IMATRON
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
----------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1999
----------
TO THE SHAREHOLDERS OF IMATRON INC:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Imatron Inc. (the "Company") will be held at the Company's
headquarters at 389 Oyster Point Boulevard, South San Francisco, California on
October 29, 1999 at 9:00 a.m. for the following purposes:
1. To ratify the sale of securities to the Company's President in a
private placement transaction.
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of the Common Stock as of the close of business on Friday,
September 17, 1999 are entitled to notice of and to vote at the Special Meeting
or any adjournments thereof.
By Order of the Board of Directors,
/s/ S. Lewis Meyer
------------------
S. Lewis Meyer
Chief Executive Officer
South San Francisco, California
September 27, 1999
- --------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS
SOON AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR
THAT PURPOSE. ANY SHAREHOLDER ATTENDING THE MEETING MAY
VOTE IN PERSON EVEN IF SUCH SHAREHOLDER PREVIOUSLY SIGNED
AND RETURNED A PROXY.
- --------------------------------------------------------------------------------
<PAGE>
IMATRON
389 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
----------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1999
----------
This Proxy Statement is being furnished to the holders of the Common Stock,
no par value per share (the "Common Stock"), of Imatron Inc. (the "Company") in
connection with the solicitation of proxies on behalf of the Board of Directors
of the Company for use at the special meeting (the "Special Meeting") of
shareholders of the Company to be held for the purposes described herein, and at
any adjournment or postponements thereof. This Proxy Statement and the
accompanying form of proxy are first being mailed to shareholders on or about
September 27, 1999.
INFORMATION CONCERNING SOLICITATION AND VOTING
VOTING SECURITIES; RECORD DATE
Only holders of the Common Stock as of the close of business on September
17, 1999 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting or any adjournments thereof, either in person or by proxy. At
the close of business on the Record Date, there were 94,957,051 shares of
Imatron Common Stock outstanding, each of which is entitled to one vote on each
matter properly coming before the Special Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Mere attendance at
the Annual Meeting will not serve to revoke a proxy.
QUORUM; ABSTENSIONS AND BROKER NON-VOTES
Holders of Common Stock are entitled to one vote for each share of Common
Stock held. In order to constitute a quorum for conduct of business at the
Special Meeting, a majority of the shares of Common Stock outstanding on the
Record Date must be represented in person or by proxy at the Special Meeting.
Votes cast by proxy or in person at the Special Meeting will be tabulated by the
election inspectors appointed for the meeting who will determine whether or not
a quorum is present. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters.
While brokers holding shares for beneficial owners in "street name" must
vote those shares according to specific instructions they receive from the
owners, brokers have discretionary authority to vote on "routine" matters.
Absent specific instructions from the beneficial owners in the case of
"non-routine" matters, the brokers may not vote the shares. "Broker non-votes"
result when brokers are precluded from exercising their discretion on certain
types of proposals. Proposal 1, ratification
<PAGE>
of the sale of securities to the Company's President (the "Transaction
Proposal") is considered a non-routine matter whereas Proposal 2, ratification
of the Company's accountants (the "Accountants Proposal") is considered routine.
Shares that are voted by brokers on the Accountants Proposal but not the
Transaction Proposal will be treated as shares present for purposes of
determining the presence of a quorum on both matters, but will not be treated as
shares entitled to vote at the Special Meeting on the Transaction Proposal if
instructions to vote have not been provided by the owner. Therefore, a properly
executed proxy marked "ABSTAIN" (or an abstention at the Special Meeting) and
shares represented by broker non-votes will be counted for purposes of
determining whether there is a quorum at the Special Meeting but will have no
effect on the ratification of the Transaction Proposal.
SOLICITATION
The Company will bear the entire cost of soliciting proxies from its
shareholders, including preparation, assembly, printing and mailing of this
Proxy Statement, the proxy card and any additional information furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
facsimile, telegram or personal solicitation by representatives of the Company.
No additional compensation will be paid to such persons for such services. The
Company has also retained the firm of DF King & Co., Inc. to assist in the
solicitation of proxies at a cost of approximately $7,500 plus reasonable
out-of-pocket expenses.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders that are intended to be presented at the
Company's 2000 Annual Meeting 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 the meeting.
PROPOSAL 1
RATIFICATION OF SALE OF SECURITIES TO THE COMPANY'S PRESIDENT
BACKGROUND
The Company is soliciting the ratification of a sale of its securities to
its President, Terry Ross (the "Transaction"). Shareholder ratification is
necessary in order to comply with the listing requirements of the NASDAQ Stock
Market. NASDAQ regulations generally require shareholder approval of
arrangements pursuant to which the Company's officers or directors receive
Company securities, unless the securities are granted as an inducement to
acceptance of employment with the Company. Since the Transaction described below
occurred while Mr. Ross was both an officer and a director of the Company, the
Company is now seeking shareholder ratification of such Transaction.
DESCRIPTION OF TRANSACTION
On August 10, 1999, the Company announced the completion of a $3,025,000
private placement to Terry Ross, Imatron's President. In connection with the
sale, made in part pursuant to agreements previously entered into, Imatron
issued 3,767,713 shares of Common Stock, 360,000 5-year warrants to purchase its
Common Stock at $1.044 per share, and 2,991,027 1-year warrants to purchase its
Common Stock at $1.003. The aggregate purchase price for the stock and the
warrants was $3,025,000. The terms were negotiated at arms length and were
approved by the Company's Board of Directors and by its Audit Committee. The
purchase price per share was $0.84 and was determined based on a 10% discount
from the 10 day average closing bid price for the Company's Common Stock during
the period from May 5, 1999 through May 17, 1999. The terms agreed upon
2
<PAGE>
with Mr. Ross were substantially equivalent to those agreed upon with an
institutional investor for an investment of a similar amount. When the
institutional investor failed to close the agreed upon financing, the same terms
were offered to Mr. Ross who accepted them. The Company's Board believes the
terms are fair and reasonable as to the Company. The Common Stock issued or
issuable to Mr. Ross is not entitled to preemptive rights. Pending approval of
the Transaction by Imatron's shareholders, Mr. Ross has agreed not to sell,
transfer, assign or vote the shares of Common Stock.
Imatron intends to use the proceeds from the Transaction for general
corporate purposes and working capital. Pursuant to the Securities Purchase
Agreement between the Company and Mr. Ross, the Company filed a Registration
Statement on Form S-3 covering the resale of the Common Stock issued or issuable
to Mr. Ross in the Transaction.
If the Company fails to comply with NASDAQ regulations, the Common
Stock may be delisted from the NASDAQ National Market System.
NAME & POSITION NUMBER OF SHARES
--------------- ----------------
Terry L. Ross, President and Director.....................7,118,740*
- ----------
* Includes 3,767,713 shares owned directly and 3,351,027 shares issuable upon
the exercise of warrants that are exercisable as of June 15, 1999
- --------------------------------------------------------------------------------
REQUIRED VOTE
Ratification of the Transaction requires the affirmative vote of the
holders of a majority of the shares of Common Stock voting in person or by proxy
on this proposal at the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE SALE OF SECURITIES TO THE COMPANY'S PRESIDENT
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected KPMG LLP, independent auditors, to audit the
financial statements of the Company for the fiscal year ending December 31,
1999. KPMG LLP has audited the Company's financial statements since 1997.
Representatives of KPMG LLP are expected to be present at the Special Meeting
and will have an opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock voting in person or by proxy on this proposal at the Special Meeting is
required to ratify the appointment of the independent auditors.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS
3
<PAGE>
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Terry Ross has been a director of the Company since January 1987 and was
appointed President on January 1, 1999. Prior to the Transaction Mr. Ross
beneficially owned 101,250 shares of the Company's Common Stock. If the
Transaction Proposal is ratified, Mr. Ross will beneficially own 7,444,990
shares, or approximately 7.5% of the Company's issued and outstanding shares of
Common Stock as of September 10, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, 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 September 10, 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. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares subject to options or warrants
held by that person that are currently exercisable or exercisable within 60 days
of September 10, 1999 are deemed outstanding. Applicable percentage ownership
for each shareholder is based on 94,933,749 shares outstanding as of September
10, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT(1)
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF DIRECT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(2) PERCENT OF CLASS(3)
- -------------- -------------------- ----------------------- ----------------
<S> <C> <C> <C>
Common Marukin Corporation(4) 5,471,617 5.8%
Common Douglas P. Boyd 2,074,553(5) 2.2%
Common John L. Couch 35,125(6) *
Common William J. McDaniel, M.D. 82,500(7) *
Common S. Lewis Meyer 644,158(8) *
Common Terry Ross 7,444,990(9) 7.5%
Common Aldo Test 126,250(10) *
Common All Directors and 10,407,576(11) 11.0%
Executive Officers as a Group
</TABLE>
- ----------
* Does not exceed 1% of the referenced class of securities.
(1) 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.
(2) Ownership is direct unless indicated otherwise.
(3) Calculation based on 94,933,749 shares of Common Stock outstanding as of
September 10,1999.
(4) Marukin Corporation, 6, Rokuban-Cho Chiyoda-Ku, Tokyo 10
(5) Includes 2,055,801 shares owned directly and 18,752 shares issuable upon
the exercise of stock options that are exercisable as of September 10,1999
or that will become exercisable within 60 days thereafter.
4
<PAGE>
(6) All shares are issuable upon the exercise of stock options that are
exercisable as of September 10,1999 or that will become exercisable within
60 days thereafter.
(7) Includes 20,000 shares owned directly and 62,500 shares issuable upon the
exercise of stock options that are exercisable as of September 10,1999 or
that will become exercisable within 60 days thereafter.
(8) Includes 619,158 shares owned directly and 25,000 shares issuable upon the
exercise of stock options exercisable as of September 10,1999 or that will
become exercisable within 60 days thereafter.
(9) Includes 3,844,163 shares owned directly, 150,000 shares issuable upon the
exercise of stock options and 3,451,027 shares issuable upon the exercise
of warrants, exercisable as of September 10,1999 or that will become
exercisable within 60 days thereafter.
(10) Includes 20,000 shares owned directly and 106,250 shares issuable upon the
exercise of stock options exercisable as of September 10,1999 or that will
become exercisable within 60 days thereafter.
(11) 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
$100,000 for services rendered in all capacities during fiscal year 1998
(collectively referred to as the "Named Executive Officers"), as well as Mr.
Ross, who was appointed President on January 1, 1999. Compensation data is shown
for the fiscal years ended December 31, 1998, 1997 and 1996 except for Mr. Ross,
for whom data is shown for the 1999 fiscal year to date. This information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted, and certain other compensation, if any, whether paid or
deferred.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(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 1997 174,300 4,750
Board 1996 166,000 4,700
S. Lewis Meyer 1998 234,000 -0- 100,000(c) 4,750
Chief Executive 1997 221,500 4,750
Officer 1996 211,000 75,000(d) 4,750
Gary H. Brooks 1998 144,000 -0- 50,000(c) 4,320
Vice President and 1997 137,000 4,020
Chief Financial 1996 131,000 40,000(e) 3,880
Officer (through
8/31/99)
Terry Ross 1998 -0-(f) -0- -0- -0-
President
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
(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 portion of a $75,000 bonus payable to Mr. Meyer upon
commencement of his employment with the Company.
(e) Represents options granted in March 1996 under the Company's 1993 Stock
Option Plan.
(f) Mr. Ross was appointed President on January 1, 1999. Pursuant to Mr. Ross'
employment agreement, he receives an annual base salary of $200,000 and an
annual commission in the amount of 0.5% of product and upgrade sales
revenue paid monthly.
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
Messrs. 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 2,200,000 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 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.
6
<PAGE>
The maximum aggregate number of shares to be offered under the Plan is
2,300,000 shares of the Company's Common Stock. The shareholders approved an
increase in the number of shares issuable under the Plan from 1,800,000 to
2,300,000 shares at the 1999 Annual Meeting. As of September 10, 1999, 1,631,972
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, 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
September 10, 1999, a total of 178 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) other-
7
<PAGE>
wise 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 11,500,000 shares of 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. 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 (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 September 10,
1999 190 employees 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:
Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
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%($) 5%($)
- ------ ---------- ----------- ------------ -------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas P. Boyd 75,008 6% (a) $1.50(b) $1.50(b) 10/23/08(b) -0- 45,800(c)
Gary H. Brooks 50,000 4% (a) $1.50(b) $1.50(b) 10/23/08(b) -0- 30,500(c)
S. Lewis Meyer 100,000 8% (a) $1.50(b) $1.50(b) 10/23/08(b) -0- 61,100(c)
Terry Ross 25,000 2% (a) $2.13(d) $2.13(d) 01/02/08(d) -0- 33,489(e)
</TABLE>
8
<PAGE>
- ----------
(a) Based on 1,254,176 options granted to all employees during the fiscal year
ended December 31, 1998.
(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).
(d) Ten-year options were granted to Mr. Ross on January 2, 1998 (while a
non-employee director) with an exercise price of $2.13 per share, which was
100% of the market price of the stock on that date.
As part of his employment contract dated January 5, 1999, Mr. Ross received
a ten-year option to purchase 300,000 shares of Common Stock at an exercise
price of $1.13 per share, 125,000 shares of which vest quarterly over the
first 12 months of employment, 125,000 shares of which vest quarterly over
the second 12 months of employment, and 50,000 shares of which vest
quarterly in the event Mr. Ross serves for a third 12 months of employment.
The options were granted as of January 1, 1999 with an exercise price of
$1.13, which was 100% of the market price of the stock on December 28,
1998. This represents 17% of the options granted to employees during fiscal
year 1999 through close of business on September 13, 1999. Based on the 10
year option term, the potential realizable value of Mr. Ross' option grant
is 62.8% (at 5% per year) and 159.3% (at 10% per year).
(e) Based on 10-year option term and annual compounding; results in total
appreciation of 62.8% (at 5% per year) and 159.3% (at 10% per year).
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth the options exercised during the last
fiscal year by Named Executive Officers of the Company:
Aggregated Options Exercised and Option Values in Fiscal Year 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY OPTIONS AT
OPTIONS AT YEAR-END (#) YEAR-END ($)
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 is 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.
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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.
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.
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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, and in 1999 an
increase to 11,500,000 shares was approved. 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 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.
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
Terry Ross (through 12/31/98)
Aldo Test
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
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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 includes 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
[GRAPH OMITTED]
- -------------------------------------------------------------------------
YEARS 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 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 became President of the Company on January 1, 1999. The Company
entered into a two-year employment agreement with Terry Ross dated January 5,
1999. The Agreement provides for an annual base salary of $200,000 and an annual
commission in the amount of 0.5% of product and upgrade sales revenue paid
monthly. Pursuant to the Agreement, Mr. Ross received (i) a warrant to purchase
200,000 shares of Common Stock at an exercise price of $1.375 per share, 100,000
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shares of which vest on the date 6 months after commencement of employment, with
the remaining 100,000 shares vesting on the date 12 months after employment
commences; and (ii) an option to purchase 300,000 shares of Common Stock at an
exercise price of $1.13 per share, 125,000 shares of which vest quarterly over
the first 12 months of employment, 125,000 shares of which vest quarterly over
the second 12 months of employment, and 50,000 shares of which vest quarterly in
the event Mr. Ross serves for a third 12 months of employment.
In connection with his employment, the Company and Mr. Ross have an
understanding that if his employment terminates within the first 24 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 24 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.
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
(through 8/31/99)
</TABLE>
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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 provide employees with the greatest amount of incentive to increase the
value of the Company.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Special
Meeting. If any other matters properly come before the Special Meeting, it is
the intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board may recommend.
South San Francisco, California
September 27, 1999
THE BOARD OF DIRECTORS
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APPENDIX A
FORM OF STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 16th day of
June, 1999 by and between IMATRON INC., a New Jersey corporation with principal
offices located at 389 Oyster Point Boulevard, South San Francisco, California
94080 ("Seller") and TERRY ROSS (the "Purchaser").
WHEREAS, Seller has authorized the issuance and sale of certain shares of
its common stock (the "Common Stock") and warrants to purchase its common stock
(the "Warrants") in exchange for certain consideration; and
WHEREAS, Purchaser desires to purchase and Seller desires to sell the
Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
the Seller and Purchaser hereby agree as follows:
AGREEMENT
1. PURCHASE AND SALE OF SHARES. Seller agrees to sell to Purchaser and upon
the basis of the representations and warranties, and subject to the terms and
conditions, set forth in this Agreement, Purchaser agrees to purchase for an
Aggregate Purchase Price equal to the following: (i) 3,767,713 shares of Common
Stock (the "Shares"); (ii) a five year warrant to purchase 360,000 shares of
Common Stock at $1.044; and (iii) a one year warrant to purchase 2,991,077
shares of Common Stock at $1.003 per share (collectively, the "Warrants"). The
forms of the Warrants are attached hereto as Exhibits A and B. The Shares and
the Warrants are hereinafter collectively referred to as the "Securities". The
Shares and the shares of Common Stock issuable upon exercise of the Warrants are
hereinafter referred to as the "Registrable Securities".
2. CLOSING. The closing of the purchase and sale of securities pursuant to
Section 1 hereof shall take place at the offices of Seller set forth in Section
12 below as soon as all of the conditions set forth in Section 6 below have been
satisfied. Within ten (10) business days following the Closing, Seller will
deliver to Purchaser certificates representing the Securities. Delivery of such
certificates shall be in accordance with Purchaser's instructions.
3. RESTRICTION ON TRANSFER OF SECURITIES.
3.1. RESTRICTIONS. The Shares are transferable only pursuant to (a) a
public offering registered under the Securities Act of 1933, as amended (the
"Securities Act"), (b) Rule 144 (or any similar rule then in effect) adopted
under the Securities Act, if such rule is available, and (c) subject to the
conditions elsewhere specified in this Section 4, any other legally available
means of transfer.
3.2. LEGEND. Each certificate representing Securities will be endorsed
with the following legend: "The securities evidenced hereby may not be
transferred without (i) the opinion of counsel satisfactory to the Company that
such transfer may be lawfully made without registration under the Securities Act
of 1933 and all applicable state securities laws or (ii) such registration."
3.3. STOP TRANSFER ORDER. A stop transfer order shall be placed with
the Seller's transfer agent preventing transfer of any of the securities
referred to in Section 3.2 above pending compliance with the conditions set
forth in any such legend.
3.4. REMOVAL OF LEGEND. Any legend endorsed on a certificate or
instrument evidencing a security pursuant to Section 3.2 hereof shall be
removed, and Seller shall issue a certificate or instrument without such legend
to the holder of such security, (a) in accordance with Section 3.2 hereof, (b)
if such security is being disposed of pursuant to registration under the
Securities Act and
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any applicable state acts or pursuant to Rule 144 or any similar rule then in
effect, or (c) if such holder provides Seller with an opinion of counsel
satisfactory to it to the effect that a sale, transfer, assignment, offer,
pledge or distribution for value of such security may be made without
registration and that such legend is not required to satisfy the applicable
exemption from registration.
4. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller represents and warrants
to Purchaser that:
4.1. ORGANIZATION, STANDING, POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has the requisite corporate power and authority to own its
properties and to carry on its business in all material respects as it is now
being conducted. Seller has, or at the Closing will have, the requisite
corporate power and authority to issue the Securities, and to otherwise perform
its obligations under this Agreement.
4.2. QUALIFICATION. Seller is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction wherein the nature of its
activities or of its properties owned or leased makes such qualification or
licensing necessary and failure to be so qualified or licensed would have a
material adverse impact on its business.
4.3. COMPLIANCE WITH APPLICABLE LAWS AND OTHER INSTRUMENTS.The
business and operations of Seller have been and are being conducted in
accordance with all applicable laws, rules and regulations of all governmental
authorities. Subject to shareholder approval of appropriate amendments to the
Articles of Incorporation as contemplated by this Agreement, and except with
respect to existing registration rights of holders of certain securities issued
by Seller, neither the execution nor delivery of, nor the performance of or
compliance with, this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or, with or without the giving of notice
or passage of time, result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any asset or property
of Seller pursuant to, any applicable law, administrative regulation or
judgment, order or decree of any court or governmental body, any agreement or
other instrument to which Seller is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Articles of Incorporation or Bylaws of Seller. Seller is not in violation of its
Articles of Incorporation or its Bylaws.
4.4. COMMON STOCK. The Shares, and the Common Stock issuable upon
exercise of the Warrants, when issued and paid for pursuant to the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants that:
5.1. INVESTMENT INTENT. The Securities being acquired hereunder are
being purchased for Purchaser's own account and not with the view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act. Purchaser understands that the Securities
have not been registered under the Securities Act or any applicable state laws
by reason of their issuance or contemplated issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Securities Act
and such laws and that the reliance of Seller and others upon this exemption is
predicated in part upon this representation and warranty. Purchaser further
understands that the Securities may not be transferred or resold without (a)
registration under the Securities Act and any applicable state securities laws
or (b) an exemption from the requirements of the Securities Act and applicable
state securities laws.
5.2. ACCREDITED INVESTOR. Purchaser qualifies as an accredited
investor within the meaning of Rule 501 under the Securities Act. Purchaser has
such knowledge and experience in financial and business matters that Purchaser
is capable of evaluating the merits and risks of the investment to be made
hereunder by Purchaser.
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5.3. ACTS AND PROCEEDINGS. This Agreement has been duly executed and
delivered by Purchaser, and is a valid and binding agreement upon the part of
Purchaser.
5.4. NO BROKERS OR FINDERS. No person, firm or corporation has or will
have, as a result of any act or omission by Purchaser, any right, interest or
valid claim against Seller for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement. Purchaser will indemnify and hold
Seller harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable as a result of the actions of Purchaser in connection with the
transactions contemplated by this Agreement.
6. CONDITIONS OF PURCHASER'S OBLIGATION. Purchaser's obligation to purchase
and pay for the Securities on the Closing Date is subject to the fulfillment
prior to or on the Closing Date of the conditions set forth below. In the event
that any such condition is not satisfied to Purchaser's satisfaction, then
Purchaser shall not be obligated to proceed with the purchase of such Shares nor
further with any of its obligations pursuant to this Agreement.
6.1. NO ERRORS. ETC. The representations and warranties of Seller
under this Agreement shall be true in all material respects as of the Closing
Date with the same effect as though made on and as of the Closing Date.
6.2. COMPLIANCE WITH AGREEMENT.Seller shall have performed and
complied in all material respects with all agreements or conditions required by
this Agreement to be performed and complied with by it prior to or as of the
Closing.
6.3. QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the Securities shall have been obtained.
6.4. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be satisfactory in form and
substance to Purchaser and its counsel.
7. CONDITIONS OF SELLER'S OBLIGATION. Seller's obligation to sell the
Securities to Purchaser on the Closing Date is subject to the fulfillment prior
to or on the Closing Date of the conditions set forth below. In the event that
any such condition is not satisfied, Seller shall not be obligated to proceed
with the sale of such Securities.
7.1. NO ERRORS, ETC. The representations and warranties of Purchaser
under this Agreement shall be true in all material respects as of the Closing
with the same effect as though made on and as of the Closing.
7.2. COMPLIANCE WITH CONDITIONS. Purchaser shall have performed and
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Closing.
8. SELLER AFFIRMATIVE COVENANTS. Seller covenants and agrees that:
8.1. CORPORATE EXISTENCE. Seller will maintain its corporate existence
in good standing and comply with all applicable laws and regulations of the
United States or of any state or states thereof or of any political subdivision
thereof and of any governmental authority where failure to so comply would have
a material adverse impact on Seller or its business or operations.
8.2. BOOKS OF ACCOUNT AND RESERVES. Seller will keep books of record
and account in which full, true and correct entries are made of all of its
respective dealings, business and affairs, in accordance with generally accepted
accounting principles. Seller will employ certified public accountants selected
by the Board who are "independent" within the meaning of the accounting
regulations of the Securities and Exchange Commission and will have annual
audits made by such independent public accountants in the course of which such
accountants shall make such exami-
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nations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of Seller that will satisfy the requirements of the Securities and
Exchange Commission in effect at such time with respect to certificates and
opinions of accountants.
8.3. FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. Seller will
deliver to Purchaser:
(a) as soon as practicable, but in any event within 45 days after
the close of each quarterly period, unaudited consolidated balance sheets of
Seller as of the end of such period, together with the related consolidated
statements of operations and cash flow for such period, setting forth the
budgeted figures for such period prepared and submitted in connection with
Seller's annual business plan and in comparative form figures for the
corresponding quarterly period of the previous fiscal year, all in reasonable
detail and certified by an authorized accounting officer of Seller, subject to
year-end adjustments;
(b) as soon as practicable, but in any event within 90 days after
the end of each fiscal year, a consolidated balance sheet of Seller as of the
end of such fiscal year, together with the related consolidated statements of
operations, shareholders' equity and cash flow for such fiscal year, setting
forth in comparative form figures for the previous fiscal year, all in
reasonable detail and duly certified by Seller's independent public accountants,
which accountants shall have given Seller an opinion, unqualified as to the
scope of the audit, regarding such statements; and
(c) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of Seller as is
available to Seller and as from time to time Purchaser may reasonably request.
9. REGISTRATION OF STOCK. The Company shall use its best efforts to file
with the SEC as promptly as practicable and thereafter shall use its best
efforts to cause to be declared effective by December 15, a "shelf" registration
statement on the appropriate form under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by Purchaser all
of the Registrable Securities, pursuant to Rule 415 or any similar rule that may
be adopted by the SEC (the "Shelf Registration"). The Company shall use its best
efforts to keep the Shelf Registration continuously effective in order to permit
the prospectus forming part thereof to be usable by Purchaser for a period
ending on the earlier of (i) (x) the second anniversary of the Closing, (y) the
expiration of the period following the Closing after which Rule 144(k) under the
Securities Act generally becomes available to non-affiliates of an issuer or (z)
in the event the Company has at any time suspended the use of the prospectus
contained in the Shelf Registration pursuant to this paragraph, the date beyond
the earlier of the periods referred to in clauses (x) and (y) that reflects an
additional period of days equal to the number of days during all of the periods
from and including the dates the Company gives notice of such suspension
pursuant to this paragraph to and including the date when holders of Registrable
Securities receive an amended or supplemented prospectus necessary to permit
resales of Registrable Securities under the Shelf Registration or to and
including the date on which the Company gives a Resumption Notice of (ii) such
time as all of the Registrable Securities covered by the Shelf Registration have
been sold pursuant to the Shelf Registration or pursuant to Rule 144 (in any
such case, such period being called the "Shelf Registration Period"). The
Company shall be deemed not to have used its best efforts to keep the Shelf
Registration effective during the requisite period if it voluntarily takes any
action that would result in holders of Securities covered thereby not being able
to offer and sell Registrable Securities during that period, unless such action,
in the opinion of the Company after consulting with legal counsel, is required
by applicable law. Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated herein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part of any
Shelf Registration, and any supplement to such prospectus does
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not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
9.1. INDEMNIFICATION. In the event that Shares purchased pursuant to
this Agreement are included in a registration statement under this Section 9,
Seller will indemnify and hold harmless each Selling Shareholder and each other
person, if any, who controls such Selling shareholder within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Selling Shareholder or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement pursuant
to which the Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or arise out of or are based upon the
failure by Seller to file any amendment or supplement thereto that was required
to be filed under the Securities Act, and will reimburse such Selling
Shareholder and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action. Notwithstanding the foregoing,
Seller will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or omission made in such registration statement, preliminary prospectus, final
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to Seller through an instrument duly executed by
or on behalf of any Selling Shareholder specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus, or
amendment or supplement.
It shall be a condition precedent to the obligation of Seller to take
any action pursuant to this Section that seller shall have received an
undertaking satisfactory to it from each Selling Shareholder to indemnify and
hold harmless Seller (in the same manner and to the same extent as set forth in
this Section), each director of Seller, each officer who shall sign such
registration statement, and any persons who control Seller within the meaning of
the Securities Act, with respect to any statement or omission from such
registration statement, preliminary prospectus, or any final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to Seller through an instrument duly executed by the indemnifying
party specifically for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, or amendment or supplement.
Promptly following receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to above in this Section
9.3, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party for any
legal or other expenses subsequently incurred by the latter in connection with
the defense thereof.
9.2. BINDING PROVISIONS. The provisions of this Section 9 shall be
binding on the successors of Seller. No Shareholder may assign the provisions of
this Section 9 or all or any part of its or their rights or obligations
hereunder, except that in the event of a merger or consolidation in which the
Seller is not the survivor, the Seller shall assign and transfer, and successor
shall assume, the provisions of this Section 9.
A-5
<PAGE>
9.3. CONFLICTS. To the extent that Seller's compliance with the
obligations set forth in Sections 9.1 through 9.4 above would conflict with or
otherwise cause a breach of or default under any of its existing obligations
pursuant to any agreements to which it currently is a party, Seller's failure to
comply with those obligations shall not be deemed a breach of this Agreement.
9.4. LIQUIDATED DAMAGES. In the event that the Company by December 15,
1999 shall fail to cause the Shelf Registration Statement with respect to the
Securities to be declared effective and shall fail to obtain all necessary
stockholder and NASDAQ approvals in order to enable Purchaser to freely sell the
Registrable Securities pursuant to the Shelf Registration, the Company shall pay
to the Purchaser for each month or portion thereafter until such Shelf
Registration Statement becomes effective an amount equal to two percent (2%) of
the purchase price paid for the Securities pursuant to this Agreement. Provided
that the Company shall continue to use its reasonable best efforts to cause such
Shelf Registration to become effective as promptly as practicable, the delivery
of such Common Stock shall be in full satisfaction of any liability on the part
of the Company for failing to register the Shares as provided herein; provided
further however, that such delivery shall not excuse the Company from the
obligation to register all of such Registrable Shares which obligation shall
continue.
10. REMEDIES CUMULATIVE, AND NOT WAIVED.
10.1. No right, power or remedy conferred upon any party shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy, whether conferred hereby or by
any such security or now or hereafter available at law or in equity or by
statute or otherwise.
10.2. No course of dealing between the parties, and no delay in
exercising any right, power or remedy conferred hereby or by any such security
or now or hereafter existing at law or in equity or by statute or otherwise,
shall operate as a waiver of or otherwise prejudice any such right, power or
remedy; provided, however, that this Section 10 shall not be construed or
applied so as to negate the provisions and intent of any statute which is
otherwise applicable.
11. CHANGES. WAIVERS.
ETC. Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by a statement in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. 12. NOTICES. All communications hereunder shall be in
writing and if sent to the Purchaser, shall be sufficient in all respects if
personally delivered, sent by registered mail, or by telecopy and confirmed to
the Purchaser at the address set forth on the Signature Page, or if sent to the
Company, shall be personally delivered, sent by registered mail, or by telecopy
and confirmed to the Company as follows:
Imatron Inc.
Oyster Point Blvd.
South San Francisco, California 94080
Attn: Chief Financial Officer
Telephone: (650) 583-9964
Facsimile: (650) 871-0418
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All representations
and warranties contained herein shall survive the execution and delivery of this
Agreement, any investigation at any time made by Purchaser or on its behalf, and
the sale and purchase of the Shares. All statements contained in any
certificate, instrument or other writing delivered by or on behalf of Seller
pursuant hereto or in connection with or contemplation of the transactions
herein contemplated (other than legal opinions) shall constitute representations
and warranties by Seller hereunder and not by the individual officer who signed
the certificate, instrument or writing by or on behalf of Seller.
14. PARTIES IN INTEREST. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the
A-6
<PAGE>
parties hereto, whether so expressed or not, and, in particular, shall inure to
the benefit of and be enforceable by the current holder or holders of any of the
Shares.
15. HEADINGS. The headings of the Sections and paragraphs of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.
16. CHOICE OF LAW. It is the intention of the parties that the laws of
California shall govern the validity of this Agreement, the construction of its
terms and the interpretation of the rights and duties of the parties.
17. COUNTERPARTS. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.`
18. SEVERABILITY. In the event that any part of this Agreement is
determined by a court of competent jurisdiction to be unenforceable, the balance
of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the
parties execute this Agreement as of the date set forth below.
SELLER:
IMATRON INC.
By:----------------------------------
Chief Executive Officer
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Address
-------------------------------------
City and Country
-------------------------------------
Facsimile Number
A-7
<PAGE>
APPENDIX B
FORM OF COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF STOCK OF IMATRON INC TO BE ISSUED UPON ANY
EXERCISE OF THIS WARRANT HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY STATE SECURITIES LAW AND ANY SALE, TRANSFER, PLEDGE OR OTHER
DISPOSITION THEREOF MAY BE MADE ONLY (I) IN A REGISTRATION UNDER SAID ACT OR
(II) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
TO THAT EFFECT REASONABLY SATISFACTORY TO IT.
IMATRON INC.
COMMON STOCK PURCHASE WARRANT
TO PURCHASE 360,000 SHARES OF COMMON STOCK
OF IMATRON INC.
This Warrant Expires June 15, 2004
Warrant No. 99-3
THIS CERTIFIES that, subject to the terms and conditions herein set forth
in this warrant, TERRY L. ROSS (the "Holder") is entitled to purchase from
Imatron Inc., a New Jersey corporation ("Company"), at any time or from time to
time during the Exercise Period (defined in Section 12 below) the number of
fully paid and non-assessable shares of common stock of the Company (the
"Shares") as provided herein upon surrender of this Warrant at the principal
office of the Company, and, at the election of the Holder, upon payment of the
purchase price at said office in cash or by cashier's check or by the wire
transfer of funds in a dollar amount equal to the purchase price of the Shares
for which the consideration is being given. This Warrant shall be exercisable
for that number of Shares as set forth above, in minimum units of 1,000 shares.
1. PURCHASE PRICE. Subject to adjustment as hereinafter provided, the
purchase price of one share of Common Stock (or such securities as may be
substituted for one share of Common Stock pursuant to the provisions hereinafter
set forth) (the "Warrant Price") shall One Dollar and Four and Four-tenths of
One Cent ($1.044).
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind of
securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
a. ADJUSTMENT FOR DIVIDENDS IN STOCK. If at any time on or after the
date hereof, the holders of the Common Stock of the Company (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received, or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend (other than as provided for in Section 2(b) below), then and in each
such case, upon the exercise of this Warrant, the Holder shall be entitled to
receive, in addition to the number of shares of Common Stock receiv-
B-1
<PAGE>
able, and without payment of any additional consideration therefor, the amount
of such other or additional stock of the Company which the Holder would receive
on the date of such exercise had it been the holder of record of such Common
Stock on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and/or
all other additional stock receivable by it as aforesaid during such period and
given effect to all adjustments called for during such period by this Section 2.
b. ADJUSTMENT FOR CHANGES IN COMMON STOCK. In the event of changes in
the outstanding Common Stock of the Company by reason of split--ups,
recapitalizations, reclassifications, mergers, consolidations, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Warrant Price shall be correspondingly adjusted by the Board of Directors of
the Company. The adjustment shall be such as will give the Holder on exercise
for the same aggregate Warrant Price the total number, class, and kind of shares
as the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription under this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of Common Stock on the date of exercise as determined in good faith by the
Company's Board of Directors.
4. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle its holder to any
of the rights of a stockholder of the Company prior to its exercise.
5. RESERVATION OF STOCK. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. EXERCISE OF WARRANT. This Warrant may be exercised by the Holder or its
registered assigns, in whole or in part and in minimum units of 10,000 shares,
by the surrender of this Warrant at the principal office of the Company,
together with the attached form of subscription duly executed, accompanied by
payment in full of the amount of the Warrant Price in the form described in this
Warrant. Upon partial exercise of this Warrant, a new warrant or warrants
containing the same date and provisions as this Warrant shall be issued by the
Company to the registered holder for the number of shares of Common Stock with
respect to which this Warrant shall not have been exercised. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. As promptly as practicable on or after such date, the
Company shall issue and deliver to the person or persons entitled to receive the
shares, a certificate or certificates for the number of full shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction of
a share as provided above.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price is adjusted as
provided in Section 2, the Company shall promptly deliver to the record holder
of this Warrant a certificate of an officer of the Company setting forth the
relevant Warrant Price or number of shares after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
8. COMPLIANCE WITH SECURITIES ACT. The Holder, by acceptance of this
Warrant, agrees that this Warrant and the shares of Common Stock to be issued
upon its exercise (or shares of any security into which such Common Stock may be
converted) (the "Shares") are being acquired for investment and that the Holder
will not offer, sell, or otherwise dispose of this Warrant and any shares of
Common Stock to be issued upon its exercise (or shares of any security into
which such
B-2
<PAGE>
Common Stock may be converted) except under circumstances which will
not result in a violation of the Securities Act of 1933, as amended (the
"Securities Act"). Upon exercise of this Warrant, the holder hereof shall, if
requested by the Company, confirm in writing its investment purpose and
acceptance of the restrictions on transfer of the Shares.
9. SUBDIVISION OF WARRANT. At the request of the holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant and upon
surrender of this Warrant for such purpose to the Company, the Company at its
expense (except for any transfer tax payable) will issue in exchange therefor
warrants of like tenor and date representing in the aggregate the right to
purchase such number of shares of such Common Stock as shall be designated by
such holder at the time of such surrender; provided, however, that the Company's
obligations to subdivide securities under this Section shall be subject to and
conditioned upon the compliance of any such subdivision with applicable state
securities laws and with the Securities Act.
10. LOSS, THEFT, DESTRUCTION, OR MUTILATION OF WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and in the case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it and
reimbursement to the Company of all reasonable expenses incidental thereto, in
the case of mutilation, and upon surrender and cancellation of this Warrant the
Company will make and deliver a new Warrant of like tenor and dates as of such
cancellation, in lieu of this Warrant.
11. MISCELLANEOUS. This Warrant shall be governed by the laws of the State
of California. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part of this Warrant.
Neither this Warrant nor any term included may be changed, waived, discharged,
or terminated orally but only by an instrument in writing signed by the Company
and the Holder. All notices and other communications from the Company to the
Holder shall be by telecopy or expedited courier service to the address
furnished to the Company in writing by the last holder of this Warrant who shall
have furnished an address to the Company in writing.
12. EXERCISE PERIOD. The Exercise Period shall mean the period commencing
on June 15, 2000 and ending on June 15, 2004.
ISSUED this 15th day of June, 1999.
IMATRON INC.
By
----------------------------------------
S. Lewis Meyer, Chief Executive Officer
ATTEST:
- -----------------------------------------
B-3
<PAGE>
FORM OF ASSIGNMENT
IMATRON INC.
FOR VALUE RECEIVED the undersigned registered owner of this warrant hereby
sells, assigns, and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below.
Name of Assignee Address Number of Shares
and does hereby irrevocably constitute and appoint Attorney to make such
transfer on the books of IMATRON INC. maintained for the purpose, with full
power of substitution in the premises.
Dated:
---------------------------------
------------------------------------
Name of Warrant Holder
Signature:
--------------------------
Witness:
-------------------------------
B-4
<PAGE>
SUBSCRIPTION FORM
IMATRON INC.
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for and purchases ____________________ of the number of shares of Common
Stock of IMATRON INC. purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated:
-----------------------------------
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
B-5
<PAGE>
APPENDIX C
FORM OF COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF STOCK OF IMATRON INC TO BE ISSUED UPON ANY
EXERCISE OF THIS WARRANT HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY STATE SECURITIES LAW AND ANY SALE, TRANSFER, PLEDGE OR OTHER
DISPOSITION THEREOF MAY BE MADE ONLY (I) IN A REGISTRATION UNDER SAID ACT OR
(II) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
TO THAT EFFECT REASONABLY SATISFACTORY TO IT.
IMATRON INC.
COMMON STOCK PURCHASE WARRANT
TO PURCHASE 2,991,027 SHARES OF COMMON STOCK
OF IMATRON INC.
Warrant No. 99-4
THIS CERTIFIES that, subject to the terms and conditions herein
set forth in this warrant, TERRY L. ROSS (the "Holder") is entitled to purchase
from Imatron Inc., a New Jersey corporation ("Company"), at any time or from
time to time during the Exercise Period (defined in Section 12 below) the number
of fully paid and non-assessable shares of common stock of the Company (the
"Shares") as provided herein upon surrender of this Warrant at the principal
office of the Company, and, at the election of the Holder, upon payment of the
purchase price at said office in cash or by cashier's check or by the wire
transfer of funds in a dollar amount equal to the purchase price of the Shares
for which the consideration is being given.
This Warrant shall be exercisable for that number of Shares as set
forth above, in minimum units of 1,000 shares.
1. PURCHASE PRICE. Subject to adjustment as hereinafter provided,
the purchase price of one share of Common Stock (or such securities as may be
substituted for one share of Common Stock pursuant to the provisions hereinafter
set forth) (the "Warrant Price") shall One Dollar and Three-tenths of One Cent
($1.003).
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
kind of securities issuable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the happening of certain events as follows:
a. ADJUSTMENT FOR DIVIDENDS IN STOCK. If at any time on or after
the date hereof, the holders of the Common Stock of the Company (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received, or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend (other than as provided for in Section 2(b) below), then and in each
such case, upon the exercise of this Warrant, the Holder shall be entitled to
receive, in addition to the number of shares of Common Stock receiv-
C-1
<PAGE>
able, and without payment of any additional consideration therefor, the amount
of such other or additional stock of the Company which the Holder would receive
on the date of such exercise had it been the holder of record of such Common
Stock on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and/or
all other additional stock receivable by it as aforesaid during such period and
given effect to all adjustments called for during such period by this Section 2.
b. ADJUSTMENT FOR CHANGES IN COMMON STOCK. In the event of changes
in the outstanding Common Stock of the Company by reason of split--ups,
recapitalizations, reclassifications, mergers, consolidations, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Warrant Price shall be correspondingly adjusted by the Board of Directors of
the Company. The adjustment shall be such as will give the Holder on exercise
for the same aggregate Warrant Price the total number, class, and kind of shares
as the Holder would have owned had the Warrant been exercised prior to the event
and had the Holder continued to hold such shares until after the event requiring
adjustment.
3. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any subscription under this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of one
share of Common Stock on the date of exercise as determined in good faith by the
Company's Board of Directors.
4. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle its holder
to any of the rights of a stockholder of the Company prior to its exercise.
5. RESERVATION OF STOCK. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
6. EXERCISE OF WARRANT. This Warrant may be exercised by the Holder
or its registered assigns, in whole or in part and in minimum units of 10,000
shares, by the surrender of this Warrant at the principal office of the Company,
together with the attached form of subscription duly executed, accompanied by
payment in full of the amount of the Warrant Price in the form described in this
Warrant. Upon partial exercise of this Warrant, a new warrant or warrants
containing the same date and provisions as this Warrant shall be issued by the
Company to the registered holder for the number of shares of Common Stock with
respect to which this Warrant shall not have been exercised. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the holder of such shares of record as of the close of
business on such date. As promptly as practicable on or after such date, the
Company shall issue and deliver to the person or persons entitled to receive the
shares, a certificate or certificates for the number of full shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction of
a share as provided above.
7. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price is adjusted
as provided in Section 2, the Company shall promptly deliver to the record
holder of this Warrant a certificate of an officer of the Company setting forth
the relevant Warrant Price or number of shares after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
8 . COMPLIANCE WITH SECURITIES ACT. The Holder, by acceptance of this
Warrant, agrees that this Warrant and the shares of Common Stock to be issued
upon its exercise (or shares of any security into which such Common Stock may be
converted) (the "Shares") are being acquired for investment and that the Holder
will not offer, sell, or otherwise dispose of this Warrant and any shares of
Common Stock to be issued upon its exercise (or shares of any security into
which such
C-2
<PAGE>
Common Stock may be converted) except under circumstances which will not result
in a violation of the Securities Act of 1933, as amended (the "Securities Act").
Upon exercise of this Warrant, the holder hereof shall, if requested by the
Company, confirm in writing its investment purpose and acceptance of the
restrictions on transfer of the Shares.
9. SUBDIVISION OF WARRANT. At the request of the holder of this
Warrant in connection with a transfer or exercise of a portion of the Warrant
and upon surrender of this Warrant for such purpose to the Company, the Company
at its expense (except for any transfer tax payable) will issue in exchange
therefor warrants of like tenor and date representing in the aggregate the right
to purchase such number of shares of such Common Stock as shall be designated by
such holder at the time of such surrender; provided, however, that the Company's
obligations to subdivide securities under this Section shall be subject to and
conditioned upon the compliance of any such subdivision with applicable state
securities laws and with the Securities Act.
10. LOSS, THEFT, DESTRUCTION, OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and in the case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it and
reimbursement to the Company of all reasonable expenses incidental thereto, in
the case of mutilation, and upon surrender and cancellation of this Warrant the
Company will make and deliver a new Warrant of like tenor and dates as of such
cancellation, in lieu of this Warrant.
11. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part of
this Warrant. Neither this Warrant nor any term included may be changed, waived,
discharged, or terminated orally but only by an instrument in writing signed by
the Company and the Holder. All notices and other communications from the
Company to the Holder shall be by telecopy or expedited courier service to the
address furnished to the Company in writing by the last holder of this Warrant
who shall have furnished an address to the Company in writing.
12. EXERCISE PERIOD. The Exercise Period shall mean the period
commencing on the date hereof and ending on June 15, 2000.
ISSUED this 15th day of June, 1999.
IMATRON INC.
By
----------------------------
S. Lewis Meyer, Chief Executive Officer
ATTEST:
- -------------------------
C-3
<PAGE>
FORM OF ASSIGNMENT
IMATRON INC.
FOR VALUE RECEIVED the undersigned registered owner of this warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below.
Name of Assignee Address Number of Shares
and does hereby irrevocably constitute and appoint ____________________ Attorney
to make such transfer on the books of IMATRON INC. maintained for the purpose,
with full power of substitution in the premises.
Dated:
----------------------------
----------------------------------
Name of Warrant Holder
Signature:
-----------------------
Witness:
---------------------------
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<PAGE>
SUBSCRIPTION FORM
IMATRON INC.
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases ________________ of the number of shares of
Common Stock of IMATRON INC. purchasable with this Warrant, and herewith makes
payment therefor, all at the price and on the terms and conditions specified in
this Warrant.
Dated:
------------------------
--------------------------------
(Signature of Registered Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
C-5
<PAGE>
APPENDIX D
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (this "Agreement") is made this 14th day of
September, 1999 by and between IMATRON INC., a New Jersey corporation ("Seller")
and Terry Ross (the "Purchaser").
RECITALS:
WHEREAS, Seller and Purchaser have previously entered into an
agreement for the purchase and sale of 3,767,713 shares of Seller's common stock
(the "Shares) and warrants to purchase 3,351,027 shares of Seller's common stock
(the "Warrants"); and
WHEREAS, pending the approval of the foregoing transaction the
Nasdaq Stock Market, Inc. has requested that Purchaser's rights with respect to
such shares be restricted as hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchaser agrees that until Seller's shareholders have approved
of the purchase and sale of the Shares and the Warrants in the manner provided
under New Jersey law, Purchaser shall not sell, transfer or assign the Shares or
Warrants nor shall Purchase vote the Shares. Upon receipt of such approval, this
Agreement and the obligation of Purchaser pursuant hereto shall be terminated
and shall thereafter be without any further force or effect.
2. Seller agrees to promptly notice and hold a special meeting of
its shareholders for the purpose of acting upon a proposal to approve the
purchase and sale of the Shares and the Warrants.
3. All other terms and conditions relating to the purchase and
sale of the Shares and Warrants shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
Purchaser:
---------------------------
Terry Ross
Seller:
Imatron Inc.
By
---------------------------
Its Chief Executive Officer
D-1
