SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. 1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(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:
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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, 1998
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 Thursday, May 7,
1998 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 200,000 shares to a new total of 400,000 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
1,200,000 shares to a new total of 4,300,000 shares.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31, 1998.
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, 1998 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/ David J. Illingworth
David J. Illingworth
President and Chief Executive Officer
Fremont, California
April 6, 1998
- --------------------------------------------------------------------------------
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 Thursday, May 7, 1998 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 telephone number at the
meeting location is (650) 598-9000. The Company's telephone number at its
principal executive offices is (510) 492-4900.
These proxy solicitation materials were mailed on or about April 6, 1998
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, 1998 are entitled to notice of, and to vote at, the
Annual Meeting. As of March 31, 1998, 15,255,292 shares of the Company's Common
Stock, $0.001 par value (the "Common Stock") were issued and outstanding and
held of record by approximately 265 stockholders.
The following table sets forth information known to the Company with
respect to the beneficial ownership of its Common Stock as of March 31, 1998,
for (i) each person who is known by the Company to own beneficially more than
5% of the Common Stock, (ii) each nominee for election as a director, (iii)
each executive officer named in the Summary Compensation Table and (iv) all
directors and executive officers as a group.
Shares
Beneficially Approximate
Name and Address of Beneficial Owner Owned(1) Percent of Total(2)
- ----------------------------------------- -------------- --------------------
Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022 ................... 1,604,050 10.52%
INVESCO Funds Group Inc.
7800 East Union Avenue, Mail Stop 1102
Denver, CO 80237 ..................... 1,052,632 6.900%
Stuart D. Edwards(3)
Somnus Medical Technologies, Inc.
285 N. Wolfe Road
Sunnyvale, CA 94086 .................. 313,349 2.05%
John N. Hendrick(4) .................. 126,394 *
James A. Heisch(5)
7197 Wooded Lake Drive
San Jose, CA 95120 ................... 100,488 *
Michael H. Spindler(6)
Esquisse, Inc.
1717 Embarcadero Road
Palo Alto, CA 94303 .................. 24,725 *
Richard D. Brounstein ................ 13,408 *
1
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially Approximate
Name and Address of Beneficial Owner Owned(1) Percent of Total(2)
- ------------------------------------------------------------ -------------- --------------------
<S> <C> <C>
Wayne I. Roe(7)
Covance
1100 New York Avenue NW, Suite 200E
Washington, DC 20005 ................................ 3,797 *
Patricia S. Garfield ................................ 3,000 *
Carol A. Chludzinski ................................ 2,954 *
Franklin D. Brown(8)
33691 Magellan Isle
Monarch Beach, CA 92629 ............................. 1,389 *
Robert Erra(9)
MCG Healthcare
608 2nd Avenue South, Suite 370
Minneapolis, MN 55402 ............................... 1,389 *
John V. Scibelli, Ph.D.(10)
2343 Country Club Loop
Denver, CO 80234 .................................... 833 *
David J. Illingworth ................................ 0 *
All executive officers and directors as a group
(14 persons) (3)(4)(5)(6)(7)(8)(9)(10)(11) ......... 700,630 4.59%
<FN>
- ------------
* Represents beneficial ownership of 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) Applicable percentage ownership is based on 15,255,292 shares of Common
Stock outstanding as of March 31, 1998 together with applicable options
for such stockholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission, based on factors
including voting and investment power with respect to shares. Shares of
Common Stock subject to the options currently exercisable, or exercisable
within 60 days after March 31, 1998, are deemed outstanding for computing
the percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage ownership of any other
person.
(3) Includes 268,905 shares held by Mr. Edwards and options to purchase up to
44,444 shares exercisable within 60 days after March 31, 1998.
(4) Includes 38,663 shares held by Mr. Hendrick and options to purchase up to
87,731 shares exercisable within 60 days after March 31, 1998.
(5) Includes 59,376 shares held by Mr. Heisch and options to purchase up to
41,112 shares exercisable within 60 days after March 31, 1998.
(6) Includes options to purchase up to 24,725 shares exercisable within 60
days after March 31, 1998.
(7) Includes options to purchase up to 3,797 shares exercisable within 60 days
after March 31, 1998.
(8) Includes options to purchase up to 1,389 shares exercisable within 60 days
after March 31, 1998.
(9) Includes options to purchase up to 1,389 shares exercisable within 60 days
after March 31, 1998.
(10) Includes options to purchase up to 833 shares exercisable within 60 days
after March 31, 1998.
(11) Includes options to purchase up to 24,725 shares exercisable within 60
days after March 31, 1998.
</FN>
</TABLE>
2
<PAGE>
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: Proxy Department) 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 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 200,000 shares
for issuance thereunder, for approval of the amendment to the 1992 Stock Plan
and reservation of an additional 1,200,000 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 1999 Annual Meeting
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1999 Annual Meeting must be received by the
Company no later than November 30, 1998 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 seven directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the seven 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:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ------------------------------ ----- ------------------------------------------------- ------
<S> <C> <C> <C>
David J. Illingworth ......... 44 President, Chief Executive Officer and Director 1998
Franklin D. Brown ............ 54 Director 1997
Stuart D. Edwards ............ 52 Director 1992
Robert Erra .................. 55 Director 1997
Wayne I. Roe ................. 48 Director 1997
John V. Scibelli ............. 52 Director 1998
Michael H. Spindler .......... 55 Director 1994
</TABLE>
Mr. Illingworth became President and Chief Executive Officer of the
Company in April 1998 and has served as a director of the Company since
February 1998. From January 1993 through March 1998, Mr. Illingworth has held
positions with Nellcor Puritan Bennett, Inc., a wholly owned subsidiary of
Mallinckrodt Inc., most recently serving as Executive Vice President and
President, Alternative Care Business. From September 1991 until December 1992,
he served as a General Manager of G.E. Medical Systems. He holds a B.S. in
Engineering from Texas A&M University.
Mr. Brown has served as a director of the Company since December 1997. Mr.
Brown has been the Chairman and President of FDB Healthcare Consulting since
October 1997. Previously, Mr. Brown served as Chairman of the Board, President
and Chief Executive Officer of Imagyn Medical, Inc. from October 1994 to
September 1997. From 1986 to 1994, Mr. Brown served as President and Chief
Executive Officer of Pharmacia Deltec, Inc. Mr. Brown serves on the Board of
Directors of the following publicly traded companies: Cardiovascular Dynamics,
Inc. and Xillix Technologies, Inc.
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. Mr. Edwards has served as Chairman of the Board, President and Chief
Executive Officer of Somnus Medical Technologies, Inc., a publicly traded
company, since January 1996. From July 1992 to May 1995, Mr. Edwards also
served as Chairman of the Board of VidaMed. 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 devices.
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. Erra has served as a director of the Company since December 1997.
Since November 1993, Mr. Erra has been a partner of MCG/Healthcare, a health
care consulting firm. Previously, he was Senior Vice President and Director of
Clinic Operations at the Scripps Clinic and Research Foundation. Mr. Erra also
4
<PAGE>
previously served as President of Western Health Plans, a health maintenance
and preferred provider organization. He was also the founding chairman of
TheraTx, Inc. He is currently a director of Edix Corp. and Hospitalists, Inc.
Mr. Roe has served as a director of the Company since May 1997. 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.
Dr. Scibelli has served as a director of the Company since February 1998.
Dr. Scibelli held several positions with Valleylab, Inc., formerly a division
of Pfizer, Inc., from October 1989 to January 1998 including Vice President
Operations, Senior Vice President Operations and Research & Development, Vice
President--General Manager USA and, most recently, President. Dr. Scibelli
received a B.S. in Chemistry from Long Island University and a Ph.D. in
Chemistry from the University of Michigan at Ann Arbor.
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 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.
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 six meetings during
the year ended December 31, 1997. No nominee who was a director during the
entire fiscal year attended fewer than 75 percent of the meetings of the Board
of Directors or committees on which such person served. The Board of Directors
has a Compensation Committee, an Audit Committee and 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 was
composed of Michael Spindler and David Douglass through December 16, 1997 and
Messrs. Spindler and Erra for the remainder of December 1997, held three
meetings during 1997. Director Douglass is not standing for reelection at the
1998 annual meeting of stockholders.
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 was composed of Messrs. Douglass
and Mohr through December 16, 1997 and Messrs. Brown and Douglass for the
remainder of 1997, held two meetings during 1997. Director Douglass is not
standing for reelection at the 1998 annual meeting of stockholders.
The Nominating Committee evaluates candidates for board membership and
makes recommendations regarding such evaluations to the Board. The Nominating
Committee was formed in December 1997
5
<PAGE>
and was composed of Messrs. Roe and James Heisch, the Company's former
President and Chief Executive Officer, who is not standing for reelection at
the 1998 annual meeting of stockholders.
The Company anticipates that, because Messrs. Douglass and Heisch are not
standing for reelection at the 1998 annual meeting, the Board will reappoint
the committees on which they were serving at its first meeting following the
annual stockholders meeting.
Compensation of Directors
As of December 1997, the Company pays its nonemployee directors fees of
$1,500 per Board meeting attended and $500 per Committee meeting attended and
reimburses travel expenses incurred by nonemployee directors in attending
meetings. 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 special assignments of the Board of
Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
6
<PAGE>
EXECUTIVE COMPENSATION
Compensation Tables
Summary Compensation Table. The following table sets forth certain
information for the years ended December 31, 1997, 1996 and 1995 regarding the
compensation of the Company's Chief Executive Officer and each of the other
four most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and All Other
Principal Position Year Salary Bonuses Options Compensation(1)
- ------------------------------- ------ ------------------- ------------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
James A. Heisch 1997 $ 214,346 $ 20,000 (2) $ 50,000 $3,692
President and Chief 1996 189,711 20,000 (3) 290,000 3,600
Executive Officer 1995 175,000 17,500 (4) 47,232 3,600
Richard D. Brounstein 1997 93,733 (6) -- 100,000 2,400
Vice President, Finance and
Chief Financial Officer(5)
John N. Hendrick 1997 184,481 7,500 (7) 35,000 3,646
Vice President and 1996 175,000 7,500 (8) 65,000 3,600
Chief Operating Officer 1995 196,000 -- 2,790 3,600
Carol A. Chludzinski 1997 157,419 62,032 (9) 20,000 6,154
Senior Vice President N. Am. 1996 110,000 24,000 (10) 120,000 4,938
Sales & Marketing 1995 33,746 (11) 8,000 (12) 20,000 1,108
Patricia S. Garfield 1997 106,923 (14) 100,000 3,225
Vice President, World Wide
Marketing(13)
<FN>
- ------------
(1) Consists of automobile expenses paid for by the Company.
(2) Mr. Heisch's employee bonus for his continuous service with the Company
during 1997.
(3) Mr. Heisch's employee bonus for his continuous service with the Company
during 1996.
(4) Mr. Heisch's employment agreement with the Company provided for a 10%
bonus after 6 months of employment with the Company.
(5) Mr. Brounstein joined the Company as Vice President, Finance and Chief
Financial Officer in May 1997.
(6) Had he been employed for all of calendar 1997, Mr. Brounstein's annual
salary would have been $140,000.
(7) Mr. Hendrick's employee bonus for his continuous service with the Company
during 1997.
(8) Mr. Hendrick's employee bonus for his continuous service with the Company
during 1996.
(9) Ms. Chludzinski's employment agreement with the Company provided for a
sales bonus for 1997.
(10) Ms. Chludzinski's employment agreement with the Company provided for an
annual bonus of $24,000.
(11) 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.
(12) Had Ms. Chludzinski been employed for all of calendar 1995, her annual
bonus would have been $24,000.
(13) Ms. Garfield accepted the position of Vice President, WorldWide Marketing
in February 1997.
(14) Ms. Garfield's annual salary would have been $120,000 if she had been
employed for all of calendar 1997.
</FN>
</TABLE>
7
<PAGE>
Option Grants in Last Fiscal Year. The following table sets forth certain
information concerning stock options granted during the calendar year ended
December 31, 1997 to the executive officers named in the Summary Compensation
Table above. Actual realizable values, if any, of stock options will depend on
the future performance of the Common Stock.
OPTION GRANTS IN CALENDAR YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term(1)
-------------------------------------------------------- --------------------------
Number of
Securities % of Total Exercise
Underlying Options or Base
Options Granted Price Expiration
Name Granted (#) in 1997 ($/SH) Date 5% ($) 10% ($)
- ----------------------- --------------- ------------ --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
James A. Heisch 50,000(2) 3% $ 4.50 12/16/07 $141,500 $ 385,592
50,000(3) 3% $ 4.81 9/5/07 151,342 383,534
36,120(3) 2% $ 4.81 9/5/07 109,330 277,065
40,000(3) 2% $ 4.81 9/5/07 120,998 306,636
200,000(3) 12% $ 4.81 9/5/07 605,370 1,534,134
Richard D. Brounstein 25,000(2) 1% $ 4.50 12/16/07 70,750 179,296
75,000(3) 4% $ 4.81 9/5/07 227,014 575,300
John N. Hendrick 35,000(2) 2% $ 4.50 12/16/07 99,050 251,014
2,790(3) * $ 4.81 9/5/07 8,445 51,401
40,000(3) 2% $ 4.81 9/5/07 121,074 306,827
25,000(3) 1% $ 4.81 9/5/07 75,671 191,767
Carol A. Chludzinski 20,000(2) 1% $ 4.50 12/16/07 56,600 143,437
3,000(3) * $ 4.81 9/5/07 9,081 23,012
80,000(3) 5% $ 4.81 9/5/07 242,148 613,654
37,000(3) 2% $ 4.81 9/5/07 111,993 283,815
20,000(3) 1% $ 4.81 9/5/07 60,537 153,413
Patricia S. Garfield 100,000(2) 6% $ 4.81 9/5/07 302,685 767,067
<FN>
- ------------
* 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 or projection of future stock price performance. Actual gains, if
any, are dependent on the actual future performance of the Company Stock.
There can be no assurance that the amounts reflected in this table will be
achieved.
(2) The shares subject to these options will vest at a rate of 12/48 of the
shares subject to the option on December 16, 1998 and an additional
1|M/48th of the shares at the end of each full month thereafter.
(3) These options are subject to an agreement between the optionee and the
Company in connection with the repricing of such options on September 5,
1997. These options are exercisable one year from the date of repricing
(September 5, 1998).
</FN>
</TABLE>
8
<PAGE>
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, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Shares Value Options at Options at
December 31, 1997 December 31, 1997
Acquired on Realized ---------------------- ----------------------
Name Exercise (#) ($)(1) Vested Unvested Vested Unvested
- --------------------------- -------------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James A. Heisch ........... 0 0 161,153 256,079 36,681 32,182
Richard D. Brounstein ..... 0 0 0 100,000 0 0
John N. Hendrick .......... 0 0 89,719 100,802 104,882 42,068
Patricia S. Garfield ...... 0 0 0 100,000 0 0
Carol A. Chludzinski ...... 0 0 48,042 111,958 0 0
<FN>
- ------------
(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, 25,115 and
19,213 unvested options held by Messrs. Hendrick and Heisch, respectively,
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, 1997 ($4.375 per share),
and the exercise price (ranging from $2.70 per share to $4.813 per share).
</FN>
</TABLE>
Option Repricing Report and Table
In May 1997 and September 1997, the Board of Directors, including the
Compensation Committee thereof, authorized the exchange of certain stock
options at the then fair market values of the Company's Common Stock. The
Company and the Board of Directors took this action to retain employees due to
intense competition for experienced personnel and to maintain momentum relating
to the United States commercial launch of the Company's TUNA system for
treatment of benign prostatic hyperplasia. In particular, the competition for
skilled sales and marketing personnel in the medical device industry has been,
and is expected to continue to be, intense. In the judgment of the Board of
Directors, including the Compensation Committee thereof, the disparity between
the original exercise prices of the Company's outstanding stock options and the
market price for the Common Stock at the time of the repricings did not provide
a meaningful incentive or retention device to the employees holding those stock
options. The Board, including the Compensation Committee, therefore determined
that the repricing of stock options was in the best interests of the Company
and its stockholders.
In May 1997, options to purchase 866,250 shares of Common Stock at
exercise prices ranging from $7.500 to $11.875 per share were exchanged for a
like number of options at an exercise price of $6.875 per share. Participants
in the May 1997 repricing were required to agree not to exercise their new
options, except in the case of death, disability or involuntary termination of
employment, for a period of one year (in the case of executive officers) and
six months (in the case of all other employees). In September 1997, options to
purchase 987,581 shares of Common Stock at exercise prices ranging from $6.250
to $6.875 per share were exchanged for a like number of options at an exercise
price of $4.813 per share. Participants in the September 1997 repricing were
required to agree not to exercise their new options, except in the case of
death, disability or involuntary termination of employment, for a period of one
year (in the case of executive officers) and six months (in the case of all
other employees).
9
<PAGE>
The following table sets forth certain information regarding the
participation of the Named Executive Officers and other officers in the
Company's repricing of stock options described above.
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Market Length of
Number of Price Exercise Original
Securities of Stock at Price at Option Term
Underlying Time of Time of Remaining at
Options/ Repricing Repricing New Date of
SARs or or Exercise Repricing or
Repriced or Amendment Amendment Price Amendment
Name Date Amended (#) ($) ($) ($) (in Years)
- ----------------------- --------- ------------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A. Heisch 5/07/97 40,000 $ 6.875 $ 7.625 $ 6.875 8.7
200,000 6.875 8.750 6.875 8.9
50,000 6.875 10.875 6.875 9.6
John N. Hendrick 5/07/97 40,000 $ 6.875 $ 7.625 $ 6.875 8.7
25,000 6.875 10.875 6.875 9.6
Carol A. Chludzinski 5/07/97 20,000 $ 6.875 $ 7.500 $ 6.875 8.4
3,000 6.875 10.250 6.875 8.8
37,000 6.875 9.250 6.875 8.9
80,000 6.875 10.875 6.875 9.6
Patricia S. Garfield 5/07/97 100,000 $ 6.875 $ 7.750 $ 6.875 9.8
All other executive
officers as a group
(0 persons) -- 0 -- -- -- --
James A. Heisch 9/05/97 36,120 $ 4.813 $ 6.250 $ 4.813 7.9
40,000 4.813 6.875 4.813 8.3
200,000 4.813 6.875 4.813 8.6
50,000 4.813 6.875 4.813 9.3
John N. Hendrick 9/05/97 2,790 $ 4.813 $ 6.25 $ 4.813 7.9
40,000 4.813 6.875 4.813 8.3
25,000 4.813 6.875 4.813 9.3
Richard D. Brounstein 9/05/97 75,000 $ 4.813 $ 6.875 $ 4.813 9.7
Carol A. Chludzinski 9/05/97 20,000 $ 4.813 $ 6.875 $ 4.813 8.1
3,000 4.813 6.875 4.813 8.4
37,000 4.813 6.875 4.813 8.6
80,000 4.813 6.875 4.813 9.3
Patricia S. Garfield 9/05/97 100,000 $ 4.813 $ 6.875 $ 4.813 9.5
All other executive
officers as a group
(0 persons) -- 0 -- -- -- --
</TABLE>
10
<PAGE>
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. A
variety of factors, both individual and corporate, were considered in
evaluating the performance of the Company's executive officers. The Company
adopted an executive bonus program for 1997 with bonuses payable to executive
officers based on achievement of quarterly and annual revenue and earnings
targets. The revenue target for the first quarter of 1997 was achieved, and,
accordingly, bonuses were paid under this program.
Stock Option Awards for 1997. 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 December 1997 the Committee granted an incentive stock
option of 50,000 shares with a four year vesting period to James Heisch, the
Company's then Chief Executive Officer. As with other executive officers of the
Company, the amount of the stock option award is based on attainment of a
combination of corporate and individual performance objectives. In addition,
Mr. Heisch received regrants of stock options in connection with the stock
option repricing programs described under "Executive Compensation--Stock Option
Repricing Report and Table." The basis for the decision of the Board and
Compensation Committee to approve such stock option repricing is as set forth
in such section.
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.
Respectfully submitted,
Robert Erra and Michael H. Spindler
11
<PAGE>
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.
[GRAPHIC OMITTED]
[The Following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
6/21/95 12/95 12/96 12/97
VIDAMED, INC. 100 146 198 167
NASDAQ U.S. 100 114 140 172
PEER GROUP 100 135 150 179
12
<PAGE>
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 200,000 shares to a new total of 400,000 shares. The essential
features of the Purchase Plan are set forth below.
Status of Shares. As of December 31, 1997, 106,167 shares had been issued
under the Purchase Plan and 93,833 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 200,000 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 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
13
<PAGE>
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, 1997 a total of 3,100,000 shares of Common Stock have
been reserved for issuance under the Company's 1992 Stock Plan (the "Stock
Plan"). As of December 31, 1997, 2,823,436 shares had been issued upon the
exercise of stock options granted under the Stock Plan, 1,881,160 options were
outstanding and 554,651 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 "non-statutory stock options," which do not qualify for such treatment.
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 1,200,000 shares will be authorized and
available for future grants under the Stock Plan for a new total of 4,300,000
shares. The principal purpose of the increase in authorized shares is to
facilitate stock option grants to David Illingworth, the Company's new
President and Chief Executive Officer, as well as to provide a sufficient
reserve for option grants to potential new employees. The Board, including the
Compensation Committee thereof, has approved option grants aggregating 750,000
shares of Common Stock to Mr. Illingworth in connection with his employment as
President and Chief Executive Officer. Accordingly, the increase in the shares
reserved for issuance under the Stock Plan is necessary to provide a sufficient
reserve for these grants as well as for option grants to potential new
employees.
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 note, 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.
14
<PAGE>
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 stockholder approval of any Stock Plan
amendment in such a manner and to such a degree as required.
Change of Control. In the event of a change in control of the Company,
including a merger or sale of substantially all of the Company's assets (a
"change of control"), outstanding options held by executive officers, other
than David Illingworth, the Company's new President, will become fully
exercisable and vested upon such change in control. The options granted to Mr.
Illingworth provide that 50% of his unvested options will vest upon a change of
control and the remaining unvested options will vest in the event his
employment is terminated without cause by the successor entity within 12 months
after the date of the change of control. In September 1997, the Company's Board
of Directors approved an amendment to the form of option agreement used
pursuant to the Plan, which amendment provides that the in event of termination
of an employee's employment following a change of control transaction (other
than for cause), the option shall become exercisable in full upon such
termination.
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% stockholder 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.
15
<PAGE>
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, 1998, and has further directed that man agement
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. Absten
tions 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
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.
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 con sist 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. 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.
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.
16
<PAGE>
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.
Patricia Garfield, Vice President of Marketing of the Company, is
President of HealthCare Recruiters International of the Bay Area, a health care
executive search firm. Since joining VidaMed, Ms. Garfield has not participated
in the day-to-day operations of such firm. During 1997, the Company paid
Healthcare Recruiters fees for executive searches aggregating $136,650.
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 dis interested 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.
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, 1997. To the best of the Company's knowledge,
all of these filing requirements have been satisfied, except that Wayne Roe,
Richard Brounstein and Robin Bush did not timely file their initial statements
of beneficial ownership of securities on Form 3. In addition, Richard D.
Brounstein, Robin Bush, Carol Chludzinski, James Heisch and John Hendrick did
not timely file their annual statements of changes in beneficial ownership of
securities on Form 5. 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., 46107 LANDING PARKWAY, FREMONT,
CALIFORNIA 94538.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David J. Illingworth
David J. Illingworth
President and Chief Executive Officer
Dated: April 6, 1998
17
<PAGE>
APPENDIX A
PROXY
VIDAMED, INC.
1998 Annual Meeting of Stockholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of VidaMed, Inc., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement, each dated April 6, 1998, and hereby appoints Richard Brounstein and
William Weiland 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 1998 Annual Meeting of Stockholders of VidaMed,
Inc., to be held May 7, 1998 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:
1. Election of Directors:
[ ] FOR all the nominees listed below (except as indicated).
[ ] WITHHOLD authority to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Franklin D. Brown, Stuart D. Edwards, Robert Erra, David J. Illingworth,
Wayne I. Roe, John V. Scibelli, Michael H. Spindler
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
200,000 shares to a new total of 400,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
3. Proposal to approve an amendment to the 1992 Stock Plan to increase the
number of Common Stock reserved for issuance thereunder by 1,200,000 shares
to a new total of 4,300,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the year ending 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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 of 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.
Dated ----------------------- , 1998
Signature: ------------------------
Signature: ------------------------
NOTE: (This proxy should be marked,
signed by the stockholder(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.)
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. PLEASE SIGN, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN
THE UNITED STATES.
