As filed As filed with the Securities and Exchange Commission on June __, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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VIDAMED, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 77-0314454
46107 Landing Parkway
Fremont, California 94538
(510) 492-4900
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DAVID J. ILLINGWORTH
President and Chief Executive Officer
VidaMed, Inc.
46107 Landing Parkway
Fremont, California 94538
(510) 492-4900
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Copies to:
Christopher D. Mitchell, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(415) 493-9300
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to to be Price Offering Registration
be Registered Registered Per Share Price Fee
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<S> <C> <C> <C> <C>
Common stock $0.001 par value......... 6,000,000 shares $2.0156 $12,093,600 $3,362.02
- ------------------------------------------------------------------------------------------------------------------------------------
Warrants to purchase shares of common
stock(2).............................. 1,500,000 $0.00 N/A N/A
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Common stock issuable upon exercise of
Warrants (3).......................... 1,500,000 shares $2.0156 $3,023,400 $840.51
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<FN>
- ----------------
(1) Estimated solely for the purpose of computing the amount of the registration fee based on the average of the high and low
prices of the common stock as reported on the Nasdaq National Market on June 8, 1999 pursuant to Rule 457(c) promulgated under
the Securities Act of 1933.
(2) Pursuant to Rule 457(g) promulgated under the Securities Act of 1933, no filing fee is required.
(3) Pursuant to Rule 416 promulgated under the Securities Act of 1933, there are also being registered such indeterminate number of
additional shares as may become issuable pursuant to the anti-dilution provisions of the Warrants.
</FN>
</TABLE>
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED, WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IF NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE __, 1999
PROSPECTUS
VIDAMED, INC.
6,000,000 Shares of Common Stock
1,500,000 Warrants to Purchase Common Stock
1,500,000 Shares of Common Stock
Issuable Upon Exercise of Warrants
The shares offered in this prospectus involve a high degree of risk.
See "Risk Factors" beginning on page 5 of this prospectus for information that
you should consider before purchasing these securities.
We may sell these shares and warrants in amounts, at prices and on
terms determined at the time of the sale. We will provide specific terms of
these securities in supplements to this prospectus. You should read this
prospectus and any supplement carefully before you invest.
Our common shares are traded on the Nasdaq National Market System under
the symbol "VIDA." On June 8, 1999, the average for the high and low price of
our common stock on the Nasdaq was $2.0156 per share.
--------------------------
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities commission nor has
the Securities and Exchange Commission or any state securities commission
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is June __, 1999
<PAGE>
TABLE OF CONTENTS
Page
Forward Looking Information....................................................2
Summary........................................................................3
Risk Factors...................................................................5
Use of Proceeds...............................................................12
Plan of Distribution..........................................................12
Description of Securities.....................................................13
Legal Matters.................................................................14
Experts.......................................................................14
Where You Can Find More Information...........................................15
You should rely only on the information incorporated by reference or
provided in this prospectus or in a prospectus supplement or amendment. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. Also, this prospectus does not offer to sell any securities other
than the securities covered by this prospectus. You should not assume that the
information in this prospectus or a prospectus supplement or amendment is
accurate as of any date on the front of the document.
In this prospectus, unless otherwise indicated, "VidaMed," "we," "us,"
and "our" refer to VidaMed, Inc. and its subsidiaries.
FOWARD LOOKING INFORMATION
This prospectus and the documents incorporated by reference contain
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
include statements of VidaMed's expectations, beliefs, intentions or future
strategies. We base all forward looking statements on information available to
us on the date of this prospectus. We will not update any such forward looking
statements. Actual results could differ materially from those in the forward
looking statements because of the risk factors set forth under "Risk Factors"
and in the documents incorporated by reference in this prospectus.
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SUMMARY
VidaMed designs, develops, and markets urological systems that are used
for urinary tract disorders. Our technologically and clinically advanced systems
are cost effective. We primarily treat the enlarged prostrate or Benign
Prostatic Hyperplasia, a noncancerous condition of the prostrate gland effecting
urination. VidaMed's primary product, the patented VidaMed TUNA Systems, is a
reasonably priced alternative therapy that minimizes surgical invasion, side
effects and complications for this condition. On October 8, 1996, we received
510(k) clearance from the United States Food and Drug Administration to sell the
TUNA System commercially in the United States. In the United States, we sell our
products primarily through direct sales personnel. Internationally, we primarily
sell to distributors who resell to physicians and hospitals.
VidaMed has designed and developed the TUNA System and the TUNA
Procedure for restoring and improving urinary flow in patients suffering from
Benign Prostatic Hyperplasia. Compared to other therapies, such as drug therapy
and current surgical therapies, the TUNA Procedure:
o Results in fewer complications and adverse effects;
o Requires shorter recovery time; and
o Costs less.
Because the Tuna Procedure can be performed on an outpatient basis, it
will result in relatively fewer complications and reduced expense.
The TUNA System mainly consists of:
o A single-use needle ablation hand piece that delivers radio
frequency energy to the prostate;
o A low power radio frequency energy generator; and
o An optical device that allows direct viewing during the procedure.
TUNA HAND PIECE.
The single-use TUNA hand piece measures 18-1/2 French (approximately
five millimeters) in diameter and contains needles along its sides that extend
at an angle of approximately 90 degrees. A patented, retractable shield covers
each needle. These shields protect the urethra and are adjusted by the urologist
to selectively control the area of prostate tissue ablated or pierced during the
procedure. The needles and shields can independently advance and retract using
controls on the hand piece. Thermocouples on the shield tip and at the hand
piece tip record temperatures at the lesion site and in the prostatic urethra.
The hand piece allows for irrigation, aspiration and bladder drainage
during the procedure without removing the handpiece from the bladder. These
features improve the view of the area of treatment and reduce post-procedural
urethral irritation. In addition, these capabilities allow the physician to more
closely control urethral tissue temperature during the procedure.
TUNA RADIO FREQUENCY GENERATOR.
The TUNA radio frequency energy generator is designed specifically for
use with the TUNA hand piece. The generator has digital displays indicating the
temperature at each thermocouple, the power being delivered to each needle,
ablation time and electrical impedance. The physician uses these measurements to
control tissue ablation. The generator uses both automated and manual control
modes.
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The generator has an automatic shut-off activated by both temperature and
impedance measurements to ensure controlled ablation, or piercing, of the
tissue.
TUNA OPTICS.
The TUNA optical device allows precise positioning of the hand piece
between the verumontanum and the bladder neck during the procedure using direct
visualization. The optical device is reusable after sterilization. It is
equipped with a three-way exchange adapter, which allows the unit to be used
with endoscopic light sources made by other companies.
The TUNA Procedure desiccates prostatic tissue and nerve endings in the
prostate to improve symptoms such as urgency and frequency with urinary flow.
The procedure takes 30 to 45 minutes using local anesthesia which may be
supplemented by intravenous sedation. The TUNA hand piece is inserted into the
patient's urethra. The two shielded needle electrodes then advance into one of
the two lateral lobes of the prostate. Controlled radio frequency energy
delivered by the needle electrodes heats targeted portions of the prostate lobe
to temperatures of 90 to 100 degrees centigrade, while the shields protect the
urethra from thermal damage. Once a lesion of sufficient size has been created,
the urologist retracts the needles and places the hand piece at the next site to
be ablated and repeats the process.
Typically, two treatments in each lateral prostate lobe are performed
depending upon the size of the prostate. If the patient is unable to urinate due
to temporary swelling or irritation of the urethra, a catheter will be inserted
into the patient's urethra. This catheter, if inserted, is typically left in
place for one to two days.
THE TUNA SYSTEM.
The design of the VidaMed TUNA System offers advantages over other
therapies. Because the TUNA System shields the urethra and delivers controlled
energy directly into the interior of the prostate, the procedure protects the
prostatic urethra and reduces the risk of unintended thermal damage to
surrounding structures. In other procedures where this control does not exist,
the prostatic urethra and other structures can be damaged or destroyed, causing
significant patient discomfort and complications.
Complications associated with transurethral resection of prostate
surgery, the standard treatment for Benign Prostatic Hyperplasia, include:
o Impotence;
o Retrograde ejaculation; and
o Incontinence.
Clinical trials of the TUNA Procedure indicate that the TUNA Procedure results
in fewer of these complications.
The cost of the TUNA Procedure in the United States, including
physician charges, will be less than the standard treatment. The TUNA radio
frequency generator costs less than the general surgical lasers required to
perform laser procedures and the ultrasound and microwave devices required for
other surgical procedures. The TUNA Procedure can be done on an outpatient
basis, further reducing costs.
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RISK FACTORS
An investment in the securities being offered by this prospectus
involves a high degree of risk. You should consider the following factors, and
those discussed elsewhere in this prospectus, before purchasing our securities.
VIDAMED HAS A LIMITED HISTORY OF OPERATIONS.
Since inception in July 1992, we have been primarily engaged in
research and development of the VidaMed TUNA System. We have experienced
significant operating losses since inception and, as of December 31, 1998, had
an accumulated deficit of $88.2 million.
VIDAMED ANTICIPATES LOSSES RELATED TO PRODUCT DEVELOPMENT.
The TUNA System and other new products, if any, will require product
development, clinical, regulatory, marketing and other expenditures. VidaMed
expects operating losses to continue as it continues to:
o Expand marketing and sales activities;
o Fund clinical trails to support regulatory and reimbursement
approvals; and
o Engage in research and development.
Both domestically, and abroad, profitability remains uncertain. Results
of operations may fluctuate significantly from quarter to quarter. Factors
affecting operations include:
o Regulatory actions;
o Reimbursement matters;
o Progress of clinical trials;
o Market acceptance of the TUNA System;
o Pricing promotions;
o Volume discounts to distributors;
o Alternative therapies for Benign Prostatic Hyperplasia; and
o Competition.
VIDAMED'S PRODUCTS MUST ACHIEVE GREATER ACCEPTANCE.
VidaMed's TUNA Procedure is a new therapy. Even when necessary
international and United States reimbursement approvals are obtained, the TUNA
System must gain market acceptance among physicians, patients and healthcare
payors. Physicians will not recommend the TUNA Procedure unless they conclude,
based on clinical data and other factors, that it is an attractive alternative
to other methods of treatment. Physicians may not recommend the TUNA Procedure
until the duration of the relief provided by the procedure can be better
established and acceptable reimbursement from health care payors is available.
Broad use of the TUNA System will require the training of numerous
physicians. The time required to complete such training could result in a delay
or dampening of market acceptance.
Health care payor acceptance of the TUNA Procedure will require
evidence that it costs less than other therapies. The TUNA Procedure can
demonstrate cost effectiveness over time if it provides long-lasting relief to
patients. A thorough analysis can assess the durability of the relief provided
by TUNA therapy. This requires follow-up data on patients over a period of
years.
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Patients' acceptance of the procedure will depend on factors including:
o Physician recommendations;
o Degree of invasiveness;
o Rate and severity of complications; and
o Relative effectiveness of other therapies.
VIDAMED DEPENDS ON THIRD PARTY REIMBURSEMENT.
Our success among other things, requires satisfactory reimbursement
from health care payors for the TUNA Procedure. In the United States and in
international markets, third party reimbursement is generally available for
existing therapies. In the United States, third party reimbursement for the TUNA
Procedure depends on decisions by the local Medicare Medical Directors who adopt
Medicare reimbursement guidelines as well as by individual health maintenance
organizations, private insurers and other payors.
Reimbursement systems in international markets vary significantly by
country. Many international markets have governmentally managed health care
systems that govern reimbursement for new devices and procedures. In most
markets, there are private insurance systems as well as governmentally managed
systems. We have received approvals by the Ministry of Health and Welfare in
Japan and by the British Provident Association Ltd., the largest private health
care insurer in the United Kingdom.
Reimbursement requires physician advocacy of the VidaMed TUNA System.
Availability of reimbursement will depend not only on the clinical efficacy and
direct cost of the TUNA Procedure, but also on the duration of the relief
provided by the procedure. In the United States, TUNA Procedures are currently
being reimbursed by certain private payors. However, Medicare reimbursement is
particularly critical for widespread market acceptance of the TUNA Procedure in
the United States because of the age of patients using it.
CPT Code #53852, covering the physician fee component of the TUNA
Procedure, was included in the 1998 edition of CPT codes which became effective
January 1, 1998. If adopted by local Medicare Medical Directors, this code
should enhance the reimbursement process for physicians performing the VidaMed
TUNA Procedure in an outpatient hospital environment. The CPT code is presently
active in over 35 states covering reimbursement of the VidaMed TUNA Procedure in
the hospital. While we continue to work with the remaining state medical
directors, there is no assurance when or if the remaining states will reimburse.
Office reimbursement is expected to phase in after the federal office
of Health Care Financing Administration resolves its Year 2000 issues, which is
projected to be on or after June 30, 2000. We cannot assure you that
office-based reimbursement for our products will be available in the United
States or in international markets under either governmental or private
reimbursement systems at adequate reimbursement levels. Nor can we assure that
physicians will support reimbursement for the VidaMed TUNA Procedure. Changes in
reimbursement policies of governmental or private health care payors could also
have a material adverse effect on VidaMed's business, financial condition and
results of operations.
VIDAMED MAY REQUIRE ADDITIONAL FINANCING.
VidaMed plans to:
o Continue clinical trails for regulatory and reimbursement approvals;
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o Expand sales and marketing activities; and
o Research and develop products.
Expenditures may be greater than anticipated if unforeseen difficulties
arise. Our financial plan indicates that funds available through our existing
bank credit facilities, cash reserves and the future sales will be sufficient to
meet our operating and capital requirements during the next 12 months.
Nevertheless, we cannot assure you that VidaMed will not require additional
financing within this time frame.
The Company's future liquidity and capital requirements will depend
upon numerous factors, including;
o Progress of clinical trials;
o Actions relating to regulatory and reimbursement matters; and
o Extent to which the TUNA System gains market acceptance.
Any additional financing, if required, may not be available on
satisfactory terms or at all. Future equity financing may dilute the equity of
our current stockholders. Future debt financings may require VidaMed to pledge
assets and to comply with financial and operational covenants.
VIDAMED'S STOCK PRICE WILL FLUCTUATE.
The stock market has experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies necessarily cause such fluctuations. Conversely, these broad market
fluctuations may adversely affect the market price of our common stock. The
market price of our common stock is likely to be highly volatile because of
factors such as:
o Fluctuations in the Company's operating results;
o Announcements of technological innovations or new products;
o Food and Drug Administration and international regulatory actions,
o Actions with respect to reimbursement matters;
o Developments with respect to patents or proprietary rights;
o Public concern as to the safety of our products;
o Changes in health care policy in the United States and
internationally;
o Changes in stock market analyst recommendations;
o Other medical device companies or the medical device industry
generally;
o General market conditions.
MOST OF VIDAMED'S COMPETITORS HAVE GREATER RESOURCES.
Intense market competition exists for treatment of Benign Prostatic
Hyperplasia and such competition is expected to increase. Our principal
competition will most likely come from invasive surgical procedures, drug
therapy, other minimally invasive therapies and watchful waiting. Most of our
competitors have financial, technical, research, marketing, sales, distribution
and other resources that are significantly greater than ours. We cannot assure
you that our competitors will not succeed in developing or marketing superior
technologies and products.
Any product we develop that gains regulatory approval will have to
compete for market acceptance and market share. Important factors in such
competition include the relative speed with which we can:
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o Develop products;
o Complete clinical testing
o Obtain regulatory approval processes;
o Gain reimbursement acceptance;
o Supply commercial quantities of the product to the market; and
o Demonstrate safe, effective and lasting treatment.
VIDAMED'S PRODUCTS MUST COMPLY WITH U.S. GOVERNMENT REGULATIONS.
The Food and Drug Administration regulates the TUNA System in the
United States as a medical device under the Federal Food, Drug, and Cosmetic
Act. Pursuant to the act, the administration regulates the manufacture,
distribution and production of all medical devices in the United States. Any
failure to comply with the requirements of the act can result in:
o Fines;
o Injunctions;
o Civil penalties;
o Recall or seizure of products;
o Total or partial suspension of production;
o Failure of the government to grant approval for devices; and
o Criminal prosecution.
Medical devices are classified into Class I, II or III, on the basis of
the controls necessary to reasonably ensure their safety and effectiveness.
Controls for Class I devices include general controls such as, labeling,
premarket notification and adherence to standards set by the Food and Drug
Administration for good manufacturing practices. Controls for Class II devices
include the use of special controls such as performance standards, postmarket
surveillance, patient registries, and federal guidelines. Generally, Class III
devices such as life-sustaining, life-supporting and implantable devices or new
devices which have not been found substantially equivalent to legally marketed
devices are those which must receive premarket approval by the Food and Drug
Administration.
Before a new device can be introduced into the market, the manufacturer
must generally obtain clearance through either a 510(k) notification or a
premarket approval. A 510(k) clearance will be granted if the submitted data
establishes that the proposed device is "substantially equivalent" to a legally
marketed Class I or II medical device, or to a class III medical device for
which the administration has not called for premarket approval. The Food and
Drug Administration has recently been requiring a more rigorous demonstration of
substantial equivalence than in the past. It generally takes from three to nine
months from submission to obtain a 510(k) clearance, but it may take longer. The
administration may determine that the proposed device is not substantially
equivalent, or that additional data is needed before a determination can be
made. A "not substantially equivalent" determination, or a request for
additional data, could delay the market introduction of new products that fall
into this category and adversely effect our business, financial condition and
results of operations. There can be no assurance that:
o We will obtain 510(k) clearance within the above time frames, if at
all, for any device for which it files a future 510(k) notification;
or
o We will not be required to submit a premarket approval application
for any device which we may develop in the future.
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For any of VidaMed's products that are cleared through the 510(k)
process, including our TUNA System, modifications or enhancements that could
affect safety or efficacy will require new 510(k) submissions.
VIDAMED PRODUCTS MUST COMPLY WITH FOREIGN GOVERNMENT REGULATIONS.
Sales of medical devices outside the United States are subject to
regulatory requirements that vary widely from country to country. The time
required to obtain approval for sale in a foreign country may be longer or
shorter than that required in the United States. The requirements may also
differ. VidaMed has received regulatory approvals where required for commercial
sale of the TUNA System in all major international markets.
In June 1994, we received a report of compliance for the TUNA System
from the British Standards Institute. In August 1994 we received a certificate
of compliance from TUV, a European quality assurance auditor, certifying the
TUNA System's safety and its adherence to published electronic and mechanical
specifications.
These certifications allow the Company to affix a mark, referred to as
the CE mark, to the VidaMed TUNA System. The CE mark verifies approval to
commercially market and sell the TUNA System in all countries of the European
Economic Area. In order to maintain these approvals, we are subject to periodic
inspections. Additional product approvals from foreign regulatory authorities
may be required for international sale of our general electrosurgical device for
which a 510(k) notification has been filed. Failure to comply with applicable
regulatory requirements can result in loss of previously received approvals and
other sanctions and could have a material adverse effect on our business,
financial condition and results of operations.
VidaMed's distributor in Japan, Century Medical, Inc., is responsible
for management of clinical trials and obtaining regulatory and reimbursement
approval for the TUNA System. Such regulatory approval was received from the
Japanese Ministry of Health and Welfare in July 1997. However, failure to obtain
approval of current or future products or to obtain market acceptance for the
TUNA Procedure in Japan could preclude the commercial viability of our products
in Japan and could adversely effect on our business, financial condition and
results of operations.
MANUFACTURING DIFFICULTIES POSE RISKS TO VIDAMED.
VidaMed relies on outside companies to manufacture our products.
Manufacturers often encounter difficulties in scaling up production of new
products. Such difficulties involve:
o Production yields;
o Quality control and assurance;
o Component supply; and
o Lack of qualified personnel.
These difficulties, if encountered by the manufacturers of VidaMed
products, could adversely effect our business, financial condition and results
of operations. We cannot assure you that current manufacturers will adequately
meet our manufacturing needs on an on-going basis.
Any products manufactured or distributed by VidaMed pursuant to Food
and Drug Administration clearances or approvals are subject to continuing
regulation, including recordkeeping and reporting requirements regarding use of
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the device. Manufacturing facilities where we outsource products are also
subject to periodic inspection by federal, state and foreign regulatory
agencies. Failure of our manufacturers to comply with regulatory requirements
could adversely effect our business.
VIDAMED'S CANNOT COMPLETELY PROTECT ITS INTELLECTUAL PROPERTY.
We have been issued 42 United States patents and 40 foreign patents
covering a method of prostate ablation using the VidaMed TUNA System and the
design of the TUNA System. We currently have 16 patent applications pending in
the United States and 49 corresponding patent applications pending in various
foreign countries. In addition, we hold licenses to certain technology used in
the TUNA System. We cannot assure that our issued United States patents, or any
patents which may be issued to us, will offer any degree of protection.
We cannot assure that any of our patents or patent applications will
not be challenged, invalidated or circumvented in the future. In addition, many
of our competitors have substantial resources and have made substantial
investments in competing technologies. Such competitors may seek to apply for
and obtain patents that will prevent, limit or interfere with our ability to
make, use or sell our products either in the United States or in international
markets.
Extensive litigation regarding patents and other intellectual property
rights characterize the medical device industry. Companies in the medical device
industry have used intellectual property litigation to gain a competitive
advantage. VidaMed is aware of patents held by other participants in the Benign
Prostatic Hyperplasma market. We have been and may in the future be notified
that we may be infringing patent or other proprietary rights. Conversely, in
1998, we entered a settlement agreement with respect to a claim that we had
brought against another medical device company. Although patent and intellectual
property disputes in the medical device area have often been settled through
licensing or similar arrangements, costs could be substantial and could include
ongoing royalties. We cannot assure that necessary licenses would be available
to us on satisfactory terms or at all.
The defense and prosecution of intellectual property suits, United
States and Trademark Office interference proceedings and related legal and
administrative proceedings consume money and time. Nevertheless, litigation may
be necessary to:
o Enforce our patents;
o Protect our trade secrets or know-how; or
o Determine the enforceability, scope and validity of the proprietary
rights of others.
Litigation or interference proceedings could drain our financial
resources and divert the efforts of our human resources. An adverse
determination in litigation or interference proceedings could subject us to
significant liabilities to third parties or require us to seek licenses from
third parties. An adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent us from
manufacturing and selling our products, which would adversely effect our
business, financial condition and results of operations.
In addition to patents, we rely on trade secrets and proprietary
know-how. We seek to protect these, in part, through proprietary information
agreements with employees, consultants and other parties. Our proprietary
information agreements with employees and consultants contain industry standard
provisions. Such provisions require individuals to assign to VidaMed, without
additional consideration, any inventions that they conceive or reduce to
practice while employed or retained by us, subject to customary exceptions. We
cannot assure that proprietary information agreements with employees,
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consultants and others will not be breached, that we would have adequate
remedies for any breach, or that our trade secrets will not otherwise become
known to or independently developed by competitors.
The proprietary information agreement between the Company and Stuart D.
Edwards, one of our founders, obligates Mr. Edwards to assign to VidaMed his
inventions and related intellectual property only in the field of urology. Mr.
Edwards has assigned to Rita Medical Systems, Inc., formerly ZoMed
International, Inc., his inventions in the cancer field. Mr. Edwards has
conceived of, and may continue to conceive of, various medical device product
concepts for other fields outside of urology. Mr. Edwards' intellectual property
includes (i) certain product concepts for the treatment of snoring and sleep
apnea that have been assigned and (ii) certain product concepts in the
gynecology field that have been licensed to an unrelated third party. Such party
also has an option to purchase all future technology developed by Mr. Edwards in
the gynecology field. Product concepts outside of urology developed by Mr.
Edwards will not be owned by or commercialized through VidaMed, and VidaMed will
have no rights or ownership interests with respect thereto.
We have entered into a cross license agreement with Rita Medical
Systems. Under the cross license, Rita has the right to use VidaMed technology
in the cancer field and VidaMed has the right to use Rita technology in the
treatment of urological diseases and disorders. 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, and VidaMed and Rita may
therefore become competitors in this field.
VIDAMED IS AT RISK FOR PRODUCT LIABILITY CLAIMS.
Although we have not experienced any product liability claims to date,
any such claims could adversely impact us. We may not be able to obtain product
liability insurance and evaluate our insurance requirements on an ongoing basis.
We cannot assure that product liability claims will not exceed such insurance
coverage limits or that such insurance will be available on commercially
reasonable terms or at all.
VIDAMED'S CORPORATE STRUCTURE INHIBITS STOCKHOLDERS' CONTROL.
Certain provisions of our Certificate of Incorporation and Bylaws
inhibit stockholders control of VidaMed by:
o Allowing the Company to issue preferred stock without any vote or
further action by the stockholders;
o Eliminating the right of stockholders to act by written consent
without a meeting; and
o Eliminating cumulative voting in the election of directors.
Because these provisions may make it more difficult for stockholders to
take certain corporate actions, they could have the effect of delaying or
preventing a change in control of VidaMed. Such provisions could limit the price
that certain investors might be willing to pay for future shares of our common
stock.
NO PUBLIC MARKET EXITS FOR VIDAMED'S WARRANTS.
We do not intend to apply for the listing of the warrants on any
exchange. Accordingly, no public market for the warrants will exist prior to the
offering of the warrants, and there can be no assurance that an active trading
market will develop in any of the warrants after any offering thereof. The
exercise price and terms of the warrants may be determined arbitrarily by
negotiations with any purchaser. Factors considered in such negotiations, in
addition to prevailing market conditions, may include:
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<PAGE>
o The history and prospects of the industry;
o An assessment of our management;
o VidaMed's prospects;
o Our capital structure; and
o Other relevant factors.
Therefore, the exercise price and terms of the warrants may not
necessarily bear any relationship to established valuation criteria. The
exercise price, therefore, may not indicate prevailing prices in a public market
for the warrants.
The warrants will not be exercisable unless, at the time of the
exercise:
o VidaMed has a current prospectus covering the shares of common stock
issuable upon exercise of the warrants; or
o Such shares have been registered, qualified or deemed to be exempt
under the securities laws of the state of residence of the
exercising holder of the warrants.
We will use our best efforts to have all the shares of common stock
issuable upon exercise of the warrants registered or qualified on or before the
exercise date and to maintain a current prospectus until the expiration of the
warrants. However, we cannot assure that we will be able to do so. The warrants
may be deprived of value if a current prospectus covering the shares of common
stock issuable upon the exercise of the warrants is not kept effective.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement for
any offering of these securities, VidaMed intends to use the net proceeds for
general corporate purposes.
Until VidaMed uses the proceeds in our business, we will invest the
proceeds in short-term investment grade interest bearing instruments.
PLAN OF DISTRIBUTION
VidaMed may sell these securities to or through one or more
underwriters, and also may sell these securities directly to other purchasers or
through agents.
These securities may be distributed in one or more transactions at a
fixed price or prices, which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices.
In connection with the sale of these securities, underwriters may
receive compensation from VidaMed or from purchasers of the securities, for whom
they may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell these securities to or through dealers and such dealers
may receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Any such underwriter or agent will be identified, and any such
compensation received from VidaMed will be described in the prospectus
supplement.
Shares sold pursuant to a prospectus supplement and any shares issuable
upon exercise of any of these warrants issued pursuant to a prospectus
supplement are expected to be listed on the Nasdaq National Market. Unless
otherwise specified in the related prospectus supplement, each series of
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<PAGE>
warrants will be a new issue with no established trading market. We may elect to
list any series of warrants on an exchange, but are not obligated to do so. It
is possible that one or more underwriters may make a market in a series of these
warrants, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market of any these securities.
Under agreements we may enter into, underwriters, dealers and agents
who participate in the distribution of these securities may be entitled to
indemnification by VidaMed against certain liabilities, including liabilities
under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, VidaMed in the ordinary course of
business.
DESCRIPTION OF SECURITIES
SHARES.
VidaMed's authorized capital stock consists of 60,000,000 shares of
common stock, $.001 par value per share, and 5,000,000 shares of preferred
stock, $.001 par value per share. As of June 8, 1999, 20,579,456 shares of
common stock were outstanding, held of record by approximately 272 stockholders.
No shares of the preferred stock were outstanding as of June 8, 1999, although
60,000 shares of the preferred stock have been designated Series A Participating
Preferred Stock. One one-thousandth of a share of Series A Participating
Preferred Stock is issuable upon exercise of each preferred share purchase
right. Each outstanding share of common stock also represents the preferred
share purchase right related to that share of common stock.
WARRANTS.
The following summary describes the warrants and sets forth terms and
provisions. Such summary is not necessarily complete. We qualify this summary in
all respects by reference to the actual text of the warrant.
Exercise Price and Terms. Each warrant here registered will entitle the
registered holder to purchase, for a fixed time period beginning the date of
issuance, a fixed number of shares of common stock at a fixed price per share.
The price may be adjusted according to the anti-dilution and other provisions
referred to below. The holder of any warrant will be able to exercise such
warrant by surrendering the certificate representing the warrant to American
Securities Transfer, Inc., the warrant agent.
The subscription form on the warrant must be properly completed and
executed, and the exercise price must be paid. You may exercise the warrants at
any time, in whole or in part, at the applicable exercise price until the
warrants expire. However, the warrants may include a provision enabling VidaMed
to call the warrants, compelling holders to exercise, in the event that the
price per share of VidaMed's stock exceeds the exercise price of the warrants
for an enumerated period of time.
No fractional shares will be issued upon the exercise of the warrants.
The warrants may not provide for cashless exercise. The exercise price of the
warrants may not relate to their value. You should not regard the exercise price
as an indication of any future market price of the common stock.
Adjustments. The exercise price and the number of shares of common
stock purchasable upon the exercise of the warrants will be adjusted when
certain events occur, including:
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<PAGE>
o Stock splits;
o Reverse stock splits; or
o Combinations of the common stock.
In order to enable warrant holders to acquire securities or property
receivable by a holder of common stock that might have been purchased upon the
exercise of the warrant, the exercise price may be adjusted in the following
cases:
o Reclassification or exchange of common stock;
o VidaMed's consolidation or merger with or into another corporation
(other than a consolidation or merger in which VidaMed is the
surviving corporation); or
o Sale of all or substantially all of VidaMed's assets
Transfer, Exchange and Exercise. The warrants will be in registered
form and may be presented to the warrant agent for transfer, exchange or
exercise at any time on or prior to their expiration date, at which time the
warrants will become wholly void and of no value. If a market for the warrants
develops, the holder may sell the warrants instead of exercising them. There can
be no assurance, however, that a market for the warrants will develop or
continue and VidaMed does not intend to apply for the listing of the warrants on
any exchange.
Warrant Holder Not a Stockholder. The warrants will not confer upon
holders any voting, dividend or other rights as stockholders of VidaMed.
Modification of warrant. Modification of the warrants, including the
modification of the number of shares of common stock purchasable upon the
exercise of any warrant, the exercise price and the expiration date with respect
to any warrant, will require the consent of the holders of a majority of the
warrants.
The warrants will not be exercisable unless, at the time of the
exercise, VidaMed has a current prospectus covering the shares of common stock
issuable upon exercise of the warrants, and such shares have been registered,
qualified or deemed to be exempt under the securities laws of the state of
residence of the exercising holder of the warrants. Although we will use our
best efforts to have all the shares of common stock issuable upon exercise of
the warrants registered or qualified on or before the exercise date and to
maintain a current prospectus until the expiration of the warrants, there can be
no assurance that we will be able to do so.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill
Rd., Palo Alto, California 94304.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our annual report on form 10-K for
the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
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<PAGE>
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS.
We file proxy statements, reports and other information with the
Securities and Exchange Commission in accordance with the Securities Exchange
Act of 1934. You can inspect and copy this information at regional offices of
the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048; and at the Public Reference Office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
You can also obtain copies of such material from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The Commission also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding VidaMed and other companies that file electronically with the
Commission.
Our common stock is traded on the Nasdaq National Market. Our reports
and other information may be inspected at the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended. You can receive copies of registration statement from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees of the Commission's fees.
INFORMATION INCORPORATED BY REFERENCE.
We incorporate by reference the following documents and all future
documents filed by VidaMed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until this offering is completed.
1. Our registration statements on Form 8-A filed with the Securities
and Exchange Commission on June 17, 1995 and January 31, 1997;
2. The annual report on Form 10-K for the fiscal year ended December
31, 1998 filed on March 31, 1999;
3. Our quarterly report on Form 10-Q for the quarter ended March 31,
1999 filed on April 17, 1999;
4. Our current report on Form 8-K filed on September 24, 1997.
You may receive free copies of these filings by writing or telephoning
us at the following address:
VidaMed, Inc.
46107 Landing Parkway
Fremont, California 94538
Telephone: (510) 492-4902
Attention: Investor Relations
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
Securities and Exchange Commission registration fee ............... $ 4,203
Nasdaq National Market listing fee ................................ 17,500
Printing and engraving expenses ................................... 5,000
Legal fees and expenses ........................................... 25,000
Accounting fees and expenses ...................................... 7,500
Transfer agent and registrar fees and expenses .................... 1,500
Miscellaneous ..................................................... 2,136
-----------
Total ............................................. $ 62,839
===========
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of the Registrant's Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification
of officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
II-1
<PAGE>
Item 16. Exhibits
Exhibit Number Description
- -------------- -----------
4.1++ Certificate of Incorporation of Registrant.
4.2++ Restated Bylaws of Registrant.
4.3+++ Form of common stock Certificate.
4.4++++ Preferred Shares Rights Agreement dated as of January 27,
1997, between the Registrant and American Securities
Transfer & Trust, Inc., including the Certificate of
Designations, the Form of Rights Certificate and the Summary
of Rights attached thereto as Exhibit A, Exhibit B and
Exhibit C, respectively.
4.5 Form of common stock Purchase Warrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (included on P. II-4).
- ----------
+ Filed as exhibit 99.1 to the Registrant's Current Report on Form 8-K
filed with the Commission on September 24, 1997 and incorporated herein
by reference.
++ Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and incorporated herein by
reference.
+++ Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (File No. 33-90746) and incorporated herein by reference.
++++ Filed as an Exhibit to the Registrant's Registration Statement on Form
8-A filed with the Commission on January 31, 1997 and incorporated
herein by reference.
Item 17. Undertaking
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and persons
controlling the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
II-2
<PAGE>
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer of controlling persons of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this registration statement as of the time it was declared effective.
3. That, for purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
4. For purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
5. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, VidaMed,
Inc. certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on this 9th day of
June 1999.
VIDAMED, INC.
By: /s/ David J. Illingworth
-------------------------------------
David J. Illingworth
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints David J. Illingworth and Richard
D. Brounstein, as his attorney-in-fact, with full power of substitution, for him
in any and all capacities, to sign any and all amendments to this Registration
Statement and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David J. Illingworth President and Chief Executive Officer and Director
- ------------------------------- (Principal Executive Officer) June 9, 1999
(David J. Illingworth)
/s/ Richard D. Brounstein Vice President of Finance and Chief Financial Officer
- ------------------------------- (Principal Financial Officer and Principal Accounting
(Richard D. Brounstein) Officer) June 9, 1999
/s/ Franklin D. Brown Director June 9, 1999
- -------------------------------
(Franklin D. Brown)
/s/ Robert J. Erra Director June 9, 1999
- -------------------------------
(Robert J. Erra)
/s/ Wayne I. Roe Director June 9, 1999
- -------------------------------
(Wayne I. Roe)
/s/ Michael H. Spindler Director June 9, 1999
- -------------------------------
(Michael H. Spindler)
</TABLE>
II-4
<PAGE>
Exhibit Index
Exhibit Number Description
4.1++ Certificate of Incorporation of Registrant.
4.2++ Restated Bylaws of Registrant.
4.3+++ Form of common stock Certificate.
4.4++++ Preferred Shares Rights Agreement dated as of January 27,
1997, between the Registrant and American Securities
Transfer & Trust, Inc., including the Certificate of
Designations, the Form of Rights Certificate and the Summary
of Rights attached thereto as Exhibit A, Exhibit B and
Exhibit C, respectively.
4.5 Form of common stock Purchase Warrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (included on P. II-4).
- ----------
+ Filed as exhibit 99.1 to the Registrant's Current Report on Form 8-K
filed with the Commission on September 24, 1997 and incorporated herein
by reference.
++ Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and incorporated herein by
reference.
+++ Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (File No. 33-90746) and incorporated herein by reference.
++++ Filed as an Exhibit to the Registrant's Registration Statement on Form
S-8 filed with the Commission on January 31, 1997 and incorporated
herein by reference.
II-5
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
VIDAMED, INC.
THIS CERTIFIES that, for value received, [Name] (the "Investor"), is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or prior to the close of business on the date three (3) years after
the date hereof, but not thereafter, to subscribe for and purchase, from
VIDAMED, INC. a Delaware corporation (the "Company"), [Shares] shares of Common
Stock. The purchase price of one share of Common Stock under this Warrant shall
be $[Price] per share. The purchase price and the number of shares for which the
Warrant is exercisable shall be subject to adjustment as provided herein.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
2. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any time
before the close of business on the date three (3) years after the date hereof,
by delivery of the Notice of Exercise form annexed hereto duly executed at the
office of the Company, in Fremont, California (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company), and
upon payment of the purchase price of the shares thereby purchased (by cash or
by check or bank draft payable to the order of the Company); whereupon the
holder of this Warrant shall be entitled to receive a certificate for the number
of shares of Common Stock so purchased. The Company agrees that if at the time
of the surrender of this Warrant and purchase the holder hereof shall be
entitled to exercise this Warrant, the shares so purchased shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been exercised as
aforesaid. If this Warrant should be exercised in part only, the Issuer shall,
upon surrender of this Warrant, execute and deliver a new Warrant evidencing the
rights of the holder hereof to purchase the balance of the Warrant Shares
purchasable hereunder.
<PAGE>
(b) In lieu of the cash payment set forth in paragraph 2(a)
above, the Holder shall have the right ("Conversion Right") to convert this
Warrant in its entirety (without payment of any kind) into that number of shares
of Common Stock equal to the quotient obtained by dividing the Net Value (as
defined below) of the Shares issuable upon exercise of this Warrant by the Fair
Market Value (as defined below) of one share of Common Stock. As used herein,
(A) the Net Value of the Shares means the aggregate Fair Market Value of the
shares of Common Stock subject to this Warrant minus the aggregate exercise
price; and (B) the Fair Market Value of one share of Common Stock means:
(i) if the exercise occurs at a time during which the
Company's Common Stock is traded on a national securities exchange or on the
Nasdaq National Market or the Nasdaq Small Cap Market, the Fair Market Value of
one share of Common Stock means the average last reported or closing sale price
for the Company's Common Stock on such exchange or market for the ten (10)
trading days ending one business day before the exercise of this Warrant;
(ii) if the exercise is in connection with a merger,
sale of assets or other reorganization transaction as described in Section 9(a)
below, the Fair Market Value of one share of Common Stock means the value
received by the holders of the Company's Common Stock pursuant to such
transaction; and
(iii) in all other cases, the Fair Market Value of
one share of Common Stock shall be determined in good faith by the Company's
Board of Directors.
(c) Certificates for shares purchased hereunder shall be
delivered to the holder hereof promptly after this Warrant shall have been
exercised as aforesaid. The Company covenants that all shares of Common Stock
which may be issued upon the exercise of rights represented by this Warrant
will, upon exercise of the rights represented by this Warrant, be fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then Fair
Market Value shall be paid in cash to the holder of this Warrant.
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof.
2
<PAGE>
5. No Rights as Shareholders. This Warrant does not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company
prior to the exercise thereof.
6. Exchange and Registry of Warrant. This Warrant is exchangeable,
without charge, upon the surrender hereof by the registered holder at the
above-mentioned office or agency of the Company, for a new Warrant of like tenor
and dated as of such exchange.
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor and dated as of such cancellation, in lieu of this
Warrant.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
9. Early Termination and Registration Statement Adjustments.
(a) Merger, Sale of Assets, etc. In case of any consolidation
of the Company with, or merger of the Company into, any other corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and in which no change occurs in its outstanding Common Stock), or
in case of any sale or transfer of all or substantially all of the assets of the
Company, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company, except where the Company is the surviving
entity and no change occurs in its outstanding Common Stock), the corporation
formed by such consolidation or the corporation resulting from or surviving such
merger or the corporation which shall have acquired such assets or securities of
the Company, as the case may be, shall execute and deliver to the Holder
simultaneously therewith a new Warrant, satisfactory in form and substance to
the Holder, together with such other documents as the Holder may reasonably
request, entitling the Holder thereof to receive upon exercise of such Warrant
the kind and amount of shares of stock and other securities and property
receivable upon such consolidation, merger, sale, transfer, or exchange of
securities, or upon the dissolution following such sale or other transfer, by a
holder of the number of shares of Common Stock purchasable upon exercise of this
Warrant immediately prior to such consolidation, merger, sale, transfer, or
exchange. Such new Warrant shall contain the same basic other terms and
conditions as this Warrant and shall provide for adjustments which, for events
subsequent to the effective date of such written instrument, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9. The above provisions of this paragraph (a) shall similarly apply to
successive
3
<PAGE>
consolidations, mergers, exchanges, sales or other transfers covered hereby.
Notwithstanding the foregoing, in the event the consideration to be paid to
holders of Company capital stock in any transaction of the nature referred to
above in this Section 9(a) (a "Transaction") consists of cash or cash
equivalents, then, provided that the Company shall have given the holder hereof
the notice required by Section 10, this Warrant shall, to the extent it has not
been exercised by the effective date of such Transaction, terminate upon the
completion of such Transaction.
(b) Reclassification, etc. If the Company at any time shall,
by subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant exist
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) Cash Distributions. Except as set forth herein, no
adjustment on account of cash dividends on the Company's Common Stock or other
securities purchasable hereunder will be made to the purchase price under this
Warrant.
(d) Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company further covenants and agrees (i) that it will not, by
amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observation or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company, (ii) promptly to take such action as may be required of the Company
to permit the Holder to exercise this Warrant and the Company duly and
effectively to issue shares of its Common Stock or other securities as provided
herein upon the exercise hereof and (iii) promptly to take all action required
or provided herein to protect the rights of the Holder granted hereunder against
dilution.
(e) If the Company declares a dividend on Common Stock, or
makes a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities convertible into
or exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend or
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<PAGE>
distribution, in proportion to the increase in the number of outstanding shares
(and shares of Common Stock issuable upon conversion of all such securities
convertible into Common Stock) of Common Stock as a result of such dividend or
distribution, and the Exercise Price shall be adjusted so that the aggregate
amount payable for the purchase of all the Warrant Shares issuable hereunder
immediately after the record date for such dividend or distribution shall equal
the aggregate amount so payable immediately before such record date.
(f) If the Company declares a dividend on Common Stock (other
than a dividend covered by subsection (g) above) or distributes to holders of
its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than Common Stock or
securities convertible into or exchangeable for Common Stock), the Holder shall
receive notice of such event as set forth in Section 11 below.
(g) If the Company shall, at any time before the expiration of
this Warrant, sell all or substantially all of its assets and distribute the
proceeds thereof to the Company's stockholders, the Holder shall, upon exercise
of this Warrant have the right to receive, in lieu of the shares of Common Stock
of the Company that the Holder otherwise would have been entitled to receive,
the same kind and amount of assets as would have been issued, distributed or
paid to the Holder upon any such distribution with respect to such shares of
Common Stock of the Company had the Holder been the holder of record of such
shares of Common Stock receivable upon exercise of this Warrant on the date for
determining those entitled to receive any such distribution. If any such
distribution results in any cash distribution in excess of the Exercise Price
provided by this Warrant for the shares of Common Stock receivable upon exercise
of this Warrant, the Holder may, at the Holder's option, exercise this Warrant
without making payment of the Exercise Price and, in such case, the Company
shall, upon distribution to the Holder, consider the Exercise Price to have been
paid in full and, in making settlement to the Holder, shall obtain receipt of
the Exercise Price by deducting an amount equal to the Exercise Price for the
shares of Common Stock receivable upon exercise of this Warrant from the amount
payable to the Holder. Notwithstanding the foregoing, in the event the
consideration to be paid to holders of Company capital stock in any transaction
of the nature referred to above in this Section 9(i) (an "Asset Sale
Transaction") consists of cash or cash equivalents and the consideration payable
per share of Common Stock of the Company is less than the Exercise Price
hereunder, then, provided that the Company shall have given the holder hereof
the notice required by Section 10, this Warrant shall, to the extent it has not
been exercised by the effective date of such Transaction, terminate upon the
completion of such Transaction.
(h) The term "Common Stock" shall mean the Common Stock of the
Company as the same exists as of the date hereof, or as such stock may be
constituted from time to time, except that for the purpose of this Section 9,
the term "Common Stock" shall include any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company.
(i) Whenever the number of Warrant Shares or the Exercise
Price shall be adjusted as required by the provisions of this Section 9, the
Company forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof, a
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<PAGE>
certificate prepared by its Chief Financial Officer, showing the adjusted number
of Warrant Shares and the adjusted Exercise Price and setting forth in
reasonable detail the circumstances requiring the adjustments.
(j) No adjustment in the Exercise Price in accordance with the
provisions of this Section 9 need be made if such adjustment would amount to a
change in such Exercise Price of less than $.01; provided however, that the
amount by which any adjustment is not made by reason of the provisions of this
paragraph (l) shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(k) If an adjustment is made under this Section 9 and the
event to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 9 shall be readjusted to the Exercise Price and the
number of Warrant Shares which would be in effect had the earlier adjustment not
been made.
10. Notice of Adjustment. So long as this Warrant shall be outstanding,
(a) if the Company shall propose to pay any dividends or make any distribution
upon the Common Stock, or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any other
similar rights, or (c) if there shall be any proposed capital reorganization of
the Company in which the Company is not the surviving entity, recapitalization
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or other transfer of all or
substantially all of the property and assets of the Company, or voluntary or
involuntary dissolution, liquidation or winding up of the Company, or (d) if the
Company shall give to its stockholders any notice, report or other communication
respecting any significant or special action or event, then in such event, the
Company shall give to the Holder, at least ten (10) days prior to the relevant
date described below, a notice containing a description of the proposed action
or event and stating the date or expected date on which a record of the
Company's stockholders is to be taken for any of the foregoing purposes, and the
date or expected date on which any such dividend, distribution, subscription,
reclassification, reorganization, consolidation, combination, merger,
conveyance, sale, lease or transfer, dissolution, liquidation or winding up is
to take place and the date or expected date, if any is to be fixed, as of which
the holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such event.
11. Notice. Any notice to be given or to be served upon any party in
connection with the Warrant must be in writing and will be deemed to have been
given and received upon confirmed receipt, if sent by facsimile, or two (2) days
after it has been submitted for delivery by Federal Express or an equivalent
carrier, charges prepaid and addressed to the following addresses with a
confirmation of delivery:
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<PAGE>
If to the Company, to:
VidaMed, Inc.
46107 Landing Parkway
Fremont, California 94538
Attn.: Richard Brounstein
Telephone: (510) 492-4940
Facsimile: (510) 492-4999
If to the Holder, to:
Address set forth in Exhibit A to Purchase Agreement
Any party may, at any time by giving written notice to the other party,
designate any other address in substitution of an address established pursuant
to the foregoing to which such notice will be given.
12. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company.
(b) Restrictions. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant may have restrictions
upon its resale imposed by state and federal securities laws.
(c) Governing Law. This Agreement shall be governed in all
respects by and construed in accordance with the laws of the State of Delaware
without any regard to conflicts of laws principles.
(d) Successors and Assigns. Except as otherwise contemplated
hereby, this Warrant shall be binding upon and inure to the benefit of any
successors and assigns of the Company.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, VIDAMED, INC. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: [Date]
VIDAMED, INC.
By: ___________________________________
Richard Brounstein,
Vice President and Chief
Financial Officer
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<PAGE>
NOTICE OF EXERCISE
To: VIDAMED, INC.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of VIDAMED, INC. pursuant to the terms of the attached Warrant, and
____ tenders herewith payment of the purchase price in full.
____ is electing to convert the Warrant on a "net exercise"
basis in accordance with Section 2(b) hereof.
[please check one of the foregoing lines]
(2) Please issue a certificate of certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________________________
(Name)
________________________________________________
________________________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; provided, that such representation shall not be required at such
time as the shares of Common Stock underlying this Warrant are registered under
the Securities Act of 1933.
_______________________________ ______________________________
(Date) (Signature)
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________________________________
(Please Print)
whose address is ______________________________________________________
(Please Print)
_______________________________________________________________________
Dated:_______________________, 19____.
Holder's Signature:_______________________________
Holder's Address:_________________________________
__________________________________________________
Signature Guaranteed: _________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
OPINION OF WILSON SONSINI GOODRICH & ROSATI
Exhibit 5.1
June 9, 1999
VidaMed, Inc.
46107 Landing Parkway
Fremont, California 94538
Re: VidaMed, Inc. (the "Company") Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed
with the Securities and Exchange Commission (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
of a shelf offering of (i) 6,000,000 shares of the Company's common stock, $00.1
par value per share (the "Shares"), (ii) 1,500,000 warrants to purchase common
stock of the Company (the "Shelf Warrants"), and (iii) 1,500,000 shares of the
Company's common stock, $.001 par value per share, issuable upon exercise of the
Shelf Warrants (the "Shelf Warrant Shares"). As your counsel, we have examined
the proceedings proposed to be taken in connection with the sale and issuance of
the above-referenced securities.
It is our opinion that the Shares, the Shelf Warrants and the Shelf
Warrant Shares, when issued and sold in the manner referred to in the
Registration Statement, will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
II-6
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of VidaMed, Inc.
for the registration of 7,500,000 shares of its common stock and 1,500,000
warrants to purchase shares of common stock and to the incorporation by
reference therein of our report dated January 15, 1999, with respect to the
consolidated financial statements and schedule of VidaMed, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Palo Alto, California
June 10, 1999
II-7
