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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 2
INSIGHT HEALTH SERVICES CORP.
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(Name of Issuer)
Common Stock, par value $0.001 per share
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(Title of Class of Securities)
45766Q 10 1
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(CUSIP number)
Glenn A. Youngkin Howard B. Adler, Esq.
The Carlyle Group Gibson, Dunn & Crutcher LLP
1001 Pennsylvania Avenue, N.W. 1050 Connecticut Ave., N.W.
Washington, D.C. 20004 Washington, D.C. 20036
(202) 347-2626 (202) 955-8589
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(Name, address and telephone number of person
authorized to receive notices and communications)
June 2, 1999
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
/ /.
NOTE. Six copies of this statement, including all exhibits, should be
filed with the Commission. SEE Rule 13d-1(a) for other parties to whom copies
are to be sent.
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EXPLANATORY NOTE
This Amendment No. 2 is filed by the Reporting Persons (as defined
in Amendment No. 1 to Schedule 13D) to amend Item 4 of the Schedule 13D filed
on October 24, 1997 and amended on May 18, 1999, relating to the common
stock, $0.001 par value, of InSight Health Services Corp (the "Company").
This Amendment is filed for the purposes of describing the termination of
certain discussions between the Reporting Persons and the Halifax Group, on
one hand, and the Company, on the other hand.
* * *
Item 4 of Schedule 13D is hereby amended and restated as follows:
ITEM 4. PURPOSE OF TRANSACTION
The Purchaser's and CIM's (for the Fund) acquisition of 25,000 shares
of the Company's Series B Preferred Stock and 250,000 warrants (the "Warrants")
to purchase an equivalent number of shares of Common Stock was consummated by
the Reporting Persons as a long-term strategic investment in the Company. The
acquisition was consummated on October 14, 1997. The aggregate consideration
paid by CP II was $8,207,727. The aggregate consideration paid by CP III was
$347,632. The aggregate consideration paid by CIP II was $6,928,169. The
aggregate consideration paid by CIP III was $373,289. The aggregate
consideration paid by C/S was $1,559,913. The aggregate consideration paid by
CIG was $8,621. The aggregate consideration paid by C-IP was $3,181,349. The
aggregate consideration paid by C-IIP was $918,659. The aggregate consideration
paid by the CIM on behalf of the Fund was $3,447,641. TC Group Mgmt. was
assigned Warrants by TC Group, which Warrants were issued by the Company in lieu
of a management fee. Neither TC Group nor TCG has any separate beneficial
ownership in any securities of the Company, nor, to the knowledge of the
Reporting Persons, does either have any present intention to acquire any such
separate beneficial ownership.
On October 14, 1997, the Company consummated a recapitalization
("Recapitalization") pursuant to which (a) the Purchasers and CIM (for the Fund)
made a cash investment of $25 million in the Company and received therefor (i)
25,000 shares of newly issued Convertible Preferred Stock, Series B, par value
$0.001 per share of the Company ("Series B Preferred Stock"), initially
convertible, at the option of the holders thereof, in the aggregate into
2,985,075 shares of Common Stock, and (ii) warrants (the "Carlyle Warrants") to
purchase up to 250,000 shares of Common Stock at the initial exercise price of
$10.00 per share; (b) General Electric Company, a New York corporation ("GE")
(i) surrendered its rights with respect to a supplemental service fee payable
from the Company to GE in exchange for (A) the issuance of 7,000 shares of the
Company's newly issued Convertible Preferred Stock, Series C, par value $0.001
per share (the "Series C Preferred Stock"), initially convertible, at the option
of GE, in the aggregate into 835,821 shares of Common Stock, and (B) warrants
(the "GE Warrants") to purchase up to 250,000 shares of Common Stock at the
initial exercise price of $10.00 per share, and (ii) agreed to exchange all of
its shares of the Company's Convertible Preferred Stock, Series A, par value
$0.001 per share (the "Series A Preferred Stock") on the business day (the
"Second Closing") after all waiting periods with respect to GE's filing under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired or
were terminated, for an additional 20,953 shares of Series C Preferred Stock,
initially convertible, at the option of the holders thereof, in the aggregate
into 2,501,851 shares of Common Stock; and (c) the Company executed a Credit
Agreement with NationsBank, N.A. pursuant to which NationsBank, as agent,
committed to provide a total of $125 million in senior secured credit, including
a $50 million acquisition facility (the "Credit Facility"), upon the
satisfaction of certain customary conditions, which now have been satisfied. The
shares of Series B Preferred Stock and Series C Preferred Stock are also
initially convertible, at the option of holders of a majority of each such
series and under certain conditions, one year or more after the initial funding
under the Credit Facility, into, in the aggregate, 632,274.7 shares of the
Company Convertible Preferred Stock, Series D, par value $0.001 per share
("Series D Preferred Stock"). The Series D Preferred Stock is convertible into
Common Stock at an initial conversion ratio of ten (10) shares of Common Stock
for each share of Series D Preferred Stock. Conversion prices and ratios are
subject to anti-dilution adjustment as more fully described in Sections 5, 6, 7
and 8 of the Certificate of Designation, Preferences and Rights of Convertible
Preferred Stock, Series B (the "Series B Certificate of
(Page 1 of 6)
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Designation," which is filed as Exhibit 5 to Schedule 13D and incorporated
herein by reference), Sections 5, 6, 7 and 8 of the Certificate of
Designation, Preferences and Rights of Convertible Preferred Stock, Series C
(the "Series C Certificate of Designation," which is filed as Exhibit 6 to
Schedule 13D and incorporated herein by reference), and Sections 5, 6 and 7
of the Certificate of Designation, Preferences and Rights of Convertible
Preferred Stock, Series D (the "Series D Certificate of Designation," which
is filed as Exhibit 7 to Schedule 13D and incorporated herein by reference).
The holders of the shares of Series B Preferred Stock have the right to
vote with the holders of Common Stock and the holders of the Series A Preferred
Stock and Series C Preferred Stock with respect to all matters submitted to a
shareholder vote, except for the election of directors (with respect to which
the holders of the shares of Series B Preferred Stock have the voting rights set
forth in the next paragraph). With respect to all matters submitted to a
shareholder vote (except for the election of directors), each holder of Series B
Preferred Stock has one vote for every share of Common Stock into which each
share of Series B Preferred Stock is convertible pursuant to the terms of the
Series B Certificate of Designation; provided, however, that the aggregate
number of such votes, when combined with the aggregate number of votes
attributable to the holders of the shares of Series C Preferred Stock, shall not
exceed 37% of the total number of votes eligible to be cast. Pursuant to Section
6 of the Securities Purchase Agreement dated October 14, 1997 between the
Purchasers, the SBA and the Company (the "Securities Purchase Agreement"), and
Sections 10 and 11 of the Series B Certificate of Designation: (i) the holders
of the shares of Series B Preferred Stock have certain class voting rights with
respect to certain transactions and preemptive rights with respect to certain
securities issuances by the Company; and (ii) certain committees of the board of
directors of the Company (including as members one or more Preferred Stock
Directors, as defined below) are established with certain powers relating to the
management of the affairs of the Company to be exercised pursuant to certain
voting requirements. Pursuant to the Voting Agreement (CP II) dated as of
October 14, 1997 (the "CP II Agreement"), filed, together with certain
Irrevocable Proxies related thereto, as Exhibit 8 to Schedule 13D, and
incorporated by reference herein, by and among certain Purchasers identified
therein, such Purchasers agreed that CP II shall be entitled to exercise the
power, with holders of a majority of the then outstanding shares of Series C
Preferred Stock, to nominate the Joint Director and the power to control the
voting of all shares of Series B Preferred Stock with respect to the actions
specified in Sections 6.12(a) - 6.12(v) of the Securities Purchase Agreement.
Pursuant to the Voting Agreement (CP III) dated as of October 14, 1997 (the "CP
III Agreement"), attached hereto, together with certain Irrevocable Proxies
related thereto, as Exhibit 9, and incorporated by reference herein, by and
among certain Purchasers identified therein, such Purchasers agreed that CP III
shall be entitled to designate as nominee for election to the Company's Board of
Directors (the "Board") one director that the Purchasers are entitled to elect
as holders of the Series B Preferred Stock and the Purchasers further agreed to
elect such person to the Company's Board of Directors. Pursuant to the Voting
Agreement (C-IP) dated as of October 14, 1997 (the "C-IP Agreement" and together
with the CP II Agreement and the CP III Agreement, the "Voting Agreements")
filed, together with certain Irrevocable Proxies related thereto, as Exhibit 10
to Schedule 13D, and incorporated by reference herein, by and among certain
Purchasers identified therein, such Purchasers agree that C-IP shall be entitled
to designate as nominee for election to the Company's Board of Directors one
director that the Purchasers are entitled to elect as holders of the Company's
Series B Preferred Stock and the Purchasers further agreed to elect such person
to the Board.
Pursuant to the terms of the Recapitalization, the number of directors
comprising the Board (the "Board") is currently fixed at nine. Six directors
(the "Common Stock Directors") are to be elected by the common stockholders, one
of whom (the "Joint Director") is to be proposed by the majority holders 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. Of the three remaining
directors, two are to be elected by the holders of the Series B Preferred Stock
and one is to be elected by the holders of the Series C Preferred Stock, subject
to increase or decrease in certain circumstances (the "Preferred Stock
Directors"). As of June 1, 1999, the Board of the Company consists of eight
directors, five of whom are Common Stock Directors and three of whom are
Preferred Stock Directors elected by the holders of the Series B Preferred
Stock. The vacancy created for the Joint Director has not yet been filled.
Upon a conversion by the holders of the Series B Preferred Stock and
the Series C Preferred Stock of their shares of preferred stock into shares of
Series D Preferred Stock (a "Type B Event Date"), the number of members of the
Board shall be increased automatically by the smallest whole number that will
result in at least the Type B
(Page 2 of 6)
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Percentage (but less than sixty six and two-thirds percent (66 2/3%)) of the
members of the Board being Series D Directors. Immediately following a Type B
Event Date, the holders of Series D Preferred Stock shall have the right to
elect all of the new directors (the "Conversion Directors"), using cumulative
voting. The "Type B Percentage" equals a percentage equal to the number of
shares of Common Stock held by all holders of Series B Preferred Stock and
Series C Preferred Stock as of the Type B Event Date (assuming conversion of
all such shares of Series B Preferred Stock and Series C Preferred Stock into
Common Stock) divided by the total number of shares of Common Stock
outstanding as of such date (assuming conversion of all convertible shares of
Series B Preferred Stock and Series C Preferred Stock as of such date);
provided, however, that the maximum Type B Percentage is sixty-four percent
(64%). "Series D Directors" means, collectively, the Preferred Stock
Directors and the Conversion Directors.
The foregoing discussion in response to this Item 4 is qualified in
its entirety by reference to the Securities Purchase Agreement, the Series B
Certificate of Designation, the Series C Certificate of Designation, the
Series D Certificate of Designation, the Registration Rights Agreement and
the Warrant Agreement, all of which were filed as exhibits to Schedule 13D
and are hereby incorporated herein.
The Reporting Persons, in conjunction with The Halifax Group, a
private equity investment group ("Halifax"), which is not currently a
stockholder of the Company, initiated discussions with the Company with
respect to a possible transaction that would cause the Common Stock to be
neither listed on any exchange nor quoted on an inter-dealer quotation system
(a "Going-Private Transaction"). It was contemplated that public stockholders
of the Company would receive cash for their shares in any such transaction.
The Reporting Persons and Halifax proposed a price of $10.00 per share of
Common Stock, subject to significant conditions. No agreement was reached
with the Company with respect to a Going-Private Transaction or the terms and
conditions of any such transaction. By letter dated June 2, 1999, the
Reporting Persons and Halifax advised the Company that they were terminating
all discussions relating to a Going-Private Transaction. It is possible that
the Reporting Persons may reinitiate discussions with the Company regarding
such a transaction, or alternative transactions, in the future.
Each Reporting Person may, subject to the continuing evaluation of
the factors discussed herein, acquire from time to time additional shares of
the Company's preferred stock, warrants or shares of Common Stock, or other
securities of the Company in the open market or in privately negotiated
transactions, by exchange offer or otherwise. Depending on the factors
discussed herein, each Reporting Person may, from time to time, retain or
sell all or a portion of its holdings of the Series B Preferred Shares,
Carlyle Warrants or shares of Common Stock to one or more of certain of their
affiliates (including, by way of distribution to their partners or members,
as applicable) pursuant to the provisions of the Securities Purchase
Agreement, or, under certain circumstances described in the Securities
Purchase Agreement, to other persons in the open market or in privately
negotiated transactions. Each Reporting Person may also have discussions with
the Company's management regarding methods of increasing the Company's sales,
cash flow and profitability. Any actions that any Reporting Person might
undertake will be dependent upon such Reporting Person's review of numerous
factors, including, among other things, the availability of shares of the
Company's preferred stock, warrants or shares of Common Stock, for purchase
and the relevant price levels; general market and economic conditions;
ongoing evaluation of the Company's business operations and prospects; the
relative attractiveness of alternative business and investment opportunities;
the actions of the Company's management and Board of Directors; and other
future developments.
Other than as set forth in this Item 4, neither any Reporting Person
nor TC Group nor TCG has any current plans which relate to or would result in
any of the events described in Items (a) through (j) of the instructions to
this Item 4 of Schedule 13D.
(Page 3 of 6)
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of each, the
undersigned hereby certify that the information set forth in this statement is
true, complete, and correct.
Dated: June 3, 1999.
CARLYLE PARTNERS II, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
CARLYLE PARTNERS III, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
(Page 4 of 6)
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CARLYLE INTERNATIONAL PARTNERS III, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
C/S INTERNATIONAL PARTNERS,
a Cayman Islands general partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
CARLYLE INVESTMENT GROUP, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
CARLYLE-INSIGHT INTERNATIONAL
PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
(Page 5 of 6)
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CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By: TCG Holdings, L.L.C. as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
TC GROUP, L.L.C.,
a Delaware limited liability company
By: TCG Holdings, L.L.C., as the Managing Member
By: /s/ Glenn A. Youngkin
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Name: Glenn A. Youngkin
Title: Managing Director
CARLYLE INVESTMENT MANAGEMENT, L.L.C.,
a Delaware limited liability company
By: /s/ Daniel A. D'Aniello
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Name: Daniel A. D'Aniello
Title: Managing Director
(Page 6 of 6)
