<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
Alliance Imaging, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1)
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:
------------------------------------------------------------------------
<PAGE>
ALLIANCE IMAGING, INC.
1065 NORTH PACIFICENTER DRIVE
SUITE 200
ANAHEIM, CALIFORNIA 92806
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 15, 1997
9:00 A.M.
-----------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alliance
Imaging, Inc., a Delaware corporation (the "Company"), will be held at The
Pacific Club, 4110 MacArthur Boulevard, Newport Beach, California 92660 on
Thursday, May 15, 1997 at 9:00 a.m., to consider and act upon the following
matters:
(1) To elect six (6) directors of the Company.
(2) To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of shares of authorized common
stock from 25,000,000 to 50,000,000.
(3) To approve an amendment to the Company's Amended and Restated 1991
Stock Option Plan.
(4) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for fiscal 1997.
(5) To transact such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on March 24, 1997 will
be entitled to notice of and to vote at this meeting and any adjournment or
postponement thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Terrence M. White
SECRETARY
Orange, California
April 11, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING, PLEASE MARK, DATE, AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE>
ALLIANCE IMAGING, INC.
1065 NORTH PACIFICENTER DRIVE
SUITE 200
ANAHEIM, CALIFORNIA 92806
-----------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1997
-----------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alliance Imaging, Inc. ("Alliance" or the
"Company") for use at its Annual Meeting of Stockholders to be held at 9:00 a.m.
on May 15, 1997, and at any adjournment or postponement of that meeting (the
"Annual Meeting"). The approximate mailing date for this Proxy Statement and
the enclosed proxy is April 11, 1997. The proxy holders will vote all proxies
in accordance with the instructions contained in the proxy, and if no choice is
specified the proxy holders will vote in favor of the nominees for directors and
the proposals set forth in this Proxy Statement.
The Board of Directors has fixed the close of business on March 24, 1997 as
the record date for the determination of stockholders entitled to vote at the
Annual Meeting. At that time, there were outstanding and entitled to vote
10,927,471 shares of the Company's Common Stock ("Common Stock"). Holders of
Common Stock are entitled to one vote for each share held.
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to or at the Annual Meeting. A proxy may be
revoked by written notice to the Secretary of the Company stating that the proxy
is revoked, by a subsequent proxy signed by the person who signed the earlier
proxy, or by attendance at the Annual Meeting and voting in person.
The expense of preparing, printing and mailing these proxy materials will
be borne by the Company. Proxies may be solicited by certain of the Company's
directors, officers, and employees, without additional compensation, personally
or by telephone or telegram. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares of Common Stock
for their expenses in forwarding solicitation material to such beneficial
owners.
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of six directors will be elected at the Annual Meeting. The term
of office of each person elected as a director will continue until the next
Annual Meeting or until his successor has been duly elected and qualified, or
until his earlier death, resignation or removal. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the six nominees
for the Board of Directors named below. Each share of Common Stock is entitled
to cast one vote for each seat to be filled by a vote of stockholders at the
Annual Meeting. With respect to each seat, the candidate receiving the highest
number of votes will be elected. If any nominee for any reason is unable or
declines to serve, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill such vacancy. Shares
represented by the accompanying proxy cannot be voted for a greater number of
persons than the number of nominees (six) or, except as provided in the
preceding sentence, any person other than the nominees named in the accompanying
proxy.
2
<PAGE>
NOMINEES
Set forth below is information regarding the nominees for directors,
including their principal occupations for the past five years, certain other
directorships held by them, and their ages as of March 15, 1997. There are no
family relationships among any of the director nominees. All of the director
nominees are currently directors of the Company, except Mr. Hayes, who has been
nominated for election to the Board by stockholders at the Annual Meeting to
fill the vacancy that currently exists on the Board of Directors.
DIRECTOR
NAME AGE SINCE
---- --- -----
Richard N. Zehner 44 1988
Vincent S. Pino 48 1991
Robert B. Waley-Cohen 48 1988
James E. Buncher 60 1993
John C. Wallace 70 1995
Douglas M. Hayes 53 -
Richard N. Zehner has been the Chairman, President and Chief Executive
Officer of the Company since the Company was acquired in a going-private
transaction (the "Acquisition") in November 1988. Mr. Zehner was a founder and
has been the President of the Company and its predecessors since 1983. From
1987 until the Acquisition, he served as a director and President and Chief
Operating Officer of the Company.
Vincent S. Pino has been Executive Vice President and the Chief Operating
Officer of the Company since December 1991 and August 1993, respectively, and a
director since June 1991. From the date of the Acquisition to August 1993, he
was Chief Financial Officer of the Company.
Robert B. Waley-Cohen was the Chairman and Chief Executive Officer of the
Company from 1987 until the Acquisition. He has remained a director of the
Company and is currently the Chairman of Alliance Medical, Ltd., a company
organized under the laws of England, which provides MRI services in the United
Kingdom.
James E. Buncher is President of the Health Plans Group of Value Health,
Inc. He joined Community Care Network, Inc. ("CCN"), a developer and operator
of managed care networks for workers compensation and group health, as Chief
Executive Officer in August 1992, and was elected President of that company in
November 1992. CCN was subsequently acquired by Value Health, Inc. During
1992, prior to joining CCN, Mr. Buncher served as a consultant to and Vice
President of TakeCare, a company which owns and operates health maintenance
organizations, and from 1988 to 1991 he was a general partner in Lake
Investments, a private investment partnership. From 1982 to 1987, Mr. Buncher
served as President and Chief Executive Officer of Republic Health Corporation.
He also serves on the Board of Directors of United Dental, a managed dental care
company.
John C. Wallace is a principal of ALPHA+ Capital Management, an investment
portfolio advisor, which he co-founded in 1986. Mr. Wallace was employed by
Petrolane Incorporated, a worldwide marketing and services company with
interests in LP-gas distribution, petroleum services and consumer products, from
1950 through 1984. He served as President and Chief Operating Officer from 1971
and Chief Executive Officer from 1983 until the Company was acquired by Texas
Eastern Corporation in 1984. He is Vice Chairman of the Board of St. Mary's
Hospital, Long Beach, California. Previously, he has served as a director of
Coldwell Banker, Stater Bros., Inc., H & H Oil Tool Company, Inc., Consolidated
Hydro, Inc. and Kampgrounds of America, Inc.
Douglas M. Hayes is a Managing Director of DLJ Capital Corporation, an
investment portfolio advisor, in Los Angeles. Prior to joining DLJ Capital
Corporation in 1986, Mr. Hayes was a Managing Director of Merrill Lynch Capital
Markets, also in Los Angeles, from 1984 to 1988. Mr. Hayes also served as
Managing Director for Warburg Paribas Becker, an investment banker in Los
Angeles, from 1978 to 1984.
3
<PAGE>
FURTHER INFORMATION CONCERNING THE BOARD
During the fiscal year ended December 31, 1996, the Board of Directors held
six (6) meetings. During fiscal 1996, each member of the Board of Directors,
other than Mr. Waley-Cohen, attended 100% of the combined total of all meetings
of the Board of Directors and its committees on which the director served at any
time during the year. Mr. Waley-Cohen attended 83% of such Board of Directors
meetings and 100% of such committee meetings.
The Company has an Audit Committee that is currently composed of Messrs.
Buncher and Wallace. The Committee has reviewed the engagement of the Company's
independent accountants, approved services performed by such accountants and, in
consultation with the Company's independent accountants, reviewed and evaluated
the Company's accounting systems and its system of internal accounting controls.
The Company has a Compensation Committee that is currently composed of
Messrs. Buncher, Waley-Cohen and Wallace. Among its other functions, the
Compensation Committee makes recommendation to the full Board of Directors
regarding levels of compensation of the Company's executive officers. The
Company's 1991 Stock Option Plan is administered by a Stock Option Plan
Committee. Messrs. Buncher and Waley-Cohen presently serve on this Committee.
Directors who are not officers each receive compensation of $4,500 per
quarter plus $1,500 for each Board meeting attended, plus reimbursement of
travel expenses. In addition, on March 25, 1997, each of the non-employee
directors of the Company (i.e., Messrs. Buncher, Waley-Cohen and Wallace)
received stock options covering 30,000 shares of Company Common Stock. Such
stock options vest in four equal annual installments from the date of grant,
have a term of ten years and have an exercise price of $6-9/16 per share (the
closing sale price of the Company Common Stock on the trading day preceding the
date of grant). Further, on that date the Board adopted a new 1997 Non-Employee
Directors Option Plan which provides that (a) upon an individual joining the
Board as a non-employee director and (b) at each annual meeting of stockholders
of the Company at which a non-employee director is elected to the Board, such
individual will receive a stock option covering 10,000 shares of Company Common
Stock. The vesting and term of each such option will be the same as described
above in this paragraph, and the exercise price of each such option will
likewise be set as the closing sale price of the Company Common Stock on the
trading day immediately preceding the date of grant.
OFFICERS OF THE COMPANY
Set forth below is information regarding the Company's executive officers,
including their principal occupations for the past five years and their ages as
of March 15, 1997. There are no family relationships among any of the executive
officers, or among any of the executive officers and the director nominees.
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION
- ---- --- ----------------
<S> <C> <C>
Richard N. Zehner 44 Chairman, President and Chief Executive Officer
Vincent S. Pino 48 Executive Vice President and Chief Operating Officer
Terrence M. White 42 Senior Vice President, Chief Financial Officer and
Secretary
Jay A. Mericle 42 Senior Vice President
Terry A. Andrues 45 Senior Vice President
Neil M. Cullinan, Ph.D. 55 Senior Vice President
Cheryl A. Ford 41 Senior Vice President
Michael W. Grismer 35 Controller, Assistant Secretary
</TABLE>
Additional information regarding each executive officer who is not a
director is set forth below. For additional information with respect to
Messrs. Zehner and Pino, who are also nominees for directors of the Company at
the Annual Meeting, see "Nominees".
4
<PAGE>
Terrence M. White joined the Company in July 1993 as Senior Vice President,
Chief Financial Officer and Secretary. From 1975 through May 1993, he was
employed by Ernst & Young LLP and its predecessor, and was a partner in such
firms since 1987.
Jay A. Mericle has acted as Senior Vice President of the Company since 1988
and technical marketing manager of the Company since 1986.
Terry A. Andrues was Vice President of Customer Support since 1988 and was
appointed Senior Vice President in 1991. From 1987 to 1988, Mr. Andrues acted
as a marketing representative of the Company.
Neil M. Cullinan, Ph.D., served since 1987 as the President of
Atlantic/Gulf Imaging, Inc., which was acquired by the Company on March 27,
1992. He was employed as Senior Vice President of the Company in connection
with the acquisition.
Cheryl A. Ford became Senior Vice President of the Company in February
1995. She joined the Company as Vice President in October 1993. From 1987 to
October 1993, she was employed by Mobile Technology, Inc. in various capacities,
including most recently as Vice President - Eastern Region.
Michael W. Grismer joined the Company as Controller and Assistant Secretary
in July 1995. He served as Controller of Wynn Oil Company from 1993 through
1995, and was employed by Ernst & Young LLP and its predecessor from 1983
through 1993, most recently as Senior Manager since 1991.
EXECUTIVE COMPENSATION
----------------------
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years indicated the annual
and long-term compensation of the Company's Chief Executive Officer and the
other four most highly compensated executive officers whose total cash
compensation exceeded $100,000 during the fiscal year ended December 31, 1996
(the "Named Officers").
<TABLE>
<CAPTION>
LONG -TERM
COMPENSATION
ANNUAL COMPENSATION ------------
----------------------------------------- SECURITIES UNDERLYING
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION(2) OPTIONS/SARS(3) COMPENSATION(4)
- --------------------------- ------- ------ ----- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Zehner 1996 $296,000 $419,025 -- 155,000 $15,596
President, Chief Executive Officer and 1995 278,750 191,544 -- -- 15,495
Chairman of the Board 1994 260,000 280,462 -- 205,000 15,490
Vincent S. Pino 1996 208,000 192,140 -- 125,025 3,596
Executive Vice President, Chief 1995 195,500 113,666 -- -- 3,486
Operating Officer and Director 1994 182,000 230,393 -- 125,000 2,125
Terrence M. White 1996 150,000 108,150 -- 90,025 3,488
Senior Vice President, Chief 1995 131,250 70,605 -- -- 3,351
Financial Officer and Secretary 1994 120,000 209,083 -- 45,000 1,402
Terry A. Andrues 1996 126,000 73,392 -- 33,050 3,411
Senior Vice President 1995 116,000 58,000 -- -- 3,320
1994 104,000 36,844 -- 70,000 1,851
Jay A. Mericle 1996 126,000 70,691 -- 33,050 3,436
Senior Vice President 1995 117,300 66,540 -- -- 3,323
1994 109,200 38,816 -- 70,000 2,269
</TABLE>
5
<PAGE>
- ----------------------
(1) Rows specified "1996," "1995" and "1994" represent fiscal years ended
December 31, 1996, 1995 and 1994, respectively.
(2) With respect to each Named Officer for each fiscal year, excludes
perquisites, which did not exceed the lesser of $50,000 or 10% of Named
Officer's salary and bonus for the fiscal year.
(3) All stock options were granted under the Company's 1991 Stock Option Plan.
Option grant figures for 1994 include replacement options for previously
granted options, in addition to new issuances.
(4) Includes 401(k) matching contributions (for 1996, 1995 and 1994,
respectively: Mr. Zehner - $3,164, $3,077 and $3,077; Mr. Pino - $3,164,
$3,077 and $1,749; Mr. White - $3,164, $3,077 and $1,154; Mr. Andrues
$3,139, $3,077 and $1,636; and Mr. Mericle - $3,164, $3,077 and $2,041); the
balance for each Named Officer represents life insurance premiums paid by
the Company.
EXECUTIVE COMPENSATION PLAN
The Company compensates its executive officers using a plan that includes a
predetermined target level of annual cash compensation for each officer. The
plan is set by the Compensation Committee of the Board of Directors at the
beginning of the fiscal year. The actual total level of compensation for the
fiscal year is determined after fiscal year-end based on the level of
achievement of various criteria. The compensation plan establishes a minimum
annual renumeration (i.e., base salary), a maximum compensation level and a
target compensation amount.
The annual minimum, target and maximum compensation levels established
for the Named Officers for 1996 is presented in the following table, together
with the total actual cash compensation earned.
1996
1996 1996 1996 AMOUNT
NAME MINIMUM MAXIMUM TARGET EARNED
- ---- ------- ------- ------ ------
Richard N. Zehner $296,000 $740,000 $518,000 $715,025
Vincent S. Pino 208,000 416,000 312,000 400,140
Terrence M. White 150,000 270,000 210,000 258,150
Terry A. Andrues 126,000 226,800 176,400 199,392
Jay A. Mericle 126,000 226,800 176,400 196,691
The actual amounts of cash compensation to the Company's Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer were determined by
the Compensation Committee based on its evaluation of the extent to which the
Company's 1996 earnings per share and cash flow budgets and individual
objectives applicable to each executive were achieved. The actual amounts of
cash compensation to executives responsible for the Company's various operating
regions were determined by the Compensation Committee based on its evaluation of
the extent to which regional operating profit budgets and individual objectives
applicable to each such executive were achieved. These amounts were generally
more than the target amounts because the Company significantly exceeded its
earnings per share, cash flow and regional operating budgets. A predetermined
percentage of the possible compensation award above the minimum amount is
determined by each of the criteria mentioned above for the respective officers.
For additional discussion of executive compensation, see "Compensation Committee
Report on Executive Compensation" below.
6
<PAGE>
STOCK OPTION PLAN
GENERAL
In May 1991, the Company's Board of Directors approved the 1991 Stock
Option Plan (as amended to the date hereof, but before giving effect to proposed
amendments described below under Proposal 3, the "1991 Plan"), which currently
provides for the grant of stock options covering up to an aggregate of 2,000,000
shares of Company Common Stock. The 1991 Plan was approved by the Company's
stockholders prior to the Company's initial public offering in November 1991.
At the 1992 Annual Meeting of Stockholders, the Company's stockholders approved
an amendment to the 1991 Plan increasing the number of shares available for
issuance thereunder from 250,000 to 500,000. At the 1993 Annual Meeting of
Stockholders, the Company's stockholders approved an amendment to the 1991 Plan
increasing the number of shares available for issuance thereunder from 500,000
to 1,000,000. At the 1996 Annual Meeting of Stockholders, the Company's
stockholders approved an amendment to the 1991 Plan increasing the number of
shares available for issuance thereunder from 1,000,000 to 2,000,000.
The purpose of the 1991 Plan is to secure for the Company and its
stockholders the benefits arising from stock ownership by directors, executives
and other key persons selected by the Company's Stock Option Committee. Under
the 1991 Plan, options to purchase shares of the Company Common Stock may be
granted to directors, executives and other key persons at the discretion of the
Company's Stock Option Committee, which is composed of two non-employee
directors. Currently, the Stock Option Committee consists of Messrs. Buncher
and Waley-Cohen. Stock options granted under the 1991 Plan may be either
"incentive" stock options or "non-qualified" stock options, except that
incentive stock options may not be granted to directors who are not also
employees. See "Federal Income Tax Matters" below. As of March 15, 1997,
approximately 24 persons were eligible to participate in the 1991 Plan.
All options granted under the 1991 Plan are non-transferable and
exercisable in installments determined by the Stock Option Committee, but not
within six months of the date of grant. Each option granted has a term
specified in the option agreement, but all incentive stock options expire no
later than ten years from the date of grant.
In the case of incentive stock options, the exercise price must be at least
equal to the fair market value of the stock on the date the option is granted
(110% of fair market value in the case of grants to 10% beneficial owners of the
Company's shares). The exercise price of a non-qualified option need not be
equal to the fair market value of the stock at the date of grant, but may be
granted with any exercise price, not less than 85% of fair market value at the
time the option is granted, as the Stock Option Committee may determine. Upon
exercise of any option, the purchase price must be paid in full either in cash
or in the Company's Common Stock valued at market value (unless the Stock Option
Committee permits payment in the form of a note secured by the shares issued
upon exercise of the option). The aggregate fair market value (determined at
the time the options are granted) of the shares covered by incentive stock
options granted to any employee under the 1991 Plan (or any other incentive
stock option plan of the Company) which may become exercisable for the first
time in any one calendar year may not exceed $100,000.
FEDERAL INCOME TAX MATTERS
As stated above, participants in the 1991 Plan may be granted either
"incentive" stock options (qualified as such under the Internal Revenue Code of
1986, as amended (the "Code")) or "non-incentive" stock options (customarily
referred to as "non-qualified" stock options). Persons who receive
non-qualified stock options under the 1991 Plan will realize no tax consequence
upon receipt. On the date of option exercise, however, the optionee will
generally have income (and the Company will have a deduction) equal to the
excess of (a) the fair market value of the stock received upon such date less
(b) the option exercise price. If the stock acquired upon exercise of the
option is subject to a "substantial risk of forfeiture," however, the taxable
event will generally be delayed to the date on which the risk of forfeiture
ends, at which time the participant will be taxed on the excess of the stock's
fair market value on such date over the cost of such stock, and the Company will
be entitled to an equal deduction at that time.
7
<PAGE>
In the case of an incentive stock option, however, the employee will
generally not have taxable income upon exercise or lapse of any forfeiture
restrictions. The employee will be taxed only upon the sale of stock received
on the incentive option exercise. If the employee holds the stock for more than
one year after exercise and two years after option grant, the employee's gain
will generally be long-term capital gain, and the Company will not be entitled
to a deduction for compensation paid. Any earlier sale will result in ordinary
income to the employee and an equal deduction for the Company. Depending upon a
particular option holder's circumstances, there may be a favorable differential
tax rate applicable to long-term capital gains.
Upon exercise of incentive stock options, the alternative minimum tax may
apply to optionees because the following constitutes an item of tax preference:
the excess of the fair market value of shares received over the exercise price
of an incentive stock option on the exercise date (unless there is a
disqualifying disposition, as defined in the Code). The alternative minimum tax
may produce a higher tax than the regular income tax applicable to an optionee.
The above summary of tax matters is general in scope and does not apply to
every specific transaction which may arise. Moreover, the rules of government
taxation of non-qualified and incentive stock options are complex, and the
statement of tax consequences set forth herein is necessarily general. Finally,
Congress is considering many additional proposals to change the tax laws, and
the interpretation of existing laws and any additional revisions ultimately
adopted could significantly alter the tax requirements and effects covered in
this discussion.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options during the 1996
fiscal year to the Named Officers pursuant to the Company's 1991 Plan. No stock
appreciation rights have ever been granted to the Named Officers.
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE VALUE
OPTIONS/SARS AT ASSUMED ANNUAL RATE OF STOCK
NUMBER OF SHARES GRANTED TO EXERCISE OR BASE PRICE APPRECIATION FOR OPTION TERM (3)
UNDERLYING EMPLOYEES IN RICE PER SHARE EXPIRATION -------------------------------------
NAME OPTIONS/SARS (1) FISCAL YEAR ($/SH) (2) DATE 0% 5% 10%
---- ---------------- ----------- ---------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Richard N. Zehner 155,000 31.7% $3.5625 3/1/06 $0 $347,268 $880,045
Vincent S. Pino 125,025 25.6% 3.5625 3/1/06 0 280,111 709,855
Terrence M. White 90,025 18.4% 3.5625 3/1/06 0 201,695 511,136
Terry A. Andrues 33,050 6.8% 3.5625 3/1/06 0 74,046 187,648
Jay A. Mericle 33,050 6.8% 3.5625 3/1/06 0 74,046 187,648
</TABLE>
- ------------------
(1) All options granted in 1996 vest on March 1, 2003; however, vesting of the
1996 option shares will be accelerated based on achievement of the
following per share stock prices for 15 consecutive trading days, as
reported by NASDAQ: $4.75 - 25%; $5.50 - 50%; $6.25 - 75%; $7.00 - 100%;
subject to a maximum vesting of one-third per year from February 29, 1996
regardless of stock price (no limits after year three). As of March 15,
1997, the Company's stock price had achieved the first three accelerated
vesting hurdles, and the 1996 options were two-thirds vested at such date.
(2) All options were granted at market value (based on the closing price as
reported on the NASDAQ Small Capitalization Market System on the business
day prior to the grant date) at the date of grant.
8
<PAGE>
(3) Valuations based upon the assumed rates of stock price appreciation are
based upon appreciation over a ten-year period from the $3.5625 exercise
price of the options. The 5% and 10% assumed annual rates of appreciation
would result in the price of the Company's Common Stock increasing to $5.80
and $9.24 per share, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table presents information with respect to options exercised
by each of the Named Officers in 1996, as well as the unexercised options to
purchase the Company's Common Stock granted under the 1991 Plan to the Named
Officers and held by them as of December 31, 1996. The value of unexercised
in-the-money options as of fiscal year end is based upon the last reported sales
price of the Company's Common Stock on the NASDAQ Small Capitalization Market
System on December 31, 1996 of $5.75 per share.
<TABLE>
<CAPTION>
SHARES NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXCERCISED OPTIONS/SARS IN-THE MONEY OPTIONS/
ON VALUE AT YEAR-END SARS AT FISCAL YEAR-END
NAME AND PRINCIPAL POSITION EXERCISE REALIZED EXERCISABLE EXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------- -------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard N. Zehner - - 243,750 116,250 $1,401,563 $668,438
President, Chief Executive Officer
and Chairman of the Board
Vincent S. Pino - - 31,256 93,769 179,722 539,172
Executive Vice President and
Chief Operating Officer
Terrence M. White 45,000 $230,625 22,506 67,519 129,375 388,234
Senior Vice President,
Chief Financial Officer and
Secretary
Terry A. Andrues - - 78,263 24,787 450,012 142,525
Senior Vice President
Jay A. Mericle - - 78,263 24,787 450,012 142,525
Senior Vice President
</TABLE>
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
In addition to the annual plan described above under "Executive
Compensation Plan," the Company instituted a long-term executive incentive plan
("LTIP") in 1995 to provide future awards in cash or equivalent amounts of
Common Stock to key executives. The objective of the plan is to advance the
long-term interests of the Company and its stockholders by providing substantial
incentive to meet or exceed certain cash-flow goals necessary to ensure that the
Company would be able to service its long-term obligations on a continuing
basis, and that it would be able to pay certain preferred stock dividends in
cash, thereby avoiding the substantial dilution to existing common stockholders
if such dividends were paid in common stock equivalents. As of January 2, 1997,
the Company had retired all of its Series A 6% Redeemable Preferred Stock (the
"Series A Preferred Stock"), thereby fully satisfying the second objective of
the LTIP.
9
<PAGE>
The following awards under the plan were earned by the Named Officers in 1996:
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAY-OUTS UNDER
NUMBER OTHER PERIOD NON-STOCK PRICE-BASED PLAN (1)
SHARES, UNITS UNTIL MATURATION ---------------------------------------
NAME OR OTHER RIGHTS OR PAY-OUT THRESHOLD TARGET MAXIMUM
- ---- --------------- ---------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Richard N. Zehner $356,250 Four-Year Period Ending 12/31/98 $0 $356,250 $356,250
Vincent S. Pino 285,000 Four-Year Period Ending 12/31/98 0 285,000 285,000
Terrence M. White 213,750 Four-Year Period Ending 12/31/98 0 213,750 213,750
Terry A. Andrues 142,500 Four-Year Period Ending 12/31/98 0 142,500 142,500
Jay A. Mericle 142,500 Four-Year Period Ending 12/31/98 0 142,500 142,500
</TABLE>
(1) Under the LTIP, amounts may be accrued with respect to each of the fiscal
years from 1995 to 1998 based upon two factors: (a) the extent to which
the Company's actual earnings before depreciation, amortization, interest,
taxes and equipment charges (as more precisely defined in the long-term
incentive plan, "EBDIT") exceeds targeted EBDIT for such year, and (b) the
extent to which the Company pays dividends on its Series A Preferred Stock
in cash for such year (thereby avoiding the potential dilution to holders
of Common Stock from the payment of dividends in Common Stock equivalents).
As noted above, the Company retired all of the Series A Preferred Stock as
of January 2, 1997, thereby satisfying the Series A Preferred Stock
dividend criteria of the LTIP; therefore, the cumulative amount of the
dividend component of the award was deemed earned and was accrued in fiscal
1996. Amounts accrued under the LTIP are allocated to specified senior
officers; however, because such officers must generally be employed by the
Company as of the first quarter 1999 payment date under the LTIP (excluding
specified circumstances including death, retirement, termination by the
Company without cause, a change of control and the sale of the Company
before the end of the program period, as to which different rules are
applicable), the amounts reflected in the table above for each of the Named
Officers may not actually be paid. Amounts in the table reflect the
potential pool amounts accrued in 1996 allocable to each of the Named
Officers based upon the two criteria summarized above as applied to fiscal
1996.
401(k) PLAN
Effective January 1, 1990 the Company adopted a tax deferred savings plan
(the "401(k) Plan") that covers all employees who were hired before that date or
who have subsequently been employed by the Company for at least six months.
Employees may contribute from 1% to 15% of their compensation to the 401(k) Plan
on a pre-tax basis, subject to statutory limitations. For up to 7% of an
employee's compensation, the Company may contribute up to $0.333 for each $1.00
of the employee's contribution. The rates of pre-tax and matching contributions
may be reduced with respect to highly compensated employees, as defined in the
Code, so that the 401(k) Plan will comply with Sections 401(k) and 401(m) of the
Code. Pre-tax and matching contributions are allocated to each employee's
individual account, which is invested in selected fixed income or stock managed
accounts according to the directions of the employee. An employee's pre-tax
contributions are fully vested and nonforfeitable at all times. Matching
contributions vest ratably over six years of service. An employee may forfeit
unvested amounts upon termination of employment, unless the termination is
because of death, disability or retirement.
Matching contributions made by the Company pursuant to the 401(k) Plan to
the Named Officers for the 1994, 1995 and 1996 fiscal years are included under
"All Other Compensation" in the Summary Compensation Table above.
1O
<PAGE>
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company is a party with each of the Named Officers to a written
employment agreement. Each employment agreement remains in effect until notice
of termination is given by either party. Each contract provides that the Named
Officer will continue to receive his or her base salary and be entitled to earn
bonuses and participate in all benefit plans and programs at levels and pursuant
to terms that are substantially consistent with current levels and terms,
subject to periodic review and possible increases by the Board of Directors or
the Compensation Committee. In addition, each contract provides that if the
Named Officer is terminated by the Company other than for Just Cause (as defined
in the agreement) or if the Named Officer terminates his or her employment as a
result of a Constructive Discharge (as defined in the agreement) (in either
event, a "Severance"), then the Named Officer will be entitled to a cash
severance benefit equal to a specified number of months of salary at his or her
then current rate of salary, acceleration of the vesting of stock options and
certain other benefits identified in the contract. If such Severance were to
occur within one year prior to or following a Change of Control (as defined in
the agreement), then each employment agreement provides for an increased cash
severance benefit.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Company's compensation program for executive officers primarily
comprises base salary, annual incentives and long-term incentives in the form of
stock option grants and a long-term incentive plan. Executives also participate
in various other benefit plans, including medical and retirement plans generally
available to all employees of the Company.
It is the Company's philosophy to pay base salaries to executives that
enable the Company to attract, motivate and retain highly qualified executives
in similarly situated companies. The annual incentive program is designed to
increase annual compensation based on the achievement of specified financial
results and accomplishment of individual objectives. Stock option grants are
intended to result in minimal or no rewards if the stock price does not
appreciate, but may provide substantial rewards to executives as stockholders
benefit from stock price appreciation. The long-term executive incentive plan
provides significant deferred compensation if certain critical financial goals
are achieved over a four-year period and also contains provisions to encourage
the executives to continue their employment with the Company for several years.
BASE SALARY AND ANNUAL INCENTIVES
Base salaries for executive positions are established relative to
comparable positions in similar companies. The Compensation Committee has
access to competitive surveys and outside compensation consultants to help
determine the relevant competitive pay levels. The Compensation Committee
targets base pay above the competitive median to attract and retain highly
experienced executives. In determining salaries, the Compensation Committee
also takes into account individual experience and performance, level of
responsibility relative to other positions within the Company, and specific
issues particular to the Company and position.
Annual incentive awards are based on the achievement of predetermined
performance objectives including profitability and cash flow. See "Executive
Compensation Plan" above.
STOCK OPTION GRANTS
The Company strongly believes in tying executive rewards directly to the
long-term success of the Company and increases in stockholder value through
grants of executive stock options. Stock option grants will also enable
executives to develop and maintain a meaningful stock ownership position in the
Company's Common Stock. The Compensation Committee has granted additional
options in 1997, and may make further grants in future years to executives and
key employees.
11
<PAGE>
LONG-TERM EXECUTIVE INCENTIVE PLAN
In 1995, the Compensation Committee established a long-term executive
incentive plan which provides certain members of the executive management team
with the opportunity for incentive compensation based on meeting or exceeding
certain financial targets on which the December 1994 financial restructuring of
the Company's balance sheet was based. This plan is structured over a four-year
period to motivate the plan participants to exceed the minimum cash flow targets
necessary to service the Company's restructured obligations. Under the terms of
the incentive plan, additional awards were to be provided if the Company was
able to pay the Series A 6% Redeemable Preferred Stock dividends in cash, in
order to avoid significant dilution to existing common stockholders. As of
January 2, 1997, the Company retired all of the Series A 6% Redeemable Preferred
Stock, thereby satisfying the Series A Preferred Stock dividend criteria of the
plan; therefore, the total amount of the dividend component of the award was
deemed earned and was accrued in fiscal 1996. The goals and awards are based on
both annual and cumulative achievement during the four year plan period. All
amounts earned under the long term incentive plan will be calculated and paid by
March 15, 1999. A participant must be actively employed by the Company on the
payment date to receive any payment under this plan, unless involuntarily
terminated without cause, death or disability, in which case the participant
receives a pro-rata share for the portion of the four years he or she is in the
plan.
OTHER BENEFITS
Executive officers are eligible to participate in benefit programs designed
for all full-time employees of the Company. These programs include medical,
dental and life insurance, and a qualified retirement program allowed under
Section 401(k) of the Code.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Zehner was a founder of the Company and has served as its President and
Chief Executive Officer ("CEO") since the Acquisition in November 1988. Mr.
Zehner served in similar capacities with the Company's predecessors. The 1996
annual incentive plan for the CEO was based on the pro rata achievement of the
corporate earnings per share budget, the cash flow budget and accomplishment of
his individual objectives. Mr. Zehner received a pro rata bonus payment
calculated from the corporate earnings per share budget equal to 60% of his base
salary, a pro rata bonus payment calculated from the cash flow budget equal to
45% of his base salary and a discretionary bonus payment equal to 36.56% of his
base salary based upon achievement of individual objectives. His total bonus
equaled 141.56% of his base salary compared to his target bonus of 75%. Mr.
Zehner substantially contributed to the Company's major accomplishments during
the year, including the Company's significantly improved profitability,
advantageous refinancing of certain debt and redeemable preferred stock,
improved financial strength, the signing of a number of long-term contracts,
significant cost reductions, and the maintenance of high equipment utilization
levels in a competitive market.
The Compensation Committee believes it is important to retain the services
of Mr. Zehner and other key executives over the next several years and encourage
continuing financial success. Consequently, the Long-Term Executive Incentive
Plan described above was established to meet these objectives. The Committee
also desires that strong incentives exist for Mr. Zehner and his management team
to focus on increased stock value for stockholders. Accordingly, the 1991 Stock
Option Plan Committee has granted stock options to him and other executives in
both 1996 and 1997.
James E. Buncher
Robert B. Waley-Cohen
John C. Wallace
Members of the Compensation Committee
March 6, 1997
12
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from December 31, 1991 through the end of the 1996
fiscal year with the cumulative total returns over the same period on the CRSP
Total Return Index for the NASDAQ Stock Market and a custom MRI Industry Index.
[GRAPH]
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE IMAGING INC. $ 100 $ 52 $ 11 $ 9 $ 43 $ 85
PEER GROUP $ 100 $ 70 $ 34 $ 37 $ 51 $ 110
NASDAQ COMPOSITE (US) $ 100 $ 115 $ 132 $ 128 $ 179 $ 220
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472. Data from
Bloomberg Financial Markets
(1) Assumes $100 invested on December 31, 1991 in Alliance, The Total Return
Index for Nasdaq U.S. Companies and a custom market weighted index of MRI
Industry companies including American Shared Hospital Services, Healthcare
Imaging Services Inc., Health Images Inc., SMT Health Services, Inc., and
Medical Resources, Inc. In the prior year, NMR of America, Inc., American
Health Services Company, Maxum Health Corporation and Medical Imaging Centers of
America were included in the MRI Industry Index, but have been excluded in 1996
because they were either merged, acquired by other companies or ceased business
activities in the MRI industry.
(2) Assumes reinvestment of dividends on a daily basis.
13
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 27, 1997, for each person
known to the Company to beneficially own more than 5% of such stock, each
director and director nominee of the Company, each of the Named Officers and all
executive officers and directors of the Company as a group. Unless otherwise
specified, the address of each such person is 1065 North PacifiCenter Drive,
Suite 200, Anaheim, CA 92806.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------------ ------------------ --------
<S> <C> <C>
General Electric Company (1) (7) 3,050,000 21.8%
20825 Swenson Drive, Suite 100
Waukesha, Wisconsin 53186
The Northwestern Mutual Life Insurance Company (7) 2,030,063 18.5
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
The Travelers Insurance Group, Inc. (2) (7) 1,092,099 10.0
One Tower Square
Hartford, Connecticut 06183
Meridian Trust Company, as trustee for 982,567 9.0
DLJ Capital Corp. (3)
c/o Meridian Asset Management, Inc.
55 Valley Stream Parkway
Malvern, Pennsylvania 19355
The Lincoln National Life Insurance Company (7) 589,170 5.4
1300 South Clinton Street
Fort Wayne, Indiana 46801
Richard N. Zehner (4) 565,472 5.0
Vincent S. Pino (4) 447,395 4.1
Robert B. Waley-Cohen (4)(5) 188,092 1.7
James E. Buncher (4) 7,500 *
John C. Wallace (4) 10,000 *
Douglas M. Hayes (8) - *
Terrence M. White (4) 114,717 1.0
Terry A. Andrues (4) 107,555 1.0
Jay A. Mericle (4) 128,920 1.2
All executive officers, directors and director nominee as a group
(12 persons) (6)(8) 1,683,984 14.4
</TABLE>
____________________
(1) General Electric Company holds 18,000 shares of Series D Preferred Stock
which are convertible into 3,000,000 shares of Common Stock.
(2) The Travelers Insurance Group, Inc. shares voting and dispositive powers
with its affiliates, Associated Madison Companies, Inc. and The Travelers
Inc.
(3) Meridian Trust Company is the Trustee under the Amended and Restated Voting
Trust Agreement, dated December 29, 1988, by and between DLJ Capital Corp.
and Meridian Trust Company.
14
<PAGE>
(4) Includes shares that the following Named Officers and Directors presently
have the right to acquire by exercise of options: Mr. Zehner, 308,333
shares; Mr. Pino, 83,350 shares; Mr. White, 60,017 shares; Mr. Andrues,
92,033 shares; Mr. Mericle, 92,033 shares; Mr. Waley-Cohen, 20,000 shares;
Mr. Buncher, 7,500 shares; and Mr. Wallace, 5,000 shares.
(5) Includes 84,046 shares of Common Stock held by Felicity A. Waley-Cohen, Mr.
Waley-Cohen's wife.
(6) Includes shares that all executive officers and directors as a group
presently have the right to acquire by exercise of options.
(7) Includes shares that the following stockholders presently have the right to
acquire by exercise of warrants: General Electric Company, 50,000; The
Northwestern Mutual Life Insurance Company, 41,863; The Travelers Insurance
Group, Inc. and affiliates, 25,371; The Lincoln National Life Insurance
Company, 12,686.
(8) Douglas M. Hayes is a nominee for election to the Board of Directors. He
presently serves as a Managing Director for DLJ Capital Corp., which owns
982,567 shares of the Company's Common Stock through Meridian Trust
Company. Mr. Hayes disclaims beneficial ownership of all shares of the
Company's Common Stock owned by DLJ Capital Corp.
*Less than one percent.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's financial restructuring effective as of
December 31, 1994, the Company entered into various transactions with the
holders of its then outstanding Senior Subordinated Debentures, including The
Northwestern Mutual Life Insurance Company, various affiliates of The Travelers
Insurance Group, Inc., The Lincoln National Insurance Company, and The Equitable
Life Assurance Society of the United States, an affiliate of DLJ Capital Corp.
Among other things, such holders agreed to a reduction in the interest rate on
the remaining Senior Subordinated Debentures and a postponement in the repayment
of principal. In addition, such holders exchanged $25,000,000 in principal
amount of the Senior Subordinated Debentures for (a) an aggregate of 3,000,000
shares of the Company's Common Stock and (b) an aggregate of 155,000 shares of
the Company's Series A 6% Redeemable Preferred Stock with an aggregate
liquidation preference and redemption value of $15,500,000.
On December 31, 1996, the Company entered into a Bridge Loan Agreement with
General Electric Company (enabling the Company to borrow up to $18,000,000) and
borrowed $12,872,000 under a senior bridge loan; an additional $5,128,000 was
borrowed on January 2, 1997. The senior bridge loan was convertible into 18,000
shares of a new Series D 4% Convertible Preferred Stock. On December 31, 1996,
the Company used the proceeds of the senior bridge loan to repurchase
$11,345,000 carrying value of its Senior Subordinated Debentures and $11,071,000
of its Series A Redeemable Preferred Stock at a discount (plus related accrued
interest and dividends). In connection with this transaction, on January 2,
1997, the Company used the additional senior bridge loan proceeds to repurchase
the remaining balance of its Senior Subordinated Debentures and Series A
Redeemable Preferred Stock at a discount (plus related accrued interest and
dividends). The aggregate purchase price paid by the Company for the Senior
Subordinated Debentures and the Series A Redeemable Preferred Stock was
$10,000,000 plus accrued interest and $6,830,000 plus accrued dividends,
respectively. Such purchase price was paid to The Northwestern Mutual Life
Insurance Company, various affiliates of The Travelers Group, Inc., The Lincoln
National Life Insurance Company and Bedrock Asset Trust I (as assignee of The
Equitable Life Assurance Society of the United States) pro rata based upon their
ownership of the securities purchased. In connection with these transactions
the Company agreed that, subject to the fiduciary duties of the Company's Board
of Directors, The Northwestern Mutual Life Insurance Company has the right to
designate one director to the Company's Board of Directors as long as The
15
<PAGE>
Northwestern Mutual Life Insurance Company continues to own at least 10% of the
Company's Common Stock.
On March 26, 1997, General Electric Company exercised its option to convert
the senior bridge loan into 18,000 shares of Series D Convertible Preferred
Stock, which are convertible into 3,000,000 Common Shares (subject to
adjustment). At that time, senior notes not to exceed $9,000,000 also held by
General Electric Company became convertible into a new Series E Preferred Stock
on or after January 1, 1998.
The above transactions were entered into pursuant to arm's length
negotiations with the parties involved. Any future transactions between the
Company and any affiliated parties, including any loans to any such persons,
will be on terms not less favorable to the Company than could be obtained from
unaffiliated parties on an arm's length basis, and will be approved by a
majority of the Company's disinterested directors.
PROPOSAL 2
INCREASE IN AUTHORIZED COMMON STOCK
PROPOSED AMENDMENT
The Company's Restated Certificate of Incorporation currently provides for
an authorized capitalization of 25,000,000 shares of Common Stock, $0.01 par
value per share. As of March 27, 1997, there were 10,927,471 shares of Company
Common Stock issued and outstanding. The proposed amendment would increase the
number of authorized shares of Company Common Stock to 50,000,000. The proposed
amendment has been approved by the Board of Directors of the Company.
FACTORS TO BE CONSIDERED
The Board of Directors believes that the authorization of additional shares
of Common Stock is in the best interests of the Company and its stockholders to
assure that the Company has sufficient available capital to comply with the
terms of existing outstanding securities and to meet any financing, refinancing
or restructuring requirements or opportunities that might arise, and to
facilitate planned future growth. As of March 26, 1997, in addition to shares
of Company Common Stock already outstanding, another 4,748,320 shares were
subject to issuance upon exercise or conversion of stock options and warrants to
purchase Common Stock and securities convertible into Common Stock (including,
among other securities, the Series D Preferred Stock recently issued to General
Electric Company); as a result, as of that date, the Company had only an
additional 9,324,209 shares of authorized but unissued and unreserved shares
available for issuance. In addition to providing shares to meet the Company's
obligations under existing outstanding securities, the increased capital
authorization would provide the Company with greater flexibility in financing
future expansion and providing for the working capital needs of its business.
In particular, the Company has a strategy of identifying and pursuing
acquisition candidates in the MRI equipment and services industry, and making
such acquisitions using Company Common Stock as the consideration could be
advantageous to the Company; among other things, using Company Common Stock as
the purchase price could enable the Company to utilize "pooling of interest"
accounting in one or more transactions. The additional shares could also be
issued for any other proper corporate purpose.
Stockholders should be aware, however, that if this Proposal 2 is approved
by stockholders, the Board of Directors could issue the additional authorized
shares of Common Stock without obtaining stockholder approval at the time of
issuance (unless, under applicable corporate law, stockholder approval is
otherwise required for the particular transaction involved) and at prices or for
property negotiated by the Board of Directors alone. As a result, issuances of
shares of the additional authorized Common Stock could dilute, and perhaps
substantially dilute, the equity interests of existing stockholders in the
Company. Likewise, such issuances could reduce, and perhaps substantially
reduce, the voting power of existing stockholders.
16
<PAGE>
VOTE REQUIRED
The proposed amendment to the Restated Certificate of Incorporation of the
Company requires the affirmative vote of the holders of at least a majority of
the shares of outstanding Company Common Stock. Consequently, broker non-votes
and abstentions will have the effect of a vote against the Proposal.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 2, AND UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
PROPOSAL.
PROPOSAL 3
APPROVAL OF AMENDMENT TO AMENDED AND RESTATED 1991 STOCK OPTION PLAN
BACKGROUND
The Company's Amended and Restated 1991 Stock Option Plan (the "1991 Plan")
currently provides that the aggregate number of shares of Common Stock that may
be issued upon the exercise of all options under the 1991 Plan shall not exceed
two million (2,000,000). As of March 27, 1997, 313,100 shares had been issued
pursuant to the 1991 Plan and an additional 1,286,900 shares were subject to
outstanding options. The Board of Directors of the Company, on March 25, 1997,
subject to stockholder approval at the Annual Meeting, approved an amendment to
the 1991 Plan described below.
DESCRIPTION OF AMENDMENTS TO THE 1991 PLAN
The general terms of the 1991 Plan are described above under "Executive
Compensation -- Stock Option Plan." That description and the description of the
following proposed amendment to the 1991 Plan are subject in their entirety to
the full text of the 1991 Plan, copies of which have been included in the
Company's SEC filings and are available from the Company upon written request.
The proposed amendment to the 1991 Plan would provide that the shares
issuable pursuant to options outstanding under the 1991 Plan at any particular
time will be the greatest of the following: (A) 2,000,000 (as the Common Stock
is presently constituted, adjusted for splits, combinations, recapitalizations
and similar events); (B) twelve and one-half percent (12.5%) of the number of
shares of Common Stock then outstanding plus the maximum number of such shares
then subject to issuance upon exercise of outstanding options, warrants or other
rights to acquire Common Stock (excluding only shares subject to outstanding
options granted pursuant to the 1991 Plan) and upon conversion of outstanding
securities convertible into shares of Common Stock; and (C) the greatest amount
previously determined pursuant to the immediately preceding clause (B). As of
the date of this Proxy Statement, the greatest of the foregoing amounts is that
described in clause (A), or 2,000,000 shares. Consequently, the immediate
effect of adoption of this Proposal 3 would be to permit the granting of stock
options covering an additional 313,100 shares in excess of the 400,000 shares
currently available under the 1991 Plan, since the proposed amendment would
result in an "evergreen" measurement of shares available under the 1991 Plan.
Under this approach, shares previously issued pursuant to stock option exercises
are not subtracted from shares available under the 1991 Plan; rather, stock
option exercises, in effect, increase availability since the limit on shares
available is based solely on the number of shares subject to outstanding,
unexercised stock options at any particular time. Under the proposed amendment,
therefore, as stock options are exercised, availability under the 1991 Plan is
automatically replenished.
The Board of Directors believes that this approach to defining shares
available under the 1991 Plan is superior to the approach currently employed
(i.e., fixing a specific number of shares issuable under the 1991 Plan). The
Board believes that providing for an "evergreen" pool of shares available to
satisfy outstanding stock options will ensure that there is an appropriate
amount of availability under the 1991 Plan at any particular time. The Company
has in the past utilized stock options as a significant element of compensation
of the Named Officers and other key employees and directors, and intends to
continue to do so. By basing
17
<PAGE>
availability under the 1991 Plan, in part, on the Company's outstanding
securities, availability will be "dynamic," based upon the size and growth of
the Company. For example, if the Company grows through acquisitions that
involve the issuance of Company Common Stock, availability under the 1991 Plan
will correspondingly increase. Among other things, this is expected to provide
the Company with greater flexibility in terms of entering into appropriate
compensation arrangements with management of acquired companies.
The Board of Directors believes that the effect of the foregoing amendment
to the 1991 Plan will be to preserve the benefits to the Company of the 1991
Plan by ensuring that executives, directors and other key employees who are
eligible to receive stock options pursuant to the 1991 Plan may continue to
receive such options. Without such amendment, the Company might soon reach the
limit of authorized shares that may be validly issued upon exercise of all
options under the 1991 Plan. In that event, the Board believes that the ability
of the Company to provide appropriate incentives to management, in particular,
could be significantly impaired. As a result, the Board believes that it is
appropriate to provide a mechanism for regularly replenishing the number of
shares available under the 1991 Plan.
OPTION GRANT INFORMATION
The following table sets forth the number of stock options received through
March 27, 1997 under the 1991 Plan by the Named Officers and all current
executive officers as a group. No directors who are not also employees or
consultants have received any grant under the 1991 Plan.
<TABLE>
<CAPTION>
TOTAL OPTIONS
GRANTED PERCENTAGE OF
NAME UNDER PLAN TOTAL OPTIONS
- ---- ---------- -------------
<S> <C> <C>
Richard N. Zehner 460,000 28.7%
Vincent S. Pino 330,025 20.6
Terrence M. White 195,025 12.2
Terry A. Andrues 128,050 8.0
Jay A. Mericle 128,050 8.0
All Executive Officers as a Group (Eight Persons) 1,484,200 92.8
</TABLE>
VOTE REQUIRED
Approval of the Board of Directors' action in adopting the 1991 Plan, as
amended and restated, requires the affirmative vote of at least a majority of
the shares of outstanding Common Stock represented and voting at the Meeting and
cast on this Proposal 3. Broker abstentions and non-votes will have the effect
of a vote against the Proposal.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 3, AND UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
PROPOSAL.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Ernst & Young LLP the
Company's independent auditors for the fiscal year ending December 31, 1997.
Services provided to the Company and its subsidiaries by Ernst & Young LLP
with respect to fiscal year 1996 included the audit of the Company's
consolidated financial statements, reviews of certain income tax returns and
consultations on various accounting and tax matters.
18
<PAGE>
Ernst & Young LLP has audited the Company's financial statements annually
since 1989. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting. They do not expect to make a statement, but will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
Approval of the selection of Ernst & Young LLP as the Company's independent
accountants for fiscal year 1997 will require the affirmative vote of at least a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 4, AND UNLESS
DIRECTED OTHERWISE, IT IS THE INTENTION OF THE PROXIES NAMED IN THE FORM OF
PROXY THAT ACCOMPANIES THIS PROXY STATEMENT TO VOTE FOR THE APPROVAL OF SUCH
PROPOSAL.
OTHER MATTERS
The Board of Directors does not know of other matters which may come before
the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.
INCORPORATION BY REFERENCE
The Company's audited financial statements as of December 31, 1996 and 1995
and for each of the three years ended December 31, 1996, 1995 and 1994, the
management's discussion and analysis of financial condition and results of
operations relating thereto and the additional information required by Item
13(a) of Schedule 14A is incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
STOCKHOLDER PROPOSALS - NEXT ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
stockholder meeting if they comply with the requirements of the proxy rules.
Proposals of stockholders which are intended to be presented at the Company's
1998 Annual Meeting of Stockholders must be received by the Company no later
than December 11, 1997 in order to be included in the proxy statement and proxy
relating to that meeting.
TERRENCE M. WHITE
SECRETARY
April 11, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND THE
MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR
PROXIES.
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ALLIANCE IMAGING, INC.
1065 NORTH PACIFICENTER DRIVE, SUITE 200
ANAHEIM, CALIFORNIA 92806
ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Alliance Imaging, Inc., a Delaware
corporation (the "Company"), hereby appoint(s) Richard N. Zehner and Terrence M.
White, and each of them, with full power of substitution to each, true and
lawful attorneys, agents and proxy holders of the undersigned, and hereby
authorizes them to represent and vote, as specified herein, all the shares of
Common Stock of the Company registered in the name of the undersigned at the
close of business on March 24, 1997, at the Annual Meeting of Stockholders to be
held on May 15, 1997, at 9:00 a.m., local time, at the Pacific Club, 4110
MacArthur Boulevard, Newport Beach, California 92660, and at any and all
adjournments or postponements thereof.
(To be signed on the other side)
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THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE, IT
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS AND FOR PROPOSALS 2
AND 3.
1. ELECTION OF DIRECTORS: FOR all WITHHOLD
Nominees: James E. Buncher, nominees listed AUTHORITY to vote
Vincent S. Pino, Robert Waley-Cohen, (except as marked for all nominees
John C. Wallace, Richard N. Zehner, to the contrary) listed.
Douglas M. Hayes / / / /
INSTRUCTION: To withhold authority to vote for one or more nominees, write
the nominee's name on the following line:
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2. TO APPROVE AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF AUTHORIZED COMMON STOCK FROM 25,000,000
TO 50,000,000.
For Against Abstain
/ / / / / /
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
For Against Abstain
/ / / / / /
4. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG, LLP
AS INDEPENDENT AUDITORS
For Against Abstain
/ / / / / /
IN WITNESS WHEREOF, the undersigned has signed this proxy this ______ day
of _______________________, 1997
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Signature
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Signature
NOTE: Please date and sign exactly as your name appears below. If shares
are registered in the name of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys, and corporate
officers should show their full titles. If a partnership, please sign in
the partnership name by an authorized partner.
PLEASE MARK, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
