<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INSIGHT HEALTH SERVICES CORP.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MARILYN U. MACNIVEN-YOUNG, ESQUIRE
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
1
<PAGE>
[LOGO]
INSIGHT HEALTH SERVICES CORP.
4400 MacArthur Boulevard, Suite 800
Newport Beach, California 92660
__________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 17, 1998
The Annual Meeting of Stockholders of InSight Health Services Corp. ("Company")
will be held at the Hyatt Regency Hotel, located at 17900 Jamboree Road, Irvine,
California 92714 on Tuesday, February 17, 1998 at 10:00AM, Pacific Standard
Time, for the following purposes:
(1) to elect one of the Company's directors to a serve three-year term until the
2000 Annual Meeting of Stockholders and until his successor is duly elected and
qualified; and
(2) to transact such other business as may properly come before the Annual
Meeting and any and all postponements or adjournments thereof.
The close of business on Friday, December 31, 1997 has been fixed as the record
date for the determination of stockholders entitled to receive notice of, and to
vote at, the Annual Meeting and any and all postponements or adjournments
thereof.
The presence, either in person or by proxy, of persons entitled to vote a
majority of the outstanding Common Stock is necessary to constitute a quorum for
the election of directors, and the presence, either in person or by proxy, of
persons entitled to vote a majority of the votes represented by the outstanding
Common Stock, Series B Senior Convertible Preferred Stock and Series C Senior
Convertible Preferred Stock is necessary to constitute a quorum for the
transaction of any other business as may properly come before the Annual
Meeting. To assure your representation at the Annual Meeting, please vote, sign
and mail the enclosed Proxy for which a return envelope is provided.
By Order of the Board of Directors
/s/ Thomas V. Croal
- - ---------------------------
Thomas V. Croal, Secretary
Newport Beach, California
January 14, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON; HOWEVER,
TO ENSURE YOUR REPRESENTATION AT THE MEETING YOU ARE URGED TO VOTE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE ENCLOSED FOR
THAT PURPOSE.
<PAGE>
INSIGHT HEALTH SERVICES CORP.
4400 MacArthur Boulevard
Suite 800
Newport Beach, California 92660
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
February 17, 1998
This Proxy Statement is being mailed in connection with the solicitation on
behalf of the Board of Directors of InSight Health Services Corp., a Delaware
corporation ("Company"), of proxies for use at the Annual Meeting of
Stockholders of the Company to be held at the Hyatt Regency Hotel, located at
17900 Jamboree Road, Irvine, California 92714, on Tuesday, February 17, 1998 at
10:00AM, Pacific Standard Time, and at any and all postponements or adjournments
thereof.
The entire cost of the solicitation of proxies will be borne by the Company,
including expenses in connection with preparing, assembling and mailing the
proxy solicitation materials and all papers accompanying them. The Company will
reimburse brokers or other persons holding stock in their name or in the names
of their nominees for the benefit of other beneficial owners for their expenses
in sending proxies and proxy materials to beneficial owners. In addition to
solicitation by mail, certain directors, officers and regular employees of the
Company, who will receive no special compensation for their services, may
solicit proxies personally or by telephone or facsimile.
The person named in the accompanying proxy card will vote shares represented by
all valid proxies in accordance with the instructions contained thereon. In the
absence of such instructions, shares represented by properly executed proxies
will be voted in favor of the nominee for director. Any stockholder may revoke
his or her proxy at any time prior to its use by filing with the secretary of
the Company, at 4400 MacArthur Boulevard, Suite 800, Newport Beach, California
92660, written notice of revocation or a duly executed proxy bearing a later
date. Execution of the enclosed proxy will not affect your right to vote in
person if you should later decide to attend the Annual Meeting.
This Proxy Statement and the accompanying proxy card are first being mailed to
holders of the Company's common stock, par value $0.001 per share ("Common
Stock"), on or about January 14, 1998.
RECORD DATE AND VOTING SECURITIES
The close of business on Wednesday, December 31, 1997, has been fixed as the
record date for determination of the holders of Common Stock entitled to notice
of and to vote at the Annual Meeting. On that date, there were outstanding and
entitled to vote 2,734,725 shares of Common Stock. Each share of Common Stock
is entitled to one vote with respect to the election of directors to be elected
by the holders of Common Stock ("Common Stock Directors") (see "Election of
Directors"). The presence, either in person or by proxy, of persons entitled to
cast a majority of such votes constitutes a quorum for the purpose of the
election of the Common Stock Directors. Votes may be cast in favor of or
withheld from the Common Stock Director nominee. Votes that are withheld will
be excluded entirely from the vote and will have no effect. Certain of the
Company's directors ("Preferred Stock Directors") are elected by the holders of
the Company's Series B Senior Convertible Preferred Stock ("Series B Preferred
Stock") and Series C Senior Convertible Preferred Stock ("Series C Preferred
Stock" and, together with the Series B Preferred Stock, "Preferred Stock") as
separate classes and acting by written consent. See "ELECTION OF DIRECTORS".
All matters, other than the election of directors and matters which are to be
voted on by the holders of Series B Preferred Stock and Series C Preferred Stock
as separate classes, are to be voted on by the holders of Common Stock and
Preferred Stock (voting on an as-if-converted basis) as a single class, provided
that the maximum aggregate voting percentage of the Preferred Stock in such
event may not exceed 37% of the shares eligible to vote. The Series B Preferred
Stock is currently convertible into 2,985,075 shares of Common Stock and the
Series C Preferred Stock is currently convertible into 3,337,581 shares of
Common Stock. The presence, either in person or by proxy, of persons entitled
to vote a majority of the votes represented by the outstanding Common Stock and
Preferred Stock (on an as-if-converted basis) is necessary to constitute a
quorum for the transaction of any other business which may properly come before
the Annual Meeting. The Company is not aware of any
1
<PAGE>
business to be presented for consideration at the Annual Meeting other than the
election of the Common Stock Director identified herein.
ELECTION OF DIRECTORS
Pursuant to the terms of a recent recapitalization ("Recapitalization"), the
number of directors comprising the Company's Board of Directors ("Board") is
fixed at nine, consisting of six Common Stock Directors, one of whom ("Joint
Director") is to be proposed by the holders of a majority of each of the Series
B Preferred Stock and the Series C Preferred Stock and approved by a majority of
the Board in its sole discretion, and three Preferred Stock Directors, two of
whom are to be elected by the holders of the Series B Preferred Stock ("Series B
Directors") and one of whom is to be elected by the holders of the Series C
Preferred Stock ("Series C Director"), acting by written consent and without a
meeting of the Common Stock holders. As long as the initial purchasers of the
Series B Preferred Stock and their affiliates ("Carlyle Stockholders") own at
least 50% of the Series B Preferred Stock, the holders of the Series B Preferred
Stock will have the right to elect two Preferred Stock Directors and as long as
the Carlyle Stockholders own at least 25% but less than 50% of such Stock, such
holders will have the right to elect one Preferred Stock Director. As long as
General Electric Company ("GE") owns at least 25% of the Series C Preferred
Stock, the holders of the Series C Preferred Stock will have the right to elect
one Preferred Stock Director. Except in the event of a conversion of all of
the Series B Preferred Stock and Series C Preferred Stock into Series D Senior
Convertible Preferred Stock (see "POSSIBLE FUTURE BOARD CHANGES"), if the
ownership percentage of the Carlyle Stockholders or GE falls below the
applicable threshold, the Preferred Stock Director(s) formerly entitled to be
elected by the Series B Preferred Stock holders or the Series C Preferred Stock
holders, as applicable, will automatically be removed and the Board will be able
to fill the resulting vacancies for the balance of the terms of such directors.
Thereafter, such directors will be elected by the Common Stock holders.
Holders of the Series B Preferred Stock and the Series C Preferred Stock are not
entitled to participate in the election of the Common Stock Directors.
Presently, the Board consists of eight directors, five of whom are Common Stock
Directors and three of whom are Preferred Stock Directors. The vacancy created
for the Joint Director has not yet been filled.
The Company's Certificate of Incorporation provides that the Common Stock
Directors serve for three-year terms which are staggered to provide for the
election of approximately one-third of the Board members each year. The term of
the Class I directors (which will include the Joint Director) expires at this
Annual Meeting, the term of the Class II directors expires at the 1998 Annual
Meeting and the term of the Class III directors expires at the 1999 Annual
Meeting. The terms of the two Series B Directors coincide with the terms of the
Class I and Class III directors, respectively, and the term of the Series C
Director coincides with the term of the Class II directors.
NOMINEE FOR ELECTION. The nominee for election as a Class I director is set
forth below, together with information regarding the nominee:
NAME AGE CURRENT POSITION TERM TO EXPIRE YEAR FIRST
- - ---- --- ---------------- -------------- ----------
ELECTED TO
----------
SERVE
-----
E. Larry Atkins 51 President and Chief Executive 1997 1996
Officer and Director, Class I
E. Larry Atkins has been a director and president and chief executive officer of
the Company since February 23, 1996. Mr. Atkins joined American Health Services
Corp. ("AHS") in 1986 and has served as AHS's president and chief executive
officer since August 1990 and chairman of the board from December 1990 to June
1992. Mr. Atkins served as executive vice president and chief operating officer
of AHS from 1986 to August 1990. Mr. Atkins became a director of AHS in 1988.
From 1979 to 1986, Mr. Atkins served as president and chief executive officer of
AMI Diagnostic Services, a wholly owned subsidiary of American Medical
International, Inc.
BOARD OF DIRECTORS. Set forth below are the Class II and Class III directors
of the Company whose terms do not expire this year and the Preferred Stock
Directors who are elected by the holders of the Preferred Stock, together with
certain information about the Company's directors:
2
<PAGE>
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION TERM TO EXPIRE YEAR FIRST
- - ---- --- ---------------- -------------- ----------
ELECTED TO
----------
SERVE
-----
<S> <C> <C> <C> <C>
COMMON STOCK DIRECTORS:
Grant R. Chamberlain 32 Director, Class II 1998 1996
Frank E. Egger 53 Chairman of the Board and Director,
Class III 1999 1996
Leonard H. Habas 54 Director, Class III 1999 1996
Ronald G. Pantello 53 Director, Class II 1998 1996
PREFERRED STOCK DIRECTORS:
Michael E. Aspinwall 44 Series C Director 1998 1997
David W. Dupree 44 Series B Director 2000 1997
Glenn A. Youngkin 30 Series B Director 1999 1997
</TABLE>
Grant R. Chamberlain has been a director of the Company since July 19, 1996.
Since April 1995, Mr. Chamberlain has been a vice president of Shattuck Hammond
Partners, Inc., an investment banking firm based in New York City. From April
1991 to April 1995, he served as manager of strategic investments and
restructurings for GE.
Frank E. Egger has been chairman of the board and a director of the Company
since February 23, 1996. Mr. Egger was a director of AHS from August 1991 until
June 26, 1996. He was appointed chairman of the board of AHS in May 1995, and
served as such until June 26, 1996. From 1995 through December 1996, Mr. Egger
served as vice president of Kovens & Associates, Inc. ("Kovens & Associates"), a
successor entity to Kovens Enterprises, where Mr. Egger served as chief
financial officer from 1980 to 1995. Kovens & Associates is a group of real
estate development and investment companies based in Miami, Florida. Since
December 1996, Mr. Egger has been a consultant.
Leonard H. Habas has been a director of the Company since February 23, 1996.
From 1986 to June 26, 1996, Mr. Habas was a director of Maxum Health Corp.
("MHC"). Since 1995 he has been a director , chairman of the board and chief
executive officer of Advance Publishers, L.C., a book distribution company based
in Winter Park, Florida. He established his own financing and consulting firm in
1987, which he continues to own. Mr. Habas is also a director of Dick Davis
Digest and CeraMed Corporation.
Ronald G. Pantello has been a director of the Company since February 23, 1996.
From 1993 to June 26, 1996, Mr. Pantello was a director of MHC. He is a
founding partner of Lally, McFarland & Pantello, an advertising agency
specializing in the health care industry, based in New York City, and has been
its chief executive officer since 1980.
Michael E. Aspinwall has been a director of the Company since November 20, 1997.
Mr. Aspinwall is senior vice president and healthcare industry leader in the
Equity Capital Group of GE Capital, where he is focused on private equity
investments in the healthcare industry. From 1994 to 1996, Mr. Aspinwall was
senior vice president and manager, healthcare receivables in GE Capital's
Commercial Finance Group. From 1987 to 1994, Mr. Aspinwall held several vice
presidential positions with Chase Manhattan Bank in New York.
David W. Dupree has been a director of the Company since October 14, 1997. Mr.
Dupree is a managing director of The Carlyle Group, a Washington, D.C. based
merchant banking firm where he has been employed since 1992. From 1990 to 1992,
Mr. Dupree was a principal in Corporate Finance, Private Placements, with
Montgomery Securities. From 1988 to 1990,
3
<PAGE>
he was vice president-corporate finance and co-head of Equity Private Placements
at Alex, Brown & Sons, Incorporated. Mr. Dupree is also a director of Care
Systems Corporation, Pharmaceutical Research Associates, Inc., and Whole Foods
Market, Inc.
Glenn A. Youngkin has been a director of the Company since October 14, 1997.
Mr. Youngkin is a vice president at The Carlyle Group, where he has been
employed since 1995. Mr. Youngkin was a consultant with McKinsey & Company, a
global management consulting firm from 1994 to 1995. From 1990 to 1992, Mr.
Youngkin worked in the National Resource Group of CS First Boston where he
structured and executed merger and acquisition transactions and capital market
financings.
In fiscal 1997, the Board of Directors held four meetings at which all the
directors were present. In addition, the Board of Directors took action by
unanimous written consent eight times.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During fiscal
1997, the Company's Compensation Committee consisted of two non-employee
directors, Messrs. Habas (co-chairman) and Pantello (co-chairman). Following the
Recapitalization, the Compensation Committee now consists of three non-employee
directors, Messrs. Habas, Pantello and Youngkin. The Compensation Committee is
responsible for determining the specific forms and levels of compensation of the
Company's executive officers, and administering the Company's 1996 Employee
Stock Option Plan and 1996 Directors' Stock Option Plan, AHS's 1987 Stock Option
Plan, AHS's 1992 Option and Incentive Plan, and MHC's 1989 Stock Option Plan.
ACQUISITIONS COMMITTEE. The Acquisition Committee was created pursuant to the
Recapitalization. It currently consists of Messrs. Aspinwall, Atkins, Egger and
Youngkin. Its principal functions are to consider certain transactions with
respect to which the aggregate compensation payable in connection therewith is
less than $15 million.
AUDIT COMMITTEE. During fiscal 1997, the Audit Committee consisted of Messrs.
Egger (chairman) and Chamberlain. Its principal functions are to review the
results of the Company's annual audit with the Company's independent auditors
and review the performance of the Company's independent auditors. Following
the Recapitalization, the Audit Committee now consists of Messrs. Chamberlain
and Pantello. It is intended that the Joint Director, when appointed and
approved, will be a member of the Audit Committee
EXECUTIVE COMMITTEE. Following the Recapitalization, the Executive Committee
was created. The Executive Committee currently consists of Messrs. Aspinwall,
Atkins, Dupree and Egger. It is authorized to exercise all the power and
authority of the Board in the management of the business of the Company but its
authority does not extend to certain fundamental corporate transactions.
NOMINATING COMMITTEE. The Nominating Committee currently consists of Messrs.
Habas and Egger. Its principal function is to make recommendations relating to
the composition of the Board, including identifying potential candidates as
Board members.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") requires
the Company's directors and officers and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC") and
the National Association of Securities Dealers, Inc. Directors and officers and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of the reports they file. Based solely on the review of the
copies of such reports and written representations from certain persons that
certain reports were not required to be filed by such persons, the Company
believes that all its directors, officers and greater than 10% beneficial owners
complied with all filing requirements applicable to them with respect to
transactions for the period July 1, 1996 through June 30, 1997, except that Mr.
Egger failed to file timely a Statement of Changes in Beneficial Ownership on
Form 4 reporting the grant of a warrant; when it was brought to his attention,
Mr. Egger promptly filed a Form 4, disclosing this inadvertent omission.
4
<PAGE>
EXECUTIVE OFFICERS
For fiscal 1997, the executive officers of the Company, together with the year
in which they were appointed to their current positions, are set forth below:
EXECUTIVE OFFICER AGE POSITION YEAR
- - ----------------- --- -------- ----
E. Larry Atkins 50 President, Chief Executive Officer 1996
and Director
Glenn P. Cato 44 Senior Executive Vice President and 1996
Chief Operating Officer
Thomas V. Croal 38 Executive Vice President, Chief
Financial Officer and Secretary 1996
Michael A. Boylan 41 Senior Vice President-Operations 1996
Michael D. Cragin 50 Senior Vice President-Operations 1996
Brian G. Drazba 36 Senior Vice President-Finance and 1996
Corporate Controller
Robert N. LaDouceur 53 Senior Vice President-Operations 1996
Deborah M. MacFarlane 42 Senior Vice President-Marketing 1996
Information concerning Mr. Atkins is set forth above under "ELECTION OF
DIRECTORS".
Glenn P. Cato has been senior executive vice president and chief operating
officer of the Company since February 23, 1996. Mr. Cato has served as
president and chief executive officer of MHC since March 1994 and served as
secretary from 1993 until June 26, 1996. From 1989 to 1994, he served as senior
vice president and chief financial officer of MHC.
Thomas V. Croal has been executive vice president, chief financial officer and
secretary of the Company since February 23, 1996. Mr. Croal served as a
director of AHS from March 1991 until June 26, 1996. He has served as vice
president and chief financial officer of AHS since April 1991. He was
controller of AHS from 1989 until April 1991. In December 1990, Mr. Croal was
appointed corporate secretary. From 1981 to 1989, Mr. Croal was employed by
Arthur Andersen & Co., an independent public accounting firm.
Michael A. Boylan has been senior vice president-operations of the Company since
February 23, 1996. Mr. Boylan has served as executive vice president of MHC
since March 1994. From 1992 to 1994, he served as a regional vice president of
MHC's principal operating subsidiary, Maxum Health Services Corp. ("MHSC").
From 1991 to 1992, he served as an executive director of certain of MHC's
operations. From 1986 to 1991, Mr. Boylan served in various capacities as an
officer or employee, including president and chief operating officer, with
American Medical Imaging Corporation.
Michael D. Cragin has been senior vice president-operations of the Company since
February 23, 1996. Mr. Cragin has served as regional vice president, western
operations of AHS since he joined AHS in May 1994. From 1989 to 1994, he was
Director of Professional Business Affairs at Saint John's Hospital, Santa
Monica, California.
Brian G. Drazba was elected senior vice president-finance of the Company on
July 18, 1997. From March 28, 1996, he served as vice president-finance of the
Company. Since June 1995, he has served as vice president-finance of AHS. Mr.
Drazba served as corporate controller for AHS from 1992 to 1995. From 1985 to
1992, Mr. Drazba was employed by Arthur Andersen & Co.
Robert N. LaDouceur has been senior vice president-operations of the Company
since February 23, 1996. Mr. LaDouceur has served as executive vice president
of MHC since March 1994. From 1992 to 1994, he served as a regional vice
president of MHSC. From 1991 to 1992, he served as an executive director of
certain of MHC's operations. From 1984 to 1991, Mr. LaDouceur served in various
capacities as an officer or employee, including vice president, with Glassrock
Home Health Care.
Deborah M. MacFarlane has been senior vice president-marketing of the Company
since March 28, 1996. Since July 1991, she has served as vice president,
marketing of AHS. From 1987 until June 1991, Ms. MacFarlane served as director
of marketing for the Center Operating Group of Medical Imaging Centers of
America, Inc.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. Because (i) the Company was not a reporting
company pursuant to Section 13(a) or 15(d) of the Exchange Act until June 26,
1996, (ii) its fiscal year ended shortly thereafter on June 30, 1996 and (iii)
each of its predecessors, MHC and AHS, were reporting companies and have
reported executive compensation information through the year ended December 31,
1995, the following table sets forth information concerning the annual,
long-term and all other compensation for services rendered in all capacities to
the Company, its subsidiaries and predecessors for the years ended December 31,
1995 and 1994, the six months ended June 30, 1996 and the year ended June 30,
1997 of (i) the Company's Chief Executive Officer and (ii) the four most highly
compensated executive officers (other than the chief executive officer) of the
Company (the "Other Executive Officers") whose aggregate cash compensation
exceeded $100,000 for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term All Other
Annual Compensation Compensation Comp(3)
---------------------------------------------------- -------
Awards
Name and Principal Stock Options
Position Period Salary(1) Bonus(2) Other(3) (Shares)
- - -------- ------ --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
E. Larry Atkins Year ended 1997 $246,400 $86,000 $2,160 100,000 $11,040
President and Chief Six months ended
Executive Officer June 30, 1996 123,200 -- 5,250 -- 4,691
Year ended 1995 246,400 61,600 4,680 175,000 7,882
Year ended 1994 220,000 54,000 3,789 -- 9,327
Glenn P. Cato Year ended 1997 180,000 54,000 9,000 25,000 13,296
Senior Executive Vice Six months ended
President and Chief June 30, 1996 97,500 10,000 3,000 -- --
Operating Officer Year ended 1995 172,500 20,000 6,000 30,000 3,158
Year ended 1994 143,750 71,875 4,500 57,500 1,751
Thomas V. Croal Year ended 1997 175,230 53,000 2,340 25,000 9,804
Executive Vice Six months ended
President, Chief June 30, 1996 87,615 -- 4,500 -- 2,669
Financial Officer and Year ended 1995 175,230 43,808 4,742 125,000 5,252
Corporate Secretary Year ended 1994 148,500 38,000 4,836 -- 3,519
Robert N. LaDouceur Year ended 1997 165,000 36,000 7,800 10,000 8,169
Senior Vice Six months ended
President-Operations June 30, 1996 82,500 10,000 3,900 -- --
Year ended 1995 165,000 20,000 6,400 30,000 3,072
Year ended 1994 165,000 82,500 5,400 35,000 1,751
Michael A. Boylan Year ended 1997 165,000 36,000 7,800 10,000 5,509
Senior Vice Six months ended
President-Operations June 30, 1996 81,865 25,000 3,900 -- --
Year ended 1995 165,000 20,000 6,400 30,000 --
Year ended 1994 165,000 82,500 5,400 35,000 --
--------------- -------- ------ ----- ------ ------
</TABLE>
(1) Includes amounts for periods during which the chief executive officer
and the Other Executive Officers of the Company, whose aggregate cash
compensation exceeded $100,000, served as executive officers of AHS or MHC,
which are now wholly owned subsidiaries of the Company.
6
<PAGE>
(2) Annual bonuses are earned and accrued during the fiscal years
indicated, and paid subsequent to the end of each fiscal year.
(3) Amounts of Other Annual Compensation include perquisites (auto
allowances and commissions for contract awards and renewals) and amounts of
All Other Compensation include (i) amounts contributed to the Company's,
MHC's or AHS's 401(k) profit sharing plans, as the case may be, (ii)
specified premiums on executive split-dollar insurance arrangements, and
(iii) specified premiums on executive health insurance arrangements, for
the chief executive officer and the Other Executive Officers of the
Company.
COMPENSATION OF DIRECTORS. The members of the Board who are not employees of
the Company receive an annual director fee of $15,000 and options to purchase
Common Stock for their services as directors, as provided in the Company's 1996
Directors' Stock Option Plan ("Directors' Plan"). On March 28, 1996, the
Company entered into a consulting agreement with Mr. Egger pursuant to which Mr.
Egger receives $85,000 per year for services rendered to the Company in
connection with its acquisition and financing activities. See "EMPLOYMENT
AGREEMENTS AND SEVERANCE AGREEMENTS" and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
The Directors' Plan provided for the automatic grant at the effective time of
the merger of each of AHS and MHC into wholly owned subsidiaries of the Company
("Merger") to each non-employee director then serving on the Board of an option
to purchase 15,000 shares of Common Stock at an exercise price equal to the fair
market value of such stock on the date of the grant. In addition, each new
director of the Company who commences service after the effective time of the
Merger will be granted an option to purchase 15,000 shares of Common Stock. The
initial grants vest monthly on a pro rata basis over a three-year period, so
long as the individual remains a director of the Company or is an employee or
independent contractor of the Company or any of its subsidiaries. At the end of
such three-year period and annually thereafter during the term of the Directors'
Plan, so long as the individual remains a director, he or she will be granted an
option to purchase 5,000 shares of Common Stock. These additional grants vest
monthly over one year on the same terms as the initial grants. These options
expire ten years from the date of grant. In accordance with this formula, on
June 26, 1996, each of Messrs. Egger, Habas and Pantello were granted options to
purchase 15,000 shares of Common Stock at an exercise price of $5.37 per share.
In addition, on July 19, 1996, Mr. Chamberlain was granted an option to
purchase 15,000 shares of Common Stock at an exercise price of $7.00 per share.
On July 17, 1997, the Company issued to each of Messrs. Chamberlain, Egger,
Habas and Pantello a warrant to purchase 15,000 shares of Common Stock at an
exercise price of $4.56 per share, which was the fair market value of the
Common Stock on such date. The warrants vest cumulatively at the rate of 416.66
shares per month and are exercisable at any time up to July 17, 2000.
In lieu of an automatic grant, under the Directors' Plan, to each of the Series
B Directors and the Series C Director of an option to purchase 15,000 shares of
Common Stock, at the request of such Preferred Stock Directors, upon the date
each of them became a Preferred Stock Director, the Company issued to an
affiliate of the Carlyle Stockholders a warrant to purchase 30,000 shares of
Common Stock at an exercise price of $7.25 per share and GE a warrant to
purchase 15,000 shares of Common Stock at an exercise price of $10.00 per share.
The Carlyle Stockholders warrant vests cumulatively at the rate of 833.33
shares per month and the GE warrant vests cumulatively at the rate of 416.67
shares per month. The Carlyle Stockholders warrant is exercisable at any time
up to October 14, 2000 and the GE warrant is exercisable at any time up to
November 20, 2000. See "TRANSACTIONS WITH HOLDERS OF PREFERRED STOCK".
7
<PAGE>
OPTION GRANTS. The following table sets forth information concerning options
granted to each of the chief executive officer and the Other Executive Officers
of the Company during the year ended June 30, 1997.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------
% of
Total
Number of Options Potential Realizable
Securities Granted to Value at Assumed
Underlying Employees Exercise Annual Rates of Stock
Options in Price Per Expiration Price Appreciation for
Name Granted Fiscal Year Share (2) Date (3) Option Term (1)
- - ---- -------- ----------- --------- -------- ---------------
5% 10%
---- ----
<S> <C> <C> <C> <C> <C> <C>
E. Larry Atkins 100,000 46% $6.25 10-02-2006 $393,059 $996,089
Glenn P. Cato 25,000 11% 6.25 10-02-2006 98,265 249,022
Thomas V. Croal 25,000 11% 6.25 10-02-2006 98,265 249,022
Robert N. LaDouceur 10,000 5% 6.25 10-02-2006 39,306 99,609
Michael A. Boylan 10,000 5% 6.25 10-02-2006 39,306 99,609
</TABLE>
(1) Potential realizable value is determined by taking the exercise price per
share and applying the stated annual appreciation rate compounded annually for
the remaining term of the option (ten years), subtracting the exercise price per
share at the end of the period and multiplying the remaining number by the
number of options granted. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the future performance of the Common
Stock and overall stock market conditions.
(2) All options were granted at fair market value (the closing price reported
on NASDAQ Small Cap Market for the Common Stock).
(3) Options granted in fiscal 1997 are exercisable starting twelve (12) months
after the grant date, with 25% of the shares becoming exercisable at that time
and with an additional 25% of the shares becoming exercisable on each successive
anniversary date, with full vesting occurring on the fourth anniversary date.
The options were granted for a term of ten years, subject to earlier termination
in certain events related to termination of employment.
No stock options were granted under any stock option plan of either AHS or MHC,
to the chief executive officer and the Other Executive Officers of the Company.
8
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES. During the year ended June 30,
1997, neither of the chief executive officer nor the Other Executive Officers of
the Company exercised any stock options. The following table sets forth
information with respect to the unexercised stock options to purchase Common
Stock granted, under (i) MHC's and AHS's stock option plans and assumed by the
Company pursuant to the Merger, and (ii) Company's 1996 Employee Stock Option
Plan, to the chief executive officer and the Other Executive Officers of the
Company as of June 30, 1997.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options at
Name June 30, 1997 June 30, 1997(1)
- - ---- ------------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
E. Larry Atkins 10,500 107,000 $ 18,375 $ 12,250
Glenn P. Cato 52,325 25,000 195,819 --
Thomas V. Croal 7,500 30,000 13,125 8,750
Robert N. LaDouceur 38,870 10,000 144,260 --
Michael A. Boylan 38,870 10,000 144,260 --
------ ------ ---------- -------
(1) Based on the closing price reported on NASDAQ Small Cap Market for the
Common Stock on that date of $4.25 per share.
INDEMNIFICATION AGREEMENTS. The Company has entered into separate
indemnification agreements with each of its directors and executive officers
that could require the Company, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors and executive officers and to advance expenses incurred by them as a
result of any proceedings against them as to which they could be indemnified.
The Recapitalization agreements also contain provisions for the indemnification
of the Company's directors under certain circumstances. The agreements pursuant
to which the Carlyle Stockholders and GE acquired Series B Preferred Stock and
Series C Preferred Stock, respectively, provide that the Company will indemnify,
defend and hold harmless the Carlyle Stockholders and GE, as the case may be,
and their respective affiliates, directors, officers, advisors, employees and
agents to the fullest extent lawful from and against all demands, losses,
damages, penalties, claims, liabilities, obligations, actions, causes of action
and reasonable expenses ("Losses") arising out of the agreements or the related
transactions or arising by reason of or resulting from the breach of any
representation, warranty, covenant or agreement of the Company contained in such
agreements for the period for which such representation or warranty survives;
provided, however, that the Company does not have any liability to indemnify the
Carlyle Stockholders or GE with respect to Losses arising from the bad faith or
gross negligence of the Carlyle or GE indemnified party. The Recapitalization
agreements provide that no claim may be made by the Carlyle Stockholders or GE
against the Company for indemnification until the aggregate dollar amount of all
Losses incurred by the Carlyle Stockholders or GE, as applicable, exceeds
$250,000 and the indemnification obligations of the Company shall be effective
only until the dollar amount paid in respect of the Losses incurred by the
Carlyle Stockholders or GE, as applicable, and indemnified against aggregates to
an amount equal to $25 million, except with respect to Losses resulting from the
breaches of certain representations or covenants, which are unlimited in amount.
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS. The Company has entered into
executive employment agreements with its chief executive officer, the Other
Executive Officers and Messrs. Cragin and Drazba and Ms. MacFarlane, which
provide for rolling twelve (12) month periods of employment, and severance
compensation equal to 12 months of compensation at his or her annual salary rate
then in effect, in the event the executive's employment is terminated (i)
because of physical or mental disability, (ii) because of discretionary action
of the Board, or (iii) voluntarily by the executive due to a "Change of
Control." A "Change of Control" will have occurred if the Company or its
stockholders enter into an agreement to dispose of, whether by sale, exchange,
merger, consolidation, reorganization, dissolution or liquidation, (a) not less
than 80% of the assets of the Company or (b) a portion of the outstanding Common
Stock such that one person or "group" (as defined by the SEC) owns, of record or
beneficially, not less than 50% of the outstanding Common Stock. In the event
that the executive's employment is terminated for cause, he or she has no right
to receive any severance compensation under his or her employment agreement. In
consideration for such severance compensation, each executive has agreed not to
solicit, entice, divert or otherwise contact any customer or employee of InSight
for any provision of services which constitute "Company Business" during the
period that the executive is receiving severance compensation or for a period of
12 months after the executive's termination of employment, whichever is later.
"Company Business" means the development and operation, at times together with
other healthcare providers, of outpatient facilities which provide diagnostic
services in the areas of general
9
<PAGE>
radiology, MRI, cardiology and neurosciences utilizing the related equipment and
computer programs and software and various distribution methods and investment
structures.
Mr. Egger, a director and chairman of the board, has entered into a consulting
agreement with InSight providing for compensation at the rate of $85,000 per
year. Mr. Egger's agreement provides for severance compensation equal to 12
months of compensation in the event the agreement is terminated as a result of
(i) Mr. Egger becoming physically or mentally disabled, (ii) discretionary
action of the Board, or (iii) a corporate reorganization that has the effect of
diminishing or impairing Mr. Egger's consulting responsibilities.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. The Compensation
Committee is responsible for determining the specific forms and levels of
compensation for executive officers of the Company and administering the
Company's stock option plans. The Compensation Committee also consults
periodically with the Company's chief executive officer concerning the
compensation and benefits of the Other Executive Officers of the Company.
In accordance with the SEC's rules, this report shall not be incorporated by
reference into any of the Company's registration statements, reports or filings
under the Securities Act of 1933, as amended ("Securities Act"), or the Exchange
Act.
The Board believes that the achievements of the Company result from the
coordinated efforts of all employees (including executive officers of the
Company) working toward the common goals of meeting the needs of the Company's
customers and enhancing stockholder value. The Company's compensation policies
are therefore strongly oriented toward providing compensation opportunities that
are competitive with those of comparable companies; establishing a link between
the chief executive officer's and executive officers' compensation and the
Company's short-term and long-term goals and including elements of financial
risks and rewards. Specific corporate performance objectives are established
("budget") and the chief executive officer's and executive officers'
contribution to the enhancement of stockholder value is derived from achieving
the Company's budget. The Compensation Committee, while intending to provide
compensation to the Company's executive officers at competitive levels in order
to attract and retain qualified executive officers, believes that achieving
budget and other strategic and business plan objectives is critical to the
long-term success of the Company.
Compensation of the Company's chief executive officer and Other Executive
Officers consists principally of base salary, a cash bonus, contribution to a
401(k) profit sharing plan and stock options.
First, the base salary component represents the base rate of pay provided to an
executive officer for carrying out the overall responsibilities of the position.
Base salary is determined using companies providing comparable services within
the healthcare industry and market dynamics. Comparable companies for executive
compensation purposes are the same as the peer group established to compare
stockholder return. Actual compensation levels may be greater or less than
average competitive levels in other companies, based on annual and long-term
company performance as well as individual experience and performance. In
addition, scope of responsibilities, experience and other factors may be
considered by the Compensation Committee in its discretion in the determination
of base salary for the chief executive officer and Other Executive Officers.
The base salary of the Other Executive Officers for fiscal 1997 was determined
pursuant to the terms of executive employment agreements between each of the
Other Executive Officers and the Company dated between February 22 and May 1,
1996.
Second, the Compensation Committee determines annually whether a cash bonus will
be paid to the chief executive officer and Other Executive Officers. The
determination thereof is based almost entirely upon the achievement of the
Company's budget and strategic and business plan objectives. If these
established goals are met or exceeded, the chief executive officer and Other
Executive Officers could receive bonuses up to an annually determined percentage
of their base salaries, the amounts of which are subjectively determined by the
Compensation Committee; however, in the determination of such percentage,
consideration is given to the achievement of the Company's budget and other
strategic and business plan objectives, particularly in the areas for which the
chief executive officer and executive officers have responsibility, and
individual performance achievements, including contract awards and renewals.
The Other Executive Officers received bonuses for fiscal 1997 based upon the
Compensation Committee's determination, after consultation with the chief
executive officer and independent compensation consultants, of their individual
role in the realization of the Company's financial and other objectives
following the Merger.
Third, the Company has a 401(k) profit sharing plan ("401(k) Plan") in which all
eligible employees, including the chief executive officer and Other Executive
Officers, of the Company are permitted to participate. To the extent the chief
executive officer and Other Executive Officers participate in the 401(k) Plan,
they may contribute up to 15% of their salaries on a pre-tax
10
<PAGE>
basis and the Company will contribute on their behalf an amount equal to 50% of
the first 6% of compensation contributed by the chief executive officer and
Other Executive Officers.
Fourth, the Company has established various stock option plans in which the
chief executive officer and Other Executive Officers may participate. The
Compensation Committee believes that stock option plans help to recruit, retain
and motivate executive personnel. The Compensation Committee further believes
that stock options and stock ownership by the chief executive officer and Other
Executive Officers are an important component of performance-based compensation,
as the value of stock options directly relates to the price of the Common Stock
and provides the chief executive officer and Other Executive Officers with an
incentive to enhance stockholder value. Stock options are granted on a periodic
basis, as the discretion of the Compensation Committee, with interim awards
being made in the case of new employee executive officers, promotions or a
significant increase in job responsibilities. The number of shares granted
under stock options is determined subjectively by the Compensation Committee,
but scope of responsibilities and individual performance achievements or
expectations related thereto are also considered. The Other Executive Officers
were granted stock options in fiscal 1997 based upon the recommendation of
independent compensation consultants and their ongoing contribution in the
Company's long-term business and financial objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Mr. Atkins' base salary was
determined pursuant to the terms of his executive employment agreement with the
Company entered into on February 23, 1996. Mr. Atkins also received a bonus of
$86,000 for services performed in fiscal 1997. The amount of the bonus was
determined by the Compensation Committee after consideration of the critical
role Mr. Atkins played in the realization of the financial and business
objectives of the Company following the Merger. In addition, for the reasons
described above and upon the recommendation of independent compensation
consultants, Mr. Atkins was also granted stock options in fiscal 1997.
It is the Company's policy generally to qualify compensation paid to its chief
executive officer and Other Executive Officers for deductibility under the
Internal Revenue Code of 1996 and regulations in order to maximize the Company's
income tax deductions; however, the Compensation Committee believes that its
primary responsibility is to provide compensation programs that attract, retain
and reward executive talent in a manner that is in the best interests of both
the Company and its stockholders. Accordingly, the Compensation Committee will
consider tax deductibility levels, but will not necessarily be limited by this
consideration as it determines the Company's executive compensation strategy.
Compensation Committee
Leonard H. Habas, Co-chairman
Ronald G. Pantello, Co-chairman
11
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH. The following graph compares the yearly
percentage change in the cumulative total stockholder return on the Common Stock
against the cumulative total return of the NASDAQ Stock Market-U.S. index and a
peer group index for the period commencing June 28, 1996 and ending June 30,
1997. To comply with the SEC's requirements, the Company has developed a peer
group comprised of Alliance Imaging, Inc., American Shared Hospital Services,
Diagnostic Health Services, Inc., Healthcare Imaging Services, Inc., Medical
Resources, Inc., SMT Health Services, Inc., U.S. Diagnostic Labs, Inc. and the
Company. The peer group index is weighted in accordance with the SEC's
requirements by market capitalization as of the beginning of each measurement
date. Also in accordance with the SEC's rules, this graph is not intended to be
incorporated by reference into any of the Company's registration statements,
reports or filings under the Exchange Act.
COMPARISON OF 12 MONTH CUMULATIVE TOTAL RETURN*
AMONG INSIGHT HEALTH SERVICES CORP., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
Research Data Group, Inc. Total Return - Data Summary
IHSC Cumulative Total Return
--------------------------
6/28/96 6/30/97
INSIGHT HEALTH SERVICES CORP. 100 79
NASDAQ STOCK MARKET (U.S.) 100 122
PEER GROUP 100 115
* $100 INVESTED ON 6/28/96 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
12
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership, reported to the Company as
of December 31, 1997, of Common Stock, including shares as to which a right to
acquire ownership exists (for example, through the exercise of stock options and
warrants and conversions of Preferred Stock within the meaning of Rule
13d-3(d)(1) under the Exchange Act), of (i) each person known to the Company to
own beneficially 5% or more of the Common Stock, (ii) each director of the
Company, (iii) the Company's executive officers, and (iv) all directors and
executive officers, as a group.
NAME AND ADDRESSES OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNERS OF BENEFICIAL COMMON STOCK
--------------------- OWNERSHIP OF BENEFICIALLY
COMMON STOCK (1) OWNED (1)
---------------- -------------
Carlyle Stockholders (2) 3,238,408 54.2%
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004
General Electric Company (3) 3,589,248 56.8%
20825 Swenson Drive
Suite 100
Waukesha, WI 53186
E. Larry Atkins (4) 51,100 1.8%
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
Grant R. Chamberlain (5) 11,250 *
620 Fifth Avenue - Suite 2950
New York, NY 10111
Frank E. Egger (6) 54,470 2.0%
10301 S.W. 13th Street
Pembroke Pines, FL 33025
Leonard H. Habas (7) 41,591 1.5%
501 S. New York Avenue - Suite 210
Winter Park, FL 32789
David W. Dupree (8) 0 0
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004
Glenn A. Youngkin (9) 0 0
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004
Estate of Cal Kovens (10) 482,031 17.4%
9999 Collins Avenue #1K
Bal Harbour, FL 33154
13
<PAGE>
Roz Kovens (11) 563,276 20.5%
9999 Collins Avenue #1K
Bal Harbour, FL 33154
Ronald G. Pantello (12) 29,606 1.1%
60 Madison Avenue
New York, NY 10010
Glenn P. Cato (13) 58,575 2.1%
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
Thomas V. Croal (14) 17,750 *
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
Michael A. Boylan (15) 41,370 1.5%
110 Gibraltar Road
Horsham, PA 18901
Robert N. LaDouceur (16) 41,370 1.5%
11011 King Street - Suite 240
Overland Park, KS 66210
Michael D. Cragin (17) 3,750 *
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
Brian G. Drazba (18) 2,000 *
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
Deborah M. MacFarlane (19) 3,750 *
4400 MacArthur Boulevard - Suite 800
Newport Beach, CA 92660
All directors and executive
officers as a group (14 persons) (20) 356,582 11.8%
* Less than 1% of the outstanding Common Stock.
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person has the right to acquire within 60
days after December 31, 1997.
(2) The information in the table is based upon the Schedule 13D filed with
the SEC by the Carlyle Stockholders on October 24, 1997. Represents shares of
Common Stock issuable upon conversion of all 25,000 shares of Series B Preferred
Stock (convertible into 2,985,075 shares of Common Stock) and exercise of
certain warrants ("Carlyle Warrants") (exercisable for 250,000 shares of Common
Stock) held by the Carlyle Stockholders, which Stockholders are comprised of the
entities listed in the following sentence. The cumulative Carlyle Stockholders
ownership figure represents (i) 3,235,075 shares beneficially owned by Carlyle
Partners II, L.P., including 8,208 shares of Series B Preferred Stock
(convertible into 980,028 shares of Common Stock) and Carlyle Warrants to
purchase 82,077 shares of Common Stock with respect to which it has disposal
power, and 3,235,075 shares with respect to which it shares voting power; (ii)
3,235,075 shares beneficially owned by Carlyle Partners III, L.P., including 375
shares of Series B Preferred Stock (convertible into 44,732 shares of Common
Stock) and Carlyle Warrants to purchase 3,764 shares of Common Stock with
respect to which it has disposal power, and 3,235,075 shares with respect to
which it shares voting power; (iii) 896,526 shares beneficially owned by
Carlyle International
14
<PAGE>
Partners II, L.P., including 6,928 shares of Series B Preferred Stock
(convertible into 827,244 shares of Common Stock) and Carlyle Warrants to
purchase 69,282 shares of Common Stock with respect to which it has disposal
power and shares voting power; (iv) 48,304 shares beneficially owned by Carlyle
International Partners III, L.P., including 373 shares of Series B Preferred
Stock (convertible into 44,571 shares of Common Stock) and Carlyle Warrants to
purchases 3,733 shares of Common Stock with respect to which it has disposal
power and shares voting power; (v) 201,857 shares beneficially owned by C/S
International Partners, including 1,559 shares of Series B Preferred Stock
(convertible into 186,258 shares of Common Stock) and Carlyle Warrants to
purchase 15,599 shares of Common Stock with respect to which it has disposal
power and shares voting power; (vi) 1,115 shares beneficially owned by Carlyle
Investment Group, L.P., including 9 shares of Series B Preferred Stock
(convertible into 1,029 shares of Common Stock) and Carlyle Warrants to purchase
86 shares of Common Stock with respect to which it has disposal power and shares
voting power; (vii) 118,902 shares beneficially owned by Carlyle-InSight
International Partners, L.P., including 919 shares of Series B Preferred Stock
(convertible into 109,714 shares of Common Stock) and Carlyle Warrants to
purchase 9,178 shares of Common Stock with respect to which it has disposal
power and shares voting power; (viii) 3,235,075 shares beneficially owned by
Carlyle-InSight Partners, L.P. including 3,181 shares of Series B Preferred
Stock (convertible into 379,863 shares of Common Stock) and Carlyle Warrants to
purchase 31,813 shares of Common Stock with respect to which it has disposal
power and 3,235,075 shares with respect to which it shares voting power; (ix)
446,404 shares beneficially owned by Carlyle Investment Management, L.L.C.
acting as investment advisor and manager with responsibility to invest certain
assets of the State Board of Administration of the State of Florida ("State
Board"), including 3,448 shares of Series B Preferred Stock (convertible into
411,658 shares of Common Stock) and Carlyle Warrants to purchase 34,746 shares
of Common Stock with respect to which it has disposal power and shares voting
power; and (x) warrants to purchase 3,333 shares of Common Stock at an exercise
price of $7.25 per share owned by TC Group Management, LLC. Does not include
warrants to purchase 26,667 shares of Common Stock at an exercise price of $7.25
per share, owned by TC Group Management, LLC, which are not currently
exercisable. TC Group, L.L.C. may be deemed to share voting and disposal power
with respect to, and therefore be the beneficial owner of 3,235,075 shares of
Common Stock as the general partner of Carlyle Partners II, L.P., Carlyle
Partners III, L.P., Carlyle Investment Group, L.P., and Carlyle-InSight
Partners, L.P., and as the managing partner of Carlyle International Partners
II, L.P., Carlyle International Partners III, L.P., C/S International Partners,
and Carlyle-InSight International Partners II, L.P. TCG Holdings, L.L.C., as a
member holding a controlling interest in TC Group, L.L.C., may be deemed to
share all rights herein described belonging to TC Group, L.L.C. Furthermore,
because certain managing members of TCG Holdings, L.L.C, are also managing
members of Carlyle Investment Management, L.L.C., Carlyle Investment Management,
L.L.C. may be deemed to be part of the Carlyle Stockholders and consequently,
TCG Holdings, L.L.C. may be deemed the beneficial owner of the shares of Common
Stock controlled by Carlyle Investment Management, L.L.C. The principal business
address of TC Group, L.L.C. and TCG Holdings, L.L.C. is c/o The Carlyle Group,
1001 Pennsylvania Avenue, N.W., Suite 220 South, Washington, D.C. 20004. The
principal business address of Carlyle Partners II, L.P., Carlyle Partners III,
L.P., Carlyle Investment Group, L.P., Carlyle-InSight Partners, L.P., and
Carlyle Investment Management, L.L.C. is Delaware Trust Building, 900 Market
Street, Suite 200, Wilmington, Delaware 19801. The principal business address
of Carlyle International Partners II, L.P., Carlyle International Partners III,
L.P., C/S International Partners, and Carlyle-InSight International Partners,
L.P. is Coutts & Co., P.O. Box 707, Cayman Islands, British West Indies. The
Carlyle Stockholders own all of the outstanding shares of the Series B Preferred
Stock.
(3) The information in the table is based upon Amendment No. 1 to Schedule
13D filed by GE with the SEC on October 23, 1997. Represents shares of Common
Stock issuable upon (i) conversion of all 27,953 shares of Series C Preferred
Stock (convertible into 3,337,581 shares of Common Stock) held by GE, (ii)
exercise of certain warrants ("GE Warrants") (exercisable for 250,000 shares of
Common Stock), and (iii) warrants to purchase 1,667 shares of Common Stock at an
exercise price of $10.00 per share. Does not include warrants to purchase
13,333 shares of Common Stock at an exercise price of $10.00 per share, which
are not currently exercisable. GE owns all of the outstanding shares of Series
C Preferred Stock.
(4) Includes (i) options to purchase 14,000 shares of Common Stock at an
exercise price of $2.50 per share and (ii) options to purchase 25,000 shares of
Common Stock at an exercise price of $6.25 per share. Does not include (i)
options to purchase 3,500 shares of Common Stock at an exercise price of $2.50
per share, (ii) options to purchase 75,000 shares of Common Stock at an exercise
price of $6.25 per share, (iii) options to purchase 50,000 shares of Common
Stock at an exercise price of $4.56 per share, and (iv) options to purchase
150,000 shares of Common Stock at an exercise price of $8.37 per share, which
are not currently exercisable.
(5) Includes (i) options to purchase 7,917 shares of Common Stock at an
exercise price of $7.00 per share and (ii) warrants to purchase 3,333 shares of
Common Stock at an exercise price of $4.56 per share. Does not include options
to
15
<PAGE>
purchase 7,083 shares of Common Stock at an exercise price of $7.00 per share
and (ii) warrants to purchase 11,667 shares of Common Stock at an exercise price
of $4.56 per share, which are not currently exercisable.
(6) Includes (i) options to purchase 8,333 shares of Common Stock at an
exercise price of $5.37 per share, (ii) options to purchase 2,400 shares of
Common Stock at an exercise price of $2.50 per share, (iii) options to purchase
2,000 shares of Common Stock at an exercise price of $16.20 per share, (iv)
warrants to purchase 2,268 shares of Common Stock at an exercise price of $5.64
per share, and (v) warrants to purchase 3,333 shares of Common Stock at an
exercise price of $4.56 per share. Does not include (i) options to purchase
6,667 shares of Common Stock at an exercise price of $5.37 per share, (ii)
options to purchase 600 shares of Common Stock at an exercise price of $2.50 per
share and (iii) warrants to purchase 11,667 shares of Common Stock at an
exercise price of $4.56 per share, which are not currently exercisable.
(7) Includes (i) options to purchase 8,333 shares of Common Stock at an
exercise price of $5.37 per share, (ii) options to purchase 4,485 shares of
Common Stock at an exercise price of $15.64 per share, (iii) options to purchase
8,970 shares of Common Stock at an exercise price of $1. 25 per share, (iv)
options to purchase 8,970 shares of Common Stock at an exercise price of $0.10
per share and (v) warrants to purchase 3,333 shares of Common Stock at an
exercise price of $4.56 per share. Does not include (i) options to purchase
6,667 shares of Common Stock at an exercise price of $5.37 per share and (ii)
warrants to purchase 11,667 shares of Common Stock at an exercise price of $4.56
per share, which are not currently exercisable.
(8) Mr. Dupree is a managing member of TCG Holdings, L.L.C. Mr. Dupree's
interest in TCG Holdings, L.L.C. is not controlling and thus Mr. Dupree
expressly disclaims any beneficial ownership in the Common Stock beneficially
owned by TCG Holdings, L.L.C.
(9) Mr. Youngkin is an employee of The Carlyle Group and holds no economic
interest in either TC Group L.L.C. or TCG Holdings, L.L.C., and as such
expressly disclaims any beneficial ownership in the Common Stock beneficially
owned by any of the Carlyle Stockholders.
(10) The information in the table is based upon Amendment No. 1 to Schedule
13D filed with the SEC on July 9, 1996. Includes warrants to purchase 33,645
shares of Common Stock at an exercise price of $5.64 per share.
(11) The information in the table is based upon Amendment No. 1 to Schedule
13D filed with the SEC on July 9, 1996. Includes (i) warrants to purchase 7,660
shares of Common Stock at an exercise price of $5.64 per share, (ii) options to
purchase 1,800 shares of Common Stock at an exercise price of $2.50 per share
and (iii) by virtue of her status as personal representative of the Estate of
Cal Kovens, the 482,031 shares beneficially owned thereby. Does not include
options to purchase 1,200 shares at an exercise price of $2.50 per share, which
are not currently exercisable.
(12) Includes (i) options to purchase 8,333 shares of Common Stock at an
exercise price of $5.37 per share, (ii) options to purchase 8,970 shares of
Common Stock at an exercise price of $1.25 per share, (iii) options to purchase
8,970 shares of Common Stock at an exercise price of $0.10 per share and (iv)
warrants to purchase 3,333 shares of Common Stock at an exercise price of $4.56
per share. Does not include (i) options to purchase 6,667 shares of Common
Stock at an exercise price of $5.37 per share and (ii) warrants to purchase
11,667 shares of Common Stock at an exercise price of $4.56 per share, which are
not currently exercisable.
(13) Includes (i) options to purchase 25,415 shares of Common Stock at an
exercise price of $0.42 per share, (ii) options to purchase 8,970 shares of
Common Stock at an exercise price of $0.10 per share, (iii) options to purchase
17,940 shares of Common Stock at an exercise price of $0.84 per share and (iv)
options to purchase 6,250 shares of Common Stock at an exercise price of $6.25
per share. Does not include (i) options to purchase 18,750 shares of Common
Stock at an exercise price of $6.25 per share, (ii) options to purchase 30,000
shares of Common Stock at an exercise price of $4.56 per share, and (iii)
options to purchase 80,000 shares of Common Stock at an exercise price of $8.37
per share, which are not currently exercisable.
(14) Includes (i) options to purchase 10,000 shares of Common Stock at an
exercise price of $2.50 per share and (ii) options to purchase 6,250 shares of
Common Stock at an exercise price of $6.25 per share. Does not include (i)
options to purchase 18,750 shares of Common Stock at an exercise price of $6.25
per share, (ii) options to purchase 25,000 shares of Common Stock at an exercise
price of $4.56 per share, (iii) options to purchase 2,500 shares of Common
Stock at $2.50 per
16
<PAGE>
share, and (iv) options to purchase 140,000 shares of Common Stock at an
exercise price of $8.37 per share, which are not currently exercisable.
(15) Includes (i) options to purchase 11,960 shares of Common Stock at an
exercise price of $0.42 per share, (ii) options to purchase 8,970 shares of
Common Stock at an exercise price of $0.10 per share, (iii) options to purchase
17,940 shares of Common Stock at an exercise price of $0.84 per share and (iv)
options to purchase 2,500 shares of Common Stock at an exercise price of $6.25
per share. Does not include (i) options to purchase 7,500 shares of Common Stock
at an exercise price of $6.25 per share, (ii) options to purchase 10,000 shares
of Common Stock at an exercise price of $4.56 per share, and (iii) options to
purchase 50,000 shares of Common Stock at an exercise price of $8.37 per share,
which are not currently exercisable.
(16) Includes (i) options to purchase 11, 960 shares of Common Stock at an
exercise price of $0.42 per share, (ii) options to purchase 8,970 shares of
Common Stock at an exercise price of $0.10 per share, (iii) options to purchase
17,940 shares of Common Stock at an exercise price of $0. 84 per share and (iv)
options to purchase 2,500 shares of Common Stock at an exercise price of $6.25
per share. Does not include (i) options to purchase 7,500 shares of Common
Stock at an exercise price of $6.25 per share, (ii) options to purchase 10,000
shares of Common Stock at an exercise price of $4.56 per share, and (iii)
options to purchase 50,000 shares of Common Stock at an exercise price of $8.37
per share, which are not currently exercisable.
(17) Includes options to purchase 3,750 shares of Common Stock at an exercise
price of $6.25 per share. Does not include (i) options to purchase 11,250
shares of Common Stock at an exercise price of $6.25 per share, (ii) options to
purchase 10,000 shares of Common Stock at an exercise price of $4.56 per share,
and (iii) options to purchase 30,000 shares of Common Stock at an exercise price
of $8.37 per share, which are not currently exercisable.
(18) Includes options to purchase 2,000 shares of Common Stock at an exercise
price of $6.25 per share. Does not include (i) options to purchase 6,000 shares
of Common Stock at an exercise price of $6.25 per share and (ii) options to
purchase 10,000 shares of Common Stock at an exercise price of $4.56 per share,
which are not currently exercisable.
(19) Includes options to purchase 3,750 shares of Common Stock at an exercise
price of $6.25 per share. Does not include (i) options to purchase 11,250
shares of Common Stock at an exercise price of $6.25 per share and (ii) options
to purchase 10,000 shares of Common Stock at an exercise price of $4.56 per
share, which are not currently exercisable.
(20) Assumes the exercise in full of options or warrants described in
footnotes (4) through (9) and (12) through (19) that are currently exercisable
or that will become exercisable within 60 days of December 31, 1997.
Except as otherwise noted, the Company believes that each of the stockholders
listed in the table above has sole voting and dispositive power over all shares
owned.
POSSIBLE FUTURE BOARD CHANGES. The Common Stock holders currently are entitled
to elect a majority of the Board. Under certain circumstances, the holders of
the Series D Preferred Stock (which is issuable only on conversion of the Series
B Preferred Stock and the Series C Preferred Stock) would be entitled to elect a
majority of the Board. If, at any time on or after October 22, 1998 ("Trigger
Date"), a majority of the holders of each of the Series B Preferred Stock and
the Series C Preferred Stock elect to convert such Stock into Series D Preferred
Stock, then all shares of Series B Preferred Stock and Series C Preferred Stock
will automatically be converted into shares of Series D Preferred Stock on the
date of such election ("Conversion Date"). Immediately following such
conversion, the number of members of the Board will be increased by an
additional number of directors ("Conversion Directors") such that the percentage
of the total Board represented by the Conversion Directors and the Preferred
Stock Directors ("Series D Directors") would correspond to the percentage of
Common Stock owned by the Series D Preferred Stock holders on an as-if-converted
basis, provided that the Series D Directors shall constitute less than
two-thirds of the Board. In such event, the Preferred Stock Directors would
remain on the Board and the vacancies created for the Conversion Directors would
be filled by the Series D Preferred Stock holders. Assuming conversion of all
of the outstanding Series B Preferred Stock and Series C Preferred Stock, the
percentage of the outstanding Common Stock currently owned by the Series B
Preferred Stock holders is approximately 33% and the percentage of Common Stock
currently owned by the Series C Preferred Stock holders is approximately 37%. If
such Preferred Stock were converted into Series D Preferred Stock on or after
the Trigger Date, the aggregate percentage of Common Stock owned by the Series D
17
<PAGE>
Preferred Stock holders would be approximately 70%. Thus, as a result of such
conversion, designees of the Series D Preferred Stock holders would constitute
a majority (but less than two-thirds) of the Board.
The holders of Series D Preferred Stock will have the right to vote with the
holders of Common Stock with respect to all matters submitted to a stockholder
vote except, until the second annual meeting of stockholders after the
Conversion Date, for the election of directors. At and after the second annual
stockholders meeting, the positions of all directors whose terms have expired
will be subject to election by holders of Common Stock and Series D Preferred
Stock voting together as a class, with each share of Series D Preferred Stock
having the number of votes equal to the number of shares of Common Stock into
which such share is then convertible. Notwithstanding the foregoing, if the
Conversion Date is prior to October 14, 1999, then from the Conversion Date
until the second subsequent annual stockholders meeting, except as provided in
the next sentence, none of the following transactions may be effected by the
Company, and neither the Carlyle Stockholders, GE, nor any other holder of
Series D Preferred Stock shall participate in such transactions, if any
transferee of the Carlyle Stockholders or GE or any other person referred to in
the following clauses beneficially owns five percent (5%) or more of the
Company's voting shares: (i) any merger or consolidation of the Company or any
of its subsidiaries with or into such person; (ii) any sale, lease, exchange or
other disposition of all or any substantial part of the assets of the Company or
any of its subsidiaries to such other person; (iii) the issuance or delivery of
any voting securities of the Company or any of its subsidiaries to such other
person in exchange for cash, other assets or securities, or a combination
thereof; or (iv) any dissolution or liquidation of the Company. The foregoing
prohibition shall not apply with respect to a transaction approved by (i) at
least 80% of the Company's outstanding voting shares (which includes the Common
Stock and the Series D Preferred Stock) or (ii) at least two-thirds of the
Company's directors (which must include, to the extent still a director, either
(A) the Joint Director, if such Joint Director served in such position as of the
Conversion Date or has been approved by a majority of the directors who were
Common Stock Directors as of the Conversion Date or (B) at least one director
who was a Common Stock Director prior to the Conversion Date).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH THE ESTATE OF CAL KOVENS. In November 1994, AHS issued Cal
Kovens a warrant to purchase 200,000 shares of AHS Common Stock at $0.25 per
share in consideration of certain Gamma Knife financing activities which Mr.
Kovens, who was a director of AHS until his death on February 6, 1995, assisted
in facilitating. Pursuant to the terms of the Merger, InSight assumed the
warrant which, after the applicable exchange ratio, became a warrant to purchase
20,000 shares of InSight Common Stock at the exercise price of $2.50 per share.
The warrant was exercised by the estate of Mr. Kovens in November 1997. A
loan to a wholly owned subsidiary of AHS was secured by a letter of credit of
$400,000 which was guaranteed by the estate of Cal Kovens until September 30,
1997, when the guarantee expired.
TRANSACTIONS WITH FRANK E. EGGER. Since July 1, 1996, Mr. Egger has been and
continues to be paid $85,000 per year for acquisition and financing activities
pursuant to a consulting agreement. In the event the agreement is terminated as
a result of (i) Mr. Egger becoming physically or mentally disabled, (ii)
discretionary action of the Board of InSight, or (iii) a corporate
reorganization that has the effect of diminishing or impairing Mr. Egger's
consulting responsibilities, he is entitled to severance compensation equal to
12 months of compensation.
Pursuant to certain agreements among InSight, AHS and the holders of AHS Series
B Preferred Stock, InSight issued to Mr. Egger on August 9, 1996 a warrant to
purchase 2,268 shares of Common Stock at the exercise price of $5.64 per share.
The warrant is exercisable at any time up to August 9, 2001. In addition,
subject to certain conditions, Mr. Egger, and other holders, have certain
"piggyback" registration rights to register the shares subject to the warrants
under the Securities Act. See "TRANSACTIONS WITH HOLDERS OF AHS SERIES B
PREFERRED STOCK."
TRANSACTIONS WITH GE. GE, as the primary creditor of AHS and Maxum, had from
time to time granted AHS and Maxum certain financial accommodations with respect
to certain loans and leases. In exchange for such accommodations, AHS and Maxum
issued certain considerations to GE. As a prerequisite to the consummation of
the Merger, certain financial accommodations were provided by GE, the primary
creditor of each of AHS and Maxum, and its affiliates. As a result, certain
debt and operating lease obligations of AHS and Maxum were reduced in exchange
for, among other things, the issuance to GE immediately prior to the
consummation of the Merger of AHS Series C Preferred Stock and Maxum Series B
Preferred Stock. At the effective time of the Merger, the AHS Series C Preferred
Stock and Maxum Series B Preferred Stock issued to GE was converted into the
right to receive such number of shares of InSight Series A Preferred Stock which
were convertible into Common Stock representing approximately 48% of the Common
Stock outstanding at the effective time of the Merger (after giving effect to
such conversion).
18
<PAGE>
In addition, as part of the granting of certain financial accommodations
contemplated to be provided by GE, at the effective time of the Merger, warrants
previously issued to GE by AHS to acquire 1,589,072 shares of AHS Common Stock,
and warrants previously issued to GE by Maxum to acquire 700,000 shares of Maxum
Common Stock, were canceled. Furthermore, GE had the right to receive for ten
years annual payments ("Supplemental Service Fee") under its maintenance
agreements with InSight, AHS and Maxum equal to 14% of InSight pre-tax income,
subject to certain adjustments, and further subject to proportional reductions
for certain post-Merger acquisitions. InSight terminated the Supplemental
Service Fee on October 14, 1997 as part of the Recapitalization in exchange for
the issuance to GE of 7,000 shares of Series C Preferred Stock.
TRANSACTIONS WITH HOLDERS OF AHS SERIES B PREFERRED STOCK. Pursuant to certain
agreements among InSight, AHS and the holders of AHS Series B Preferred Stock,
the holders of Series B Preferred Stock agreed to waive any rights to dividends,
liquidation preferences, voting and redemption they might have had in connection
with the Merger and certain other rights. In consideration therefor, upon the
consummation of the Merger, InSight issued to such holders, including Mr. Egger,
Roz Kovens and the estate of Cal Kovens, warrants to purchase an aggregate of
50,000 shares of InSight Common Stock at the exercise price of $5.64 per share.
The warrants are exercisable at any time up to August 9, 2001. In addition,
subject to certain conditions, the holders have certain "piggy-back"
registration rights to register the shares subject to the warrants under the
Securities Act.
TRANSACTIONS WITH SHATTUCK HAMMOND PARTNERS. On August 14, 1996, the Company
entered into an agreement with Shattuck Hammond Partners, Inc. ("SHP"), an
investment banking firm located in New York in which a director of the Company,
Mr. Chamberlain, is a vice president, pursuant to which SHP will provide general
strategic advisory and investment banking services. The term of the agreement
commenced July 1, 1996 and extended through December 31, 1997. The Company has
recently agreed to extend the term of the agreement through December 31, 1998.
The Company is obligated to pay SHP $180,000, payable in quarterly installments
of $30,000. SHP also is entitled to separately negotiated fees for certain
mergers or acquisitions. The Company also issued SHP a warrant to purchase
35,000 shares of InSight Common Stock at an exercise price of $5.50 per share,
which vested cumulatively on a monthly basis over the 18 month term of the
initial agreement. The warrant is now fully exercisable and is exercisable at
any time up to August 14, 2000. In addition, SHP has certain "piggy-back"
registration rights to register the shares subject to the warrant under the
Securities Act. In connection with the Recapitalization, the Company paid SHP a
fee of $500,000 for providing certain advisory services
TRANSACTIONS WITH HOLDERS OF PREFERRED STOCK. In lieu of an automatic grant,
under the Directors' Plan, to each of the Series B Directors and the Series C
Director of an option to purchase 15,000 shares of Common Stock, at the request
of such Preferred Stock Directors, upon the date each of them became a Preferred
Stock Director, the Company issued to an affiliate of the Carlyle Stockholders a
warrant to purchase 30,000 shares of Common Stock at an exercise price of $7.25
per share and GE a warrant to purchase 15,000 shares of Common Stock at an
exercise price of $10.00 per share. The Carlyle Stockholders warrant vests
cumulatively at the rate of 833.33 shares per month and the GE warrant vests
cumulatively at the rate of 416.67 shares per month. The Carlyle Stockholders
warrant is exercisable at any time up to October 14, 2000 and the GE warrant is
exercisable at any time up to November 20, 2000.
In connection with the Recapitalization, the Company paid to each of the Carlyle
Stockholders and GE a placement fee of $125,000, reimbursed the Carlyle
Stockholders and GE an aggregate of $500,000 for reasonable out-of-pocket
expenses incurred and agreed to pay each of the Carlyle Stockholders and GE an
annual financial advisory fee equal to $50,000, payable quarterly, for a
two-year period.
SELECTION OF AUDITORS
Arthur Andersen LLP, independent public accountants, have been the auditors of
the consolidated financial statements of the Company and its subsidiaries since
1996. A meeting of the Board or the Audit Committee will be held in the near
future, at which time a recommendation will be made to confirm the selection of
the Company's auditors for the current fiscal year. Representatives of Arthur
Andersen LLP are expected to be present at the 1997 Annual Meeting. Such
representatives will be given an opportunity to make a statement if they desire
to do so and will be available to respond to any appropriate questions from the
stockholders.
19
<PAGE>
OTHER BUSINESS
The Certificate of Incorporation requires that all nominations for persons to be
elected Common Stock directors, other than those made by the Board of Directors,
be made pursuant to written notice to the secretary of the Company. The notice
must be received not less than 50 nor more than 75 days prior to the meeting
which the election will take place (or not later than 15 days after public
disclosure of such meeting date if such disclosure occurs less than 65 days
prior to the date of such meeting). The notice must set forth all information
relating to each nominee that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, pursuant to the
Exchange Act (including the nominee's written consent to serve as a director).
The notice must also include the stockholder's name and address as they appear
on the Company's books and the class, series and number of shares beneficially
owned by the stockholder.
The management of the Company knows of no further or other matters which are to
be considered at this Annual Meeting. If any other business shall properly come
before this Annual Meeting, the person named in the accompanying form of proxy
will, as to such items, vote or refrain from voting in accordance with his best
judgment.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended June 30,
1997, including audited consolidated financial statements for the fiscal year
ended June 30, 1997, is being mailed to the stockholders concurrently with this
Proxy Statement.
STOCKHOLDER PROPOSALS
Any eligible stockholders of the Company wishing to have a proposal considered
for inclusion in the Company's proxy solicitation materials for the 1998 Annual
Meeting must set forth such proposal in writing and file it with the secretary
of the Company on or before June 1, 1998. The Board will review the proposals
from eligible stockholders which it receives by that date and will determine
whether such proposals will be included in its 1998 proxy solicitation
materials.
By Order of the Board of Directors
/s/ Thomas V. Croal
- - --------------------------
Thomas V. Croal, Secretary
Newport Beach, California
January 14, 1998
20
<PAGE>
INSIGHT HEALTH SERVICES CORP.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INSIGHT HEALTH
SERVICES CORP.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and the accompanying Proxy Statement
for the 1997 Annual Meeting to be held February 17, 1998 and,
revoking all prior proxies, hereby appoints E. Larry Atkins, with full
power of substitution, as proxy of the undersigned to attend and vote
all shares of Common Stock of InSight HealthServices Corp. which the
undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held on February 17, 1998, and any and all
postponements or adjournments thereof, upon the matter specified below
and such other business as may properly come before the Annual
Meeting.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE USING DARK INK ONLY.
FOR WITHHOLD VOTE
1. The election of E. Larry Atkins
as a director of the Company to
hold office for a three-year term / / / /
and until his successor is duly
elected and qualified.
2. To transact such other business as may properly come before the Annual
Meeting and any and all postponements or adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL
VOTE FOR THE NOMINEE FOR DIRECTOR AND IN HIS DISCRETION ON ANY OTHER MATTERS
THAT MAY COME BEFORE THE ANNUAL MEETING.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON YOUR STOCK CERTIFICATE(S). IF
THE STOCK IS JOINTLY HELD, EACH OWNER SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS SHOULD SO INDICATE WHEN SIGNING. ATTORNEYS
SHOULD SUBMIT POWERS OF ATTORNEY.
____________________________________ ___________________ Dated:________, 1998
Signature(s) of stockholder(s)
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
SO THAT IT CAN BE COUNTED AT THE ANNUAL MEETING ON FEBRUARY 17, 1998.
