IMATRON INC, DEF 14A, 1999-05-17

IMATRON INC
DEF 14A, 1999-05-17
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(A) of the
Securities Exchange Act of 1934

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 ss.240.14a-11(c) or ss.240.14a-12

IMATRON
- --------------------------------------------------------------------------------
(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 the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies: N/A

(2) Aggregate number of securities to which transaction applies: N/A

(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): N/A

(4) Proposed maximum aggregate value of transaction: N/A

(5) Total fee paid: N/A

[ ] 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: N/A

(2) Form, Schedule or Registration Statement No.: N/A

(3) Filing Party: N/A

(4) Date Filed: N/A

<PAGE>

[IMATRON LOGO]
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080

-----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

JUNE 18, 1999

-----------------

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 Friday, June 18,
1999, 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 approve the increase in the number of shares authorized to be
issued pursuant to the 1993 Employee Stock Option Plan from
5,500,000 common shares to 11,500,000 common shares.

3. To approve the increase in the number of shares authorized to be
issued pursuant to the 1994 Employee Stock Purchase Plan from
1,800,000 common shares to 2,300,000 common shares.

4. To approve the increase in the number of shares authorized to be
issued pursuant to the Stock Bonus Incentive Plan from 1,200,000
common shares to 2,200,000 common shares.

5. To approve the increase in the number of shares authorized to be
issued pursuant to the 1998 Amended and Restated Non-Employee
Directors' Stock Option Plan from 1,000,000 common shares to
1,500,000 common shares; to approve the increase in the number of
shares granted in the Initial Option to each newly elected eligible
director from 25,000 common shares to 40,000 common shares; and to
approve the increase in the number of shares granted in the annual
option to each eligible director from 25,000 common shares to 40,000
common shares.

6. 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 7, 1999 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 17, 1999

---------------------------------------------------------------------
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.
---------------------------------------------------------------------

<PAGE>

[IMATRON LOGO]
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080

------------------------

PROXY STATEMENT

------------------------

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 18, 1999 at 10:00 a.m. local time, at
which shareholders of record on May 7, 1999 will be entitled to vote. On April
30, 1999, the Company had issued and outstanding 90,698,764 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 to vote for each share of Common Stock
held. Under New Jersey law, approval of increases in the number of shares
authorized to be issued pursuant to the Company's Employee Stock Option Plan,
the Employee Stock Purchase Plan, the Stock Bonus Incentive Plan and the
Non-Employee Directors' Stock Option Plan 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

<PAGE>

the Company will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in connection
therewith.

The Company intends to mail this proxy statement on or about May 18, 1999.

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

Proposals of shareholders that are intended to be presented at the
Company's 2000 annual meeting of shareholders must be received by the Company no
later than January 7, 2000 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 six nominees for the six Board positions currently established
pursuant to 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 six nominees named below. The six 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

Six directors will be elected at the annual meeting to serve for one year
expiring on the date of the annual meeting in 2000. Proxies can be voted for no
more than six nominees. Set forth below is information regarding the nominees,
including information furnished by them.

<TABLE>
<CAPTION>
PERCENTAGE OF 1998
BOARD OR COMMITTEE
NAME AGE MEETINGS ATTENDED(A) EXECUTIVE POSITION
- ------ ----- ---------------------- ----------------------
<S> <C> <C> <C>
Douglas P. Boyd 57 100% Chairman of the Board
John L. Couch 58 100%
S. Lewis Meyer 54 100% Chief Executive Officer
(and until 1/1/99,
President)
William J. McDaniel, M. D. 56 100%
Terry Ross 51 100% President
(appointed 1/1/99)
Aldo J. Test 75 100%

</TABLE>

- -------------------
(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.

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

<PAGE>

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. and is a member of the Compensation Committee of its
board, and serves as a director of Accuimage Diagnostics Corp.

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.

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 Founder, President and Chief
Executive Officer of American Health Services Corp., (now Insight Health
Services) a developer and operator of diagnostic imaging and treatment centers.
Mr. Meyer is a director of Finet Holdings Corporation and a member of its
Compensation Committee. Until 1998, Mr. Meyer was a member of the Board of
Directors of the American Electronics Association (AEA) and until 1999 he was a
member of the board of BSD 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.
From January 1988 through December 31, 1998, Mr. Ross served as President and
Chief Executive Officer of CEMAX-ICON, Inc., a privately held company engaged in
the manufacture and sale of medical imaging and networking software.
Effective January 1, 1999, Mr. Ross returned to the Company as its President.

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.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

Dr. Douglas Boyd, currently Chairman of the Board and Chief Technology
Officer for the Company, also serves as a director of Accuimage Diagnostics
Corporation (see above). During the year ended December 31, 1998, the Company
sold no products to Accuimage Diagnostics Corporation, and purchased goods and
services from Accuimage Diagnostics Corporation, primarily workstations and
other peripherals, in the amount of $375,159. All goods and services purchased
were at competitive prices. Goods and services purchased from Accuimage during
1998 represented less than one percent (1%) of goods and services purchased by
the Company during 1998.

In February, 1999 the Company sold the San Francisco Center of HeartScan
Imaging, Inc. in an arm's length asset sale to Imaging Technology Group, a
Nevada corporation. HeartScan Imaging, Inc. is a majority-owned subsidiary of
the Company. Dr. Boyd is a minority shareholder of Imaging Technology Group and
his wife is a substantial shareholder. The sale to Imaging Technology followed a
solicitation of bids by the Company from all viable purchasers and an open
auction. The successful bid by Imaging Technology contained the best and most
favorable terms for the Company.

Aldo Test, a director of the Company, is a member of the law firm of Flehr,
Hohbach, Test, Albritton & Herbert, which represents the Company with respect to
intellectual property matters and may be expected to continue to do so in the
future. The fees paid to the firm did not exceed five percent of the law firm's
gross revenues for the fiscal year.

<PAGE>

S. Lewis Meyer, pursuant to authorization of the Board of Directors,
borrowed $336,000 from the Company in June 1998 pursuant to a full-recourse
promissory note bearing 5.6% simple interest, with interest payable quarterly
beginning July 1, 1998. The purpose of the loan was to enable Mr. Meyer to
exercise 600,000 options expiring in June 1998 granted in connection with his
employment in June 1993. The loan is secured by the 600,000 shares of common
stock he purchased upon exercise of the options plus other personal property.

Douglas P. Boyd, pursuant to authorization of the Board of Directors,
borrowed $115,000 from the Company in August 1998 pursuant to a full-recourse
promissory note bearing 5.6% simple interest, with interest payable quarterly
beginning October 1, 1998. The purpose of the loan was to enable Dr. Boyd to
exercise 225,000 options previously granted in connection with his employment.
The loan is secured by the 225,000 shares of common stock he purchased upon
exercise of the options, plus other personal property.

BOARD COMMITTEES AND MEETINGS

During 1998 the Board of Directors held four meetings in person and two
actions by unanimous written consent. 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 consists of Mr. Test and, as of July 13,
1998 Admiral McDaniel, and until January 1, 1999 Mr.
Ross, 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 consists of Mr. Test and, as of July 13, 1998 Admiral McDaniel,
and until January 1, 1999 Mr. Ross, 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 $11,100
during 1998, 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, rendered
consulting services to the Company pursuant to a month-to-month consulting
agreement between November 1993 and December 31, 1998 after which, effective
January 1, 1999 he was appointed President of the Company. In 1998 Mr. Ross
received $12,000 pursuant to such agreement. Admiral McDaniel, a director of the
Company since January, 1997 renders consulting services to the Company on a
month-to-month basis for which he received compensation of $63,237 during 1998,
and may be expected to do so in the future.

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 directors and
shareholders approved the Directors' Plan in 1991 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. Thereafter,
in 1998 and effective as of January 1, 1998, the directors and shareholders
approved the 1998 Amended and Restated Non-Employee Directors' Stock Option Plan
(the "Restated Directors' Plan"). Subject to provisions relating to adjustments
upon changes in stock, the Restated Directors' Plan currently covers an
aggregate of 1,000,000 shares of

<PAGE>

the Company's Common Stock, which number will increase to 1,500,000 shares of
the Company's Common Stock if approved by the Shareholders. (SEE PROPOSAL FIVE
OF THIS STATEMENT.)

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 under the Restated
Directors' Plan vest pursuant to one of two schedules: immediately; or 25% per
year starting with the first anniversary of the date of grant. Options granted
under the 1991 Directors' Plan have a term of five years and options granted
under the 1998 Restated Directors' Plan have a term of ten years. Each option
terminates prior to the expiration date if the optionee's service as a
non-employee director terminates, or if the optionee's service continues
thereafter as an employee, when that service terminates.

The Restated 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 Restated Directors' Plan will terminate at the end of
the year 2008.

Options may be granted only to directors of the Company who are not
employees of the Company or any affiliate of the Company. The Restated
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, which number
will increase to 40,000 shares of the Company's Common Stock if approved by the
Shareholders. (SEE PROPOSAL FIVE OF THIS STATEMENT.) The Restated Directors'
Plan also provides that every non-employee director is to receive an option to
purchase 25,000 shares on January 1st of each year if such director served
continuously as such for the thirty days preceding that date, which number will
increase to 40,000 shares of the Company's Common Stock if approved by the
Shareholders. (SEE PROPOSAL FIVE OF THIS STATEMENT.)

The non-employee directors (Messrs. McDaniel and Test and until December
31, 1998 Mr. Ross) are entitled to receive options to purchase 25,000 shares
each under the 1998 Restated Directors' Plan on January 1st of each year. Under
that provision, Messrs. Ross and Test each received 25,000 shares in fiscal year
1998 at an option price of $2.13 per share and Mr. Test and Admiral McDaniel
each received 25,000 shares on January 1, 1999 at an option price of $1.17 per
share. In January 1997, Admiral McDaniel also 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 but not fees
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, Messrs. Meyer and Couch and, effective January 1, 1999 Mr.
Ross) receive no additional compensation for such service. Dr. Boyd and Mr.
Meyer and, effective January 1, 1999 Mr. Ross, are also named executive officers
of the Company. The compensation for Dr. Boyd and Mr. Meyer is reflected in the
Summary Compensation Table contained elsewhere in this statement.

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, 1999 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.

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER(AA)
<TABLE>
<CAPTION>

NAME AND ADDRESS OF AMOUNT OF DIRECT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------- ----------------------- ----------------------- -----------------
<S> <C> <C> <C>
Common Marukin Corporation(bb) 5,471,617 6.0%

</TABLE>

- ----------------------
(aa) 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.

(bb) 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.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (a) PERCENT OF CLASS (b)
- -------------- ---------------------------- ------------------------- -------------------
<S> <C> <C> <C>
Common Douglas P. Boyd 2,065,177(c) 2.3%
Common Gary H. Brooks 157,797(d) *
Common John L. Couch 34,625(e) *
Common William J. McDaniel, M.D. 82,500(f) *
Common S. Lewis Meyer 629,058(g) *
Common Terry Ross 132,500(h) *
Common Aldo Test 126,250(i) *
Common All Directors and 3,196,657(j) 3.5%
Executive Officers as a Group

- -----------------------
* Does not exceed 1% of the referenced class of securities.

(a) Ownership is direct unless indicated otherwise.

(b) Calculation based on 90,503,777 shares of Common Stock outstanding as of
March 31,1999.

(c) Includes 2,055,801 shares owned directly and 9,376 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1999 or that
will become exercisable within 60 days thereafter.

(d) Includes 121,547 shares owned directly and 36,250 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1999 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, 1999 or that will become exercisable within 60
days thereafter.

(f) Includes 20,000 shares owned directly and 62,500 shares issuable upon the
exercise of stock options that are exercisable as of March 31, 1999 or that
will become exercisable within 60 days thereafter.

(g) Includes 616,558 shares owned directly and 12,500 shares issuable upon the
exercise of stock options exercisable as of March 31, 1999 or that will
become exercisable within 60 days thereafter.

(h) Includes 32,500 shares owned directly, 68,750 shares issuable upon the
exercise of stock options exercisable as of March 31, 1999 or that will
become exercisable within 60 days thereafter, and

<PAGE>

an additional 31,250 shares issuable upon the exercise of stock options
exercisable as of March 31, 1999 provided the shareholders approve the
increase in authorized shares issuable under the 1993 Stock Option Plan.

(i) Includes 20,000 shares owned directly and 106,250 shares issuable upon the
exercise of stock options exercisable as of March 31, 1999 or that will
become exercisable within 60 days thereafter.

(j) Percentage of beneficial ownership assumes the exercise of the aforesaid
options by officers and directors.

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 1998
(collectively referred to as the "Named Executive Officers"). Compensation data
is shown for the fiscal years ended December 31, 1998, 1997 and 1996. 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.

SUMMARY COMPENSATION TABLE

- -----------------------------------------------------------------------------------------------------------------
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 1998 182,000 -0- 75,008(c) 4,750
Chairman of the Board 1997 174,300 4,750
1996 166,000 4,700

S. Lewis Meyer 1998 234,000 -0- 100,000(c) 4,750
President and 1997 221,500 4,750
Chief Executive Officer 1996 211,000 4,750

Gary H. Brooks 1998 144,000 -0- 50,000(c) 4,320
Vice President and 1997 137,000 4,020
Chief Financial Officer 1996 131,000 40,000(d) 3,880

- -----------------------------------------------------------------------------------------------------------------
</TABLE>

(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 options granted by the Board of Directors on February 24, 1998 at
100% of the closing price of a share of Company stock on that date, and
subsequently repriced and regranted on October 23, 1998.

(d) Represents options granted in March 1996 under the Company's 1993 Stock
Option Plan.

<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 was
amended and restated by the Board in 1996, and is administered by the
Compensation Committee of the Board of Directors which presently consists of Mr.
Test and Admiral McDaniel. 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. The total number of shares of Common
Stock which may be issued under the Stock Bonus Plan will increase to 2,200,000
shares if approved by the shareholders. (SEE PROPOSAL FOUR OF THIS STATEMENT.)

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 1998 fiscal year 285,250 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 Named 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, which number will increase to
2,300,000 if approved by the shareholders. (SEE PROPOSAL THREE OF THIS
STATEMENT.) 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 April 30, 1999, 76,398 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 ran through June
30,

<PAGE>

1998. The third Offering Period began July 1, 1998 and runs through September
30, 2000. Each Interim Offering Period is a calendar quarter. As of April 30,
1999, a total of 176 employees met the eligibility requirements under the Plan.

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, which number will
increase to 11,500,000 shares if approved by the shareholders. (SEE PROPOSAL TWO
OF THIS STATEMENT.) 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

<PAGE>

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.

Options may be granted under the Option Plan to all full-time regular
employees including officers, directors (if 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 30, 1999 approximately 176
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 in sixteenths, one-sixteenth each quarter
of a year 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%($)(C)
- ------ ---------- ----------- ------------ -------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>

Douglas P. Boyd 75,008 6% $1.50(b) $1.50(b) 10/23/08(b) -0- 45,800

Gary H. Brooks 50,000 4% $1.50(b) $1.50(b) 10/23/08(b) -0- 30,500

S. Lewis Meyer 100,000 8% $1.50(b) $1.50(b) 10/23/08(b) -0- 61,100

- ---------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Based on 1,254,176 options granted to all employees.

(b) Ten-year options were granted on February 24, 1998 with an exercise price
of $2.56, which was 100% of the market price of the stock on that date. On
October 23, 1998, all of those options were cancelled, regranted and
repriced with an exercise price of $1.50, which was 100% of the market
price of the stock on October 23, 1998.

(c) 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).

<PAGE>

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:

Aggregated Options Exercised and Option Values in Fiscal Year 1998

<TABLE>
<CAPTION>
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 225,000 $377,250 0/75,008 0/0

S. Lewis Meyer 600,000 $1,200,000 0/100,000 0/0

Gary H. Brooks 100,000 $75,500 27,500/62,500 0/0
</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
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:

o Link rewards to business results and stockholder returns;
o Encourage creation of stockholder value and achievement of
strategic objectives;
o Maintain an appropriate balance between base salary and short-and
long-term incentive opportunity;
o Attract and retain, on a long-term basis, highly qualified
executive personnel; and
o 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.

<PAGE>

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.

CASH BONUS PROGRAM. From time to time, the Committee adopts an Executive
Officer Cash Bonus Program, pursuant to which executive officers are eligible to
receive a bonus from a pool consisting of a set percentage of net profits from
that particular fiscal year. The Committee allocates to each executive officer a
percentage of the bonus pool. For the year 1998 the Committee did not adopt a
Cash Bonus Program, and no cash bonus awards were made to any executive officer
during 1998.

STOCK BONUS INCENTIVE PLAN. In 1988 the shareholders approved the adoption
of the 1987 Stock Bonus Incentive Plan, which was subsequently updated and
amended in 1996. 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. During 1998, the Compensation Committee awarded
75,008, 100,000 and 50,000 options to the Chairman, the Chief Executive Officer
and the Chief Financial Officer, respectively, as set forth on the above chart.

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, which number
will increase to 11,500,000 shares if approved by the shareholders. (SEE
PROPOSAL TWO OF THIS STATEMENT.) 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.

1998 COMPENSATION. Total revenue, net product revenue, scanner shipments
and total assets for the year ended December 31, 1998 decreased from the prior
fiscal year. HeartScan Imaging, Inc., the

<PAGE>

Company's majority-owned subsidiary, sustained losses, albeit substantially less
than those sustained during the prior fiscal year. Nevertheless, compensation
levels during 1998 were principally driven by a highly competitive market in San
Francisco - Silicon Valley, particularly for personnel with engineering and
technical training. As a consequence, compensation for such personnel increased
approximately 3% to 5%. Based on the Company's performance, the Board awarded no
cash or stock bonuses and only modest cost-of-living salary increases during the
year to the Named Executive Officers. Stock Options were granted to the Named
Executive Officers, as well as to other employees of the Company, based on the
employee's level of responsibility and other factors.

Effective January 1, 1999, at the recommendation of the Chief Executive
Officer, the Board adopted a freeze on the base salaries of all executive
officers, including the Chief Executive Officer. The salary freeze will remain
in effect until the Company achieves profitability or the Board otherwise
determines that such action should be revised or terminated.

1998 CHIEF EXECUTIVE OFFICER COMPENSATION

On March 1, 1996 Mr. Meyer's base salary was increased from $195,000 to
$205,000. Effective January 1, 1997 his base salary was increased to $215,250.
Effective March 1, 1998, it was increased to $228,000. All of these adjustments
reflect modest cost of living increases. 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

William McDaniel
Aldo Test

<PAGE>

- --------------------------------------------------------------------------------

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

YEAR 1993 1994 1995 1996 1997 1998
- --------------- ----- ----- ----- ----- ----- -----
Imatron Inc. 100 219 400 663 463 275
NASDAQ Stock Market 100 98 138 170 209 293
H&Q Technology Index 100 120 180 223 262 407

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

<PAGE>

rolling six month periods thereafter (filed as Exhibit 10.65 to Annual Report on
Form 10-K for 1993.) Pursuant to the agreement, in the event of his termination,
Mr. Meyer is entitled to receive six months of compensation at the annual salary
rate then in effect.

Terry Ross was appointed President of the Company effective January 1,
1999. In connection with his employment, the Company and he have an
understanding that if his employment terminates within the first twenty-four
months of employment for any reason other than termination for cause or
voluntary resignation, he will be entitled to: salary and benefits that would
have been payable for the greater of twelve months or the then balance from the
termination date to twenty-four months; immediate vesting of options and
warrants granted in connection with his employment; and an exercise period
regarding those options and warrants of two years from the date of termination.

In April 1999, Mr. Ross and the Company entered an agreement pursuant to
which Mr. Ross loaned the Company $2 million on a short term basis at 10%
interest. By the terms of the agreement, the Company will convert the repayment
of principal and, at Mr. Ross's option, interest into Company securities on
terms and conditions comparable to those contained in the Company's next equity
financing.

REPORT ON REPRICING OF OPTIONS/SARS

Effective February 24, 1998, the Compensation Committee of the Board of
Directors repriced all options previously granted to employees pursuant to the
Company's 1993 Stock Option Plan to the lesser of the actual grant price or 100%
of the closing price of a price of the Company's common stock on that date,
which price was subsequently determined to be $2.56. This repricing applied to
all employees equally, including Named Executive Officers, to the extent that
they held options previously granted under the 1993 Plan. Pursuant to this
repricing, the Company repriced 760,597 options previously granted to employees.
None of the repriced options was held by Named Executive Officers.

Thereafter, effective October 23, 1998, the Board of Directors approved a
resolution pursuant to which all optionholders, including Named Executive
Officers, were given the option of returning to the Company any outstanding
option having an exercise price of greater than $1.50 for cancellation and
repricing at $1.50, which was 100% of the closing price of a share of the
Company's common stock as of that date. Pursuant to this repricing, the Company
cancelled and regranted 1,158,992 options previously granted to employees, of
which 100,000, 75,008 and 50,000 respectively were granted to Messrs. Meyer,
Boyd and Brooks. Pursuant to the October 23, 1998 repricing option, the vesting
schedule with respect to any options cancelled and thereupon regranted for a ten
year term at an exercise price of $1.50 began anew with a new original grant
date of October 23, 1998.

TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE EXERCISE
UNDER OF STOCK PRICE NEW LENGTH OF
OPTIONS AT TIME OF AT TIME OF EXERCISE ORIGINAL
NAME DATE REPRICED REPRICING REPRICING PRICE ($) OPTION TERM
- ------ ----- ----------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Boyd, 10/23/98 75,008 $1.50 $2.56 $1.50 2/24/08
Chairman

S. Lewis Meyer, 10/23/98 100,000 $1.50 $2.56 $1.50 2/24/08
Chief Executive
Officer

Gary H. Brooks, 10/23/98 50,000 $1.50 $2.56 $1.50 2/24/98
Chief Financial
Officer
</TABLE>

<PAGE>

The basis of the regrant to all employees, including to the above Named
Executive Officers, was the opinion of the Compensation Committee that this
method provided employees with the greatest amount of incentive to increase the
value of the Company.

Aldo Test
William McDaniel

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
16(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 four reports were not
timely filed. Gary H. Brooks, Chief Financial Officer was one month late filing
a Form 4 beneficial ownership report, reflecting the exercise of options granted
in an exempt transaction; and Douglas P. Boyd, S. Lewis Meyer and Mr. Brooks
were each late filing a Form 5 beneficial ownership report reflecting the
cancellation and regrant of options granted in exempt transactions.

PROPOSAL TWO
TO APPROVE THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE
ISSUED PURSUANT TO THE 1993 EMPLOYEE STOCK OPTION PLAN

The following is a summary of the material features of the 1993 Employee
Stock Option Plan, including the amendments for which shareholder approval is
being requested ("Stock Option Plan").

PROPOSAL

In March 1999 the Board of Directors amended the 1993 Employee Stock Option
Plan to increase the number of shares authorized to be issued pursuant to the
Stock Option Plan from 5,500,000 common shares to 11,500,000 common shares. The
remaining provisions of the Stock Option Plan remain unchanged. At the annual
meeting the shareholders are being requested to consider and approve the
increase in the number of shares authorized to be issued pursuant to the Plan to
11,500,000 common shares. The affirmative vote of the holders of a majority of
the shares represented and voting at the meeting is required for approval.

MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL TWO

The essential features of the 1993 Employee Stock Option Plan, with the
amendment for which approval is being sought, are outlined below.

PURPOSE

The purposes of the 1993 Employee Stock Option Plan are to induce persons
of outstanding ability and potential to join and remain with the Company, to
provide incentive for such employees and non-employee consultants to expand and
improve the profits and prosperity of the Company,

<PAGE>

and to attract and retain key personnel. The Stock Option Plan provides for the
granting of both incentive stock options and nonqualified stock options.

ELIGIBILITY

Options may be granted under the Stock Option Plan to all employees,
including officers and directors, and to non-employee consultants of the
Company; provided however that incentive stock options may be granted only to
employees. Directors who are not employees of the Company are not eligible to
participate in the Stock Option Plan.

ADMINISTRATION

Administration of the Stock Option Plan is by a Stock Option Plan Committee
comprised of at least three disinterested members of the Board. The Committee
has the power to: grant options; determine the option price and term of each
option, the persons to whom and the time or times at which options shall be
granted, and the number of shares to be subject to each option; interpret the
Stock Option Plan; prescribe rules and regulations relating to the Stock Option
Plan; and make all other determinations deemed necessary or advisable for the
administration of the Stock Option Plan. The Committee also has the authority to
offer participants the opportunity to replace outstanding higher priced options
with new lower priced options. The Company has reduced the exercise price of
options in the past. Members of the Committee will receive no compensation for
their services in connection with the administration of the Stock Option Plan.

OPTION TERMS

The maximum term of each option is ten years except that, in the case of a
participant who owns stock possessing more than ten percent of the voting rights
of the Company's outstanding capital stock (a "10% Holder"), the maximum term of
an incentive stock option is five years. Options granted under the Plan must
vest at a rate no less than 20% each year over five years from the grant date,
although the vesting schedule may be more rapid. Options granted under the Plan
are not transferable other than by will or the laws of descent and distribution,
and during an optionee's life are exercisable only by the optionee. Options
granted under the Plan generally terminate three months after the optionee
ceases to be employed by the Company, a parent or subsidiary, except if
termination is due to the employee's permanent and total disability, in which
event the option may be exercised within a year of terminantion. In the event of
the employee's death, the employee's estate has 18 months to exercise the
option.

EXERCISE PRICE

The exercise price of all nonstatutory stock options granted under the Plan
must be at least equal to 85% of the fair market value of the underlying stock
on the grant date, or 110% of fair market value in the case of a 10% Holder. The
exercise price of all incentive stock options granted under the Plan must be at
least equal to the fair market value of the underlying stock on the grant date,
or 110% of fair market value in the case of a 10% Holder. With respect to
incentive stock options, the aggregate fair market value (determined at the time
of grant) of stock which becomes exercisable for the first time in any year
cannot exceed $100,000. The Plan permits the exercise of options for cash or
stock, other consideration acceptable to the Committee, or pursuant to a
deferred payment arrangement.

<PAGE>

CHANGES IN STOCK AND EFFECT OF CERTAIN CORPORATE EVENTS

If there is any change in the Common Stock subject to the Stock Option Plan
or subject to any option granted under the Plan, whether through merger,
consolidation, reorganization, recapitalization, dividend or otherwise, the Plan
provides that an appropriate adjustment be made by the Committee to the
aggregate number of shares subject to the Plan and the number of shares and the
price per share of stock subject to outstanding options.

In the event of dissolution, liquidation or specified types of merger of
the Company, the options granted under the Plan accelerate and become
exercisable immediately prior to such merger or consolidation, unless the
surviving entity assumes the outstanding options or substitutes similar options.

AMENDMENT AND TERMINATION

The Board of Directors may amend or terminate the Stock Option Plan at any
time, except that any amendment which would (i) increase the aggregate number of
shares of common stock issued under the Plan, or (ii) materially increase the
benefits accruing to participants, or (iii) materially modify the eligibility
requirements will only be effective if approved by the Company's shareholders
within 12 months before or after adoption. Unless terminated earlier, the Plan
will terminate on February 23, 2003.

FEDERAL INCOME TAX CONSEQUENCES

Incentive stock options granted under the Stock Option Plan are intended to
be eligible for the favorable income tax treatment accorded incentive stock
options under Section 422 of the Internal Revenue Code. Nonqualified stock
options granted under the 1993 Plan are subject to federal income tax treatment
pursuant to rules governing options that are not incentive stock options.

INCENTIVE STOCK OPTIONS. There are generally no federal income tax
consequences to the optionee by reason of the grant or exercise of an incentive
stock option. The exercise of an incentive stock option may increase the
optionee's alternative minimum tax liability, if any, however.

If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be capital gain or loss. Any capital gain or loss realized by an
optionee on a qualifying or disqualifying (see below) disposition of stock
acquired through exercise of an incentive, stock option will be long-term or
short-term depending on whether the stock was held for more than one year.
Generally, if the optionee disposes of the stock before the expiration of either
of the holding periods described above (a "disqualifying disposition"), at the
time of disposition the optionee will realize taxable ordinary income equal to
the lesser of (i) the excess of the stock's fair market value on the date of
exercise over the optionee's adjusted basis in the stock, or (ii) the optionee's
actual gain, if any, on the purchase and sale. Any additional gain or any loss
upon the disqualifying disposition will be capital gain or loss. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.

There are no federal income tax consequences to the Company by reason of
the grant or exercise of an incentive stock option. To the extent the optionee
recognizes ordinary income by reason of a disqualifying disposition, the Company
will be entitled (subject to the requirement of reasonableness and, perhaps, in
the future, the satisfaction of its withholding obligation) to a corresponding
business expense deduction in the tax year in which the disposition occurs.

NONQUALIFIED STOCK OPTIONS. There are normally no tax consequences to the
optionee or the Company by reason of the grant of a nonqualified stock option.
Upon exercise of a nonqualified stock option, the optionee normally recognizes
ordinary income in an amount by which the fair market

<PAGE>

value of the stock on the date of exercise exceeds the exercise price. Generally
with respect to employees, the Company is required to withhold from wages an
amount based on the ordinary income realized by the exercise. Subject to the
reasonableness requirement and the satisfaction of its withholding obligation,
the Company will be entitled to a business expense deduction in the amount of
the taxable ordinary income recognized by the optionee.

Upon disposition of the stock, the optionee will recognize a capital gain
or loss equal to the difference between the selling price and the sum of the
amount paid for such shares plus any amount recognized as ordinary income upon
exercise of the option. Such gain or loss will be long or short-term depending
on whether the stock was held for more than one year. Slightly different rules
apply to optionees who acquire stock subject to certain repurchase options or
who are subject to Section 16(b) of the Exchange Act.

There are no tax consequences to the Company by reason of the disposition
of stock acquired upon exercise of a nonqualified option.

USE OF PROCEEDS

All proceeds from the sale of shares pursuant to options granted under the
1993 Plan constitute general funds of the Company

INDEMNIFICATION OF COMMITTEE

Under the terms of the 1993 Plan, members of the Committee are entitled to
be indemnified by the Company against costs and expenses reasonably incurred in
connection with any action or proceeding brought by reason of their action or
failure to act under or in connection with the 1993 Plan or any rights granted
thereunder.

PROPOSAL THREE
TO APPROVE THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE
ISSUED PURSUANT TO THE 1994 EMPLOYEE STOCK PURCHASE PLAN

The following is a summary of the material features of the 1994 Employee
Stock Purchase Plan ("Stock Purchase Plan"), including amendments for which
shareholder approval is being requested.

PROPOSAL

In March 1999 the Board of Directors amended the Employee Stock Purchase
Plan to increase the number of shares authorized to be issued pursuant to the
Plan from 1,800,000 common shares to 2,300,000 common shares. The remaining
provisions of the Stock Purchase Plan remain unchanged. At the annual meeting
the shareholders are being requested to consider and approve the increase in the
number of shares authorized to be issued pursuant to the Plan to 2,300,000
common shares. The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting is required for approval.

MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL THREE

The essential features of the 1994 Stock Purchase Plan, including the
amendment for which approval is being sought, are outlined below.

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PURPOSE

The purpose of the Stock Purchase Plan is to provide eligible employees
with an opportunity through regular payroll deductions to purchase common stock
of the Company in order to increase their proprietary interest in the Company.

ELIGIBILITY

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 ran from January 1, 1994 through March 31,
1996, the second from April 1, 1996 through June 30, 1998 and the current period
from July 1, 1998 through September 30, 2000. Each Interim Offering Period is a
calendar quarter.

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
of $10,000 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

PURCHASE PRICE

PROCEDURES

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
annually for all shares purchased during that year. 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.

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PLAN AMENDMENT AND TERMINATION

PROPOSAL FOUR
TO APPROVE THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE
ISSUED PURSUANT TO THE 1987 EMPLOYEE STOCK BONUS INCENTIVE PLAN

The following is a summary of the material features of the 1987 Employee
Stock Bonus Incentive Plan, as amended ("Stock Bonus Plan"), including
amendments for which shareholder approval is being requested.

PROPOSAL

In May 1987 the Company adopted the 1987 Stock Bonus Incentive Plan ("Stock
Bonus Plan") to enable the Company to award stock bonuses to select employees as
a reward for past services and to encourage them to remain with the Company. The
shareholders approved the Stock Bonus Plan in 1988. In October 1996 the Company
amended and restated the Stock Bonus Plan, deregistered all unsold shares of
common stock issuable under the Plan and filed a new registration statement as
to such unsold shares. On March 26, 1999 the Board amended the Stock Bonus Plan
to increase the number of shares authorized to be issued pursuant to the Plan
from 1,200,000 common shares to 2,200,000 common shares, with no more than
400,000 shares available for issuance in any single calendar year. The remaining
provisions of the Stock Bonus Plan remain unchanged from the 1996 amendments. At
the annual meeting the shareholders are being requested to consider and approve
the increase in the number of shares authorized to be issued pursuant to the
Plan to 2,200,000 common shares. The affirmative vote of the holders of a
majority of the shares represented and voting at the meeting is required for
approval.

MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL FOUR

PURPOSE

The purpose of the Stock Bonus Plan is to enable the Company to reward past
services of selected employees with bonuses consisting of common stock and to
encourage them to remain in the Company's service, as well as to provide the
Company with a valuable tool for recruitment and retention of employees of
outstanding ability.

ADMINISTRATION

The Plan is administered by the Compensation Committee of the Board of
Directors, which determines the meaning and application of the Plan's
provisions, selects employees, including officers, and consultants who
participate; determines each participant's stock bonus award; waives or changes
any of the Plan's conditions; adopts or amends rules and guidelines relating to
the Plan; and takes other actions deemed necessary to administer the Plan.

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ELIGIBILITY

Any consultant or employee currently providing services is eligible to
receive a bonus. The Committee selects participants whom it believes are in a
position to contribute materially to the attainment of the Company's goals and
objectives. Actual awards are made to reward participants for helping the
Company meet annual business plan goals through a high level of goal oriented
performance which exceeds that normally expected for which the participant is
regularly paid a salary.

BONUS AWARDS

Participants are eligible to receive up to a maximum bonus of 40% of the
participant's salary. The Committee determines any participant's actual stock
bonus award (if any). Participants receiving stock valued at less than $3,000
are issued stock as soon as practicable following the award. Bonuses of stock
valued at greater than that amount are issued within 60 days thereafter.
Distributions of bonus shares are made from authorized but unissued shares.
Participants must be currently employed or providing consulting service to the
Company at the time of the bonus award.

SHARES SUBJECT TO THE PLAN

The total number of shares of the Company's common stock which may be
issued under the Plan may not exceed 2,200,000 shares, subject to stock split,
recapitalization or similar change in corporate structure. In no event may the
Company make more than 400,000 shares per year available for issuance pursuant
to bonus awards in any fiscal year.

PROPOSAL FIVE
TO APPROVE THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE
ISSUED PURSUANT TO THE 1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

The following is a summary of the material features of the 1998 Amended and
Restated Non-Employee Directors' Stock Option Plan ("Restated Directors' Plan"),
including the amendment for which shareholder approval is being sought.

PROPOSAL

In March 1999 the Board of Directors amended Restated Directors' Plan to
increase the number of shares authorized to be issued pursuant to the Restated
Directors' Plan from 1,000,000 common shares to 1,500,000 common shares; to
increase the number of shares granted in the Initial Option to each newly
elected eligible director from 25,000 common shares to 40,000 common shares; and
to increase the number of shares granted in the annual option to each eligible
director from 25,000 common shares to 40,000 common shares. The remaining
provisions of the Restated Directors' Plan remain unchanged. At the annual
meeting the shareholders are being requested to consider and approve the
increase in the number of shares authorized: to be issued pursuant to the Plan
to 1,500,000 common shares; to be granted in the Initial Option to each newly
elected eligible director to 40,000; and to be granted to each eligible director
in each annual option to 40,000 shares. The affirmative vote of the holders of a
majority of the shares represented and voting at the meeting is required for
approval.

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MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL FIVE

PURPOSE

The purpose of the 1998 Restated Directors' Plan is to provide a means by
which each non-employee director of the Company is given an opportunity to
purchase stock, in turn assisting the Company in securing and retaining the
services of persons capable of serving in such capacity, and to provide
incentive to such persons to exert maximum efforts for the success of the
Company.

ADMINISTRATION

The Restated Directors' Plan is administered by the Company's Board of
Directors. The Board is authorized to delegate administration of the Directors'
Plan to a committee composed of at least three members of the Board.

SHARES SUBJECT TO THE DIRECTORS' PLAN

Subject to the provisions of the Restated Directors' Plan relating to
adjustments upon changes in stock, the stock that may be purchased pursuant to
options granted under the Directors' Plan, as amended, cannot exceed an
aggregate of 1,500,000 shares of the Company's Common Stock. If any option
granted under the Directors' Plan expires for any reason or otherwise terminates
without having been exercised in full, the stock not purchased under such option
again becomes available for the Directors' Plan.

ELIGIBILITY

Options under the Restated Directors' Plan may be granted only to directors
of the Company who are not employees of the Company or any affiliate of the
Company.

AUTOMATIC GRANTS

The Restated Directors' Plan provides for the automatic grant of options to
purchase shares of Common Stock of the Company to Non-Employee Directors. The
Restated Directors' Plan provides that each person who is elected for the first
time to be a Non-Employee Director after the date of approval of the Plan by the
shareholders of the Company (and who has not previously been an employee of the
Company) shall, upon the date of his or her initial election, automatically be
granted an option to purchase 40,000 shares of the Company's Common Stock.

The Restated Directors' Plan also provides that every Non-Employee Director
shall be granted an option to purchase 40,000 shares on January 1st of each year
if such Non-Employee Director has served continuously as such for at least the
immediately preceding thirty (30) days.

TERMS OF OPTIONS

TERM. Options under the Restated Directors' Plan have a ten year term;
however, each option will terminate on the last day of the three-month period
commencing on the date the Eligible Director ceases to be a member of the Board
for any reason other than death or total disability, in which case the option
may be exercised within 18 months following termination of such directorship.

EXERCISE PRICE; PAYMENT. The exercise price of each option under the
Restated Directors' Plan must be equal to 85% of the fair market value of the
stock on the grant date. The optionee may elect to pay the option price in cash,
certified check, bank draft or express money order.

<PAGE>

VESTING; OPTION EXERCISE. An option granted under the Restated Directors'
Plan vests pursuant to one of two schedules, determined by the Board at the time
of grant: (i) in full on the date of grant; or (ii) in four equal annual
installments commencing on the date one year after the grant date. Options
vesting in full on the grant date are subject to the Company's right to
repurchase at the original per share purchase price, which repurchase right
lapses at the rate of 25% per year starting with the first anniversary of the
Grant. The Company also has a repurchase right with respect to options granted
pursuant to either schedule if the service of a Non-Employee Director is
terminated for any reason other than death or total disability, which repurchase
right continues for 90 days after termination of service. If the Non-Employee
Director exercise his/her option after termination of services for any reason
other than death or total disability, the Company's repurchase right continues
for 90 days after the exercise.

RESTRICTIONS ON TRANSFER

An option under the Restated Directors' Plan is not transferable except by
will or by the laws of descent and distribution, and may be exercised during the
grantee's lifetime only by the grantee or by his/her guardian or legal
representative.

DURATION, AMENDMENT AND TERMINATION

The Board may amend, modify, revise or terminate the Restated Directors'
Plan at any time. Unless sooner terminated, the Restated Directors' Plan will
terminate ten years from the date the plan is approved by the shareholders of
the Company.

The Board may amend the Restated Directors' Plan from time to time.
However, any amendment must be approved by the vote of the shareholders of the
Company within twelve months before or after the adoption of the amendment,
where the amendment would modify the Restated Directors' Plan in any way if such
modification requires shareholder approval in order for the Restated Directors'
Plan to comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act or to prevent disqualification of the Restated Directors' Plan from
being "disinterested persons" within the meaning of Rule 16b-3. Rights and
obligations under any option granted before amendment of the Restated Directors'
Plan may not be altered or impaired by any amendment of the Restated Directors'
Plan, except with the consent of the person to whom the option was granted.

ADJUSTMENT PROVISIONS

If there is any change in the stock subject to the Restated Directors' Plan
or subject to any option granted under the Restated Directors' Plan (through
merger, consolidation, reorganization, recapitalization, stock dividend, or
other changes in the Company's capital structure or its business) the Restated
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to such plan
and the class, number of shares and price per share of stock subject to such
outstanding options. There is no provision for accelerated vesting in the event
of a dissolution, liquidation, merger or other capital reorganization of the
Company.

FEDERAL INCOME TAX INFORMATION

Options granted under the Restated Directors' Plan will be nonqualified
stock options. There are normally no tax consequences to the optionee or the
Company by reason of the grant of a nonqualified stock option. Upon exercise of
such option, the optionee normally recognizes ordinary income in an amount by
which the fair market value of the stock on the date of exercise exceeds the
exercise price. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such shares plus any

<PAGE>

amount recognized as ordinary income on exercise of the option. There are no tax
consequences to the Company by reason of the disposition of stock acquired upon
exercise of a nonqualified option.

INDEMNIFICATION OF COMMITTEE

Under the terms of the Restated Directors' Plan, members of the Committee
are entitled to be indemnified by the Company against costs and expenses
reasonably incurred in connection with any action or proceeding brought by
reason of their action or failure to act under or in connection with the
Restated Directors' Plan or any rights granted thereunder.

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG Peat Marwick LLP has served as the Company's independent auditor for
the year ended December 31, 1998. Representatives of KPMG Peat Marwick LLP are
expected to be present at the annual meeting, 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 17, 1999

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IMATRON INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS JUNE 18, 1999
Douglas P. Boyd and S. Lewis Meyer, or either of them, each with the
power of substitution and revocation, are hereby authorized to represent the
undersigned with all powers which the undersigned would possess if personally
present, to vote the securities of the undersigned at the annual meeting of
shareholders of IMATRON INC. to be held at the Embassy Suites Hotel, 250 Gateway
Boulevard, South San Francisco, California, at 10:00 a.m. local time on Friday,
June 18, 1999, and at any postponements or adjournments of that meeting as set
forth below, and in their discretion upon any other business that may properly
come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS AN AFFIRMATIVE VOTE FOR PROPOSALS ONE THROUGH
FIVE:
1. To elect directors to hold office until the 2000 annual meeting of
shareholders or until their successors are elected.

[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked below) to vote for all nominees
listed below
Douglas P. Boyd William J. McDaniel Terry Ross
John L. Couch S. Lewis Meyer Aldo Test
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE THAT NOMINEE'S NAME FROM
THE LIST ABOVE:

- --------------------------------------------------------------------------------
2. To approve the increase in the number of shares authorized to be issued
pursuant to the 1993 Employee Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the increase in the number of shares authorized to be issued
pursuant to the 1994 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve the increase in the number of shares authorized to be issued
pursuant to the 1987 Stock Bonus Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve the increase in the number of shares authorized to be issued
pursuant to the 1998 Amended and Restated Non-Employee Directors' Stock
Option Plan and to approve the increase in the number of shares granted
thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(cont. on reverse side)

<PAGE>

The undersigned hereby acknowledges receipt of (a) Notice of Annual Meeting
of Shareholders to be held June 18, 1999, (b) the accompanying Proxy Statement,
and (c) the annual report of the Company for the year ended December 31, 1998.
If no specification is made, this proxy will be voted FOR proposals one through
five.

Date:_____________________, 1999

--------------------------------

--------------------------------
Please sign exactly as signature
appears at left. Executors,
administrators, traders,
guardians, attorneys-in-fact,
etc. should give their full
titles. If signer is a
corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If a partnership, please
sign in partnership name by
authorized person. If stock is
registered in two names, both
should sign.