<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
[ X ] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e))
Rule 14a-11(c) or Rule 14a-12
Radiance Medical Systems, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined).
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------
[ ] Fee paid previously with preliminary materials:
-------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
-----------------------------------------------------------------
2) Form, Schedule or Registration Statement no.:
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3) Filing Party:
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4) Date Filed:
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Notes:
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<PAGE> 2
RADIANCE MEDICAL SYSTEMS, INC.
[LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1999
----------
To the Stockholders of Radiance Medical Systems, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders
of Radiance Medical Systems, Inc. ("Radiance" or the "Company") on June 9, 1999
at 10:00 a.m., California time. The Annual Meeting will be held at The Hampton
Inn at 27102 Towne Centre Drive, Foothill Ranch, California 92610.
At the meeting, you will be asked to consider and vote upon the election
of three individuals to serve a three year term as members of the Company's
Board of Directors.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying
postage-paid reply envelope. By returning the proxy, you can help Radiance avoid
the expense of duplicate proxy solicitations and possibly having to reschedule
the Annual Meeting if a quorum of the outstanding shares is not present or
represented by proxy. If you decide to attend the Annual Meeting and wish to
change your proxy vote, you may do so simply by voting in person at the Annual
Meeting.
May 6, 1999 MICHAEL R. HENSON
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
RADIANCE MEDICAL SYSTEMS, INC.
[LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1999
----------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Radiance Medical Systems, Inc., a Delaware corporation ("Radiance" or the
"Company"), will be held on June 9, 1999 at 10:00 a.m. at The Hampton Inn at
27102 Towne Centre Drive, Foothill Ranch, California 92610, to: (i) elect three
individuals to serve a three year term as members of the Company's Board of
Directors from the following nominees: Maurice Buchbinder, M.D., Jeffrey F.
O'Donnell and Gerard von Hoffmann; and (ii) to transact such other business as
may properly come before the Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
1
<PAGE> 4
The Board of Directors has fixed the close of business on April 23, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any continuation or adjournment
thereof.
By Order of the Board of Directors
-----------------------------------------
STEPHEN R. KROLL
Secretary
Irvine, California
May 6, 1999
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
2
<PAGE> 5
RADIANCE MEDICAL SYSTEMS, INC.
[LOGO]
13700 ALTON PARKWAY, SUITE 160
IRVINE, CALIFORNIA 92618
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1999
----------
PROXY STATEMENT
----------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Radiance Medical Systems, Inc. ("Radiance" or the "Company") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on June 9, 1999
at 10:00 a.m. at The Hampton Inn at 27102 Towne Centre Drive, Foothill Ranch,
California 92610, at which time stockholders of record on April 23, 1999 will be
entitled to vote. On April 23, 1999, Radiance had outstanding 10,072,656 shares
of its Common Stock ("Common Stock"). Stockholders of record on such date are
entitled to one vote for each share of Common Stock held on all matters to be
voted upon at the Annual Meeting.
Radiance intends to mail this proxy statement and the accompanying proxy
card on or about May 6, 1999 to all stockholders entitled to vote at the Annual
Meeting. Radiance's principal executive offices are located at 13700 Alton
Parkway, Suite 160, Irvine, California 92618. The telephone number at that
address is (949) 457-9546.
VOTING
The presence in person or by proxy of the holders of a majority of the
Common Stock issued and outstanding constitutes a quorum for the transaction of
business at the Annual Meeting. Each stockholder of record is entitled to one
vote for each share of Common Stock held as of the record date on each matter to
be voted on at the Annual Meeting. Directors are elected by the affirmative vote
of a plurality of votes cast at the Annual Meeting; therefore, broker non-votes
and abstentions or votes that are withheld will be excluded entirely from the
vote and have no effect on the outcome. If shares are not voted by a broker who
is the record holder of the shares present at the Annual Meeting, or if shares
are not voted in other circumstances in which proxy authority is defective or
has been withheld with respect to any matter, these non-voted shares will be
counted for quorum purposes but are not deemed to be present or represented for
purposes of determining whether stockholder approval of that matter has been
obtained.
3
<PAGE> 6
Shares of Common Stock represented by a properly executed proxy received
in time for the Annual Meeting will be voted as specified therein, unless the
proxy previously has been revoked. Unless otherwise specified in the proxy, the
persons named therein will vote FOR the election of each of the director
nominees. As to any other business properly submitted to stockholders at the
Annual Meeting, the persons named in the proxy will vote as recommended by the
Board of Directors or, if no recommendation is given, in its discretion.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of Radiance at Radiance's principal
executive office, a written notice of revocation or a new duly executed proxy
bearing a date later than the date indicated on the previous proxy, or it may be
revoked by the holder of record attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
SOLICITATION
Radiance will bear the entire cost of proxy solicitation, including
costs of preparing, assembling, printing and mailing this proxy statement, the
proxy card and any additional material furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others, to forward to such beneficial owners. Radiance may, if deemed necessary
or advisable, retain a proxy solicitation firm to deliver solicitation materials
to beneficial owners and to assist the Company in collecting proxies from such
individuals. Radiance may reimburse persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitation by directors, officers or other
regular employees of Radiance. No additional compensation will be paid to
directors, officers or other regular employees for such services.
4
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors currently consist of seven members, divided into
three classes approximately equal in size. Each class of directors is elected
for three-year terms on a staggered term basis, so that each year the term of
office of one class will expire and the terms of office of the other classes
will extend for additional periods of one and two years, respectively. The
nominees for election at this year's Annual Meeting will serve as Class I
Directors, with a term expiring at the Annual Meeting of Stockholders to be held
in 2002. Each director is elected to serve until the expiration of his term.
The nominees for election as Class I Directors at this year's Annual
Meeting are Maurice Buchbinder, M.D., Jeffrey F. O'Donnell and Gerard von
Hoffmann. All three nominees for election to the Board of Directors at the
Annual Meeting currently are directors of the Company. Gerard von Hoffmann has
served as a member of the Board of Directors since April, 1996, and Jeffrey F.
O'Donnell and Maurice Buchbinder, M.D. were appointed by the Board of Directors
on June 10, 1998 and January 21, 1999, respectively.
The Board of Directors will vote all proxies received by them FOR the
nominees listed below unless otherwise instructed in writing on such proxy. The
three (3) candidates receiving the highest number of affirmative votes of shares
entitled to vote at the Annual Meeting will be elected directors of Radiance. In
the event any nominee is unable to or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for an additional nominee
who shall be designated by the current Board of Directors to fill the vacancy.
As of the date of this Proxy Statement, the Board of Directors is not aware of
any nominee who is unable or will decline to serve as director. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in favor of the nominees
listed below.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below, as of March 15, 1999, for each nominee and for each
director of Radiance is information regarding his age, position(s) with
Radiance, the period he has served as a director, any family relationship with
any other director or executive officer of Radiance, and the directorships
currently held by him in corporations whose shares are publicly registered.
5
<PAGE> 8
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
Maurice Buchbinder, M.D., 45, 1999 Maurice Buchbinder, M.D. was a member of the board of
directors of the (former) Radiance Medical Systems,
Inc. since its incorporation in August 1997. See,
"Certain Transactions." Since 1995, Dr. Buchbinder
has served as the Director of Interventional
Cardiology at Sharp Memorial Hospital, San Diego,
California and as the Director of Interventional
Cardiology at the Foundation for Cardiovascular
Research, Scripps Memorial Hospital, La Jolla,
California. From 1985 to 1995, Dr. Buchbinder served
at various intervals as the Professor of Medicine and
the Associate Professor of Medicine, Cardiology
Division, USCD Medical Center, San Diego,
California. Dr. Buchbinder is Board certified,
Diplomat, from the American Board of Cardiovascular
Diseases and the American Board of Internal
Medicine. Dr. Buchbinder maintains professional
affiliations with the American College of Cardiology
and the American College of Physicians.
Jeffrey F. O'Donnell, 39, 1999 Jeff O'Donnell has served as President and CEO of
X-SITE Medical since February 1999. Prior to joining
X-SITE Medical, Mr. O'Donnell was the President from
January 1998 until March 1999, and CEO from June 1998
until March 1999, of the Company. Prior to being
named President and CEO of the Company, Mr. O'Donnell
served as Vice President, Sales and Marketing, since
joining the Company in November 1995. From January
1994 to May 1995, Mr. O'Donnell was the President and
CEO of Kensey Nash Corporation, developer of the
AngioSeal vascular closure device. Prior to joining
Kensey Nash Corporation, Mr. O'Donnell worked for
approximately six years in various sales and
regional management positions with ACS, now part of
Guidant. Mr. O'Donnell also has held various senior
level marketing and sales positions with Boston
Scientific and Johnson and Johnson. Mr. O'Donnell is
a member of the Boad of Directors of Escalon Medical
Corporation, a manufacturer and distributor of
cardiovascular and ophthalmology devices. Mr.
O'Donnell graduated from LaSalle University with a BS
degree in business administration.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
Gerard von Hoffmann, 42, 1996 Gerard von Hoffmann joined the Company as a director
in April 1996. He has been with the law firm of
Knobbe, Martens, Olson & Bear LLP, Radiance's patent
counsel, since 1986 and has been a partner since 1989.
</TABLE>
CLASS II DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
Franklin D. Brown, 55, 1997 Franklin D. Brown is the President and CEO of
Endologix, Inc., and currently serves as a director
of VidaMed, Inc. (Nasdaq), a developer of systems for
the treatment of urological conditions, Xillix
Technologies Corp. (Toronto Stock Exchange), a
developer of medical imaging products, and several
private companies. Prior to joining Endologix in
1988, Mr. Brown served as Chairman, President and CEO
at Imagyn Medical, Inc. from October 1994 until the
sale of the company in September 1997. Prior to
Imagyn, Mr. Brown served as President and CEO of
Pharmacia Deltec, Inc., an ambulatory drug delivery
company, from 1986 until the sale of the company in
1994. From 1982 to 1986, he was President of
Pharmacia Inc.'s health care group and General
Manager of its hospital division. Prior to his
employment with Pharmacia, Mr. Brown held various
sales and marketing positions with Choay
Laboratories, Mead Johnson, Abbott and Sterling
Drug. Mr. Brown currently is a director of Xillix
Technologies and Bridge Medical. Mr. Brown was
awarded Entrepreneur of the Year award in 1991. Mr.
Brown received an M.B.A. from the University of
Michigan and a bachelors degree from Western Michigan
University.
Edward M. Leonard, 57, 1996 Since September 1997, Mr. Leonard has been a Managing
Director of Broadview International LLC, an
investment bank specializing in mergers and
acquisitions for information technology companies.
From 1978 to September 1997, Mr. Leonard was a
partner in the law firm of Brobeck, Phleger &
Harrison. Mr. Leonard also serves as a director of
EndoSonics Corporation, a manufacturer of
intravascular ultrasound devices.
</TABLE>
7
<PAGE> 10
CLASS III DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATION AND
FIRST YEAR AS DIRECTOR BUSINESS EXPERIENCE
- -------------------------------------- -------------------------------------------------------
<S> <C>
William G. Davis, 67, 1995 Mr. Davis is an independent business consultant.
From 1957 to 1984, Mr. Davis was associated with Eli
Lilly and Company, a diversified health care company,
where he served as Executive Vice President, Eli
Lilly International Corporation, from 1972 to 1975,
Executive Vice President, Pharmaceutical Division,
from 1975 to 1982, and President, Medical Instrument
Systems Division, from 1982 until his retirement in
1984. Mr. Davis also is a director of ALZA
Corporation, a designer of controlled dose drug
delivery systems, and Collagen Aesthetics, Inc., a
manufacturer of cosmetic medical products, and
previously served as a director of Target
Therapeutics, Inc. from 1993 to 1997 and EndoSonics
Corporation from 1993 to 1998.
Michael R. Henson, 53, 1995 Mr. Henson joined the Company in February 1992 as
President, Chief Executive Officer and Chairman of
the Board of Directors, positions in which he
currently serves the Company. From June 1997 until
March 1999, Mr. Henson served Chairman of the Board,
Chief Executive Officer and President of the (former)
Radiance Medical Systems, Inc., and as Chairman of
the Board of the Company. Prior to joining the
Company, Mr. Henson served as the Chief Executive
Officer of EndoSonics Corporation from 1988 to
February 1995, and as Chairman of the Board from
February 1993 to November 1996. Between April 1983
and February 1988, Mr. Henson served as President and
Chief Executive Officer of Trimedyne, Inc., a
manufacturer of medical lasers and catheters. Prior
to joining Trimedyne in 1983, Mr. Henson held
positions as Vice President for G.D. Searle &
Company, Director of Marketing for the Hospital
Products Division of Abbott Laboratories, and
Marketing Manager for Bristol Myers and Company. Mr.
Henson also serves as a director of two private
companies, Endologix, Inc. and Micrus Corporation.
</TABLE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met ten times during the year ended December 31,
1998. Each Director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of
8
<PAGE> 11
Directors and (ii) the total number of meetings held by all Committees of the
Board on which such Director served. Radiance has a standing Audit Committee
composed of Messrs. Edward M. Leonard and Gerard von Hoffmann. The Audit
Committee primarily is responsible for approving the services performed by the
Company's independent public accountants and for reviewing and evaluating the
Company's accounting principles and reporting practices and its system of
internal accounting controls. The Audit Committee met two times during the year
ended December 31, 1998. Radiance has a standing Compensation Committee which
met four times during the year ended December 31, 1998. For the 1998 fiscal
year, this Committee consisted of Franklin D. Brown and William G. Davis. The
Committee administers the Company's 1996 Option/Issuance Plan (the "1996 Option
Plan") and other employee plans, and reviews and acts on matters relating to
compensation levels and benefit plans for key executives of Radiance. The
Compensation Committee has the power and authority to make stock option grants
under the 1996 Option Plan to the Company's officers.
REMUNERATION
Non-employee directors each receive a fee of $1,000 per quarter, $1,000
for each Board meeting attended and reimbursement for certain travel expenses
and other out-of-pocket costs. Members of Committees of the Board each receive
an additional fee of $500 for each Committee meeting attended. Non-employee
Board members are eligible to receive periodic option grants under the Automatic
Option Grant Program in effect under the Company's 1996 Stock Option/Stock
Issuance Plan, as summarized in Proposal No. 1 above.
Mr. von Hoffmann, a member of the Company's Board of Directors, is a
partner at Knobbe, Martens, Olson & Bear LLP, which serves as Intellectual
Property Counsel to the Company.
Officers are appointed to serve, at the discretion of the Board of
Directors, until their successors are appointed. There are no family
relationships among executive officers or directors of Radiance. There are no
arrangements or understandings involving any director or any nominee regarding
such person's status as a director or nominee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of
Radiance and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 which require them to file reports with respect
to their ownership of the Common Stock and their transactions in such Common
Stock. Based upon (i) the copies of Section 16(a) reports which Radiance
received from such persons for their 1998 fiscal year transactions in the Common
Stock and their Common Stock holdings and (ii) the written representations
received from one or more of such persons that no annual Form 5 reports were
required to be filed by them for the 1996 fiscal year, Radiance believes that
all reporting requirements under Section 16(a) for such fiscal year were met in
a timely manner by its executive officers, Board members and greater than
ten-percent stockholders.
CERTAIN TRANSACTIONS
On November 3, 1998, the Company signed a merger agreement with the
(former) Radiance Medical Systems, Inc. ("RMS"), pursuant to which RMS agreed to
merge with and into a wholly-
9
<PAGE> 12
owned subsidiary of the Company. The merger was approved by the stockholders of
the Company and completed on January 14, 1999. Pursuant to the Merger, the
Company paid the former stockholders of RMS $3.00 for each share of RMS
preferred stock and $2.00 for each share of RMS common stock, for a total
consideration of approximately $7.0 million, excluding the value of RMS common
stock options to be provided to RMS optionholders in exchange for their RMS
common stock options. The consideration was paid by delivery of an aggregate of
1,900,157 shares of Company Common Stock, and $0.7 million in cash to certain
RMS stockholders who elected cash. Options for 546,250 shares of RMS common
stock, with an exercise price of $0.065 per share, accelerated and vested
immediately prior to the completion of the Merger. Of these, 1,250 were
exercised, and holders received the same consideration for their shares of RMS
Common Stock as other holders of RMS Common Stock. The options not exercised
prior to the completion of the Merger were assumed by the Company and converted
into options to purchase $2.00 of Company common stock at the same exercise
price, which resulted in the conversion of an aggregate of 317,775 share of the
Company's Common Stock.
In addition, the former RMS stockholders and optionholders may receive
product development milestone payments of $2.00 for each share of RMS preferred
stock and $3.00 for each share of RMS common stock. The milestone payments may
be increased up to 30%, or reduced or eliminated if the milestones are reached
earlier or later, respectively, than the milestone target dates. The milestones
represent important steps in the United States Food and Drug Administration and
European approval process which the Company determined was critical to bringing
the Company's technology to the marketplace.
Michael R. Henson, currently the Chairman of the Board, President and
Chief Executive Officer of the Company, served as Chairman of the Board and
Chief Executive Officer of RMS from June 1998 until March 1999. Prior to the
merger, Mr. Henson owned 300,000 shares of RMS Common Stock, acquired in June
1998 for $0.065 per share in return for agreeing not to take a salary from RMS.
Mr. Henson also owned 15,500 shares of Radiance Series A Preferred Stock, and
options to purchase 135,000 shares of Radiance Common Stock. In addition, Mr.
Henson's wife owned options to purchase an additional 40,000 shares of Radiance
Common Stock. As a result of the merger, Mr. Henson and his wife received an
aggregate of 194,143 shares of the Company's common stock, and depending upon
the achievement by the Company of the product development milestones, are
entitled to receive up to an additional 551,835 shares of the Company's common
stock. In addition, pursuant to the merger, options held by Mr. Henson and his
wife were converted into an aggregate of 102,040 options to purchase shares of
the Company's common stock at an exercise price of $0.11.
Maurice Buchbinder, M.D., who was appointed to the Board of Directors of
the Company after completion of the merger, was the largest stockholder in RMS
(other than the Company) and owned 769,230 shares of Series A Preferred Stock of
RMS and options to purchase 160,000 shares of Common Stock of RMS.. In addition,
Dr. Buchbinder was a director of RMS. As a result of the merger, Dr. Buchbinder
received an aggregate of 693,000 shares of the Company's common stock, and
depending upon the achievement by the Company of the product development
milestones, is entitled to receive up to an additional 765,013 shares of the
Company's common stock. In addition, pursuant to the merger, Dr. Buchbinder's
options were converted into 93,294 options to purchase shares of the Company's
common stock at an exercise price of $0.11. In addition to receiving the merger
consideration in exchange for his capital stock of RMS, the Company agreed to
appoint Dr.
10
<PAGE> 13
Buchbinder the Medical Director of the Company for a period of four years on a
consulting basis, pursuant to which he received a grant of an option to purchase
50,000 shares of the Company's common stock at an exercise price of $3.63.
Prior to the merger, Gerard von Hoffmann, a director of the Company,
owned 16,000 shares of Radiance Series A Preferred Stock and options to purchase
20,000 shares of Radiance Common Stock. As a result of the merger, Mr. von
Hoffmann received an aggregate of 14,414 shares of the Company's common stock,
and depending upon the achievement by the Company of the product development
milestones, is entitled to receive up to an additional 34,868 shares of the
Company's common stock. In addition, pursuant to the merger, Mr. von Hoffmann's
options were converted into 11,661 options to purchase shares of the Company's
common stock at an exercise price of $0.11.
Other than the officer loan described below under Executive Compensation
and Related Information and the RMS transaction described above, the Company was
not involved in any transaction during the fiscal year ended December 31, 1998
in which a director, officer or greater than 5% stockholder had a direct or
indirect material interest involving an amount in excess of $60,000.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THREE
NOMINEES NAMED ABOVE.
11
<PAGE> 14
GENERAL
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to Radiance
regarding the ownership of Radiance's Common Stock as of March 15, 1999 by (i)
each stockholder known to Radiance to be a beneficial owner of more than five
percent (5%) of Radiance's Common Stock, (ii) each director and nominee for
director, (iii) the Named Executive Officers (as such term is defined under the
caption "Executive Compensation and Related Information") and (iv) all current
directors and officers of Radiance as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED (1) SHARES (2)
- ----------------------------------------------------- ---------------- -----------
<S> <C> <C>
EndoSonics Corporation 1,350,566 13.63
2870 Kilgore Rd.
Rancho Cordova, CA 95670
Interactive Research Advisors, Inc.(3) 569,800 5.75
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
William Harris Investors 515,005 5.20
Two North La Salle Street, Suite 400
Chicago, IL 60602
Dimensional Fund Advisor 552,409 5.57
1299 Ocean Avenue 11th Floor
Santa Monica, CA 90401
Boston Scientific Corporation(4) 501,000 5.06
One Boston Scientific Place
Natick, MA 01760
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED (1) SHARES (2)
- ----------------------------------------------------- ---------------- -----------
<S> <C> <C>
Michael R. Henson(5) 577,050 5.78
13700 Alton Parkway, Ste. 160
Irvine, CA 92618
Franklin D. Brown(6) 28,500 *
Maurice Buchbinder, M.D.(7) 800,357 8.00
13700 Alton Parkway, Ste. 160
Irvine, CA 92618
William G. Davis(8) 40,430 *
Gerard von Hoffmann(9) 59,629 *
Stephen R. Kroll(10) 24,663 *
Edward M. Leonard(11) 61,192 *
Edward A. McDonald(12) 34,312 *
Jeffrey F. O'Donnell(13) 128,872 *
Jeffrey H. Thiel(14) 35,633 *
Claire K. Walker(15) 75,177 *
All directors and officers as a group (10 1,865,815 17.91
persons)(16)
Total Principal Stockholders 5,354,595 51.40
</TABLE>
*Represents beneficial ownership of less than 1%.
(1) The number of shares of Common Stock beneficially owned includes any
shares issuable pursuant to stock options that may be exercised within 60
days after March 15, 1999. Shares issuable pursuant to such options are
deemed outstanding for computing percentage of the person holding such
options but are not deemed to be outstanding for computing the percentage
of any other person.
(2) Applicable percentages are based on 9,910,895 shares plus the number of
shares such individual can acquire within 60 days of March 15, 1999, which
represents 10,596,895 shares outstanding on March 15, 1999, less 686,000
treasury shares held by the Company.
(3) Pursuant to a Schedule 13G filed with the Commission on February 12, 1999,
Interactive Research Advisors, Inc. reported that it had sole voting and
investment power over 569,800 shares.
(4) Pursuant to a Schedule 13G/A filed with the Commission on February 13,
1998, Boston Scientific Corporation reported that as of December 31, 1997
it had sole voting and investment power over 501,000 shares.
13
<PAGE> 16
(5) Includes 94,758 shares subject to options exercisable within 60 days after
March 15, 1999.
(6) Includes 27,500 shares subject to options exercisable within 60 days after
March 15, 1999.
(7) Includes 97,357 shares subject to options exercisable within 60 days after
March 15, 1999.
(8) Includes 33,500 shares subject to options exercisable within 60 days after
March 15, 1999. Mr. Davis shares voting and investment power with his
spouse as co-trustee with respect to 6,930 shares held in a revocable
trust.
(9) Includes 27,500 shares subject to options exercisable within 60 days after
March 15, 1999.
(10) Includes 13,542 shares subject to options exercisable within 60 days after
March 15, 1999. Mr. Kroll shares voting and investment power with his
spouse as co-trustee with respect to these shares, which are held in a
revocable trust. Mr. Kroll was hired as CVD's Chief Financial Officer on
April 1, 1998.
(11) Includes 27,500 shares subject to options exercisable within 60 days after
March 15, 1999. Mr. Leonard shares voting and investment power as a
beneficiary with respect to 22,807 shares held in a retirement trust. Mr.
Leonard disclaims beneficial ownership with respect to 200 shares held by
his spouse and 3,000 shares held as custodian for his minor children under
the Uniform Gift to Minors Act.
(12) Mr. McDonald disclaims beneficial ownership with respect to 3,000 shares
held by his spouse, Kathleen E. Briscoe, M.D., in an IRA account and 2,000
shares held by the Estate of Lisa M. Briscoe, of which his spouse serves
as a co-executrix and is a beneficiary with respect to 50 percent of the
assets.
(13) Includes 124,061 shares subject to options exercisable within 60 days
after March 15, 1999.
(14) Includes 25,291 shares subject to options exercisable within 60 days after
March 15, 1999. Mr. Thiel shares voting and investment power with his
spouse with respect to 7,335 shares.
(15) Includes 35,956 shares subject to options exercisable within 60 days after
March 15, 1999.
(16) Includes 506,965 shares subject to options exercisable within 60 days
after March 15, 1999.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the salary and bonus earned for the three
fiscal years ended December 31, 1998, by the Company's Chief Executive Officer,
Mr. Henson and four executive officers whose salary and bonus for the 1998
fiscal year exceeded of $100,000. All the individuals named in the table are
referred to in this Proxy Statement as the "Named Executive Officers."
14
<PAGE> 17
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
SHARES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS
- ----------------------------------- ------ --------- -------- -----------
<S> <C> <C> <C> <C>
Michael R. Henson 1998 220,000 77,000 55,000
Chairman of the Board, 1997 219,051 22,000 55,000(3)
President and Chief Executive 1996 200,000 60,000 130,000(4)
Officer (*)
Stephen R. Kroll (**) 1998 108,462 21,697 60,000
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
Edward A. McDonald(***) 1998 114,214 ---- 25,000
Vice President, Advanced 1997 119,580 9,600 50,000
Technologies
Jeffrey F. O'Donnell(****) 1998 222,965 72,570 225,000
President and Chief Executive 1997 181,034 15,550 145,000(5)
Officer 1996 179,200 15,000 ----
Jeffrey H. Thiel 1998 132,692 26,640 98,000
Vice President, Operations 1997 120,000 12,000 58,000(6)
1996 18,371 ---- 50,000
Claire K. Walker 1998 125,302 25,124 78,000
Vice President, Clinical 1997 113,275 11,214 38,000(3)
Affairs
</TABLE>
(*) Mr. Henson served as the Chief Executive Officer of the Company from
January - June 1998. The Board of Directors has elected Mr. Henson to
serve as Chief Executive Officer of the Company upon the effectiveness of
Mr. O'Donnell's resignation in March 1999.
(**) Mr. Kroll was hired by the Company as Vice President, Finance and
Administration, Chief Financial Officer and Secretary in April 1998.
(***) Mr. McDonald resigned as Vice President, Advanced Technologies in October
1998.
(****)Mr. O'Donnell served as the President and Chief Operating Officer from
June 1998 until he resigned as Chief Executive Officer in March 1999.
(1) Includes amounts contributed by the Named Executive Officers to the
Company's 401(K) Plan.
(2) Represents amounts paid in subsequent fiscal year for work performed in
prior fiscal year.
(3) Represents options granted in 1998 fiscal year for work performed in 1997
fiscal year.
15
<PAGE> 18
(4) Mr. Henson voluntarily returned to the Company in 1997 options to acquire
130,000 shares. The Company did not make any replacement grants for such
options, nor was there any agreement to do so.
STOCK OPTIONS
The following table provides information with respect to the stock
option grants made during the 1998 fiscal year under the Company's 1996 Stock
Option/Stock Issuance Plan to the Named Executive Officers. No stock
appreciation rights were granted during such fiscal year to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED ANNUAL
SECURITIES GRANTED TO RATES OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE OR APPRECIATION FOR OPTION TERM
OPTION IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME GRANTED(1)(5)(6) YEAR(2) ($/SH)(3)(5)(6) DATE 5%($)(4)(5)(6) 10%($)(4)(5)(6)
- -------------------- ---------------- ----------- --------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson 40,000 4 4.94 4/7/08 124,219 314,796
15,000 1 3.63 12/14/08 34,196 88,660
Stephen R. Kroll 50,000 5 4.94 4/7/08 155,274 393,495
10,000 1 3.50 11/3/08 22,011 55,781
Edward A. McDonald 15,000 1 5.88 5/25/08 55,421 140,449
10,000 1 4.31 5/25/08 27,124 68,738
Jeffrey F. O'Donnell 15,000 1 4.94 4/7/08 46,582 118,049
10,000 1 3.63 12/14/08 22,797 57,773
100,000 9 4.94 4/7/08 310,548 786,990
50,000 5 6.00 5/20/08 188,668 478,122
50,000 5 3.63 12/14/08 113,987 288,866
Jeffrey H. Thiel 8,000 1 4.94 4/7/08 24,844 62,959
30,000 3 3.63 12/14/08 68,392 173,319
10,000 1 3.50 11/03/08 22,011 55,781
50,000 5 4.94 4/7/08 155,274 393,495
Claire K. Walker 10,000 1 4.31 8/21/08 27,124 68,738
10,000 1 4.94 4/7/08 31,055 78,699
18,000 2 3.63 12/14/08 41,035 103,992
10,000 1 3.50 11/3/08 22,011 55,781
15,000 1 5.88 5/26/08 55,421 140,449
15,000 1 3.63 12/14/08 34,196 86,660
</TABLE>
16
<PAGE> 19
(1) The option listed in the table was granted under the Company's 1998 Stock
Option/Stock Issuance Plan. The options have a maximum term of ten years
measured from the date of grant. Twenty-five percent (25%) of the options
are exercisable upon the optionee's completion of one year of service
measured from the date of grant, and as to the balance of the option shares
in a series of successive equal monthly installments upon the optionee's
completion of each additional month of service over the next 36 months
thereafter.
(2) Based upon options granted for an aggregate of 1,054,100 shares to
employees in 1998, including the Named Executive Officers.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise. The Compensation Committee of the
Board of Directors, as the Plan Administrator of the Company's 1996 Stock
Option/Stock Issuance Plan, has the discretionary authority to reprice the
options through the cancellation of those options and the grant of
replacement options with an exercise price based on the fair market value of
the option shares on the grant date.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
option term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to the
executive officers.
(5) Options granted at $12.50, $9.50 and $7.31 per share were repriced at $4.94
per share on April 7, 1998.
(6) Options granted at $6.88, $6.44, $6.00 and $5.88 per shares were repriced
at $3.63 per share on December 14, 1998.
17
<PAGE> 20
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of
options during the 1998 fiscal year and unexercised options held by the Named
Executive Officers as of the end of such year. No stock appreciation rights were
exercised by the Named Executive Officers during such fiscal year or were
outstanding at the end of that year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDER-LYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS OPTIONS AT
SHARES AGGREGATE AT FY-END FY-END($)(2)
ACQUIRED VALUE -------------------- ---------------------
ON REALIZED EXERCIS- UNEXER- EXERCIS- UNEXERCIS-
NAME EXERCISE ($)(1) ABLE CISABLE ABLE ABLE
- ---------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson 78,659 303,916 1,041 67,500 1,627 19,538
Stephen R. Kroll 0 0 0 60,000 0 0
Edward A. McDonald 0 0 0 50,000 0 275,000
Jeffrey F. O'Donnell 0 0 80,000 215,000 117,225 39,075
Jeffrey H. Thiel 0 0 5,000 113,000 0 0
Claire K. Walker 0 0 28,500 73,500 50,683 4,689
</TABLE>
(1) Based on the deemed fair value (as determined by the Board) for options
exercised prior to the initial public offering, less the exercise price
payable for such shares.
(2) Based on the fair market value of the Company's Common Stock at year-end,
$3.06 per share, less the exercise price payable for such shares.
OPTION PRICING
The following table sets forth information concerning repricing of
options granted to executive officers during the last fiscal year. For a
discussion of such repricings, see "Compensation Committee Report -- Option
Repricing."
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlying of Stock Price New Remaining
Options at the Time at Time Exercise at Date of
Name Date Repriced(#) of Repricing of Repricing Price Repricing
- ------------------ -------- ----------- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Henson 4/7/98 40,000 $4.94 $9.50 $4.94 34
Michael R. Henson 12/14/98 15,000 $3.63 $6.88 $3.63 29
Jeffery O' Donnell 4/7/98 15,000 $4.94 $9.50 $4.94 34
Jeffery O' Donnell 4/7/98 100,000 $4.94 $7.31 $4.94 42
Jeffery O' Donnell 12/14/98 10,000 $3.63 $6.88 $3.63 29
Jeffery O' Donnell 12/14/98 50,000 $3.63 $6.00 $3.63 42
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price Exercise Option Term
Underlying of Stock Price New Remaining
Options at the Time at Time Exercise at Date of
Name Date Repriced(#) of Repricing of Repricing Price Repricing
- ------------------ -------- ----------- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffery H. Thiel 4/7/98 50,000 $4.94 $12.50 $4.94 31
Jeffery H. Thiel 4/7/98 8,000 $4.94 $9.50 $4.94 34
Jeffery H. Thiel 12/14/98 30,000 $3.63 $6.88 $3.63 29
Claire K. Walker 4/7/98 10,000 $4.94 $9.50 $4.94 34
Claire K. Walker 12/14/98 18,000 $3.63 $6.88 $3.63 29
Claire K. Walker 12/14/98 15,000 $3.63 $5.88 $3.63 42
</TABLE>
- -------------------------------
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Michael Henson. The Company entered into an employment agreement with
Michael Henson dated January 14, 1999 and subsequently amended as of February 1,
1999. Pursuant to the employment agreement, Mr. Henson, Chairman of the Board of
Directors of the Company, agreed to serve as the President and Chief Executive
Officer of the Company effective as of March 1999. The term of the agreement is
two years, and shall automatically extend for successive one year periods
following the initial term unless either party delivers written notice of intent
not to renew to the other no later than sixty (60) days prior to the end of the
second anniversary or any successive anniversary of the agreement. Mr. Henson
will receive a base salary of $264,000 per year, which may be increased subject
to review annually by the Compensation Committee of the Board of Directors. Mr.
Henson also is eligible to participate in incentive compensation plans of the
Company and will be entitled to earn a bonus of up to 35% of his base salary.
Pursuant to the agreement, the Company may terminate Mr. Henson at any time upon
at least thirty (30) days prior written notice.
Jeffrey O'Donnell. In November 1998, CVD entered into a two-year
employment agreement with Jeffrey O'Donnell, the Company's President and Chief
Executive Officer from June 1998 until March 1999. Mr. O'Donnell was employed as
President and Chief Executive Officer of the Company at a base salary of
$220,000 per year, and was entitled to earn a bonus of up to 35% of his base
salary. The agreement provided that if Mr. O'Donnell voluntarily resigns, and
provides at least six months notice of such resignation, all of his options
shall continue to vest for one year following the date of termination. In
December 1998, Mr. O'Donnell resigned as Chief Executive Officer, for family
reasons, effective March 1999. In connection with such resignation, Mr.
O'Donnell was not entitled to any severance benefits under his employment
agreement. Pursuant to their terms and an agreement with the Company, Mr.
O'Donnell's options shall continue to vest in accordance with their terms during
his continuing service as a director. In the event of a change in control or
acquisition, all of his options shall accelerate and vest whether or not the
options or the Company's stock option plan is assumed by any successor, but only
in the event that: (i) his service as a director ceases; and (ii) such
acceleration does not impair the accounting for such transaction as a "pooling
of interests."
19
<PAGE> 22
Stephen R. Kroll. The Company entered into an employment agreement with
Mr. Kroll dated February 1, 1999 pursuant to which Mr. Kroll is employed as the
Vice President and Chief Financial Officer of the Company. Mr. Kroll receives a
base salary of $175,000 per year, which may be increased subject to review
annually by the Compensation Committee of the Board of Directors. Mr. Kroll also
is eligible to participate in incentive compensation plans of the Company and
will be entitled to earn a bonus of up to 30% of his base salary.
Jeffrey Thiel. The Company entered into an employment agreement with Mr.
Thiel dated February 1, 1999 pursuant to which Mr. Thiel is employed as the
Executive Vice President, Operations of the Company. Mr. Thiel receives a base
salary of $153,846 per year, which may be increased subject to review annually
by the Compensation Committee of the Board of Directors. Mr. Thiel also is
eligible to participate in incentive compensation plans of the Company and will
be entitled to earn a bonus up to 20% of his base salary.
Claire Walker. The Company entered into an employment agreement with Ms.
Walker dated February 1, 1999 pursuant to which Ms. Walker is employed as the
Vice President, Clinical Affairs of the Company. Ms. Walker receives a base
salary of $138,180 per year, which may be increased subject to review annually
by the Compensation Committee of the Board of Directors. Ms. Walker also is
eligible to participate in incentive compensation plans of the Company and will
be entitled to earn a bonus of up to 20% of her base salary.
Pursuant to the employment agreements with each of Mr. Kroll, Mr. Thiel
and Ms. Walker, the Company may terminate each such Named Officer at any time
upon at least thirty (30) days written notice. If such termination is without
cause, each such Named Officer is entitled to received a severance amount equal
to his then current base salary payable for the remainder of the term and all of
his stock options shall accelerate and automatically vest by one additional
year, and such options shall otherwise be exercisable in accordance with their
terms. In addition, the agreements provide that in the event of a change of
control or acquisition of the Company during the term of his employment, all
options shall vest in full and all rights of the Company to repurchase
restricted stock shall terminate. A change of control is triggered by: (i) the
acquisition by any person of beneficial ownership of 50% or more of the voting
power of the Company's outstanding securities pursuant to a transaction which
the Board of Directors does not recommend to the stockholders; (ii) a change in
the majority of the incumbent members of the Board of Directors (unless such
change is approved by a majority of the incumbent members); (iii) a merger of
the Company pursuant to which more than 50% of the voting power is transferred
to a third party, in a transaction approved by the stockholders; and (iv) the
sale, transfer or other disposition of substantially all of the Company's assets
in complete liquidation or dissolution of the Company, in a transaction approved
by the stockholders.
OFFICER LOANS
On June 15, 1996, CVD extended a loan in the amount of $150,000, to
Jeffrey F. O'Donnell, who served as the Company's President from January 1998
until March 1999, and Chief Executive Officer from June 1998 until March 1999.
The note was secured by a second deed of trust on Mr. O'Donnell's home and has a
five-year term with interest compounding semi-annually at 6%. Mr. O'Donnell paid
the loan in full on January 22, 1998. On January 24, 1997, the Company extended
a loan in the amount of $100,000 to Jeffrey H. Thiel, the Company's Executive
Vice President. The
20
<PAGE> 23
note was secured by a second deed of trust on Mr. Thiel's home and has a
five-year term with interest compounding semi-annually at 6%. The principal and
interest will be due January 24, 2002.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors makes
recommendations to the full Board with respect to the base salary and bonuses to
be paid to the Company's executive officers each fiscal year. In addition, the
Compensation Committee has the authority to administer the Radiance 1996 Stock
Option/Stock Issuance Plan with respect to option grants and stock issuances
made thereunder to officers and other key employees. The following is a summary
of the policies of the Compensation Committee which affect the compensation paid
to executive officers, as reflected in the tables and text set forth elsewhere
in this Proxy Statement.
General Compensation Policy. The Company's compensation policy is
designed to attract and retain qualified key executives critical to the
Company's success and to provide such executives with performance-based
incentives tied to the achievement of Company milestones. One of the
Compensation Committee's primary objectives is to have a substantial portion of
each officer's total compensation contingent upon the Company's performance as
well as upon the individual's contribution to the success of Radiance as
measured by his personal performance. Accordingly, each executive officer's
compensation package is comprised primarily of three elements: (i) base salary
which reflects individual performance and expertise and is designed to be
competitive with salary levels in the industry; (ii) variable performance awards
payable in cash and tied to the Company's achievement of certain goals; and
(iii) long-term stock-based incentive awards which strengthen the mutuality of
interests between the executive officers and the Radiance stockholders.
Factors. The principal factors which the Compensation Committee
considered in establishing the components of each executive officer's
compensation package for the 1998 fiscal year are summarized below. However, the
Committee may in its discretion apply different factors, particularly different
measures of financial performance, in setting executive compensation for future
fiscal years.
Base Salary. The base salary levels for the executive officers were
established by the Board for the 1998 fiscal year on the basis of the following
factors: personal performance, the estimated salary levels in effect for similar
positions at a select group of companies with which the Company competes for
executive talent, and internal comparability considerations. Although the
Compensation Committee reviewed various compensation surveys, the Board, did not
rely upon any specific survey for comparative compensation purposes. Instead,
the Board made its decisions as to the appropriate market level of base salary
for each executive officer on the basis of its understanding of the salary
levels in effect for similar positions at those companies with which the Company
competes for executive talent. Base salaries will be reviewed by the
Compensation Committee on an annual basis, and adjustments will be made in
accordance with the factors indicated above.
Annual Incentive Compensation. The Radiance Employee Bonus Plan provides
the Board of Directors with discretionary authority to award cash bonuses to
executive officers and employees in accordance with recommendations made by the
Compensation Committee. The Compensation Committee's recommendations are based
upon the extent to which certain financial and performance
21
<PAGE> 24
targets (established semi-annually by the Compensation Committee) are met and
the contribution of each such officer and employee to the attainment of such
targets. For fiscal year 1998, the performance targets for each of the Named
Executive Officers included gross sales, cash flow, engineering product goals
and regulatory submission goals. The weight given to each factor varied from
individual to individual.
Long-Term Incentive Compensation. The 1996 Stock Option/Stock Issuance
Plan also provides the Board with the ability to align the interests of the
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage Radiance from the perspective of an owner
with an equity stake in the business. The number of shares subject to each
option grant is based upon the officer's tenure, level of responsibility and
relative position in Radiance. The Company has established general guidelines
for making option grants to the executive officers in an attempt to target a
fixed number of unvested option shares based upon the individual's position with
the Company and their existing holdings of unvested options. However, the
Company does not adhere strictly to these guidelines and will vary the size of
the option grant made to each executive officer as it feels the circumstances
warrant. Each grant allows the officer to acquire shares of Radiance Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time (up to 10 years from the date of grant). The option
normally vests in periodic installments over a four-year period, contingent upon
the executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she remains
in the Company's employ and the market price of the Company's Common Stock
appreciates over the option term.
CEO Compensation. The Compensation Committee set the base salary for
Michael R. Henson, the Company's Chief Executive Officer from January 1998 until
June 1998, and Jeffrey F. O'Donnell, the Company's Chief Executive Officer from
June 1998 until March 1999, at a level which is designed to provide a salary
competitive with salaries paid to chief executive officers of similarly-sized
companies in the industry and commensurate with each such individual's
experience. Mr. Henson's experience in the industry as a chief executive officer
of various companies during a period of over fifteen years, and Mr. O'Donnell's
experience at the Company and his work on several corporate transactions during
the fiscal year, including the CVD/RMS merger, were important factors in setting
the total compensation for each individual. The Compensation Committee did not
intend to have the base salary component of compensation affected to any
significant degree by Company performance. In addition, the Company granted Mr.
Henson a total of 55,000 options, and Mr. O'Donnell a total of 225,000 options,
both as recognition of such individual's service to the Company during the
fiscal year and as an incentive to participate in the success and increased
value of the Company, and to align such individual's interest with the long-term
interest of the Company's stockholders.
Option Repricing. On April 7, 1998, the Compensation Committee approved
the repricing of 299,000 options granted pursuant to the Company's 1996 Stock
Option/ Stock Issuance Plan, including an aggregate of 223,000 options granted
to the Named Executive Officers. Such options had exercise prices ranging from
$7.31 to $12.50. Such repricing was effected by cancelling existing options and
granting new options.
On December 14, 1998, the Compensation Committee approved the repricing
of 194,000 options granted pursuant to the Company's 1996 Stock Option/ Stock
Issuance Plan, including an
22
<PAGE> 25
aggregate of 138,000 options granted to the Named Executive Officers. Such
options had exercise prices ranging from $5.88 to $6.88. The repricing was
effected by cancelling existing options and granting new options.
The Compensation Committee approved the repricings because it believes
that equity interests are a significant factor in the Company's ability to
retain directors, executive officers and employees, by providing an incentive to
all such personnel to devote their utmost effort and skill to the advancement
and betterment of the Company by permitting them to participate in the success
and increased value of the Company. Following the grant of such options,
however, the price per share of the Company's Common Stock declined. The
Compensation Committee believed, that as a result of this decline, the options
so granted would not have the desired motivational effect on the optionees.
Accordingly, the Compensation Committee approved the repricing as a means of
ensuring that optionees have a meaningful equity interest in the Company.
Compliance With Internal Revenue Code Section 162(M). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held corporations for compensation exceeding $1 million paid to
certain of the corporation's executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance based compensation to be paid to the Company's executive
officers for the 1998 fiscal year did not exceed the $1 million limit per
officer, nor is it expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal 1999 will exceed that limit.
The Company's 1996 Stock Option/Stock Issuance Plan is structured so that any
compensation deemed paid to an executive officer in connection with the exercise
of option grants made under that plan will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Compensation Committee has decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
COMPENSATION COMMITTEE
William G. Davis
Franklin D. Brown
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the 1998 fiscal year were Franklin D. Brown and William G. Davis.
No member of the Compensation Committee was at any time during the 1998 fiscal
year or at any other time an officer or employee of Radiance.
No executive officer of Radiance served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
23
<PAGE> 26
STOCK PERFORMANCE GRAPH
The graph depicted below shows Radiance's stock price as an index
assuming $100 invested on June 19, 1996 (the date of Radiance's initial public
offering), along with the composite prices of companies listed on the CRSP Total
Return Index for National Association of Securities Dealers Automated Quotation
("Nasdaq") Stock Market and the Hambrecht & Quist Incorporated Total Return
Index for Healthcare Technology Companies (Excluding Biotechnology). This
information has been provided to Radiance by Hambrecht & Quist Incorporated.
HAMBRECHT & QUIST INDEX PRODUCTS AND SERVICES
1999 PROXY PERFORMANCE GRAPH DATA
<TABLE>
<CAPTION>
RADIANCE MEDICAL NASDAQ STOCK H&Q HEALTHCARE
DATES SYSTEMS MARKET - U.S. EXCLUDING BIOTECH
- ----- ---------------- ------------- -----------------
<S> <C> <C> <C>
06/19/96 100.00 100.00 100.00
Aug-96 125.00 96.81 98.24
Nov-96 102.08 109.43 107.98
Feb-97 89.58 110.63 115.32
May-97 64.58 118.72 118.64
Aug-97 64.58 135.06 126.71
Nov-97 45.83 136.32 128.32
Feb-98 40.10 151.36 145.04
May-98 55.21 150.85 149.27
Aug-98 28.13 128.46 125.29
Nov-98 34.38 167.16 151.43
</TABLE>
Note: Assumes $100 invested on 6/19/96 in Radiance and in the CRSP Total
Return Index for Nasdaq Stock Market and the H&Q Total Return Index for
Healthcare Technology Companies (Excluding Biotechnology). Assumes
Reinvestment of Dividends on a daily basis.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 which might incorporate future filings, including this
Proxy Statement, the preceding Compensation Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated by
reference into any of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
DEADLINE FOR RECEIPT OF
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any Stockholder desiring to submit a proposal for action at the 1999
Annual Meeting of Stockholders should arrange for such proposal to be delivered
to Radiance at its principal place of
24
<PAGE> 27
business no later than December 16, 1998, in order to be considered for
inclusion in Radiance proxy statement relating to that meeting. Matters
pertaining to such proposals, including the number and length thereof, the
eligibility of persons entitled to have such proposals included and other
aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the SEC and other laws and regulations.
On May 21, 1998 the SEC adopted an amendment to Rule 14a-4, as
promulgated under the Securities and Exchange Act of 1934, as amended. The
amendment to Rule 14a-4(c)(1) governs Radiance's use of its discretionary proxy
voting authority with respect to a stockholder proposal which is not addressed
in Radiance's proxy statement. The new amendment provides that if a proponent of
a proposal fails to notify Radiance at least 45 days prior to the month and day
of mailing of the prior year's proxy statement, then Radiance will be allowed to
use its discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement.
With respect to Radiance's 1999 Annual Meeting of Stockholders, if
Radiance is not provided notice of a stockholder proposal, which the stockholder
has not previously sought to include in Radiance's proxy statement, by March 1,
1999, Radiance will be allowed to use its voting authority as outlined.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
-----------------------------------------
Stephen R. Kroll
Secretary
May 6, 1999
25
<PAGE> 28
PROXY
RADIANCE MEDICAL SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 9, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of
the notice of annual meeting of stockholders to be held on June 9, 1999 and the
proxy statement and appoints Michael R. Henson and Stephen R. Kroll, or either
of them, the proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Radiance Medical Systems, Inc. ("Radiance") which
the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the Annual Meeting of Stockholders of
Radiance to be held at The Hampton Inn at 27102 Towne Centre Drive, Foothill
Ranch, California 92610 on Wednesday, June 9, 1999 at 10:00 a.m., and at any
adjournment or postponement thereof, and to vote in their discretion on such
other business as may properly come before the Annual Meeting and any
postponement or adjournment thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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- FOLD AND DETACH HERE -
Please mark your votes as indicated in /X/ this example
1. ELECTION OF DIRECTORS INSTRUCTION: To withhold authority to vote for any
individual nominee mark the "EXCEPTIONS" box, and strike a line through
the nominee's name in the list below:
MAURICE BUCHBINDER, M.D.
JEFFREY F. O'DONNELL
GERARD VON HOFFMANN
<TABLE>
<S> <C> <C>
WITHHOLD
FOR AUTHORITY
all nominees to vote for
listed below all nominees EXCEPTIONS
/ / / / / /
</TABLE>
The Board of Directors recommends a vote FOR each of the director nominees
listed above. This Proxy, when properly executed will be voted as specified
above. This Proxy will be voted FOR each of the nominees listed under Proposal
No. 1 if no specification is made. THIS PROXY ALSO CONFERS DISCRETION AUTHORITY
TO VOTE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE ANNUAL MEETING.
<PAGE> 29
PLEASE RETURN YOUR EXECUTED PROXY TO RADIANCE'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO RADIANCE, ATTENTION: SECRETARY.
Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:
--------------------------------------------------
(Print name(s) as it (they) appear on certificate)
Dated: Signature(s)
--------------------- ---------------------------------------
Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer. If a partnership, please
sign in the partnership name by an authorized person.
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