<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
VIDAMED, 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(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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<PAGE>
VIDAMED, INC.
_______
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VidaMed,
Inc., a Delaware Corporation (the "Company"), will be held on Wednesday, May 7,
1997 at 10:00 a.m., local time, at the Hotel Sofitel, 223 Twin Dolphin Drive,
Redwood City, California 94065, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1995 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 100,000 shares to a new total of 200,000
shares.
3. To approve an amendment to the Company's 1992 Stock Plan to increase
the number of shares of Common Stock reserved for issuance thereunder
by 366,666 shares to a new total of 3,100,000 shares.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on March 31, 1997 are
entitled to vote at the Annual Meeting and are cordially invited to attend the
meeting. However, to ensure your representation at the meeting, you are urged
to mark, sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. If you attend the meeting,
you may vote in person even if you return a proxy.
Very truly yours,
/s/ James A. Heisch
James A. Heisch
President and Chief Executive Officer
Menlo Park, California
April 7, 1997
- --------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY
WILL HAVE THE ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF
YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND
VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY
- --------------------------------------------------------------------------------
<PAGE>
VIDAMED, INC.
_______
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
VidaMed, Inc. (the "Company" or "VidaMed") for use at the Annual Meeting of
Stockholders to be held Wednesday, May 7, 1997 at 10:00 a.m., local time, or at
any postponement or adjournment thereof (the "Annual Meeting"), for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Hotel Sofitel, 223 Twin
Dolphin Drive, Redwood City, California 94065. The Company's telephone number
at its principal executive offices is (415) 328-8781.
These proxy solicitation materials were mailed on or about April 7, 1997 to
all Stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND STOCK OWNERSHIP
Stockholders of record of the Company's Common Stock at the close of
business on March 31, 1997 are entitled to notice of, and to vote at, the Annual
Meeting. As of March 31, 1997, 11,247,525 shares of the Company's Common Stock
were issued and outstanding.
The following table sets forth information known to the Company with
respect to the beneficial ownership of its Common Stock as of December 31, 1996,
for (i) each person who is known by the Company to own beneficially more than 5%
of the Common Stock, (ii) each of the Company's directors, (iii) each executive
officer named in the Summary Compensation Table and (iv) all directors and
executive officers as a group.
SHARES APPROXIMATE
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED OWNED
---------------------------------------- ------------ -----------
Entities affiliated with Delphi BioVentures (2) . . 83,503 1%
David L. Douglass
3000 Sand Hill Road
Building One, Suite 135
Menlo Park, California 94025
Mohr, Davidow Ventures III (3). . . . . . . . . . . 663,021 6%
Lawrence G. Mohr, Jr.
3000 Sand Hill Road
Building One, Suite 240
Menlo Park, California 94025
Carol A. Chludzinski (4). . . . . . . . . . . . . . 140,908 1%
David L. Douglass (5) . . . . . . . . . . . . . . . 224,039 2%
Stuart D. Edwards (6) . . . . . . . . . . . . . . . 313,349 3%
c/o VidaMed, Inc.
1380 Willow Road, Suite 101
Menlo Park, California 94025
James A. Heisch (7) . . . . . . . . . . . . . . . 422,702 4%
John N. Hendrick (8) . . . . . . . . . . . . . . . 191,831 2%
Noel D. Messenger (9) . . . . . . . . . . . . . . . 96,939 1%
Lawrence G. Mohr, Jr. (10). . . . . . . . . . . . . 690,801 6%
1
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Michael H. Spindler (11). . . . . . . . . . . . . . 27,780 *
All directors and executive officers as a group
(8 persons) . . . . . . . . . . . . . . . . . . . 2,108,349 19%
- -------------------------
* Less than 1%.
(1) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes 425 shares held by Delphi BioInvestments II, L.P. and 83,078
shares held by Delphi BioVentures II, L.P.
(3) Includes 663,021 owned by Mohr, Davidow Ventures III.
(4) Includes 908 shares held by Ms Chludzinski and 140,000 shares issuable
upon exercise of stock options held by Ms Chludzinski exercisable within
60 days of December 31, 1996.
(5) Includes 83,503 shares held by entities affiliated with Delphi
BioVentures, 1,479 shares held by Erin J. Alley, an administrative partner
of Delphi BioVentures, and 55,977 shares held by James J. Bochnowski, a
general partner of Delphi BioVentures. Mr. Douglass is a general partner
of each of the entities affiliated with Delphi BioVentures and disclaims
beneficial ownership of the shares held by such entities except to the
extent of his proportionate partnership interest therein. Also includes
55,300 shares held by Mr. Douglass and 11,112 shares issuable upon
exercise of stock options held by Mr. Douglass exercisable within 60 days
of December 31, 1996. Also includes 16,668 shares issuable upon exercise
of stock options granted under the 1995 Director's Stock Option Plan.
(6) Includes 268,905 shares held by Mr. Edwards and 44,444 shares issuable
upon exercise of stock options held by Mr. Edwards exercisable within 60
days of December 31, 1996.
(7) Includes 55,470 shares held by Mr. Heisch and 367,232 shares issuable upon
exercise of stock options held by Mr. Heisch exercisable within 60 days of
December 31, 1996.
(8) Includes 36,310 shares held by Mr. Hendrick and 155,521 shares issuable
upon exercise of stock options held by Mr. Hendrick exercisable within 60
days of December 31, 1996.
(9) Includes 1,934 shares held by Mr. Messenger and 95,005 shares issuable
upon exercise of stock options held by Mr. Messenger exercisable within 60
days of December 31, 1996.
(10) Includes 663,021 shares held by Mohr, Davidow Ventures III. Mr. Mohr is a
general partner of Mohr, Davidow Ventures III and disclaims beneficial
ownership of the shares held by such entity except to the extent of his
proportionate partnership interest therein. Also includes 11,112 shares
issuable upon exercise of stock options exercisable within 60 days of
December 31, 1996. Also includes 16,668 shares issued under the 1995
Director's Stock Option Plan.
(11) Includes 11,112 shares issuable upon exercise of stock options exercisable
within 60 days of December 31, 1996. Also includes 16,668 shares issued
under the 1995 Director's Stock Option Plan.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to American Securities Transfer,
Inc., 938 Quail Street, Suite 101, Lakewood, CO 80215-5513 (Attention: Tiffany
Skiles, Inspector of Elections) a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting and voting in
person.
VOTING AND SOLICITATION
Holders of shares of Common Stock are entitled to one vote per share on
all matters submitted to a vote of stockholders.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. Except with respect to the election of directors where
cumulative voting is invoked and except in certain other specific circumstances,
the affirmative vote of a majority of shares present in person or represented by
proxy at a duly held meeting at which a quorum is
2
<PAGE>
present is required under Delaware law for approval of proposals presented to
stockholders. In general, Delaware law also provides that a quorum consists of
a majority of the shares entitled to vote and present in person or represented
by proxy. The Inspector will treat abstentions as shares that are present and
entitled to vote for the purposes of determining the presence of a quorum and as
negative votes for purposes of determining the approval of any matter submitted
to the stockholders for a vote. Any proxy which is returned using the form of
proxy enclosed and which is not marked as to a particular item will be voted for
the election of directors, for approval of the amendment to the 1995 Employee
Stock Purchase Plan and reservation of an additional 100,000 shares for issuance
thereunder, for approval of the amendment to the 1992 Stock Plan and reservation
of an additional 366,666 shares for issuance thereunder, for ratification of the
appointment of the designated independent auditors and, as the proxy holders
deem advisable, on other matters that may come before the meeting, as the case
may be with respect to the item not marked. If a broker indicates on the
enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present with respect to that matter. The Company believes that
the tabulation procedures to be followed by the Inspector are consistent with
the general statutory requirements in Delaware concerning voting of shares and
determination of a quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1998 Annual Meeting must be received by the
Company no later than November 30, 1997 in order that such proposals may be
included in the proxy statement and form of proxy relating to that meeting.
3
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
A board of five directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below. All nominees are presently directors of the
Company. If any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any nominee who shall
be designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
If stockholders nominate additional persons for election as directors, the proxy
holders will vote all proxies received by them in accordance to assure the
election of as many of the Board's nominees as possible, with the proxy holder
making any required selection of specific nominees to be voted for. The term of
office of each person elected as a director will continue until the next annual
meeting of stockholders or until that person's successor has been elected.
The Board of Directors recommends a vote FOR the nominees listed below:
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
James A. Heisch........... 53 President and Chief Executive Officer 1996
Stuart D. Edwards......... 51 Director 1992
David L. Douglass(1)(2)... 45 Chairman of the Board 1993
Michael H. Spindler (1)... 54 Director 1994
Wayne I. Roe.............. 46 Director -
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Mr. Heisch has served as President, Chief Executive Officer and Chief
Financial Officer since March 1996. He served as Chief Financial Officer of the
Company since October 1994. He served as Vice President from October 1994 to
May 1995 and was appointed Executive Vice President in May 1995. From December
1990 until October 1994, Mr. Heisch was Chief Financial Officer, Vice President,
Finance and Secretary of SuperMac Technology, Inc., a supplier of color graphics
systems. From July 1983 until June 1990, Mr. Heisch held various senior
management positions, including Senior Vice President and Chief Financial
Officer, with Businessland, Inc., a distributor of computer products. Mr.
Heisch holds a B.S. in Accounting from San Jose State University and an M.B.A.
from the University of Santa Clara. He is a Certified Public Accountant.
Mr. Edwards, a co-founder of the Company, served as President and Chief
Executive Officer of the Company since its founding in July 1992 until March
1996. From July 1992 to May 1995, Mr. Edwards also served as Chairman of the
Board. From December 1989 until October 1992, Mr. Edwards was Vice President
and Chief Technical Officer of EP Technologies, Inc., a developer and
manufacturer of electrophysiology catheters. Prior to joining EP Technologies,
Mr. Edwards was Director of Development of Applied Immune Sciences, Inc. Mr.
Edwards previously held positions with Control Data Corporation, AVI
Corporation, UFE Corporation, Abbott Laboratories, Ideal Toy Corporation and
Baxter Healthcare Corporation. Mr. Edwards holds a Certificate in Mechanical
Engineering from the Union of Educational Institutions in England.
Mr. Douglass has served as a director of the Company since January 1993
and as Chairman of the Board since May 1995. Mr. Douglass has been a General
Partner of Delphi BioVentures since June 1990 and a General Partner of Matrix
Partners II, L.P. since February 1986; both are venture capital firms. From
1983 to 1986, Mr. Douglass was Chief Operating Officer of Paladin Software
Corporation, a software manufacturer. Previously, he was Vice President of
Finance and Administration and Chief Financial Officer
4
<PAGE>
of Collagen Corporation, a medical products company. Mr. Douglass serves as a
director of TheraTx, Inc. He holds a B.A. in Political Science from Amherst
College and an M.A. in Administration and Policy Analysis and an M.B.A. from
Stanford University.
Mr. Spindler has served as a director of the Company since October 1994.
From 1993 to February 1996 Mr. Spindler served as President and Chief Executive
Officer of Apple Computer, Inc. From 1980 to 1993, he has held a variety of
management positions at Apple, including Vice President of International
Marketing and Sales, President and Chief Operating Officer of Apple Europe.
Prior to joining Apple, Mr. Spindler served as European marketing manager for
Intel Corporation, and as European marketing manager for Digital Equipment
Corporation. Mr. Spindler has also held positions at Schlumberger Ltd. and
Siemens AG. Mr. Spindler holds an M.S. in Engineering from Rheinische
Fachhochschule.
Mr. Roe is a new addition to the Company's Board of Directors. Mr. Roe
has been Chairman at Covance Health Economics and Outcomes Services, Inc.
(formerly, Health Technology Associates, Inc. (HTA)) since 1989. Prior to
founding HTA, Mr. Roe directed the Medical Technology Consulting Group at Lewing
and Associates. From 1978 to 1984, Mr. Roe served as a Director and Vice
President of Economic Research and Health Policy at the Health Industry
Manufacturer's Association where he directed all research and policy development
related to the effects of changing reimbursement and health care affecting
medical products. Mr. Roe has authored numerous articles on policy and market
factors affecting medical and product utilization. He has also served as a
consultant and an adviser to the Medicare program, the Blue Cross and Blue
Shield Association, and the United States Congress. Mr. Roe holds a B.A. in
Economics from Union College, an M.A. in Economics from the University of
Maryland, and an M.A. in Political Economics from the State University of New
York at Albany.
There are no family relationships among directors or executive officers of
the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven meetings
during the fiscal year ended December 31, 1996. No nominee who was a director
during the entire fiscal year attended fewer than 75 percent of the meetings of
the Board of Directors of committees on which such person served except for
director Mohr who attended three meetings. The Board of Directors has a
Compensation Committee and an Audit Committee. There is currently no nominating
committee or committee performing the functions of a nominating committee.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, grants stock options and stock awards to employees and
consultants under the Company's stock option and award plans and otherwise
determines compensation levels, and performs such other functions regarding
compensation as the Board may delegate. The Compensation Committee, which is
composed of Messrs. Douglass and Spindler, held two meetings during 1996.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the auditors' comments as to controls, adequacy of staff,
and management performance and procedures in connection with audit and financial
controls. The Audit Committee, which is composed of Messrs. Mohr and Douglass,
held four meetings during 1996.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash for services they provide as
directors. From time to time, certain directors who are not employees of the
Company have received grants of options to purchase shares of the Company's
Common Stock. Under the 1995 Director Stock Option Plan, directors who are not
employees of the Company receive initial and annual stock option grants. The
Company does not pay additional amounts for committee participation or special
assignments of the Board of Directors.
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<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
EXECUTIVE COMPENSATION
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information for the years ended December 31, 1996, 1995 and 1994 regarding the
compensation of the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------------
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUSES OPTIONS (1)
- ------------------------------- --------- --------------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
James A. Heisch 1996 $189,711 $20,000(4) 290,000 $3,600
President and Chief 1995 175,000 17,500(5) 47,232 3,600
Executive Officer (2) 1994 32,308(3) - 77,778 692
John N. Hendrick 1996 175,000 7,500(7) 65,000 3,600
Vice President and 1995 196,000 - 2,790 3,600
Chief Operating Officer 1994 46,292(6) - 122,223 969
Noel D. Messenger 1996 139,788 - 40,000 3,600
Vice President, 1995 126,600 - 32,226 1,523
Regulatory Affairs, 1994 73,077(8) - 27,779 -
Clinical Affairs and
Quality Assurance
Carol A. Chludzinski 1996 110,000 24,000(10) 120,000 4,938
Vice President N. Am. 1995 33,746(9) 8,000(11) 20,000 1,108
Sales & Marketing
Stuart D. Edwards 1996 150,769(13) - - -
Former President and 1995 175,000 - 25,000 6,000
Chief Executive Officer (12) 1994 167,116 - 46,667 6,000
- -------------------------
</TABLE>
(1) Consists of automobile expenses paid for by the Company.
(2) Mr. Heisch accepted the position of President and Chief Executive Officer
in March 1996.
(3) Mr. Heisch joined the Company as Vice President and Chief Financial
Officer in October 1994. Had he been employed for all of calendar
1994, his annual salary would have been $175,000.
(4) Mr. Heisch's employee bonus for his continuous service with the Company
during 1996.
(5) Mr. Heisch's employment agreement with the Company provided for a 10%
bonus after 6 months of employment with the Company.
(6) Mr. Hendrick joined the Company as Vice President and Chief Operating
Officer in September 1994. Had he been employed for all of calendar 1994,
his annual salary would have been $150,000.
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<PAGE>
(7) Mr. Hendrick's employee bonus for his continuous service with the Company
during 1996.
(8) Mr. Messenger joined the Company as Senior Director of Regulatory Affairs
and Quality Assurance in May 1994, and was promoted to Vice President,
Regulatory Affairs and Quality Assurance in September 1994. Had he been
employed for all of calendar 1994, his annual salary would have been
$117,500. Mr. Messenger resigned his employment with the Company in
January 1997.
(9) Ms Chludzinski joined the Company as Director of Sales and Marketing in
September 1995. Had she been employed for all of calendar 1995, her
annual salary would have been $100,000.
(10) Ms Chludzinksi's employment agreement with the Company provides for an
annual bonus of $24,000.
(11) Had Ms Chludzinski been employed for all of calendar 1995, her annual
bonus would have been $24,000.
(12) Mr. Edwards resigned as President and Chief Executive Officer in March
1996.
(13) The terms of Mr. Edwards resignation provided for seven months of
continued salary payments to October 1996.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth certain
information concerning stock options granted during the calendar year ended
December 31, 1996 to the executive officers named in the Summary Compensation
Table above. Actual realizable values, if any, of stock options will depend on
the future performance of the Common Stock.
OPTION GRANTS IN CALENDAR YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERM
INDIVIDUAL GRANTS (1)
--------------------------------------------------------------------- -------------------------------
NUMBER OF
SECURITIES % OF TOTAL EXERCISE
UNDERLYING OPTIONS OR BASE
OPTIONS GRANTED PRICE EXPIRATION
NAME GRANTED (#) IN 1996 ($/SH) DATE 5% 10%
- ------------------ --------------- -------------- --------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James A. Heisch 40,000(2) 5% $7.62 01/04/06 $ 191,687 $ 485,773
200,000(3) 25% 8.75 04/11/06 1,100,566 2,789,049
50,000(4) 6% 10.87 12/19/06 341,804 866,199
John N. Hendrick 40,000(2) 5% 7.62 01/04/06 191,687 485,773
25,000(4) 3% 10.87 12/19/06 170,902 433,100
Noel D. Messenger 40,000(2) 5% 7.62 01/04/06 191,687 485,773
Carol A. Chludzinski 3,000(5) * 10.25 02/12/06 19,339 49,008
37,000(6) 4% 9.25 04/12/06 215,239 545,458
80,000(4) 10% 10.87 12/19/06 546,887 1,385,918
Stuart D. Edwards - - - - - -
</TABLE>
- -------------------------
* Less than 1%.
(1) The potential realizable value is based on the term of the option at date
of the grant (10 years). It is calculated by assuming that the stock price
on the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term, and that the option is exercised and sold on
the last day of the option term for the appreciated stock price. These
amounts represent certain assumed rates of appreciation only, in accordance
with the rules of the SEC, and do not reflect the Company's estimate
7
<PAGE>
or projection of future stock price performance. Actual gains, if any, are
dependent on the actual future performance of the Company's Common Stock.
There can be no assurance that the amounts reflected in this table will be
achieved.
(2) This option is immediately exercisable, subject to repurchase. The
Company's repurchase right lapses at the rate of 12/48 of the shares
subject to the option on January 4, 1997 and ratably at the end of each
full month thereafter.
(3) This option is immediately exercisable, subject to repurchase. The
Company's repurchase right lapses at the rate of 1/48 of the shares subject
to the option on March 12, 1997 and ratably at the end of each full month
thereafter.
(4) This option is immediately exercisable, subject to repurchase. The
Company's repurchase right lapses at the rate of 12/48 of the shares
subject to the option on January 2, 1998 and ratably at the end of each
full month thereafter.
(5) This option is immediately exercisable, subject to repurchase. The
Company's repurchase right lapses at the rate of 12/48 of the shares
subject to the option on February 12, 1997 and ratably at the end of each
full month thereafter.
(6) This option is immediately exercisable, subject to repurchase. The
Company's repurchase right lapses at the rate of 12/48 of the shares
subject to the option on April 1, 1997 and ratably at the end of each full
month thereafter.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES. The following table sets forth, for each of such executive
officers, the number and value of vested and unvested options held at December
31, 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
ACQUIRED UNDERLYING VALUE OF UNEXERCISED
ON VALUE UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED OPTIONS AT OPTIONS AT 12/31/96
NAME (#) ($)(1) 12/31/96 (#)(2) ($)(3)
- ---------------------- -------------- --------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
VESTED UNVESTED VESTED UNVESTED
James A. Heisch 10,000 $68,000 50,924 316,308 $249,806 $1,541,418
John N. Hendrick 34,492 204,365 34,437 121,084 346,713 823,982
Noel D. Messenger 5,000 62,965 23,661 71,344 215,284 476,006
Carol A. Chludzinski - - 6,250 133,750 33,563 375,638
Stuart D. Edwards - - 28,298 16,146 256,359 106,887
</TABLE>
- -------------------------
(1) Represents the fair market value of the Company's Common Stock on the date
of exercise (based on the price last reported sale on the Nasdaq National
Market) less the exercise price, and does not necessarily indicate that the
shares were sold by the optionee.
(2) All vested options may be immediately exercised. In addition, the unvested
options held by Messrs. Edwards, Heisch and Hendrick may be immediately
exercised, but shares purchased upon exercise of unvested options are
subject to repurchase at the option of the Company at the original issuance
price. The Company's repurchase right lapses over the scheduled vesting
period.
(3) Calculated by determining the difference between the fair value of the
securities underlying the options on December 31, 1996 ($12.87 per share),
and the exercise price (ranging from $1.2825 per share to $10.8750 per
share).
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COMPENSATION COMMITTEE REPORT
THE FOLLOWING REPORT IS PROVIDED TO STOCKHOLDERS BY THE MEMBERS OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.
COMPENSATION PHILOSOPHY. The goals of the Company's executive compensation
program are to attract and retain executive officers who will strive for
excellence, and to motivate those individuals to achieve superior performance by
providing them with rewards for assisting the Company in meeting revenue and
profitability targets.
Compensation for the Company's executive officers consists of base salary
and potential cash bonus, as well as potential long-term incentive compensation
through stock options. The Compensation Committee considers the total current
and potential long-term compensation of each executive officer in establishing
each element of compensation.
CASH-BASED COMPENSATION. Each fiscal year, the Compensation Committee
reviews with the Chief Executive Officer and approves, with appropriate
modifications, an annual base salary plan for the Company's executive officers.
This base salary plan is based on industry and peer group surveys and
performance judgments as to the past and expected future contributions of the
individual executive officers. The Compensation Committee reviews and fixes the
base salary of the Chief Executive Officer based on similar competitive
compensation data and the Committee's assessment of his past performance and its
expectation as to his future contributions in leading the Company.
The 1996 compensation levels for the Company's executive officers were
reviewed and set in March 1996. A variety of factors, both individual and
corporate, were considered in evaluating the performance of the Company's
executive officers.
STOCK OPTION AWARDS FOR 1996. The Company's 1992 Stock Plan provides for
the issuance of stock options to officers and employees of the Company to
purchase shares of the Company's Common Stock at an exercise price equal to the
fair market value of such stock on the date of grant. Stock options are granted
to the Company's executive officers and other employees both as a reward for
past individual and corporate performance and as an incentive for future
performance. The Committee believes that stock-based performance compensation
arrangements are essential in aligning the interests of management and the
stockholders in enhancing the value of the Company's equity. Consistent with
this philosophy, in March 1996 the Committee granted an incentive stock option
of 200,000 shares with a four year vesting period to the President and Chief
Executive Officer of the Company ("CEO"), Mr. James A. Heisch. As with other
executive officers of the Company, the amount of the CEO's stock option award is
based on attainment of a combination of corporate and individual performance
objectives. Mr. Heisch's stock option reflects the Committee's judgment as to
Mr. Heisch's personal performance and promotion to President and Chief Executive
Officer during 1996 as well as his role in the attainment of the Company's
overall objectives.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code (the "Code") limits the Company to a deduction for federal income
tax purposes of no more than $1 million of compensation paid to certain Named
Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The statute containing this law and the applicable proposed Treasury
regulations offer a number of transitional exceptions to this deduction limit
for pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any Named Executive Officer in a taxable
year which is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any final Treasury regulations and to comply with Code Section
162(m) in the future to the extent consistent with the best interests of the
Company.
David L. Douglass and Michael H. Spindler
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STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
returns for the Company's Common Stock, the Nasdaq Stock Market Index, and an
index based on companies in a peer group (Hambrecht & Quist Technology and
Growth Index for Health Care and Medical Technology excluding Biotechnology).
The graph assumes the investment of $100 on June 21, 1995, the date of the
Company's initial public offering. The performance shown is not necessarily
indicative of future performance.
- --------------------------------------------------------------------------------
6/21/95 12/95 12/96
- --------------------------------------------------------------------------------
VIDAMED, INC. 100 146 198
- --------------------------------------------------------------------------------
NASDAQ U.S. 100 114 140
- --------------------------------------------------------------------------------
PEER GROUP 100 135 150
- --------------------------------------------------------------------------------
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PROPOSAL NO. 2:
AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan")
provides employees of the Company with an opportunity to purchase Common Stock
of the Company through accumulated payroll deductions. The Company proposes to
amend the Purchase Plan to increase the number of shares reserved for issuance
thereunder by 100,000 shares to a new total of 200,000 shares. The essential
features of the Purchase Plan are set forth below.
STATUS OF SHARES. As of December 31, 1996, 59,719 shares had been issued
under the Purchase Plan and 40,281 shares remained available for issuance under
the Purchase Plan as of such date. If the proposed amendment to the Purchase
Plan is approved, an additional 100,000 shares of Common Stock will be available
for issuance pursuant to the Purchase Plan.
OPERATION OF THE PURCHASE PLAN. Under the Purchase Plan, the Company
withholds a percentage of each salary payment to participating employees over
certain offering periods. The Purchase Plan is currently implemented by
overlapping twenty-four month offering periods which commence on January 1 and
July 1 of each year. Each such offering period is divided into four six month
purchase periods. On the last business day of each purchase period, the funds
withheld are applied to the purchase of shares of Common Stock unless such
participating employee withdraws from the offering period prior to such purchase
date. To the extent permitted by Rule 16b-3 of the Securities Exchange Act, if
the fair market value of the Common Stock on the last day of the purchase period
is lower than the fair market value of the Common Stock on the first day of the
offering period, then all participating employees in such offering period shall
be automatically withdrawn from such offering period immediately after the stock
purchase on the last day of the purchase period and automatically re-enrolled in
the immediately following offering period. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
ELIGIBILITY; ADMINISTRATION. Employees are eligible to participate in the
Purchase Plan if they have been employed by the Company on a given Enrollment
Date. Payroll deductions may not exceed 15% of an employee's compensation, which
under the Purchase Plan is defined as base straight time gross earnings plus
overtime and commissions. No employee may purchase more than $25,000 worth of
stock in any calendar year. The Purchase Plan is currently administered by the
Board of Directors.
PURCHASE PRICE; MARKET VALUE. The price at which stock is purchased under
the Purchase Plan is equal to 85% of the fair market value of the common Stock
on the first day of the applicable offering period or the last day of each
purchase period, whichever is lower.
AMENDMENT AND TERMINATION. The Board of Directors may amend the Purchase
Plan from time to time or may terminate it or any purchase period or offering
period under it, without approval of the stockholders. However, to the extent
necessary and desirable to comply with Rule 16b-3 under the Securities Exchange
Act (or any other applicable law or regulation), the Company shall obtain
approval of the stockholders with respect to plan amendments to the extent and
in the manner required by such law or regulation. In the event of a merger or
sale of substantially all of the assets of the Company, the Board may shorten
the offering period or permit the assumption of outstanding rights to purchase
Common Stock. The Purchase Plan will terminate in April 2005 unless earlier
terminated by the Board.
TAX CONSEQUENCES OF PURCHASE PLAN TRANSACTIONS. The Purchase Plan, and
the right of participants to make purchases thereunder, is intended to qualify
under the provisions of Section 423 of the Code. Under these provisions, no
income is taxable to a participant until the shares purchased under the Plan are
sold or otherwise disposed of. Upon sale or other disposition of the share, the
participant will generally be subject to tax, depending in part on how long the
shares are held by the participant. If the shares are sold or otherwise
disposed of more than two years from the first day of the offering period, the
participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of
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the fair market value of the shares as of the first day of the offering period.
Any additional gain will be treated as long-term capital gain. If the shares
are sold or otherwise disposed of before the expiration of this holding period,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares were purchased by
the participant over the participant's purchase price. Any additional gain or
loss on the sale or disposition will be capital gain or loss. the Company is
not entitled to a deduction for amounts taxed as ordinary income or capital gain
to a participant except to the extent of ordinary income recognized by
participants upon a sale or disposition of shares prior to the expiration of the
holding period described above.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE PURCHASE
PLAN.
PROPOSAL NO. 3:
AMENDMENT TO THE 1992 STOCK PLAN
As of December 31, 1996 a total of 2,733,334 shares of Common Stock have
been reserved for issuance under the Company's 1992 Stock Plan ("the "Stock
Plan"). As of March 25, 1997, 676,733 shares had been issued upon the exercise
of stock options granted under the Stock Plan, 1,428,470 options were
outstanding and 628,131 shares remained available for future grant. The Stock
Plan is administered by the Compensation Committee of the Board of Directors.
Under the Stock Plan, options may be granted to employees, including directors
who are employees, and consultants. Only employees may receive "incentive stock
options," which are intended to qualify for certain tax treatment: nonemployees
receive "nonstatutory stock options," which do not qualify for such treatment.
In the event of a change in control of the Company, including a merger or sale
of substantially all of the Company's assets, outstanding options may be assumed
by any successor corporation or may become exercisable. The exercise price of
incentive stock options under the Stock Plan must at least equal the fair market
value of the Common Stock on the date of grant, while the exercise price of
nonstatutory options must at least equal 85% of such market value. Options
granted under the Stock Plan generally vest on a cumulative monthly basis over
four years, and in the case of incentive stock options, must be exercised within
ten years.
STATUS OF SHARES. An additional 366,666 shares will be authorized and
available for future grants under the Stock Plan for a new total of 3,100,000
shares.
ELIGIBILITY; ADMINISTRATION. Under the Stock Plan, employees may be
granted "incentive stock options" intended to qualify within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonemployees may be granted "non-statutory stock options" not intended to
qualify under such statute, and Outside Directors are granted automatic non-
statutory stock options. The Stock Plan is currently administered by the
Compensation Committee of the Board of Directors which determines the terms of
stock purchase rights and options granted, including the exercise price, the
number of shares subject to the option and the options' exercisability.
EXERCISE PRICE; MARKET VALUE. The exercise price of incentive stock
options and non-statutory stock options granted under the Stock Plan must be at
least equal to the fair market value of the Common Stock of the Company on the
date of the grant. Payment of the exercise price may be made in cash,
promissory notes, shares of Common Stock or certain other consideration.
EXERCISABILITY. Options granted under the Stock Plan generally become
exercisable at a rate of one-fourth of the shares of stock subject to the option
one year after the grant and subsequently one-forty-eighth of the shares of
stock subject to option per month. The term of an option may not exceed ten
years. No option may be transferred by the optionee other than by will or the
laws of descent or distribution. Each option may be exercised, during the
lifetime of the optionee, only by such optionee.
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AMENDMENT AND TERMINATION. The Board of Directors may at any time amend,
alter, suspend or discontinue the Stock Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Stock Plan
amendment in such a manner and to such a degree as required.
TAX INFORMATION REGARDING STOCK OPTIONS. An optionee who is granted an
incentive stock option will not recognize taxable income either at the time the
option is granted or at the time it is exercised, although exercise of the
option may subject the optionee to the alternative minimum tax. The Company
will not be allowed a deduction for federal income tax purposes as a result of
the exercise of an incentive stock option regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares at least two
years after grant of the option and one year after exercise of the option, any
gain will be treated as long-term capital gain. If these holding periods are
not satisfied at the time of sale, the optionee will recognize ordinary income
equal to the difference between the exercise price and the lower of (i) the fair
market value of the stock at the date of the option exercise or (ii) the sale
price of the stock, and the Company will be entitled to a deduction in the same
amount. (Different rules may apply upon a premature disposition by an optionee
who is an officer, director or 10% shareholder of the Company.) Any additional
gain or loss recognized on such a premature disposition of the shares will be
characterized as capital gain or loss. If the Company grants an incentive stock
option and as a result of the grant the optionee has the right in any calendar
year to exercise for the first time one or more incentive stock options for
shares having an aggregate fair market value (under all plans of the Company and
determined for each share as of the date the option to purchase the share was
granted) in excess of $100,000, then the excess shares must be treated as non-
statutory options.
An optionee who is granted a non-statutory stock option will also not
recognize any taxable income upon the grant of the option. However, upon
exercise of a non-statutory stock option, the optionee will recognize ordinary
income for tax purposes measured by the excess of the then fair market value of
the shares over the exercise price. Any taxable income recognized by an
optionee who is an employee of the Company will be subject to tax withholding by
the Company. Upon resale of the shares by the optionee, any difference between
the sales price and the fair market value at the time of exercise, to the extent
not recognized as ordinary income as described above, will be treated as capital
gain or loss. The Company will be allowed a deduction for federal income tax
purposes equal to the amount of ordinary income recognized by the optionee.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE STOCK PLAN.
13
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PROPOSAL NO. 4:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1997, and has further directed that management
submit the selection of independent auditors for ratification by the
stockholders at the Annual Meeting. Ernst & Young LLP has audited the Company's
financial statements annually since the Company's inception in 1992.
Representatives of Ernst & Young LLP are expected to be present at the meeting,
with the opportunity to make a statement if they desire to do so, and to respond
to appropriate questions.
If stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent auditors at any time during the year
if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote on the proposal at the
meeting will be required to ratify the selection of Ernst & Young LLP.
Abstentions will be counted toward the tabulation of votes cast on the proposal
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY. THE
EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE PROPOSAL.
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CERTAIN TRANSACTIONS
In August 1994, the Company entered into a cross license agreement with
RITA, formerly known as ZoMed International, Inc., a corporation formed to
develop a system for treating certain cancers. Mr. Edwards is one of the co-
founders of RITA. Mr. Edwards is a member of RITA's Board of Directors, but is
not involved in its day-to-day operations. In addition, venture capital funds
affiliated with Messrs. Douglass and Mohr are the principal initial investors in
RITA.
The cross license grants RITA a worldwide, exclusive, royalty-bearing
license to use VidaMed technology in applications for the diagnosis and
treatment of cancer and grants VidaMed a worldwide, exclusive, royalty-free
license to use RITA technology in applications for the treatment of urological
disorders other than cancer. The cross license between VidaMed and RITA allows
both companies to develop products for treatment of prostate cancer and cancers
of the lower urinary tract. For purposes of the cross license, VidaMed
technology and RITA technology consist of technology developed prior to the
earlier of (i) a merger, reorganization or sale of substantially all of the
assets of VidaMed or RITA or (ii) December 31, 1999, and with respect to
applications for prostate and lower urinary tract cancers, technology existing
at the date of the cross license.
As consideration for the cross license, RITA issued VidaMed 1,800,000
shares of RITA common stock, representing approximately 10% of the common stock
equivalents of RITA following RITA's initial $6.0 million financing. RITA will
also pay royalties to VidaMed based on a percentage of net sales of products
incorporating VidaMed technology, subject to an aggregate maximum of $500,000.
However, in the event that VidaMed introduces a product for treatment of cancer
of the prostate or lower urinary tract, no royalties will be payable on any such
product introduced by RITA. The cross license and related transactions
involving the organization of RITA were approved by a majority of the
disinterested stockholders of VidaMed as required by applicable law.
During the year ended December 31, 1995 the Company made expense advances
to RITA in the amount of $135,000. As of December 31, 1996, all of these
advances had been repaid by RITA.
In August 1996, Mr. Heisch exercised options to purchase 10,000 shares of
the Company's Common Stock. A portion of the purchase price for such shares was
paid by delivery of a full-recourse promissory note in the principal amount of
$27,000 bearing interest at the rate of 7.96%. The principal and the accrued
interest are due on February 1, 2000, but are immediately due and payable in the
event of termination of Mr. Heisch's employment with the Company.
In January 1996, Mr. Hendrick exercised options to purchase 34,492 shares
of the Company's Common Stock. A portion of the purchase price for such shares
was paid by delivery of a full-recourse promissory note in the principal amount
of $93,128.40 bearing interest at the rate of 7.96% per annum. The principal
and accrued interest are due on February 1, 2000, but are immediately due and
payable in the event of termination of Mr. Hendrick's employment with the
Company.
All future transactions, including any loans from the Company to its
officers, directors, principal stockholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
15
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission ("SEC"). Specific filing deadlines of these
reports have been established, and the Company is required to disclose in this
Proxy Statement any failure to file required reports by these dates during the
fiscal year ended December 31, 1996. To the best of the Company's knowledge,
all of these filing requirements have been satisfied, except that officer
Hendrick was late in filing his January 1996 report, director Edwards was late
in filing his May 1996 report, and officers Heisch, Hendrick and Chludzinski
were each late in filing their December 1996 reports. In making this statement,
the Company has relied solely on written representations of its directors and
executive officers and any ten percent holders and copies of the reports that
they filed with the SEC.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares they
represent as the Board of Directors may recommend.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT
TO INVESTOR RELATIONS, VIDAMED, INC., 1380 WILLOW ROAD, MENLO PARK, CALIFORNIA
94025.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James A. Heisch
James A. Heisch
President and Chief Executive Officer
Dated: April 7, 1997
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF VIDAMED, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of VidaMed, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders
and Proxy Statement each dated April 7, 1997 and hereby appoints James A.
Heisch and David L. Douglass or either of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned to represent the undersigned at the 1997 Annual Meeting of
Shareholders of VidaMed, Inc. to be held on May 7, 1997 at 10:00 a.m., local
time, at the Hotel Sofitel, 223 Twin Dolphin Drive, Redwood City, California
94065 and any postponement or adjournment thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth below:
----------------
SEE REVERSE SIDE
----------------
<PAGE>
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
1. Election of Directors / / / /
NOMINEES: James A. Heisch Stuart D. Edwards
David L. Douglass Wayne I. Roe
Michael H. Spindler
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment / / / / / /
to the 1995 Employee Stock Purchase
Plan to increase the number of
Common Stock reserved for issuance
thereunder by 100,000 shares to a
new total of 200,000 shares.
3. Proposal to approve an amendment to / / / / / /
the 1992 Stock Plan to increase the
number of Common Stock reserved for
issuance thereunder by 366,666 shares
to a new total of 3,100,000 shares.
4. Proposal to ratify the appointment / / / / / /
of Ernst & Young LLP as independent
auditors of the Company for the year
ending 1997.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF DIRECTORS; (2)
FOR THE AMENDMENT TO THE COMPANY'S 1995 EMPLOYEE STOCK PURCHASE PLAN; (3) FOR
THE AMENDMENT TO THE COMPANY'S 1992 STOCK PLAN; (4) FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED
IN THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR
TITLES. IF SIGNER IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE
A DULY AUTHORIZED OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
SIGNATURE(S) ______________________________ DATE _____________
SIGNATURE(S) ______________________________ DATE _____________
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
NOTE: (This Proxy should be marked, signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.
