[LOGO]
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1997
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TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Imatron
Inc., a New Jersey corporation (the "Company"), will be held on Monday, June 30,
1997, at 10:00 a.m., local time, at the Embassy Suites Hotel, 250 Gateway
Boulevard, South San Francisco, California, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase the authorized number of
shares of the Company's Common Stock.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on May 2, 1997 are
entitled to notice of and to vote at the meeting and at any continuation or
adjournment thereof.
By Order of the Board of Directors,
/s/Gary H. Brooks
-----------------
Gary H. Brooks
Secretary
South San Francisco, California
May 15, 1997
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ALL SHAREHOLDERS 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 POSTAGE-PREPAID
ENVELOPE ENCLOSED FOR THAT PURPOSE.
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<PAGE>
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
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PROXY STATEMENT
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GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Imatron Inc., a New Jersey corporation (the "Company"), for use at the annual
meeting of shareholders to be held on June 30, 1997 at 10:00 a.m. local time, at
which shareholders of record on May 2, 1997 will be entitled to vote. On May 2,
1997, the Company had issued and outstanding 78,373,137 shares of Common Stock.
The annual meeting will be held at the Embassy Suites Hotel, 250 Gateway
Boulevard, South San Francisco, California.
VOTING AND REVOCABILITY OF PROXIES
All properly executed proxies that are not revoked will be voted at the
meeting in accordance with the instructions contained therein. Proxies
containing no instructions regarding the proposals specified in the form of
proxy will be voted FOR approval of all proposals in accordance with the
recommendation of the Company's Board of Directors. Any person giving a proxy in
the form accompanying this statement has the power to revoke such proxy at any
time before its exercise. The proxy may be revoked by filing with the Secretary
of the Company at the Company's principal executive office an instrument of
revocation or a duly executed proxy bearing a later date, or by filing written
notice of revocation with the secretary of the meeting prior to the voting of
the proxy or by voting the shares subject to the proxy by written ballot.
Holders of Common Stock are entitled one vote for each share of Common
Stock held. Under New Jersey law, approval of the amendment of the Company's
Certificate of Incorporation to increase the authorized number of shares of
Common Stock requires the affirmative vote of the holders of a majority of the
votes cast at the annual meeting by the shareholders entitled to vote with
abstentions not counted as votes for or against. With respect to the election of
directors, shareholders are entitled to cast the number of votes held by the
shareholder for as many persons as there are directors to be elected.
SOLICITATION
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy,
and any additional material furnished to shareholders. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, or personal
solicitation by directors, officers, or employees of the Company; no additional
compensation will be paid for any such services. Except as described above, the
Company does not intend to solicit proxies other than by mail.
Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries to forward proxy material to certain
beneficial owners of the Company's Common Stock, and the Company will reimburse
<PAGE>
such brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith. The Company has
retained D.F. King & Co., Inc., to aid in the solicitation of proxies for a fee
estimated at $4,000 plus out-of-pocket expenses.
The Company intends to mail this proxy statement on or about May 20,
1997.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders that are intended to be presented at the
Company's 1998 annual meeting of shareholders must be received by the Company no
later than January 9, 1998 in order to be included in the proxy statement and
proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Each director to be elected will hold office until the next annual
meeting of shareholders and until his successor is elected and has qualified, or
until his death, resignation, or removal.
There are seven nominees for the seven Board positions authorized by
the Company's Bylaws. All nominees are currently directors of the Company. Each
person nominated for election has agreed to serve if elected, and management has
no reason to believe that any nominee will be unavailable to serve. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the seven nominees named below. The seven candidates receiving the highest
number of affirmative votes of the shares entitled to vote at the annual meeting
will be elected directors of the Company.
MANAGEMENT RECOMMENDS A VOTE FOR EACH
OF THE NOMINEES FOR DIRECTOR NAMED BELOW
NOMINEES
Seven directors will be elected at the annual meeting to serve for one
year expiring on the date of the annual meeting in 1998. Set forth below is
information regarding the nominees, including information furnished by them.
PERCENTAGE OF 1996
BOARD OR COMMITTEE
NAME AGE MEETINGS ATTENDED (A) EXECUTIVE POSITION
- ---- ----- ---------------------- -----------------------
Douglas P. Boyd 55 100% Chairman of the Board
John L. Couch 55 100%
S. Lewis Meyer 52 100% President and Chief
Executive Officer
Jose Filipe Guedes 50 100%
William J. McDaniel, M. D. 54 0%(b)
Terry Ross 49 100%
Aldo J. Test 73 100%
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(a) The percentage of meetings attended is based on the total number of Board
and Committee meetings which the particular director was eligible to
attend.
(b) Admiral McDaniel was not elected a director until 1997.
2
<PAGE>
Dr. Boyd has held several positions with the Company since its inception in
1983 including Chief Executive Officer, President, Chief Technical Officer and
Director. Dr. Boyd is currently Chairman of the Board and Chief Technology
Officer. He is an Adjunct Professor of Radiology (Physics) at the University of
California, San Francisco ("UCSF") and spends approximately 5% of his time on
his duties at the University. He has held various academic positions with UCSF
for more than the past five years. Dr. Boyd also serves as a director of
InVision Technologies, Inc.
Dr. Couch has been a director of the Company since its inception in
1983. In May 1987 he became Vice President, Scientific Affairs. He served as
Secretary from March 1990 to December 1993.
Mr. Guedes was elected a director of the Company on October 11, 1996.
From January 1991 to March 1995 he acted as the Chief Executive Officer of
Cerexport/Vista Alegre, a ceramic manufacturer. In 1996 Mr. Guedes became the
President of Ceramic, S.A., a ceramic tile manufacturer.
Admiral McDaniel, a retired United States Navy Rear Admiral, was
elected a director on January 28, 1997. From 1992 to 1995 he was Chief Executive
Officer of Naval Medical Center, Portsmouth, Virginia, a 346 bed tertiary
training medical center for the Navy. From 1995 to 1997 Admiral McDaniel was the
Surgeon General of the U.S. Pacific Command. In such position he was responsible
for all U.S. military contingency plans for the Pacific half of the world,
including preparing for responses to wartime, natural disasters, and peacetime
humanitarian relief efforts.
Mr. Meyer was elected President and Chief Executive Officer of the
Company on June 23, 1993. From April 1991 until joining the Company he was Vice
President, Operations of Otsuka Electronics (U.S.A.), Inc., Fort Collins,
Colorado, a manufacturer of clinical MR systems and analytical NMR
spectrometers. From August 1990 to April 1991 he was a founding partner of
Medical Capital Management, a company engaged in providing consulting services
to medical equipment manufacturers, imaging services providers and related
medical professionals. Prior thereto he was President and Chief Executive
Officer of American Health Services Corp., a developer and operator of
diagnostic imaging and treatment centers. Mr. Meyer is a director of BSD Medical
Corporation and Finet Holdings Corporation.
Mr. Ross has been a director of the Company since January 1987 and
served as its Vice President, Marketing and Sales from October 1985 to December
1987. Since January 1988 Mr. Ross has been President of CEMAX-ICON, Inc., a
privately held company engaged in the manufacture and sale of medical imaging
and networking software.
Mr. Test has been a director of the Company since its inception in
1983. He is a senior partner of the San Francisco and Palo Alto law firm of
Flehr, Hohbach, Test, Albritton & Herbert where he has practiced patent law for
more than the past five years.
BOARD COMMITTEES AND MEETINGS
During 1996 the Board of Directors held three meetings. The Board of
Directors has a standing Audit Committee whose function is to recommend the
engagement of the Company's independent accountants, approve services performed
by such accountants, and review and evaluate the Company's accounting system and
system of internal controls. The Audit Committee, which consisted of Messrs.
Ross and Test held one meeting during the fiscal year.
The Board of Directors has a standing Compensation Committee which
makes recommendations to the Board of Directors concerning salaries and
incentive compensation paid to officers; administers the Company's 1993 Stock
Option Plan, including the grant of options, the Company's 1987 Stock Bonus
Incentive Plan, and the Company's 1994 Employee Stock Purchase Plan; and
performs such other functions regarding compensation as the Board may delegate.
The Compensation Committee, which consisted of Messrs. Ross and Test, held three
meetings during the year.
COMPENSATION OF DIRECTORS
Aldo Test, a director of the Company, renders consulting services to
the Company on a month-to-month basis for which he received compensation of
3
<PAGE>
$16,200 during 1996, and may be expected to do so in the future. The law firm of
Flehr, Hohbach, Test, Albritton & Herbert, of which Mr. Test is a member,
represents the Company with respect to intellectual property matters and may be
expected to continue to do so in the future. Terry Ross, a director of the
Company, renders consulting services to the Company pursuant to a month-to-month
consulting agreement which commenced in November 1993. In 1996 Mr. Ross received
$18,000 pursuant to such agreement.
NON-EMPLOYEE DIRECTOR OPTIONS. In connection with their services to the
Company, directors who are not employees of the Company have periodically
received stock options under the 1991 Non-Employee Directors' Stock Option Plan
(the "Directors' Plan") to purchase shares of Common Stock. The exercise price
of the options is 85% of the fair market value of the Common Stock on the date
of grant as quoted on the NASDAQ National Market System. Typically, the options
granted to directors vest 25% per year on the anniversary of the date of grant
and have a term of five years. Each option terminates prior to the expiration
date if the optionee's service as a non-employee director, or, subsequently as
an employee, of the Company terminates.
In 1991 the directors and shareholders approved the Directors' Plan in
order to attract and retain highly qualified non-employee directors by providing
each non-employee director with an opportunity to purchase the Company's stock
and to provide incentives for such persons to exert maximum efforts on behalf of
the Company. Subject to provisions relating to adjustments upon changes in
stock, the Directors' Plan currently covers an aggregate of 550,000 shares of
the Company's Common Stock.
The Directors' Plan is administered by the Board of Directors. The
Board may suspend or terminate the Directors' Plan at any time. If no such
termination occurs, the Directors' Plan will terminate in the year 2001.
Options may be granted only to directors of the Company who are not
employees of the Company or any affiliate of the Company. The Directors' Plan
provides for the automatic grant of options to purchase shares of Common Stock
of the Company to non-employee directors. Each person elected for the first time
to be a Non-Employee Director automatically receives an option to purchase
25,000 shares of the Company's Common Stock. The Directors' Plan also provides
that every non-employee director is to receive an option to purchase 25,000
shares on July 1st of each year if such director served continuously as such for
the entire preceding twelve months.
The non-employee directors (Messrs. Guedes, McDaniel, Ross and Test)
are entitled to receive options to purchase 25,000 shares each under the plan on
July 1st of each year. Under that provision, Messrs. Ross and Test each received
25,000 shares in fiscal year 1996 at an option price of $4.99 per share. In
October, Mr. Guedes received 25,000 shares at an exercise price of $3.99 per
share upon his election as a director of the Company. In January 1997, Admiral
McDaniel received 25,000 shares at an option price of $2.24 per share upon his
election as a director of the Company. In addition, directors who are not
officers of the Company are eligible for reimbursement in accordance with
Company policy for their expenses in connection with attending meetings of the
Board of Directors and any committees thereof.
EMPLOYEE DIRECTOR COMPENSATION. Employees who serve as directors of the
Company (Dr. Boyd, Dr. Couch and Mr. Meyer) receive no additional compensation
for such service. Dr. Boyd and Mr. Meyer are also named executive officers of
the Company and their compensation is reflected in the Summary Compensation
Table contained elsewhere in this statement. In fiscal 1996 Dr. Couch, in his
capacity as Vice President, Scientific Affairs, received options to purchase
20,000 shares of the Company's Common Stock under the 1993 Stock Option Plan at
an option price of $2.06 per share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables, based in part upon information supplied by officers,
directors and principal shareholders, set forth certain information regarding
the ownership of the Company's voting securities as of March 31, 1997 by (i) all
those known by the Company to be beneficial owners of more than five percent of
any class of the Company's voting securities; (ii) each director; (iii) each
named executive officer; and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated, each of the shareholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws where applicable.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (A)
NAME AND ADDRESS OF AMOUNT OF DIRECT PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ----------------------- ---------------------- -------------
Common Marukin Corporation (b) 5,471,617 7.0%
- --------
(a) Security ownership information for beneficial owners is taken from
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), 13(g) and 16(a) and information made known to the Company.
(b) Marukin Corporation, 6, Rokuban-Cho Chiyoda-Ku, Tokyo 10
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below presents the security ownership of the Company's Directors
and Named Executive Officers.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP (A) CLASS (B)
- -------------- ------------------------- -------------- ----------------
Common Douglas P. Boyd 2,048,251(c) 2.6%
Common Gary H. Brooks 83,042(d) *
Common John L. Couch 34,000(e) *
Common Dale E. Grant 124,000(e) *
Common Jose Filipe Guedes 0 *
Common William J. McDaniel, M.D. 16,000 *
Common S. Lewis Meyer 568,996(f) *
Common Terry Ross 0 *
Common Aldo Test 35,000(g) *
Common All Directors and
Executive Officers
as a Group 2,909,289(h) 3.7%
- ----------
* Does not exceed 1% of the referenced class of securities.
(a) Ownership is Direct unless indicated otherwise.
(b) Calculation based on 78,176,769 shares of Common Stock outstanding as of
March 18, 1997.
(c) Includes 1,830,801 shares owned directly and 217,450 shares issuable upon
the exercise of stock options that are exercisable as of March 31, 1997 or
that will become exercisable within 60 days thereafter.
(d) Includes 10,542 shares owned directly and 72,500 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1997 or that
will become exercisable within 60 days thereafter.
(e) All shares are issuable upon the exercise of stock options that are
exercisable as of March 31, 1997 or that will become exercisable within 60
days thereafter.
(f) Includes 6,496 shares owned directly and 562,500 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1997 or that
will become exercisable within 60 days thereafter.
(g) Includes 10,000 shares owned directly and 25,000 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1997 or that
will become exercisable within 60 days thereafter.
(h) Includes 1,035,450 shares that directors and executive officers had the
right to acquire pursuant to the exercise of options that were exercisable
on March 31, 1997 or that will become exercisable within 60 days
thereafter. The percentage of beneficial ownership assumes the exercise of
the aforesaid options by officers and directors.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF NAMED EXECUTIVES
The Summary Compensation Table shows certain compensation information
for each person who served as Chief Executive Officer during the year and the
other most highly compensated executive officers whose aggregate compensation
exceeded $100,000 for services rendered in all capacities during fiscal year
1996 (collectively referred to as the "Named Executive Officers". Compensation
data is shown for the fiscal years ended December 31, 1996, 1995 and 1994. This
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted, and certain other compensation, if any, whether paid
or deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(A) BONUS SARS COMPENSATION(B)
- ------------------------------ ----- ------------- ------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Douglas P. Boyd
Chairman of the Board 1996 166,000 4,700
1995 158,000 4,620
1994 150,000 2,250
S. Lewis Meyer 1996 211,000 75,000(d) 4,750
President and Chief 1995 201,000 4,620
Executive Officer 1994 196,833 25,000(c) 1,845
Dale E. Grant 1996 172,000 3,193
Executive Vice 1995 164,000 50,000(e) 75,000(f)
President (h) 1994 156,000 50,000(e) 400,000(g)
Gary H. Brooks 1996 131,000 40,000(i) 3,880
Vice President and 1995 125,000 37,500(f) 3,627
Chief Financial Officer 1994 120,000 1,710
- ---------------------------------------------------------------------------------------------------------------
(a) Amounts shown include cash and non-cash compensation earned with respect to the year shown above.
(b) Represents the Company's matching contributions to its 401(k) plan.
(c) Represents portion of a $75,000 bonus payable to Mr. Meyer upon commencement of his employment with the Company.
(d) Represents HeartScan non-statutory stock options granted in February 1996 under the HeartScan 1995 Stock
Option Plan and for
which the Company has recorded compensation expense of $142,500.
(e) Represents a bonus payable to Mr. Grant upon commencement of his employment with the Company.
(f) Represents HeartScan options granted in October 1995 under the HeartScan 1995 Stock Option Plan.
(g) Represents options granted in January 1994 under the 1994 Stock Option Plan.
(h) Mr. Grant resigned as the Executive Vice President of the Company as of September 1, 1996. He is currently the
President and Chief Operating Officer of HeartScan Imaging, Inc.
(i) Represents options granted in March 1996 under the 1994 Stock Option Plan.
</TABLE>
6
<PAGE>
INCENTIVE AND REMUNERATION PLANS
1987 STOCK BONUS INCENTIVE PLAN. In 1988 the shareholders of the
Company approved the adoption of a Stock Bonus Incentive Plan ("Stock Bonus
Plan"). The Stock Bonus Plan was adopted to reward participants for past
services and to encourage them to remain in the Company's service. The Stock
Bonus Plan is administered by the Compensation Committee of the Board of
Directors which presently consists of Messrs. Test and Ross. The Committee has
exclusive authority to act on the following matters: selection of the persons
among the eligible participants (which consists of all employees, including
officers and directors of the Company, and consultants to the Company) who are
to participate in the Stock Bonus Plan; the determination of each participant's
stock bonus opportunity and actual bonus; changes in the Plan, and all other
actions the Committee deems necessary or advisable to administer the Plan.
The total number of shares of Common Stock which may be issued under
the Stock Bonus Plan is 1,200,000 shares with no more than 400,000 shares
available for issuance in any single calendar year.
In addition, the Compensation Committee has authorized additional bonus
opportunities for participants based on the participant achieving specific
corporate objectives. The bonus opportunity for each participant is expressed as
a percentage of base salary, with a maximum bonus opportunity of 40% of base
salary. After the end of each fiscal year, the Committee determines each
participant's bonus award expressed in dollars. The number of shares of Common
Stock to be issued is determined by dividing the bonus award by the closing
stock price for the Common Stock on the grant date.
No participant is eligible to receive a bonus award unless such
participant is either employed by the Company or providing consulting services
to the Company on the last day of the calendar year to which the bonus relates.
During the 1996 fiscal year 19,409 shares were granted to all employees
under the Stock Bonus Plan of which no shares were granted to any Named
Executive Officer.
STOCK PARTICIPATION AND OPTION PLANS
1994 EMPLOYEE STOCK PURCHASE PLAN. In 1993 the directors approved the
adoption of the 1994 Employee Stock Purchase Plan (the "Plan"). The Plan was
approved by the shareholders at the 1994 Annual Meeting and became effective
January 1, 1994. All employees, including executive officers, may purchase
shares of the Company's Common Stock at a discount of 15% from the market price
of the shares. The plan replaced the Company's 1984 Employee Stock Participation
Plan which expired January 17, 1994. The Plan is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, but is not subject to the
provisions of ERISA.
The maximum aggregate number of shares to be offered under the Plan is
1,800,000 shares of the Company's Common Stock. The shareholders approved an
increase in the number of shares issuable under the Plan from 1,000,000 to
1,800,000 shares at the 1996 Annual Meeting. As of March 31, 1997, 1,102,347
shares of the Company's Common Stock have been issued under the Plan.
All employees who are regular employees of the Company, whose date of
hire is at least six months prior to the beginning of the Offering Period or
Interim Offering Period, and who are customarily employed for at least 20 hours
per week and more than five months in any calendar year are eligible to
participate in the Plan. The first Offering Period began January 1, 1994 and ran
through March 31, 1996. The Second Offering Period began April 1, 1996 and will
run through June 30, 1998. Each Interim Offering Period is a calendar quarter.
As of April 1, 1997, a total of 160 employees met the eligibility requirements
under the Plan.
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Eligible employees are offered the opportunity to purchase Common Stock
by means of payroll deductions of 2%, 4%, 6%, 8% or 10% of compensation. The
specific percentage selected is at the employee's option, up to a yearly maximum
established from time to time (currently established at $7,000) of the fair
market value of the Stock, determined on the Offering Date, and so long as the
participant would not own 5% or more of the voting power of the Company's stock
following the purchase. Each participant may begin participation in the Plan at
the beginning of the Offering Period or any Interim Offering Period, may
decrease but not increase participation during the Offering Period, and may
terminate participation in the Plan before the end of any Interim Offering
Period, all subject to certain notice and filing requirements.
Administration of the Plan is by the Company's Board, or Compensation
Committee by delegation. The Committee is comprised of at least two members of
the Company's Board, each of whom must be disinterested as defined in Securities
and Exchange Commission regulations. The Committee has the powers of the Board
pursuant to the Plan, including the power to determine questions of policy and
expediency that may arise in the administration of the Plan, all subject to the
provisions of the Plan. Members of the Committee receive no compensation for
their services in connection with the administration of the Plan.
The price for the shares purchased pursuant to the Plan is equal to 85%
of the fair market value of the shares on either the Offering Date (or date of
entry for new or re-enrolling employees) or the last day of each Interim
Offering Period, whichever is less. The funds contributed by the participant
earn no interest while they are being held by the Company.
To participate in the Plan, employees must submit the appropriate
documentation authorizing deductions from payroll in specified amounts to the
Company prior to the Offering Period or Interim Offering Period. Funds deducted
during the quarter are used to purchase shares of the Company's Common Stock,
the number of which is determined (in whole shares) on the final day of that
quarter by dividing the amount in the participant's Plan Account by the purchase
price of the stock as determined above. Participants receive certificates
quarterly for all shares purchased during that quarter. They may retain the
certificated shares or sell them in the open market or otherwise, subject to
securities and tax law restrictions. Upon termination of employment,
participants will receive certificates evidencing previously purchased shares
and a return of any balance remaining in the participant's account on the date
of termination.
The Board reserves the right to amend or discontinue the Plan, provided
that no participant's existing rights are adversely affected, and provided
further that without Shareholder approval, no amendment will be effective: (1)
increasing the aggregate number of shares authorized for purchase under the Plan
or to be purchased by any participant; (2) materially changing the requirements
for eligibility to participate, or reducing the purchase price formula in the
Plan, or materially increasing the benefits accruing to participants under the
Plan; (3) extending the term of the Plan; or (4) otherwise modifying the Plan if
the modification requires shareholder approval to satisfy applicable statutes or
Internal Revenue Service and/or Securities and Exchange Commission regulations.
1993 STOCK OPTION PLAN. The Company's 1993 Stock Option Plan, which was
approved by the Shareholders at the 1993 Annual Meeting (the "Option Plan"), is
intended to advance the interests of the Company by inducing persons of
outstanding ability and potential to join and remain with the Company by
enabling them to acquire proprietary interests in the Company. The Option Plan
covers an aggregate of 5,500,000 shares of Common Stock. At the June 25, 1995
Annual Meeting, the shareholders approved an increase in the number of shares
which may be issued under the Option Plan from 3,000,000 to 5,500,000.
The Option Plan provides for the granting of two types of options:
"incentive stock options" and "nonstatutory stock options." The incentive stock
options (but not the nonstatutory stock options) are intended to qualify as
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended. The Option Plan succeeded the 1983 Stock Option Plan which
expired in 1993.
8
<PAGE>
Options may be granted under the Option Plan to all full-time regular
employees including officers, directors (whether or not employees) and
consultants of the Company; provided, however, that incentive stock options may
not be granted to any non-employee director or consultant. As of April 1, 1997
approximately 160 employees and consultants were eligible to participate in the
Option Plan.
The Compensation Committee of the Board of Directors administers the
Option Plan. The Committee has the power, subject to the provisions of the
Option Plan, to determine the persons to whom and the dates on which options
will be granted, the number of shares to be subject to each option, the time or
times during the term of each option within which all or a portion of such
option may be exercised, and the other terms of the options.
The maximum term of each option is ten years. Incentive Stock Options
(ISO) granted under the Plan generally vest quarterly over a four year period
following the date of grant. Non-Statutory Options (NSO) granted under the Plan
generally vest annually over a four-year period following the date of grant.
The exercise price of all nonstatutory stock options granted under the
Option Plan must be at least equal to 85% of the fair market value of the
underlying stock on the date of grant. The exercise price of all incentive stock
options granted under the Option Plan must be at least equal to the fair market
value of the underlying stock on the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted during the last
fiscal year to each of the named executive officers of the Company:
<TABLE>
<CAPTION>
Option/sar Grants in Last Fiscal Year
- ---------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
FOR OPTION TERM
- ---------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDER GRANTED TO
OPTIONS EMPLOYEES EXERCISE OR
GRANTED IN FISCAL BASE PRICE MARKET EXPIRATION
NAME (#) YEAR(A) ($/SH) PRICE DATE 0%($) 5%($)(B)
- ------ ---------- ----------- ------------ -------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas P. Boyd -0- -0- -0- -0- -0- -0- -0-
Gary Brooks 40,000 9.1% $2.06 $2.06 3/01/01 -0- $11,040
Dale E. Grant -0- -0- -0- -0- -0- -0- -0-
S. Lewis Meyer -0- -0- -0- -0- -0- -0- -0-
- ----------
(a) Based on 439,728 options granted to all employees.
(b) Based on 5-year option term and annual compounding; results in total
appreciation of 27.6% (at 5% per year) and 61.1% (at 10% per year).
</TABLE>
In October 1995, the Company's 49.5%-owned subsidiary, HeartScan
Imaging, Inc. ("HSI") approved the adoption of the HeartScan Imaging, Inc. 1995
Stock Option Plan (the "HSI Option Plan"). The HSI Option Plan is intended to
advance the interests of HSI by inducing persons of outstanding ability and
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potential to join and remain with HSI by enabling them to acquire proprietary
interests in HSI. The HSI Option Plan covers an aggregate of 250,000 shares of
HSI Common Stock. The Option Plan provides for the granting of two types of
options: "incentive stock options" and "nonstatutory stock options." The
incentive stock options (but not the nonstatutory stock options) are intended to
qualify as "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986, as amended. Options may be granted under the HSI Option
Plan to all employees including officers, directors (whether or not employees)
and consultants of HSI; provided, however, that incentive stock options may not
be granted to any non-employee director or consultant. HSI's Board of Directors
has the power, subject to the provisions of the HSI Option Plan, to determine
the persons to whom and the dates on which options will be granted, the number
of shares to be subject to each option, the time or times during the term of
each option within which all or a portion of such option may be exercised, and
the other terms of the options. The functions of HSI's Board of Directors under
the HSI Option Plan are presently being administered by the Compensation
Committee of Imatron's Board of Directors.
The maximum term of each option is ten years. Options granted under the
HSI Option Plan generally vest annually over a four-year period.
The exercise price of all nonstatutory stock options granted under the
HSI Option Plan must be at least equal to 85% of the fair market value of the
underlying stock on the date of grant. The exercise price of all incentive stock
options granted under the HSI Option Plan must be at least equal to the fair
market value of the underlying stock on the date of grant.
During HSI's last fiscal year, one option was granted under the plan to
S. Lewis Meyer, HSI's Chief Executive Officer. The option was granted to
purchase an aggregate of 75,000 shares of the HSI's Common Stock at $0.10 per
share, and vests over a 45 month period commencing May 29, 1996. The option is
subject to adjustment in price and amount based on the amount and terms of HSI's
future financings. HSI has reserved an additional 325,000 shares of Common Stock
for future issuance to employees under the Plan and under plans to be adopted.
It is HSI's intention to reserve, in the aggregate, approximately 20% of its
capital HSI option stock for grants to employees under the HSI Option Plan and
under plans to be adopted.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth the options exercised during the last
fiscal year by Named Executive Officers of the Company:
<TABLE>
<CAPTION>
Aggregated Options Exercised and Option Values in Fiscal Year 1996
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY OPTIONS AT
OPTIONS AT YEAR-END (#) YEAR-END ($)
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------ ----------------- ------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Douglas P. Boyd -0- -0- 211,200/18,750 $590,328/$53,109
S. Lewis Meyer 400,000(a) $2,400,000 525,000/75,000 $1,445,063/$206,438
Dale E. Grant 150,000 $872,062 74,000/125,000 $213,305/$360,313
Gary H. Brooks 100,000 $644,875 57,500/82,500 $156,519/$103,331
- ----------
(a) Represents shares acquired on exercise of warrants granted at the time of employment in 1993.
</TABLE>
COMPENSATION COMMITTEE REPORT
This report is provided by the Compensation Committee of the Board of
Directors (the "Committee") to assist stockholders in understanding the
Committee's objectives and procedures in establishing the compensation of
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Imatron's Chief Executive Officer and other executive officers. The Committee,
made up of non-employee Directors, is responsible for establishing and
administering the Company's executive compensation program. None of the members
of the Committee are eligible to receive awards under the Company's incentive
compensation programs.
Imatron's executive compensation program is designed to motivate,
reward, and retain the management talent needed to achieve its business
objectives and maintain its competitiveness in the medical imaging industry. It
does this by utilizing competitive base salaries that recognize a philosophy of
career continuity and by rewarding exceptional performance and accomplishments
that contribute to the Company's success.
COMPENSATION PHILOSOPHY AND OBJECTIVE
The philosophical basis of the compensation program is to pay for
performance and the level of responsibility of an individual's position. The
Committee finds greatest value in executives who possess the ability to
implement the Company's business plans as well as to react to unanticipated
external factors that can have a significant impact on corporate performance.
Compensation decisions for all executives, including the named executive
officers and the Chief Executive Officer, are based on the same criteria. These
include quantitative factors that directly improve the Company's short-term
financial performance, as well as qualitative factors that strengthen the
Company over the long term, such as demonstrated leadership skills and the
ability to deal quickly and effectively with difficulties which sometimes arise.
The Committee believes that compensation of Imatron's key executives
should:
* Link rewards to business results and stockholder returns;
* Encourage creation of stockholder value and achievement of strategic
objectives;
* Maintain an appropriate balance between base salary and short-and
long-term incentive opportunity;
* Attract and retain, on a long-term basis, highly qualified executive
personnel; and
* Provide total compensation opportunity that is competitive with that
provided by competitors in the medical imaging industry, taking into
account relative company size and performance as well as individual
responsibilities and performance.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Imatron's executive compensation program consists of three elements:
Base Salary, Short-Term Incentives and Long-Term Incentives. Payout of
short-term incentives depends on corporate performance measured against annual
objectives and overall performance. Payout of the long-term incentives depends
on performance of Imatron stock, both in absolute and relative terms.
BASE SALARY
A competitive base salary is crucial to support the philosophy of
management development and career orientation of executives. Salaries are
targeted to pay levels of the Company's competitors and companies having similar
capitalization and revenues, among other attributes. Executive salaries are
reviewed annually.
SHORT-TERM INCENTIVE
Short-term awards to executives are made in cash and in stock to
recognize contributions to the Company's business during the past year. The
bonus an executive receives is dependent on individual performance and level of
responsibility. Assessment of an individual's relative performance is made
annually based on a number of factors which include initiative, business
judgment, technical expertise, and management skills.
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STOCK BONUS INCENTIVE PLAN. In 1988 the shareholders approved the
adoption of the 1987 Stock Bonus Incentive Plan. Under the terms of the Stock
Bonus Plan the Committee may award shares of the Company's Common Stock to
employees, including executive officers.
LONG-TERM INCENTIVE
Long-term incentive awards provided by shareholder-approved
compensation programs are designed to develop and maintain strong management
through share ownership and incentive awards. Stock options were the only long
term incentive granted to executive officers in 1996.
STOCK OPTION PLAN. In 1994, the shareholders approved the adoption of
the 1993 Stock Option Plan (which replaced the 1983 Stock Option Plan). In 1995
the directors and shareholders approved an increase in the number of shares
reserved under the Option Plan from 3,000,000 shares to 5,500,000 shares. At the
sole discretion of the Committee, eligible officers and employees periodically
receive options to purchase shares of the Company's Common Stock pursuant to the
Option Plan. The value of the options depends entirely on appreciation of
Imatron stock. Grant of options depends upon quarterly and annual Company
performance, as determined by review of qualitative and quantitative factors.
EMPLOYEE STOCK PURCHASE PLAN. In 1994 the directors and shareholders
approved the adoption of the 1994 Employee Stock Purchase Plan. All employees,
including executive officers, may purchase shares of the Company's Common Stock
at a discount of 15% from the market price of the shares. The Plan became
effective January 1, 1994.
1996 COMPENSATION. During 1996 the Company's revenues decreased only
3.0% from the prior year, although the Company incurred a loss of $10,465,000
versus a loss of $2,449,000 during the prior fiscal year. The Company
nonetheless made substantial progress in improving its technology, raised a
significant amount of additional equity capital and bank credit to finance its
future growth, and was successful in the opening of two additional coronary
artery disease risk assessment centers. Based on this performance, only
selective cost-of-living and merit salary increases were implemented during the
year and no bonuses of cash or stock were given during the year to any Named
Executive Officer. In March 1996 Mr. Brooks was granted an option to purchase
40,000 shares of Company stock pursuant to the Option Plan in recognition of
1995 performance. Stock Options were granted to other employees of the Company
based on the employee's level of responsibility and other factors. If the
Company's financial condition improves in 1997, the Company anticipates
implementing a program of regular merit salary adjustments for executive
officers together with other forms of compensation such as bonus payments based
on achievement of specific goals and objectives.
1996 CHIEF EXECUTIVE OFFICER COMPENSATION
On March 1, 1996 Mr. Meyer's base salary was increased from $195,000 to
$205,000, and effective January 1, 1997 was increased to $215,250, both actions
reflecting modest cost of living increases. In addition, in February 1996 and
specifically in recognition of his efforts regarding the formation and
capitalization of HeartScan Imaging, Inc., Mr. Meyer was granted an option to
purchase 75,000 shares of HSI common stock at $0.10 per share, as reported
elsewhere in this statement. The Committee believes that the base salary and
other terms and conditions of his employment are consistent with the foregoing
philosophy and objectives and reflect the scope and level of his
responsibilities.
Members of the Compensation Committee
Terry Ross
Aldo Test
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- --------------------------------------------------------------------------------
SHARE INVESTMENT PERFORMANCE
The following graph compares the total return performance of the
Company for the periods indicated with the performance of the NASDAQ Index
(presented on a dividends reinvested basis) and the performance of the Hambrecht
& Quist Technology Index. The Company's shares are traded on the NASDAQ National
Market System under the symbol "IMAT". The Hambrecht & Quist Technology Index is
comprised of the publicly traded stocks of 200 technology companies and include
companies in the electronics, medical and related technology industries. The
total return indices reflect reinvested dividends and are weighted on a market
capitalization basis at the time of each reported data point.
PERFORMANCE GRAPH
[Table below represents a graph in the printed piece.]
YEAR 1991 1992 1993 1994 1995 1996
- --------------- ----- ----- ----- ----- ----- -----
Imatron Inc. 100 51.48 23.53 51.48 94.12 155.91
Hambrecht & Quist
Technology Index 100 115.02 125.52 145.70 218.76 262.49
NASDAQ Index 100 116.38 133.59 130.59 184.67 223.16
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
S. Lewis Meyer became President and Chief Executive Officer of the
Company on June 14, 1993. In connection with such employment the Company entered
into an Executive Employment Agreement with Mr. Meyer providing for an initial
term ending December 31, 1994 and continuing for rolling six month periods
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thereafter. Pursuant to the agreement Mr. Meyer is entitled to a base salary of
$185,000 per year subject to annual review, a one time hiring bonus of $75,000,
a non-qualified stock option to purchase 600,000 shares of the Company's Common
Stock at $0.58 per share (85% of the closing price of a share of the Company's
Common Stock on the date of grant) (subsequently repriced to $0.56), to be
vested over a four year period, a warrant to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $1.50 (subsequently repriced to
$0.75 per share) exercisable for seven years commencing June 14, 1994, but not
later than 12 months following Mr. Meyer's termination of employment, and
certain other benefits.
FILINGS BY DIRECTORS, EXECUTIVE OFFICERS AND TEN PERCENT HOLDERS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent 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. Executive officers, directors, and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 15(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that one report was not timely
filed. Aldo Test, a director of the Company, was one month late filing a Form 4
beneficial ownership report reflecting aggregate sales of 55,000 shares of
Company stock.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors is presenting, for approval by the shareholders,
an amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 100 million to 150 million,
without par value.
As of March 31, 1997, 78,203,036 shares of Common Stock have been
issued and are outstanding and another 21,872,174 shares have been reserved for
future issuance as follows: 285,884 shares under the Company's 1983 Stock Option
Plan; 4,386,718 shares under the Company's 1993 Stock Option Plan; 375,000 under
the 1991 Non-Employee Directors' Stock Option Plan; 691,188 shares under the
1994 Employee Stock Purchase Plan; 3,220,400 shares reserved for the exercise of
warrants; 746,317 shares under the 1987 Stock Bonus Incentive Plan; 10,666,667
shares reserved for issuance upon the exchange of HeartScan Series A Preferred
stock, and 1,500,000 shares reserved for sale pursuant to a shelf registration
statement on Form S-3 filed with the Securities and Exchange Commission on
February 1, 1996.
On April 25, 1997, the Board of Directors adopted a resolution to amend
the first paragraph of Article THIRD of the Company's Certificate of
Incorporation to read in its entirety as follows:
THIRD: A. The aggregate number of shares which the Corporation
shall have authority to issue is one hundred sixty million
(160,000,000) shares without par value of which one hundred
fifty million (150,000,000) shares shall be Common Stock and
ten million (10,000,000) shares shall be Preferred Stock
having such designations and relative voting, dividend,
liquidation and other rights, preferences and limitations as
may be stated in further amendments to the Certificate of
Incorporation.
The Board believes that the authorized number of shares of Common Stock
should be increased to provide sufficient shares for such corporate purposes as
may be determined by the Board to be necessary or desirable. These purposes may
include, without limitation: acquiring other businesses in exchange for shares
of the Company's Common Stock; entering into collaborative research and
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<PAGE>
development arrangements with other companies in which Common Stock or the right
to acquire Common Stock are part of the consideration; raising capital through
the sale of Common Stock; and attracting and retaining valuable employees by the
issuance of stock options. The Company at present has no commitments, agreements
or undertakings to issue any such additional shares. The Board considers the
authorization of additional shares of Common Stock advisable to ensure prompt
availability of shares for issuance should the occasion arise. Authorization of
additional shares notwithstanding, the rules of the NASD governing corporations
with securities listed on the NASDAQ National Market would still require
stockholder approval by a majority of the total votes cast in person or by proxy
prior to the issuance of designated securities (i) where the issuance would
result in a change of control of the Company, (ii) in connection with the
acquisition of the stock or assets of another company if an affiliate of the
Company has certain interlocking interests with the company to be acquired or
where the Company issues more than twenty percent (20%) of its currently
outstanding shares of Common Stock, or (iii) in connection with a transaction
other than a public offering involving the sale or issuance of more than twenty
percent (20%) of the Common Stock or voting power outstanding before the
issuance, subject to certain exceptions or application to the NASD.
Except as indicated above in connection with the Company's 1983 Stock
Option Plan, 1993 Stock Option Plan, 1991 Non-Employee Directors' Stock Option
Plan, 1994 Employee Stock Purchase Plan, shares reserved for the exercise of
warrants, 1987 Stock Bonus Incentive Plan, the exchange of HeartScan Series A
Preferred Stock, and under a Form S-3 shelf registration statement, there are at
present no plans, arrangements, negotiations or commitments which will result in
the issuance of additional shares of Company Common Stock except that the
Company has entered into a non-binding letter of intent with an unaffiliated
company engaged in the development and manufacture of image reconstruction
hardware and software pursuant to which the Company will issue warrants to
purchase an aggregate of 6,000,000 shares of the Company's Common Stock at an
exercise price of $4.50 per share in consideration of the development and
delivery to the Company at an agreed upon price of image reconstruction systems
meeting the Company's specifications. The warrants will be issued in
installments based on the achievement by the grantee of certain milestones. As
additional consideration, the grantee will pay the Company $2,000,000 in cash
for the final 4,000,000 warrants and will pay a royalty on all image
reconstruction systems which the grantee sells to third parties. There is no
certainty that a final agreement will be reached by the parties. The Board does
not intend to issue any of the additional shares that will be authorized under
the amendment except upon terms that the Board deems to be in the best interests
of the Company. Holders of Common Stock have no preemptive or other subscription
rights with respect to future share issuances.
The additional shares of Common Stock to be authorized by the proposed
amendment could be issued in the future by the Board in ways that would make
more difficult a change in control of the Company, for instance through a
private sale to purchasers allied with management, diluting the stock ownership
of the person seeking to gain control of the Company. In addition, the issuance
of additional Common Stock could have a dilutive effect on earnings per share
and on the equity and voting rights of the present holders of Common Stock.
However, the proposed amendment is not the result of knowledge by management of
any specific effort by any person or group to obtain control of the Company, and
the Company has no present intention of issuing additional shares (other than
shares already reserved) to discourage any such effort or for any other purpose.
VOTE REQUIRED FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the votes cast at
the annual meeting by the shareholders entitled to vote is required to approve
this amendment to the Certificate of Incorporation.
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL TWO
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INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP has served as the Company's independent auditors for
the year ended December 31, 1996. The Board of Directors is presently in the
process of selecting independent auditors for the year ending December 31, 1997.
Representatives of Ernst & Young LLP are expected to be present at the
annual meeting. Such representatives will have the opportunity to make a
statement at the meeting if they desire to do so and will be available to
respond to appropriate questions.
The Company is not asking shareholders to approve the selection of
independent auditors because the Company believes that such a selection is more
appropriately left to the discretion of its Board of Directors.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the annual meeting. If other matters are properly
brought before the meeting, however, it is the intention of the persons named in
the accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
/s/Gary H. Brooks
-----------------
Gary H. Brooks
Secretary
May 16, 1997
