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.
INSURANCE LAWS AND REGULATIONS APPLICABLE TO RISK-SHARING ARRANGEMENTS
Any physician or physician network engaged in risk-based contracting are
subject to applicable insurance laws and regulations of certain states,
including Maryland. These laws and regulations may include minimum capital
requirements and other safety and soundness requirements. If, in the future, Dr.
Jackson or we enter into any risk-based contracts, also know as capitation
arrangements, failure to comply with these statutes and regulations could
significantly adversely affect our business or financial condition. Insurance
related regulations or compliance requirements could also impose substantial
costs to us. However, neither Dr. Jackson nor we intend at this time to enter
into capitation arrangements or risk-based contracts that would subject us to
regulation as an insurer.
QUALITY ASSURANCE PROGRAMS
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 Dr.
Jackson's practice group and us, and our ability to integrate those systems and
operations. The inability of Dr. Jackson's practice group and us to develop
strong quality assurance measures could place us at a competitive disadvantage
and have a material adverse effect on our business or financial condition.
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."
TECHNICAL SERVICES DESCRIPTION
X-RAY Roentgen rays penetrate the body and record
images of organs and bone structures on film. We
lease 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."
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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. We currently lease from Imaging
Associates of Cumberland, Inc. a GE 600T
Mammography System.
We recently purchased 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.
We purchased this new equipment on November 20,
1999, for $218,104.09, which includes a one-year
warranty and service agreement. A long-term
service contract will begin after the first year
of operation.
MAGNETIC RESONANCE Strong magnetic field in conjunction with low
IMAGING (MRI) energy electromagnetic waves are processed by a
computer to produce high-resolution images of
body tissue including the brain, spine, abdomen,
heart and extremities.
We lease 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
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.
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COMPUTED TOMOGRAPHY (CT) Computer directed movement of an x-ray tube to
produce multiple cross sectional 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.
We use 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.
We also lease a new nuclear medicine machine
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
HEART STRESS TESTING conditions using a treadmill.
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. A
self-inflating sphygmomanometer cuff obtains
automatic blood pressure readings. 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.
We use 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."
In addition to the foregoing equipment, we have additional EKG equipment,
vehicles and medical, office, and professional equipment which we use in
providing technical services.
Dr. Jackson's practice group will provide professional diagnostic,
treatment, and supervisory services.
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<PAGE>
We employ 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> <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 our business operational activities at
our 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
we 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 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 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
33
<PAGE>
Mammography Quality Standards Act. This act 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 us 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. The Nuclear Medicine
Technology Certification Board also certifies one of the radiologic
technologists. In order to maintain such certifications, radiologic
technologists must obtain continuing education credits every two or three years.
Certain of our facilities and equipment, including our nuclear equipment,
must also be licensed by the State of Maryland and the U. S. Food and Drug
Administration. The American College of Radiology accredits our mammography
facilities. We have applied for similar accreditations for our MRI and
ultrasound facilities.
OUR MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
F. Daniel Jackson, M.D. is our President, a director, and our controlling
shareholder. He has not held any other office or position with us. During the
past five years, Dr. Jackson was an employee of 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 is 51 years old and
earned his M.D. degree from the School of Medicine at the University of North
Carolina, Chapel Hill, 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.
Dr. Jackson conducts his business at our offices and resides at 726
Washington Street, Cumberland, Maryland.
Our other executive officers, directors and significant employees and
information about them are described below.
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------ ---------------- ----------------------------------------------------------------
NAME, AGE AND ADDRESS TITLE BUSINESS EXPERIENCE/EMPLOYMENT DURING LAST 5 YEARS
- ------------------------------------ ---------------- ----------------------------------------------------------------
Frederick J. Hill, 64 Director Retired since 1995. Formerly Senior Vice President, Beall,
822 Buckingham Road Garner, Screen and Geare, Inc., Cumberland, MD, a financial
Cumberland, Maryland 21502 services company providing insurance, pension planning and
discount brokerage services
- ------------------------------------ ---------------- ----------------------------------------------------------------
James F. Scarpelli, Jr., 46 Director Vice President, Scarpelli Funeral Home, PA, 108 Virginia
894 Eastgate Court Avenue, Cumberland, MD
Cumberland, Maryland 21501
- ------------------------------------ ---------------- ----------------------------------------------------------------
Larry James Taylor, 50 Vice President Chief Operating Officer, The Imaging Center, 201 Virginia
Route #1, Box 124 D Avenue, Cumberland, MD, 1996 - present
Keyser, WV 26726 Interim Plant Manager, Anchor Glass Container, Keyser, WV, a
manufacturer of glass containers, 1995 - 1997
- ------------------------------------ ---------------- ----------------------------------------------------------------
D. Jeanne Starkey, 50 Treasurer Chief Financial Officer, The Imaging Center, 201 Virginia
753 Washington Street Avenue, Cumberland, MD, 1996 - present
Cumberland, MD 21502 Business Manager, The Imaging Center, Cumberland, MD, 1992 -
1996
- ------------------------------------ ---------------- ----------------------------------------------------------------
Carolyn L. Hott, 56 Corporate Secretary, The Imaging Center, 715 Williams Street,
319 Caroline Street Secretary Cumberland, MD, 1990 - present
Cumberland, MD 21502
- ------------------------------------ ---------------- ----------------------------------------------------------------
</TABLE>
None of these persons 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.
RETIREMENT PLAN
We adopted the retirement plan that is sponsored by Dr. Jackson's practice
group. This retirement plan is a 401(k) profit-sharing plan open to each
employee that has attained age 21 and completed 12 months of service during
which the employee completed 1,000 hours of service. We do not match any portion
of the elective deferral of the employee; however, we can make a discretionary
contribution of up to 15% of eligible compensation annually. Any employer
contributions are vested 20% each year with each employee fully vested after
five years.
EXECUTIVE COMPENSATION
Because we began operations on July 1, 1999, no compensation or other
remuneration was paid to our officers or directors before that date. They did,
however, receive compensation from Dr. Jackson's practice group and related
entities, our predecessors.
Each of our officers will receive compensation from us in the amount of
$20,000 annually. Our officers are also officers or employees of Dr. Jackson's
practice group and related companies and receive compensation from them.
Our directors will receive $500 for each meeting of the Board of Directors
they attend.
None of our officers has an employment agreement with us.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
Dr. Jackson is the sole owner of all 100 issued and outstanding shares of
our Class A Voting common stock.
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<PAGE>
The following table sets forth the expected respective ownership interests
in shares of our Class B Non-Voting common stock of each executive officer and
director upon completion of the offering.
OWNERSHIP OF CLASS B NON-VOTING SHARES OF COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OWNED PERCENTAGE NUMBER PERCENTAGE
BEFORE OWNED BEFORE OWNED AFTER OWNED AFTER
NAME OFFERING OFFERING OFFERING OFFERING
---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
F. Daniel Jackson, M.D. 8,999,000 90% 8,999,000 90%
Frederick J. Hill, Director 0 0 1,000 .01%
James F. Scarpelli, Jr., Director 0 0 1,000 .01%
Larry James Taylor, Vice President 0 0 1,000 .01%
D. Jeanne Starkey, Treasurer 0 0 1,000 .01%
Carolyn L. Hott, Corporate Secretary 0 0 1,000 .01%
TOTAL, ALL OFFICERS AND DIRECTORS 8,999,000 90% 9,004,000 90.05%
Others 0 0% 995,000 9.95%
</TABLE>
EXISTING AND POTENTIAL CONFLICT OF INTERESTS
Dr. Jackson is our President, a director and the sole owner of all
outstanding shares of our Class A Voting common stock. Accordingly, Dr. Jackson
will make all decisions regarding our operations, facilities and future
development. Dr. Jackson owns 100% of the stock of Value Healthcare, Inc. and a
majority of the stock of Imaging Associates of Cumberland, Inc., the companies
which leased various items of equipment to us. These 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 our
facilities and equipment are located. We leased these facilities under terms we
believe to be fair, but not necessarily the same terms as we would have obtained
through arm's length negotiations.
We lease certain of our equipment and our building from Value Healthcare,
Inc. and Imaging Associates of Cumberland, Inc. Dr. Jackson controls both of
these corporations. Current lease and financing arrangements for the building we
occupy and our major equipment are described in the following table.
<TABLE>
<CAPTION>
FINANCING/LEASING
DESCRIPTION TERMS LENDER/LESSOR
----------- ----- -------------
<S> <C> <C>
Mammography Machine Purchased for cash on November 20, 1999. Not Applicable
MRI Machine 5 year term. Monthly lease and service payments are General Electric Medical Systems
$32,974.00 for 12 months, then $ 43,829.00 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 $5,396.00, 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 Medicine Machine 5 year term. Monthly lease and service payments are General Electric Medical Systems
$9,439.00 for 12 months, then $ 13,939.00 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
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
FINANCING/LEASING
DESCRIPTION TERMS LENDER/LESSOR
----------- ----- -------------
<S> <C> <C>
Building, 715 Williams 5 year term with right to renew for an additional 5 Imaging Associates of
Street, Cumberland, MD years. Monthly lease payments are $5,835 per month for Cumberland, Inc.
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. Purchase price was $218,104.09.
2. Original cost was $23,300.
FINANCING ON OUR LEASED BUILDING AND EQUIPMENT. There is no debt owed upon
the building or any of the equipment and other property we lease from Imaging
Associates of Cumberland, Inc. and Value Healthcare, Inc. However, the building,
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 these
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 us to pledge all collectible
accounts receivable as security for full payment of rent throughout the term of
the lease. These leases require us 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.
We are obligated to maintain the leased equipment in good repair, condition
and working order at our own cost and to bear the risk of any loss or damage to
the equipment, repairing or replacing it upon loss or damage. We are 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,
in both cases naming the lessor as loss payee.
The leases require us to keep the equipment free and clear of all levies,
liens and encumbrances, and to pay when due all license and registration fees,
assessments and taxes arising from the use or operation of the equipment. The
leases require us to 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 lease covers all of the building located at
715 Williams Street, Cumberland, Maryland, which is generally known as "The
Imaging Center." The lease may be renegotiated at any time by mutual consent,
but not more than once each calendar year. The leased premises may be used and
occupied by us for any lawful purpose which complies with applicable zoning
ordinances. Except for assignment to related entities
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<PAGE>
or a purchaser of substantially all our assets, we may not sublease all or any
part of the leased premises, or assign the lease in whole or in part without the
lessor's consent.
The lease requires us to make, at our expense, all necessary repairs to the
leased premises. We may also make additions, improvements and replacements to
the leased premises from time to time as we deem desirable. The lease requires
us to 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. We are responsible for paying
all personal property taxes with respect to our personal property at the leased
premises.
If fire or other casualty resulting from our act or negligence damages the
building, our obligation to pay rent will not be diminished or abated while such
damages are being repaired. We will also be responsible for the costs of repair
not covered by insurance. We must maintain fire and extended coverage insurance
on the building and the leased premises in such amounts as approved by lessor.
We must also maintain, at our expense, fire and extended coverage insurance on
all of our personal property located at the leased premises.
The lease further requires us to maintain comprehensive general liability
insurance with respect to the activities in the building providing not less than
$1,000,000 combined single limit coverage for bodily injury, property damage or
both. Our comprehensive general liability insurance must name the lessor as an
additional insured.
The lease requires us to pay for water, sewer, gas, electricity, telephone
and other services and utilities used by us on the leased premises during the
term of the lease.
We are required to comply with the rules of the building adopted and
altered by lessor from time to time.
If fire, casualty or structural defects damage the leased premises so that
it cannot be used for our purposes, we are responsible for repairing the damage
promptly, at our expense. We are required to pay rent and other charges while
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 existing or future mortgage,
deed of trust or other lien upon the leased premises, including any renewals,
refinancing and extensions. The lessor may subordinate the lease to any present
or future mortgage, deed of trust or other lien placed upon the leased premises
or the building. The building we lease is subject to a mortgage securing a
$1,400,000 debt to The American Trust Bank, as discussed above.
DESCRIPTION OF COMMON STOCK
GENERAL. We are 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, and
9,999,000 shares of Class B Non-Voting common stock $1.00 par value per share.
The Class A shares are NOT offered under this prospectus. Upon completion of the
offering, we will have 100 Class A shares and 9,999,000 Class B shares of common
stock outstanding, assuming that all Class B shares offered under this
prospectus are purchased. The following description of our common stock is
qualified in its entirety by reference to our Articles of Incorporation, a copy
of which is attached to this prospectus as Appendix D.
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<PAGE>
We will act as transfer agent for our 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 our stockholders 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 CLASS B NON-VOTING COMMON STOCK HAVE NO RIGHT TO VOTE FOR OR
ELECT DIRECTORS OR TO VOTE ON ANY OTHER MATTER SUBMITTED TO A VOTE AT ANY
MEETING OF THE STOCKHOLDERS. CLASS B SHAREHOLDERS MAY BE ENTITLED TO VOTE WHEN
REQUIRED BY THE MARYLAND GENERAL CORPORATION LAW, BUT THEN ONLY TO THE EXTENT
NOT MODIFIED OR WAIVED BY OUR ARTICLES OF INCORPORATION. WE BELIEVE THAT
MARYLAND LAW DOES NOT REQUIRE A VOTE BY OUR CLASS B SHAREHOLDERS ON ANY MATTER
UPON WHICH OUR SHAREHOLDERS MAY OTHERWISE BE ENTITLED TO VOTE. THE HOLDERS OF
CLASS B NON-VOTING COMMON STOCK ARE ENTITLED TO RECEIVE NOTICE OF THE MEETINGS
OF THE STOCKHOLDERS BUT ARE NOT ENTITLED TO VOTE ON ANY MATTERS SUBMITTED AT
THESE MEETINGS.
All classes of stock are identical in all other respects.
The stockholders have no preemptive rights with respect to sale of any
additional shares of our common stock. All outstanding shares of common stock
and any shares acquired in this offering, when paid for, will not be subject to
any calls or assessments.
Holders of common stock may receive dividends and other distributions when
and if declared from time to time by the Board of Directors. We do not intend to
declare or pay any dividends on the shares of our common stock in the near
future.
LIABILITIES OF STOCKHOLDERS. Under Maryland law, our stockholders have no
liability when acting in that capacity to laborers, servants or our employees.
Maryland courts have, however, held shareholders liable for their actions in
other capacities, such as acting as a guarantor or as an officer or director, or
by the commission of fraud.
LIQUIDATION RIGHTS. In the event of a voluntary or involuntary liquidation,
dissolution or winding up, after distribution of any 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 our
assets remaining after payment of our liabilities. Our Articles of Incorporation
state that no holder of any class or series of stock shall have any preemptive
rights. We may, in our sole discretion, purchase or redeem 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 we may
designate and issue in the future.
OWNERSHIP OF SHARES UPON COMPLETION OF OFFERING. Upon completion of the
offering, we 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 offered
shares are purchased. The
39
<PAGE>
following table sets forth each person who owns of record as of March 1, 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.
- -------------------------- -----------------------------------------------------
OWNERSHIP INTEREST*
-----------------------------------------------------
CLASS A SHARES CLASS B SHARES
--------------------------- -------------------------
UPON UPON
PRIOR TO COMPLETION PRIOR TO COMPLETION
OWNER OFFERING OF OFFERING OFFERING OF OFFERING
- -------------------------- ------------- ------------- ------------- -----------
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.
CONTROL BY CERTAIN SHAREHOLDERS AND AFFILIATES. Dr. Jackson is the sole
owner of all Class A shares and is our President and a director. As such, he
controls the election of our directors and all decisions regarding our
operations, facilities and future development of our facilities.
SALES OF ADDITIONAL SHARES. Before this offering, no public market existed
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 our
ability to raise equity capital. We cannot predict the effect, if any, that the
sale or availability for sale in the future of shares of common stock will have
on the market price of the common stock prevailing from time to time.
All shares of Class B Non-Voting common stock sold in this offering will be
freely tradable, except that any shares purchased by "affiliates", such as our
officers and directors, 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 SEC or in transactions exempt from
registration. Dr. Jackson expects to offer and sell shares of Class B Non-Voting
common stock owned by him or entities controlled by him from time to time in
accordance with the limitations of applicable law, including SEC Rule 144.
MANAGEMENT AND OPERATION OF COMPANY. Ownership of the shares offered by
this prospectus does not entitle the owners of those shares to participate in
our management or operation, except for any rights granted by Maryland law.
LEGAL PROCEEDINGS
We are not a party to any suits or complaints relating to services provided
by us or by Dr. Jackson's practice group. However, claims may be asserted
against us in the future.
REPORTS TO INVESTORS
Under Maryland law, we are required to prepare annually and submit to the
annual meeting of stockholders a full and complete statement of our affairs,
including a balance
40
<PAGE>
sheet and a financial statement of operations for the preceding fiscal year.
This statement is also required by law to be available to all our stockholders
for inspection and copying. Stockholders are also 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 us a
statement of each class of stock or other securities issued by us 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
Richard G. McAlee, P.A., Crofton, Maryland, is passing upon certain legal
matters with respect to the validity of the shares of Class B Non-Voting common
stock. Miles & Stockbridge P.C., Baltimore, Maryland, acted as our special
counsel in this offering.
EXPERTS
Our management prepared the PRO FORMA financial information concerning us
contained in this prospectus 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. We recalculated this historical information to
take into account our creation and the services we will perform for Dr.
Jackson's practice group. Our management prepared the PRO FORMA projections with
the assistance of Huber, Michaels & Company, Certified Public Accountants, based
upon our estimates of our future operations. These projections are strictly
estimates and we do not guarantee that these projections constitute accurate
predictions of future performance. Our management prepared the financial
statements for the quarter ending September 30, 1999, with the assistance of
Huber, Michaels & Company, Certified Public Accountants.
We are independent of all experts and counsel named in this prospectus.
None of them has any financial interest in us. Huber, Michaels & Company,
Certified Public Accountants, have acted as our independent accountants since we
commenced operations on July 1, 1999.
AVAILABLE INFORMATION ABOUT THE COMPANY
We have filed with the United States Securities and Exchange Commission a
registration statement on Form SB-1 with respect to the offered shares. We have
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 for the offered shares. This prospectus, which is a part
of the registration statement, does not contain all of the information set forth
in the registration statement and its exhibits and schedules. Prospective
investors should refer to the registration statement and the exhibits and
schedules filed with it for further information about the shares and us. This
prospectus contains summaries of the provisions of certain contracts, agreements
or 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 our 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
41
<PAGE>
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 registration
statement and any amendments are also available at the SEC's Internet web site,
http://www.sec.gov.
Prior to filing the registration statement, we were not subject to any
reporting requirements under the Securities Exchange Act of 1934 or any state
securities act. Following effectiveness of the registration statement, we will
become subject to the informational and periodic reporting requirements of the
Exchange Act. These reports will be available for inspection and copying at the
public reference facilities and other regional offices described above, as well
as from the SEC's website.
APPENDICES
The following appendices are part of this prospectus.
A - PRO FORMA Financial Statements
B - PRO FORMA Financial Projections
C - Audited Financial Report for Six Months Ended December 31, 1999
D - Articles of Incorporation
42
<PAGE>
APPENDIX A
THE IMAGING CENTER, INC.
PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE SIX MONTHS ENDED JUNE 30, 1999
A-1
<PAGE>
TABLE OF CONTENTS
Page No.
--------
Pro Forma Balance Sheets 1
Pro Forma Statements of Income 2
Selected Notes to Financial Statements 3 - 9
Supplementary Information 10 - 13
A-2
<PAGE>
THE IMAGING CENTER, INC.
PRO FORMA BALANCE SHEETS
DECEMBER 31, 1998 & JUNE 30, 1999
Dec. 31, 1998 June 30, 1999
------------- -------------
ASSETS
Current Assets
Cash $ 63,294 $ 279,205
Accounts Receivable 1,577,998 1,316,078
----------- -----------
Total Current Assets 1,641,292 1,595,283
----------- -----------
Property, Plant, & Equipment
Office Furniture and Equipment 74,592 78,651
Equipment 1,294,839 4,459,709
Vehicles 20,709 20,709
----------- -----------
1,390,140 4,559,069
Less Accumulated Depreciation (731,036) (1,159,474)
----------- -----------
Total P,P,&E 659,104 3,399,595
----------- -----------
Total Assets $ 2,300,396 $ 4,994,878
=========== ===========
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $ 22,868 $ 55,000
Accrued Liabilities 20,406 40,000
Current Portion of Capital Leases Payable 224,401 601,505
----------- -----------
Total Current Liabilities 267,675 696,505
Long-Term Debt
Long-Term Leases Payable 473,197 2,724,028
Note Payable - F. Daniel Jackson 300,000 0
Deferred Income Taxes 704,978 834,245
----------- -----------
Total Liabilities 1,745,850 4,254,778
----------- -----------
Equity
Common Stock 180,000 180,000
Retained Earnings 374,546 560,100
----------- -----------
Total Equity 554,546 740,100
----------- -----------
Total Liabilities and Equity $ 2,300,396 $ 4,994,878
=========== ===========
See selected notes to the financial statements
- 1 -
A-3
<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
Dec. 31, 1998 June 30, 1999
------------- -------------
Total Revenue $ 3,008,835 $ 1,254,713
Operating Expenses
Salaries 658,347 333,963
Medical Supplies 275,443 139,988
Other Operating Expenses 1,393,773 348,012
----------- -----------
Total Operating Expenses 2,327,563 821,963
----------- -----------
Operating Income 681,272 432,750
----------- -----------
Other Income (Expenses)
Interest Income 10,994 3,895
Misc Income 2,350 0
Interest Expense (67,570) (139,403)
----------- -----------
Total Other Income (Expense) (54,226) (135,508)
----------- -----------
Income Before Inc. Taxes 627,046 297,242
Provision for Income Taxes (252,500) (111,687)
----------- -----------
Net Income $ 374,546 $ 185,555
=========== ===========
Earnings per share, Class A Common Stock $ 0.04 $ 0.02
Earnings per share, Class B Common Stock $ 0.04 $ 0.02
See selected notes to the financial statements
- 2 -
A-4
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INTRODUCTION
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.
The adjustments to the historical financial statements of F. Daniel
Jackson, MD, PA, are reflected in the supplemental information. An explanation
of the assumptions used and supporting facts follows:
For the Year Ended December 31, 1999 and the Six Months Ended June 30, 1999
- ---------------------------------------------------------------------------
(A) An evaluation of the revenues of F. Daniel Jackson, MD, PA reflected that
approximately 70% were derived from the technical components and 30% were
derived from the professional component. The balance of Accounts Receivable as
of December 31, 1998 on the Pro Forma Financial Statements of The Imaging
Center, Inc. reflects the approximate historical collection cycle of the
technical revenues of F. Daniel Jackson, MD, PA. Accounts Receivable are
calculated as being 52.4454% of annual billings. The percentage is not
considered unusual given the nature of the services provided. Uncollectible
accounts receivable adjustments are made monthly to write-off. For the six
months ended June 30, 1999, the same percentages were used.
(B) An evaluation of the operating expenses of F. Daniel Jackson, MD, PA
reflected that an estimated $1,589,586 for the Year Ended December 31, 1998, and
$596,512 for the six months ended June 30, 1999, were relative to the
professional component. A large portion of the adjustments reflect professional
salaries. The balances of the current liabilities as of December 31, 1998, and
June 30, 1999, on the Pro Forma Financial Statements of the Imaging Center, Inc.
reflect the approximate historical payment cycle of the technical expenses of F.
Daniel Jackson, MD, PA.
(C) Additional shares of Class B Stock were bought by F. Daniel Jackson on
January 1, 1998, and provided a cash flow of $170,000.
(D) Balance sheet account balances on the historical financial statements of F.
Daniel Jackson, MD, PA as of January 1, 1998, that derive from the entity before
that date are eliminated from the pro forma financial statements of The Imaging
Center, Inc.
- 3 -
A-6
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INTRODUCTION(Continued)
(E) With the operating assets eliminated as of January 1, 1998, as in Adjusting
Journal Entry 4, a loan from F. Daniel Jackson will be required to maintain a
positive cash flow.
(F) As described in Note 5, The Imaging Center, Inc., leases several pieces of
equipment. This entry records two capital leases as of December 31, 1997, that
had been recorded in the Historical Financial Statements as operating leases.
Depreciation was taken on this equipment in accordance with the Company's
depreciation methods, described at Note 2.
(G) To record the transactions related to the capital leases described above for
the Year Ended December 31, 1998.
(H) To record depreciation expense on the assets capitalized, described in item
(F) above.
(I) Based on the changes made at the journal entries above, Deferred and Current
Income Taxes on the Accrual Basis are adjusted. These changes have been
calculated using applicable federal and state rates.
Additional References For the Six Months Ended June 30, 1999
(J) Additional equipment obtained and the relevant financing information is
discussed at Note 5.
(K) For the purposes of this Pro Forma Financial Statement, it is assumed that
all new equipment was place in service January 1, 1999. The Historical Financial
Statements reflect that the equipment was placed in service throughout the year,
and contain expenses for operating leases that were replaced by the equipment in
Item (J). As all new equipment is assumed in service at January 1, 1999, the
operating expenses for the replaced equipment are omitted.
(L) To record depreciation expense on all equipment purchased through capital
leases.
(M) To adjust income taxes for the above entries.
(N) As the Company experiences positive cash flow, the loan to F. Daniel
Jackson, M.D. will be repaid.
- 4 -
A-7
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Company utilizes the accrual method for financial reporting
purposes and the ca 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.
Uses 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,
and these differences could be material.
Depreciation
Fixed assets are recorded at cost and depreciated using accelerated
methods in accordance with Internal Revenue Service regulations, and straight
line methods. Where accelerated methods have been used, the differences between
depreciation calculated using Generally Accepted Accounting Principles and
Internal Revenue Service regulations is not material. Depreciable lives with
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.
- 5 -
A-8
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
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 - EQUIPMENT LEASES
For the Year Ended December 31, 1998, the Corporation leased equipment
from Value Healthcare, Inc. (a related party) and Imaging Associates of
Cumberland, Inc. (a related party). These leases have been recorded as capital
leases and each have a term of 60 months. The lease with Value Healthcare, Inc.
began on January 1, 1997. The lease with Imaging Associates of Cumberland, Inc.
began on September 1, 1996, and may be renegotiated at any time, but not more
than once a year. These leased assets are pledged as security for debt of $1.4
million of debt of related parties.
For the Year Ended December 31, 1998, the Company also leased a
building from Imaging Associates, Inc. (a related party) with a 60 month term
for $70,020 a year. The building is insured for $711,000 at an annual cost of
$2,919. A $300,000 limit per fire and certain other limits apply. The lease is
automatically renewed unless a written notice is given at the end of 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 the unrelated entities. All collections on accounts receivable
are pledged as security for the lease payments with related parties. Included in
the insurance policy for the building is $2,500,000 coverage for equipment, with
certain limits applying.
The following is a schedule of future minimum lease payments required under the
above leases as of January 1, 1999.
Year ending December 31, Amount
------------------------ ------
1999 $ 342,120
2000 342,120
2001 309,420
2002 70,020
2003 70,020
----------
$1,133,700
==========
- 6 -
A-9
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 5 - EQUIPMENT LEASES (Continued)
The following is a schedule of the long-term debt under the capital
leases for the equipment as of January 1, 1998.
Year ending December 31, Amount
------------------------ ------
1998 $224,401
1999 243,027
2000 230,170
2001 - 0 -
2002 - 0 -
--------
$697,598
========
The Company began leasing equipment from GE Healthcare Services. In
1999, the statements are adjusted as if the leases began January 1, 1999. These
leases have been recorded as capital leases and each have a term of 60 months.
Two of the leases with GE Healthcare have an early purchase option after 57
months for 33% of the original equipment cost, or $939,856.
The following is a schedule of the future minimum lease payments for
all leases described in this note.
Amount
Six Months ending June 30, 1999 $ 457,914
Year Ending June 30,
2000 915,828
2001 915,828
2002 747,078
2003 643,728
-----------
$ 3,680,376
===========
The following is a schedule of the long-term debt under the capital
leases for all leases described in this note.
Year Ending June 30, Amount
--------------------- ------
1999 601,505
2000 651,427
2001 532,786
2002 467,415
2003 and thereafter 1,072,400
---------
$ 3,325,533
- 7 -
A-10
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 6 - COMMON STOCK
The Company is authorized to issue 1,000 shares of Class A Voting
Common Stock $1.00 par value per share, 100 shares of which are issued and
outstanding. F. Daniel Jackson, M.D. owns 100% of these shares. Holders of Class
A shares are entitled to one vote per share on all matters for which the
stockholders of the Corporation shall have the right to vote.
The Company is authorized to issue 9,999,000 shares of Class B
Non-Voting Common Stock $1.00 par value per share, 8,999,000 shares which are
issued and outstanding. F. Daniel Jackson, M.D. owns 100% of these shares.
Holders of Class B shares do not have any right to vote on any matters, but are
entitled to receive notification of the meetings of the stockholders.
NOTE 7 - EARNINGS PER SHARE
Basic EPS Computation
<TABLE>
<CAPTION>
Description Year Ended December 31, 1998 Six Months Ended June 30, 1999
- ----------- ---------------------------- ------------------------------
<S> <C> <C>
Net Income $ 374,546 $ 185,555
Less: Dividends paid -0- -0-
Income available to
Common Stockholders 374,546 185,555
Number of Shares of
Common Stock 8,999,100 8,999,100
---------- ----------
Basic EPS $ 0.04 $ 0.02
========== ==========
</TABLE>
NOTE 8 - PROFESSIONAL LIABILITY INSURANCE
F. Daniel Jackson, MD, has primary liability insurance covering
$1,000,000 per occurrence and $3,000,000 annually, and an excessive professional
liability policy covering $1,000,000 per occurrence and $1,000,000 annually. The
annual premium is $10,662 for both policies, but has been reduced 30% based on
Dr. Jackson's claim free status to $7,463.
- 8 -
A-11
<PAGE>
THE IMAGING CENTER, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
NOTE 9 - MANAGEMENT DISCUSSION AND ANALYSIS
The Company has demonstrated positive earnings for both periods.
Solvency is demonstrated by a strong ratio of Total Current Assets to Total
Current Liabilities. The Company initially required a cash infusion from F.
Daniel Jackson, MD, as Accounts Receivable are equal to approximately one half
of one years billings. However, all loans to F. Daniel Jackson, MD, PA have been
repaid by June 30, 1999. The fair market value of equipment approximates the
balance due on the related capital leases.
- 9 -
A-12
<PAGE>
THE IMAGING CENTER, INC.
SUPPLEMENTARY INFORMATON
HISTORICAL TO PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
<TABLE>
<CAPTION>
Balances per Balances per
December 31, 1998 December 31, 1998
Category Financial Statements # AJE's Pro Forma F/S
- -------- ---------------------- ----- ----------------- --------------------------
<S> <C> <C> <C> <C>
Cash 19,045 (1) (773,757) 63,294
(2) 1,446,402
(3) 170,000
(4) (850,314)
(5) 300,000
(9) (248,082)
- --------------------------------------------------------------------------------------------------------------
Investments 239,775 (4) (239,775) 0
- --------------------------------------------------------------------------------------------------------------
Accounts Receivable 2,093,742 (1) (515,744) 1,577,998
- --------------------------------------------------------------------------------------------------------------
Office Furniture & Equipment 74,592 74,592
- --------------------------------------------------------------------------------------------------------------
Equipment 176,354 (6) 1,118,485 1,294,839
- --------------------------------------------------------------------------------------------------------------
Vehicles 20,709 20,709
- --------------------------------------------------------------------------------------------------------------
Accumulated Depreciation (256,754) (6) (250,584) (731,036)
(8) (223,698)
- --------------------------------------------------------------------------------------------------------------
Accounts Payable (44,573) (2) 21,705 (22,868)
- --------------------------------------------------------------------------------------------------------------
Accrued Liabilities (101,141) (2) 80,735 (20,406)
- --------------------------------------------------------------------------------------------------------------
Accrued Pension (40,744) (2) 40,744 0
- --------------------------------------------------------------------------------------------------------------
Current Portion Leases payable 0 (6) (207,203) (224,401)
(7) (17,198)
- --------------------------------------------------------------------------------------------------------------
Deferred Income Taxes (717,260) (9) 12,282 (704,978)
- --------------------------------------------------------------------------------------------------------------
Note Payable - F. Daniel Jackson (43,511) (4) 43,511 (300,000)
(5) (300,000)
- --------------------------------------------------------------------------------------------------------------
Long-term Lease Payable (6) (697,598) (473,197)
(7) 224,401
- --------------------------------------------------------------------------------------------------------------
Common Stock (10,000) (3) (170,000) (180,000)
- --------------------------------------------------------------------------------------------------------------
Retained Earnings (1,410,234) (4) 1,046,578 (374,546)
(6) 36,900
(7) (223,696)
(10) 175,906
- --------------------------------------------------------------------------------------------------------------
Revenue (4,298,336) (1) 1,289,501 (3,008,835)
- --------------------------------------------------------------------------------------------------------------
Operating Expenses 3,741,854 (2) (1,589,586) 2,327,563
(7) (48,403)
(8) 223,698
- --------------------------------------------------------------------------------------------------------------
Interest Income (10,994) (10,994)
- --------------------------------------------------------------------------------------------------------------
Miscellaneous Income (2,350) (2,350)
- --------------------------------------------------------------------------------------------------------------
Interest Expense 2,674 (7) 64,896 67,570
- --------------------------------------------------------------------------------------------------------------
Provision for Income Taxes 16,700 (9) 235,800 252,500
- --------------------------------------------------------------------------------------------------------------
Net income 550,452 (10) (175,906) 374,546
- --------------------------------------------------------------------------------------------------------------
TOTALS 0 0 0
====================== ================= ==========================
</TABLE>
- 10 -
A-13
<PAGE>
THE IMAGING CENTER, INC.
SUPPLEMENTARY INFORMATION
ADJUSTING ENTRIES FOR PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number Account / Description Debit Credit Reference
- ------ --------------------- ----- ------ ---------
<S> <C> <C> <C> <C>
(1) Revenue 1,289,501 Note 1(A)
Accounts Receivable 515,744
Cash 773,757
To remove 30% of revenue, which reflect the professional
component of the services provided on the Historical
Financial Statements, and adjust Accounts Receivable for the
estimated outstanding balances of those revenues.
(2) Cash 1,446,402 Note 1(B)
Accounts Payable 21,705
Accrued Liabilities 80,735
Accrued Pension 40,744
Operating Expenses 1,589,586
To remove operating expenses which reflect the professional
component of the services provided on the Historical
Financial Statements, and adjust Liabilities for the
estimated outstanding balances of those expenses.
(3) Cash 170,000 Note 1(C)
Common Stock 170,000
To reflect the purchase of shares.
(4) Retained Earnings 1,046,578 Note 1(D)
Note Payable - F. Daniel Jackson 43,511
Investments 239,775
Cash 850,314
To adjust assets and liabilities on the Balance Sheet at
January 1, 1998, that do not relate to the new entity.
(5) Cash 300,000 Note 1(E)
Note Payable - F. Daniel Jackson 300,000
To reflect working capital provided.
(6) Equipment 1,118,485 Note 1(F)
Accumulated Depreciation 250,584
Current Portion Capital Lease Payable 207,203
Long-term Portion Capital Lease Payable 697,598
Retained Earnings 36,900 To adjust January 1, 1998, balance
to reflect capital leases.
(7) Long-term Capital Lease Payable 224,401 Note 1(G)
Interest Expense 64,896
Current Portion Capital Lease Payable 17,198
Operating Expenses 48,403
Retained Earnings 223,696
To reflect 1998 capital lease payments.
(8) Operating Expenses 223,698 Note 1(H)
Accumulated Depreciation 223,698
To record depreciation expense on equipment leased through
capital leases.
(9) Deferred Income Taxes 12,282 Note 1(I)
Provision for Income Taxes 235,800
Cash 248,082
To reflect change in income taxes based on above AJE's.
(10) Retained Earnings 175,906
Net Income 175,906
To adjust retained earnings and net income for above entries.
</TABLE>
- 11 -
A-14
<PAGE>
THE IMAGING CENTER, INC.
SUPPLEMENTARY INFORMATION
HISTORICAL TO PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
<TABLE>
<CAPTION>
Balances per Balances per
June 30, 1999 June 30, 1999
Category Financial Statements # AJE's Pro Forma F/S
- --------
---------------------------- ----- ----------------- ----------------------------
<S> <C> <C> <C> <C>
Cash 261,061 (1) 44,249 279,205
(2) (501,450)
(3) 663,327
(6) 301,791
(7) 41,247
(8) (531,020)
- ---------------------------------------------------------------------------------------------------------------------------
Investments 303,947 (1) (239,775) 0
(3) (64,172)
- ---------------------------------------------------------------------------------------------------------------------------
Accounts Receivable 1,868,107 (1) (515,744) 1,316,078
(2) (36,285)
- ---------------------------------------------------------------------------------------------------------------------------
Office Furniture & Equipment 78,651 78,651
- ---------------------------------------------------------------------------------------------------------------------------
Equipment 198,769 (1) 1,118,485 4,459,709
(4) 3,142,455
- ---------------------------------------------------------------------------------------------------------------------------
Vehicles 20,709 20,709
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated Depreciation (263,702) (1) (474,282) (1,159,474)
(5) (421,490)
- ---------------------------------------------------------------------------------------------------------------------------
Accounts Payable (53,170) (1) 21,705 (55,000)
(3) (23,535)
- ---------------------------------------------------------------------------------------------------------------------------
Accrued Liabilities (42,187) (1) 80,735 (40,000)
(3) (78,548)
- ---------------------------------------------------------------------------------------------------------------------------
Accrued Pension 0 (1) 40,744 0
(3) (40,744)
- ---------------------------------------------------------------------------------------------------------------------------
Current Portion Leases Payable 0 (1) (224,401) (601,505)
(4) (377,104)
- ---------------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes (691,534) (1) 12,282 (834,245)
(7) (154,993)
- ---------------------------------------------------------------------------------------------------------------------------
Note Payable - F. Daniel Jackson (43,511) (1) (256,489) 0
(4) (231,020)
(8) 531,020
- ---------------------------------------------------------------------------------------------------------------------------
Long-term Leases Payable 0 (1) (473,197) (2,724,028)
(4) (2,250,831)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock (10,000) (1) (170,000) (180,000)
- ---------------------------------------------------------------------------------------------------------------------------
Retained Earnings (1,627,140) (1) 1,035,688 (560,100)
(9) 31,352
- ---------------------------------------------------------------------------------------------------------------------------
Revenue (1,792,448) (2) 537,735 (1,254,713)
- ---------------------------------------------------------------------------------------------------------------------------
Operating Expenses 1,581,495 (3) (456,328) 821,963
(4) (422,903)
(5) 421,490
(7) (301,791)
- ---------------------------------------------------------------------------------------------------------------------------
Interest Income (3,895) (3,895)
- ---------------------------------------------------------------------------------------------------------------------------
Miscellaneous Income 0 0
- ---------------------------------------------------------------------------------------------------------------------------
Interest Expense 0 (4) 139,403 139,403
- ---------------------------------------------------------------------------------------------------------------------------
Provision for Income Taxes (2,059) (7) 113,746 111,687
- ---------------------------------------------------------------------------------------------------------------------------
Net income 216,907 (9) (31,352) 185,555
- ---------------------------------------------------------------------------------------------------------------------------
TOTALS 0 0 0
============================ ================= ============================
</TABLE>
- 12 -
A-15
<PAGE>
THE IMAGING CENTER, INC.
SUPPLEMENTARY INFORMATION
ADJUSTING ENTRIES FOR THE PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Account / Description Debit Credit Reference
- --------------------- ----- ------ ---------
<S> <C> <C> <C>
Cash 44,249 Notes
Accounts Payable 21,705 1(A) - 1(I)
Equipment 1,118,485 12/31/98
Accrued Liabilities 80,735
Accrued Pension 40,744
Deferred Income Taxes 12,282
Retained Earnings 1,035,688
Investments 239,775
Accounts Receivable 515,744
Accumulated Depreciation 474,282
Current Portion Leases Payable 224,401
Long-term Leases Payable 473,197
Note Payable - F. Daniel Jackson 256,489
Common Stock 170,000
To record cumulative effect of entries made when completing Pro
Forma Financial Statements for The Imaging Center, Inc. for the
Year Ended December 31, 1998.
Revenue 537,735 Note 1(A)
Accounts Receivable 36,285
Cash 501,450
To remove 30% of revenue, which reflect the professional component
of the services provided on the Historical Financial Statements,
and adjust Accounts Receivable for the estimated outstanding
balances of those revenues.
Cash 663,327 Note 1(B)
Accounts Payable 23,535
Accrued Liabilities 78,548
Accrued Pension 40,744
Investments 64,172
Operating Expenses 456,328
To remove operating expenses which reflect the professional
component of the services provided on the Historical Financial
Statements, and adjust Liabilities for the estimated outstanding
balances of those expenses.
Equipment 3,142,455 Note (J)
Note Payable - F. Daniel Jackson 231,020
Current Portion Leases Payable 377,104
Long-term Leases Payable 2,250,831
Interest Expense 139,403
Operating Expenses 422,903
To record new equipment purchased and acquired by capital leases at
January 1, 1999, and the leasing transactions for the six months
ended June 30, 1999.
Operating Expenses 421,490 Note (L)
Accumulated Depreciation 421,490
Adjust Accumulated Depreciation for Leased Equipment.
Cash 301,791 Note (K)
Operating Expenses 301,791
To adjust for terminated operating leases.
Cash 41,247 Note (M)
Provision for Income Taxes 113,746
Deferred Income Taxes 154,993
Reflect the changes in income taxes based on the above entries.
Note Payable - F. Daniel Jackson 531,020 Note (N)
Cash 531,020
To make partial loan repayment.
Retained Earnings 31,352
Net Income 31,352
To reconcile Retained Earnings for the various entries.
</TABLE>
- 12 -
A-16
<PAGE>
APPENDIX B
THE IMAGING CENTER, INC.
FORECASTED FINANCIAL STATEMENTS
JUNE 30, 2000
B-1
<PAGE>
TABLE OF CONTENTS
Page No.
FORECASTED BALANCE SHEETS .............................................. 1
STATEMENTS OF FORECASTED OPERATIONS .................................... 2
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES................................................. 3-5
B-2
<PAGE>
THE IMAGING CENTER, INC.
FORECASTED BALANCE SHEET
JUNE 30, 2000
ASSETS
Current Assets
Cash $1,044,506
Accounts Receivable 1,688,427
------------------
Total Current Assets 2,732,933
------------------
Property, Plant, & Equipment
Office Furniture and Equipment 4,559,069
Less Accumulated Depreciation (2,016,272)
------------------
Total P,P,&E 2,542,797
------------------
Total Assets $5,275,730
------------------
LIABILITIES AND EQUITY
Current Liabilities
Accounts Payable $55,000
Accrued Liabilities 40,000
Accrued Pension 59,111
Current Portion of Lease 651,427
------------------
Total Current Liabilities 805,538
------------------
Long-Term Debt
Deferred Income Taxes 995,403
Lease Payable 2,072,601
------------------
Total Long-Term Debt 3,068,004
------------------
Total Liabilities 3,873,542
------------------
Equity
Common Stock 180,000
Retained Earnings 1,222,188
------------------
Total Equity 1,402,188
------------------
Total Liabilities and Equity $5,275,730
------------------
See Notes to the Financial Statements
1
B-3
<PAGE>
THE IMAGING CENTER, INC.
STATEMENTS OF FORECASTED OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000
Total Revenue $3,219,453
Total Operating Expenses 1,905,382
----------------
Operating Income 1,314,071
----------------
Other Income (Expenses)
Interest Income 11,324
Miscellaneous Expense (2,421)
Interest Expense (244,304)
----------------
Total Other Income (Expense) (235,401)
----------------
Income Before Inc. Taxes 1,078,670
Provision for Income Taxes (416,582)
----------------
Net Income 662,088
Beginning Retained Earnings 560,100
----------------
Ending Retained Earnings $1,222,188
================
- 2 -
See Notes to the Financial Statements
B-4
<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.
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. As the company is in a growth
mode, and is developing many new referral sources, it is believed that
7% is a reasonable growth rate.
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.
This percentage is well within all major inflation index for the past
several years, and reasonable compared to experts predictions of future
indexes.
-3-
B-5
<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, 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, 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 747,078
2003 643,728
2004 643,728
-------
$3,866,190
The following is a schedule of the current portion of
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 $ 651,427
2001 532,786
2002 467,415
2003 1,072,400
2004 - 0 -
-----------
$2,724,028
-4-
B-6
<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.
NOTE H - ACCOUNTS RECEIVABLE
The rate of collection of billings has been monitored, and it
is estimated that accounts receivable are approximately equal to
52.4454% of annual billings. As bad debts are reviewed monthly, and the
accounts receivable is estimated as a percentage of collectable
billings, any further allowance is believed to be immaterial.
NOTE I - PENSION PLAN
All employees who, by the end of the year, have attained age
21, one year of service, and have worked at least 1000 hours during the
year, are eligible to participate in the employer sponsored 401(k)
profit sharing plan. The Company will match up to 4% of employee
contributions. An expense of $28,183 has been recorded in the financial
statements.
-5-
B-7
<PAGE>
APPENDIX C
THE IMAGING CENTER, INC.
FINANCIAL REPORT
DECEMBER 31, 1999
C-1
<PAGE>
THE IMAGING CENTER, INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Income Statement 3
Statement of Retained Earnings 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-11
C-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Imaging Center, Inc.
Cumberland, MD 21502
We have audited the accompanying balance sheet of The Imaging Center,
Inc. as of December 31, 1999, and the related statements of income, retained
earnings, and cash flows for the six months then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Imaging Center,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for the six months then ended in conformity with generally accepted
accounting principles.
Huber Michaels & Company
Cumberland, Maryland
February 7, 1999
C-3
<PAGE>
THE IMAGING CENTER, INC.
Balance Sheet
December 31, 1999
ASSETS
CURRENT ASSETS
Cash in bank - regular $58,540
Pru-Bache Money Market 16
Accounts receivable 58,634
Due from F. Daniel Jackson, MD, PA 12,227
Due from Imaging Associates 18,006
Deferred tax asset 15,993
Prepaid insurance 4,725
---------------
Total Current Assets 168,141
---------------
PROPERTY, PLANT & EQUIPMENT
Equipment 4,251,796
Less: accumulated depreciation (254,300)
---------------
Total Property, Plant & Equipment 3,997,496
---------------
OTHER ASSETS
Organizational costs 14,547
Less: accumulated depreciation (242)
---------------
Total Other Assets 14,305
---------------
TOTAL ASSETS $4,179,942
===============
LIABILITIES & STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities - leases $618,915
Accounts payable 25,926
Salaries payable 14,132
Payroll taxes payable 17,915
Income taxes payable 26,183
Accrued pension 13,653
---------------
Total Current Liabilities 716,724
---------------
LONG-TERM DEBT
Capital leases 3,825,334
Less: current maturities (618,915)
---------------
Total Long-Term Debt 3,206,419
---------------
TOTAL LIABILITIES 3,923,143
---------------
STOCKHOLDER'S EQUITY
Capital stock 179,982
Retained Earnings 76,817
---------------
Total Stockholder's Equity 256,799
---------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $4,179,942
===============
See Independent Auditors' Report
- 2 -
C-4
<PAGE>
THE IMAGING CENTER, INC.
Income Statement
For the Six Months Ended December 31, 1999
REVENUE
Technical fees $1,248,401
----------------
OPERATING EXPENSES
Salaries 472,047
Pension expense - office 13,653
Directors' fees 7,500
Payroll taxes 46,582
Supplies - office 2,060
Supplies - medical 90,559
Medical expense 522
Legal and accounting 5,100
Directors' and officers' insurance 1,575
Malpractice insurance 7,710
Group and life insurance 17,628
Postage 324
Office expense 28
Bank charges 228
Professional development 575
Depreciation expense 254,300
Amortization expense 242
Building lease 35,010
Equipment repairs and maintenance 55,605
Miscellaneous expense 807
Licenses and certification fees 2,880
Meals and entertainment 309
----------------
Total Operating Expenses 1,015,244
----------------
OPERATING INCOME 233,157
OTHER INCOME (EXPENSE)
Interest income 343
Miscellaneous income 874
Interest expense (128,367)
----------------
NET INCOME BEFORE INCOME TAXES 106,007
INCOME TAXES
Federal income taxes (21,770)
State income taxes (7,420)
----------------
NET INCOME $76,817
================
See Independent Auditors' Report
- 3 -
C-5
<PAGE>
THE IMAGING CENTER, INC.
Statement of Retained Earnings
December 31, 1999
BALANCE, beginning of period
$ 0
================
Net income for the period 76,817
----------------
BALANCE, end of period $76,817
================
See Independent Auditors' Report
- 4 -
C-6
<PAGE>
THE IMAGING CENTER, INC.
Statement of Cash Flows
For the Six Months Ended December 31, 1999
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
NET INCOME $76,817
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization $242
Depreciation 254,300
Change in accounts receivable (58,634)
Change in due from F. Daniel Jackson, MD, PA (12,227)
Change in due from Imaging Associates (18,006)
Change in deferred tax asset (15,993)
Change in prepaid insurance (4,725)
Change in current maturities - leases 618,915
Change in accounts payable 25,926
Change in salaries payable 14,132
Change in payroll taxes payables 17,915
Change in income taxes payable 26,183
Change in accrued pension 13,653
-------------
Total adjustments 861,681
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 938,498
------------
Cash flow from investing activities:
Purchase of equipment (218,104)
------------
NET CASH USED BY INVESTING ACTIVITIES (218,104)
------------
Cash flow from financing activities:
Proceeds from common stock issuance 179,982
Repayment of capital leases (841,820)
-------------
NET CASH USED BY FINANCING ACTIVITIES (661,838)
------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 58,556
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 0
------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $58,556
============
Income taxes paid $29,190
Interest paid $128,367
============
</TABLE>
See Independent Auditors' Report
- 5 -
C-7
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
The Imaging Center, Inc. provides the technical component of
diagnostic medical services. The professional component of the services
are provided by F. Daniel Jackson, MD, PA (a related party). The
Imaging Center, Inc. is paid 70% of collections for providing the
technical component of all diagnostic services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Company utilizes the accrual method for both financial
reporting purposes and tax purposes. Under the accrual method, revenues
are recognized when earned and expenses are recorded when incurred. For
financial reporting purposes, the Company has capitalized certain
leases that have been treated as operating leases for tax purposes.
This difference in reporting expenses has resulted in the recognition
of a deferred tax asset on the balance sheet 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.
Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
See Independent Auditors' Report
- 6 -
C-8
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Depreciation
Fixed assets are recorded at cost and depreciated using
straight line methods in accordance with Generally Accepted Accounting
Principles. 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 39 years
Depreciation expense for the six months ended December 31,
1999 was $305,161.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company leases office space from a related party
corporation, Imaging Associates, Inc. The terms of the lease are no
more or less favorable than would be provided an unrelated third party.
The lease started in July, 1999 and requires monthly payments of $5,835
until July, 2004. The lease may be renegotiated at any time, but not
more than once a year, with the consent of both parties.
In July, 1999, the Company also entered into a lease agreement
with Imaging Associates, Inc.(a related party), for the use of
ultrasound/radiograph equipment. This lease requires monthly payments
of $8,175. The lease is reported as a capital lease in these financial
statements. The principal amount of the capital lease was determined
using a market rate of 8%, which is considered an arms length rate.
In July, 1999, the Company entered into a lease agreement with
a related party corporation, Value Healthcare, Inc., for the use of
Medrad CT Injector equipment. This lease requires monthly payments of
$14,500. The lease is reported as a capital lease in these financial
statements. The principal amount of the capital lease was determined
using a market rate of 8%, which is considered an arms length rate.
The Company receives 100% of its technical fees from a related
party corporation, F. Daniel Jackson, MD, PA. The Company's revenue is
based on 70% of the cash collections of F. Daniel Jackson, MD, PA.
See Independent Auditors' Report
- 7 -
C-9
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - RELATED PARTY TRANSACTIONS - (Continued)
The Company is covered under an umbrella health insurance
policy which includes affiliated corporations. The payment for the
Company's portion was made by F. Daniel Jackson, MD, PA in the amount
of $26,584. This amount is included in the current asset, Due from F.
Daniel Jackson, MD, PA.
The Company paid for medical supplies and maintenance
agreements in which a portion of the expense were for affiliated
corporations. Medical supplies of $38,111 were paid on behalf of F.
Daniel Jackson, MD, PA and maintenance agreements of $18,006 were paid
on behalf of Imaging Associates, Inc. These amounts are included in the
current assets as Due from F. Daniel Jackson, MD, PA and Due from
Imaging Associates.
NOTE 4 - OPERATING LEASE
In July, 1999, the Company entered into a lease with a related
party corporation, Imaging Associates, Inc. to lease real property in
which the Company operates. The terms of the lease require payments of
$5,835 per month beginning July, 1999 and continuing for five years.
The lease may be renegotiated at any time, but not more than once a
year, with the consent of both parties.
Rents paid during the six months presented were $35,010. Rent
payments for next five years are as follows:
June 30, 2000 $ 70,020
June 30, 2001 $ 70,020
June 30, 2002 $ 70,020
June 30, 2003 $ 70,020
June 30, 2004 $ 70,020
NOTE 5 - CONCENTRATION OF CREDIT RISK
Although accounts receivable are not collateralized,
100% of them are from a related party and expected to be fully
collected. The Company is paid weekly for the previous week's
services.
Cash deposits during the year were subject to credit
risk as account balances were above the Federal Deposit Insurance
Corporation's coverage of $100,000 for a portion of the year.
See Independent Auditors' Report
- 8 -
C-10
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CONCENTRATION OF REVENUE
The company receives 100% of it's operating revenue from
a related party. This revenue is subject to fluctuation based on
the level of service provided.
NOTE 7 - PENSION PLAN
The Company operates a defined contribution plan for
employees. A contribution of 4% of an employees wages is made by
the Company for all eligible employees. Eligible employees are
those who have at least one year of service, and are at least 21
years of age. Contributions for the six months ended December 31,
1999 were $13,653. Employees may additionally defer up to 15% of
their wages through payroll withholdings. The plan is jointly
sponsored by F. Daniel Jackson, MD, PA (a related party) and the
Company. Any years of service with either company counts as
service for the plan.
NOTE 8 - INCOME TAXES
The Company uses the accrual basis of accounting for
computing its income taxes. The Company recognizes certain lease
arrangements as capital lease for financial statement purposes,
but treats them as operating leases for tax purposes. This
represents a deductible temporary difference. The company also
uses the straight line method of depreciation for financial
statement purposes, while it uses an accelerated method of
depreciation for income tax purposes. A deferred tax asset
arising from this taxable temporary difference is recorded as a
current asset and is $15,993 at December 31, 1999.
The provision for income taxes consists of the following
components:
Federal State Total
------- ------ -------
Current expense, book $ 21,770 $ 7,420 $29,190
Current expense, tax 35,029 10,154 45,183
------- ------ -------
Deferred (benefit) (13,259) (2,734) (15,993)
======= ====== =======
See Independent Auditors' Report
- 9 -
C-11
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - STATEMENTS OF CASH FLOWS - NON-CASH TRANSACTIONS
During the six months ended December 31, 1999, the
Company acquired equipment costing $4,033,692 through capital
lease agreements.
NOTE 10 - SUBSEQUENT EVENT
Subsequent to the balance sheet date, the Company filed
with the Securities Exchange Commission it's intent to offer
1,000,000 shares of it's Class B non-voting common stock to the
public.
NOTE 11 - STOCKHOLDERS' EQUITY
At December 31, 1999 the stockholder's equity of the
Company includes 100 issued and outstanding shares of Class A
voting common stock with a stated value of $.02 each and
8,999,000 issued and outstanding shares of Class B non-voting
common stock with a $.02 stated value. One thousand shares of
Class A voting common stock and 9,999,000 shares of Class B
non-voting common stock have been authorized.
During the six months ended December 31, 1999 100 shares
of Class A and 8,999,000 shares of Class B common stock were
issued.
NOTE 12 - CAPITAL LEASES
The corporation has entered into five lease agreements,
which based on the terms of the leases are required to be
capitalized under Generally Accepted Accounting Principles. Two
of the leases are with related party corporations solely owned by
the 100% shareholder of The Imaging Center, Inc. The total amount
capitalized under the capital leases is $4,033,692 with related
accumulated depreciation of $254,300 at December 31, 1999.
See Independent Auditors' Report
- 10 -
C-12
<PAGE>
THE IMAGING CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - CAPITAL LEASES - (Continued)
Future minimum lease payments for each of the next five
years are as follows:
December 31, 2000 $ 618,915
December 31, 2000 $ 795,712
December 31, 2000 $ 863,433
December 31, 2000 $ 937,370
December 31, 2000 $ 609,904
------------
$ 3,825,334
============
NOTE 13 - MANAGEMENT DISCUSSION & ANALYSIS
The Company did not meet its earnings projection which
were initially presented in the forecasted financial statements
issued June 29, 1999. Management believes projections were not
met due to the time spent in establishing and organizing this new
entity. The initial startup is now behind the Company, and they
believe the results for the next six months should be closer to
those projections.
See Independent Auditors' Report
- 11 -
C-13
<PAGE>
APPENDIX D
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
D-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-
D-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,
D-3
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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.
D-4
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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.
D-5
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<TABLE>
<CAPTION>
<S> <C>
==================================================== =====================================================
[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 THE IMAGING CENTER, INC.
COMPANY. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR 715 WILLIAMS STREET
A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER CUMBERLAND, MARYLAND 21501-1705
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 MINIMUM OF 200,000 SHARES FOR A TOTAL OF $400,000 AND
PROSPECTUS MAY CHANGE AFTER ITS DATE. MAXIMUM OF 1,000,000 SHARES FOR A TOTAL OF
$2,000,000 OF
CLASS B NON-VOTING COMMON STOCK
TABLE OF CONTENTS
----------------------------------------------------
APPEARS ON INSIDE FRONT COVER PROSPECTUS
----------------------------------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL MAY 30, 2000 (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.
March 1, 2000
==================================================== =====================================================
</TABLE>
<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 2,285.00
- ------------------------------------------ ----------------------
Printing Fees 15,000.00
- ------------------------------------------ ----------------------
Legal and Accounting Fees 160,000.00
- ------------------------------------------ ----------------------
Escrow Agent Fees 500.00
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- ------------------------------------------ ----------------------
TOTAL $ 178,340.00
- ------------------------------------------ ----------------------
* All amounts are estimated other than the Securities and Exchange Commission
filing fee.
ITEM 3. UNDERTAKINGS.
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 small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer 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 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 based upon the following facts. All of the shares of
Common Stock were offered and sold only to F. Daniel Jackson, M.D. No shares of
Common Stock were offered to the public and no solicitation, general or limited,
was undertaken in connection with the sale to Dr. Jackson. Dr. Jackson
incorporated the Company and is familiar with its business, operations and
financial condition. He has been advised by counsel that his shares of Common
Stock in the Company may not be resold except in compliance with applicable
federal and state securities laws.
ITEM 5. INDEX TO EXHIBITS
Exhibit 2.1 Issuer's Articles of Incorporation
Exhibit 2.2 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.
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ITEM 6. DESCRIPTION OF EXHIBITS
Exhibit 2.1 Issuer's Articles of Incorporation
Exhibit 2.2 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.
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 February 17, 2000.
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: February 17, 2000 Date: February 17, 2000
/s/ Larry James Taylor /s/ Frederick J. Hill
Larry James Taylor, Vice President Frederick J. Hill
and Chief Operating Officer Date: February 17, 2000
Date: February 17, 2000
5
<PAGE>
/s/ D. Jeanne Starkey /s/ James F. Scarpelli, Jr.
D. Jeanne Starkey, Treasurer James F. Scarpelli, Jr
and Chief Financial Office Date: February 17, 2000
Date: February 17, 2000
6
Exhibit 2.1 Issuer's Articles of Incorporation
Included as Appendix C to the Prospectus
Exhibit 2.2 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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<PAGE>
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
9
<PAGE>
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
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 prima 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 al 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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<PAGE>
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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<PAGE>
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.
18
<PAGE>
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 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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<PAGE>
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
20
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
<TABLE>
<CAPTION>
<S> <C>
======================================================================================================================
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.
======================================================================================================================
PLEASE COMPLETE ALL OF THE FOLLOWING:
======================================================================================================================
PURCHASER INFORMATION (COMPLETE ALL UNSHADED BLANKS)
======================================================================================================================
Name: NAME(S) IN WHICH SHARES
ARE TO BE REGISTERED.
- ----------------------------------------------------------------------------------------------------------------------
Form of Ownership (check one):
__ Individual __ Tenants in Common __ Tenants by the Entireties (Married Couples Only)
__ Joint Tenants with Right of Survivorship
__ Custodian for ____________________________________________________________________ under Uniform Transfers to
Minors Act of State: ____________________
__ Other: __________________________________________________________________________
- ----------------------------------------------------------------------------------------------------------------------
- --------------------------- -------------------------------------------------------------- ---------------------------
Address:
- --------------------------- -------------------------------------------------------------- ---------------------------
Telephone:
- --------------------------- -------------------------------------------------------------- ---------------------------
State of Residence:
- --------------------------- -------------------------------------------------------------- ---------------------------
Social Security or Employer Identification Number:
- -------------------------------------------------------------------- -------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Number of Shares I Want (NOT LESS THAN 100 NOR
to Purchase: MORE THAN 1,000 SHARES.)
------
- --------------------------- -------------------------------------------------------------- ---------------------------
Price Per Share: x $2.00
- --------------------------- -------------------------------------------------------------- ---------------------------
Total Purchase Price (No.
Shares x Price) $___________
=========================== ============================================================== ===========================
</TABLE>
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.
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 Farmers & Merchants Bank and Trust, Cumberland,
Maryland.
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 My subscription may be rejected if the information in it is
incomplete or I fail to provide additional information needed to
complete my subscription or to clarify any information I have
provided.
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 December 31, 2000 (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 reviewed the Company's Prospectus dated
March 1, 2000.
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.
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, understand that there is
presently no public market for the shares and that I may be unable
to resell the
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<PAGE>
shares, have no need for liquidity in such an investment and, at
the present time, could afford a complete loss of such investment.
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;
- 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.
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.
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<PAGE>
o ASSIGNMENT. This agreement may not be transferred assigned by me
except as may be provided above.
o APPLICABLE LAW. This agreement shall be governed by and construed
under laws of the State of Maryland.
Dated: ______________________
24
<PAGE>
==================================== ========================================
INDIVIDUAL SUBSCRIBER(S): ENTITY SUBSCRIBER:
-------------------------------------
[Entity Name]
- ------------------------------------
Signature of Purchaser By: __________________________________
Name:________________________________
Title:_________________________________
- ------------------------------------
Signature of Purchaser
==================================== ========================================
PURCHASE ACCEPTED FOR _________ SHARES:
THE IMAGING CENTER, INC.
By: ____________________________________
F. Daniel Jackson, M.D., President
Date: ___________________________
25
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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<PAGE>
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.
27
<PAGE>
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: /s/Larry Taylor By: /s/ F. Daniel Jackson
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
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EXHIBIT A
DESCRIPTION OF BUILDING
The property is a single story brick building that was constructed in 1982. The
original building has had several additions added from 1991 through 1999 and is
currently 10,500 square feet. The building includes specially designed and
constructed rooms to accommodate the CT and MRI equipment that has been
installed at the facility. The property includes paved parking for approximately
60 vehicles, with additional parking available across the street.
33
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: /s/ Larry Taylor By: /s/ F. Daniel Jackson
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
38
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
41
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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
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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: /s/ Larry Taylor By: /s/ F. Daniel Jackson
Larry Taylor F. Daniel Jackson, M.D.
Chief Operating Officer President
43
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
44
<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.
45
<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: /s/ F. Daniel Jackson
F. Daniel Jackson, M.D., President
ATTEST: F. DANIEL JACKSON, M.D., PA.
______________________ By: /s/ F. Daniel Jackson
F. Daniel Jackson, M.D., President
46
Exhibit 9 Escrow Agreement
ESCROW AGREEMENT (this "Agreement") entered into as of January 15, 2000, by
and between THE IMAGING CENTER, INC. a Maryland corporation ("Issuer") and
FARMERS & MERCHANTS BANK AND TRUST ("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 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
47
<PAGE>
(b) December 31, 2000 (the "Termination Date"); or
(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
48
<PAGE>
additional subscribers, specifying the total amount of their subscription
to be remitted to 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
49
<PAGE>
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.
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
50
<PAGE>
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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<PAGE>
If to the Issuer: If to the Escrow Agent:
The Imaging Center, Inc. FARMERS & MERCHANTS BANK AND TRUST
715 Williams Street 71 Baltimore Street
P. O. Box 1705 Cumberland, Maryland 21501
Cumberland, MD 21501-1705 Telephone: 301-777-4600
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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<PAGE>
EXECUTED on the date first written above.
Issuer: Escrow Agent:
THE IMAGING CENTER, INC FARMERS & MERCHANTS BANK AND TRUST
By: /s/ Chris E. Stoner
By: /s/ F. Daniel Jackson Chris E. Stoner, Trust Officer
F. Daniel Jackson, M.D., President
53
<PAGE>
EXHIBIT A
FORM TO ACCOMPANY SUBSCRIBERS' CHECKS
IMAGING CENTER PUBLIC OFFERING
- ---------------------------------------- -------------------- ------------------
NAME AND ADDRESS OF SUBSCRIBER AMOUNT OF CHECK NUMBER OF SHARES
- ---------------------------------------- -------------------- ------------------
- ---------------------------------------- -------------------- ------------------
- ---------------------------------------- -------------------- ------------------
- ---------------------------------------- -------------------- ------------------
- ---------------------------------------- -------------------- ------------------
- ---------------------------------------- -------------------- ------------------
54
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 included as Appendices A, B and C of the Prospectus of
The Imaging Center, Inc. for the registration of 1,000,000 shares of its Class B
Non-Voting Common Stock, dated March 1, 2000, which is included in the First
Amendment to Registration Statement (Form SB-1), dated February 17, 2000.
HUBER, MICHAELS & COMPANY, Certified
Public Accountants
By: /s/ Edward G. Huber
------------------------------
Edward G. Huber, CPA
Cumberland, Maryland
February 17, 2000
55
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]
February 3, 2000
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 1,000,000 shares of Class B Non-Voting Common
Stock, pursuant to the First Amendment to the Registration Statement (Form
SB-1), dated February 17, 2000 (the "Registration Statement") , and the related
Prospectus dated March 1, 2000 (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
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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.
We consent to the filing of this opinion of counsel as an exhibit to the
Registration Statement and the reference to us in the Registration Statement and
the Prospectus.
Very truly yours,
RICHARD G. MCALEE, P.A.
By: /s/ Richard G. McAlee
Richard G. McAlee
