<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-26082
VIDAMED, INC.
(exact name of registrant as specified in its charter)
Delaware 77-0314454
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
46107 Landing Parkway
Fremont, CA 94538
(Address of principal executive offices)
(510) 492-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [_] No
The number of outstanding shares of the registrant's Common Stock, $.001 par
value, was 30,090,833 as of March 31, 2000.
<PAGE>
VIDAMED, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements - unaudited
Condensed consolidated balance sheets - March 31, 2000
and December 31, 1999 3
Condensed consolidated statements of operations - three months
ended March 31, 2000 and 1999. 4
Condensed consolidated statements of cash flows - three months
ended March 31, 2000 and 1999 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosure About Market Risk 12
PART II. OTHER INFORMATION
Item 5. Other Information 13
Item 6. Exhibits and reports on Form 8-K 13
Signatures 14
Financial Data Schedule 15
Exhibit Index 16
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VidaMed, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31,1999
------------------- ----------------------
(Unaudited) (*)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 12,173 $ 2,748
Accounts receivable 1,753 1,443
Inventories 349 415
Other current assets 390 531
--------------- ---------------
Total current assets $ 14,665 $ 5,137
Property and equipment, net 2,426 2,017
Other assets, net 101 166
--------------- ---------------
Total assets $ 17,192 $ 7,320
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 568 $ 461
Accrued liabilities 1,973 2,558
Deferred revenue 339 272
Notes payable, current portion 1,390 1,394
--------------- ---------------
Total current liabilities $ 4,270 $ 4,685
Notes payable, long-term portion 829 1,030
Stockholders' equity:
Capital stock 114,351 101,725
Accumulated deficit (102,258) (100,120)
--------------- ---------------
Total stockholders' equity 12,093 1,605
--------------- ---------------
Total liabilities and stockholder's equity $ 17,192 $ 7,320
=============== ===============
</TABLE>
*The Balance Sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
Page 3 of 16
<PAGE>
VidaMed, Inc
Condensed Consolidated Statement of Operations
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
---------------- ----------------
<S> <C> <C>
Revenues $ 2,524 $ 1,037
Cost of Product Sold 767 833
---------------- ----------------
Gross Profit 1,757 204
Operating Expenses:
Research and Development 783 814
Selling, General and Administrative 3,265 2,504
---------------- ----------------
Total Operating Expenses 4,048 3,318
---------------- ----------------
Loss from Operations (2,291) (3,114)
Other income (expense), net 153 (42)
---------------- ----------------
Net loss $ (2,138) $ (3,156)
================ ================
Basic and diluted net loss per share $ (0.07) $ (0.16)
================ ================
Shares used in computing basic and
diluted net loss per share 28,936,000 20,313,000
================ ================
</TABLE>
See accompanying notes
Page 4 of 16
<PAGE>
VidaMed, Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,138) $ (3,156)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
Changes in current assets and liabilities: 380 313
Accounts receivable (310) (271)
Inventory 66 208
Other current assets 141 66
Other assets 65 (2)
Accounts payable 107 (83)
Accrued liabilities (379) 77
Deferred revenue 67 2
-------------- ---------------
Net cash used in operating activities (2,001) (2,846)
-------------- ---------------
Cash flows from investing activities:
Expenditures for property and equipment (789) (58)
-------------- ---------------
Net cash used in investing activities (789) (58)
-------------- ---------------
Cash flows from financing activities:
Principal payments under capital leases - (22)
Principal payments of notes payable (205) (30)
Net cash proceeds from issuance of common stock 12,420 1,388
-------------- ---------------
Net cash provided by financing activities 12,215 1,336
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 9,425 (1,568)
Cash and equivalents at the beginning of the period 2,748 9,384
-------------- ---------------
Cash and equivalents at the end of the period $ 12,173 $ 7,816
============== ===============
Supplemental disclosure of cash flows information:
Cash paid for interest $ 153 $ 95
============== ===============
</TABLE>
See accompanying notes.
Page 5 of 16
<PAGE>
VIDAMED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of
VidaMed, Inc. (the "Company" or "VidaMed") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Article 10 of Regulation S-X. The
balance sheet as of March 31, 2000, the statements of operations for the three
months ended March 31, 2000 and 1999, and the statements of cash flows for the
three months ended March 31, 2000 and 1999, are unaudited but include all
adjustments (consisting of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial position at such
date and the operating results and cash flows for those periods. Certain
information normally included in financial statements and related footnotes
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. The accompanying financial statements should be read in
conjunction with the financial statements and notes included in the Company's
annual report on Form 10-K for the year ended December 31, 1999, filed with the
Securities and Exchange Commission.
Results for any interim period shown in this report are not necessarily
indicative of results to be expected for any other interim period or for the
entire year.
2. Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of shares
of common stock issued and outstanding during the periods presented. Diluted net
loss per share is computed based on the weighted average number of shares of our
common stock and common equivalent shares (stock options and warrants to
purchase common stock) if dilutive. Because the Company has incurred losses from
operations in each of the periods presented, there is no difference between
basic and diluted net loss per share amounts. As of March 31, 2000, we had
30,090,833 issued and outstanding shares of common stock , with an additional
3,291,554 options outstanding under employee and director stock option plans,
and an additional 3,945,563 warrants outstanding to purchase common stock. The
options and warrants will be included in the calculation of net loss per share
at such time as their effect is no longer anti-dilutive, as calculated using the
treasury stock method.
3. Inventories
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market value. Inventories at March 31, 2000 and December
31, 1999 consist of the following (in thousands):
March 31, December 31,
2000 1999
--------- ------------
Raw materials $ 129 $ 147
Work in process 16 39
Finished goods 204 229
--------- ----------
$ 349 $ 415
========= ==========
Page 6 of 16
<PAGE>
4. Notes Payable
In October 1998, we finalized a $5.5 million debt facility with Transamerica
Technology Finance, a division of Transamerica Corporation. The facility is
secured by our assets and consists of a revolving accounts receivable-based
credit line of up to $3 million and a $2.5 million equipment term loan. The term
loan was funded in full as of December 31, 1998, at an interest rate of 12% per
year. Repayment of that loan is amortized over a three-year period, with the
first monthly payment having been made in December 1998 and continuing monthly
thereafter. As of March 31, 2000, we had borrowed approximately $505,000 against
the revolving accounts receivable-based line at a rate of 10.5% per year.
In January 2000, we renewed our debt facility arrangement with Transamerica and
in consideration of this renewal paid a fee of $15,000 and issued a warrant to
Transamerica to acquire an additional 77,320 shares of common stock for a
purchase price of $1.94 per share. The warrant has a term of five years.
5. Reporting Comprehensive Income (Loss)
We follow the Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (Statement 130). Statement 130 establishes new rules for
the reporting and display of comprehensive income and its components. Statement
130 requires unrealized gains or losses on our available-for-sale securities and
foreign currency translation adjustments, to be included in other comprehensive
income (loss). During the three months ended March 31, 2000 and 1999, the total
comprehensive loss was not materially different from the net loss.
6. Common Stock
The increase in capital stock for the three months ended March 31, 2000, is due
to the issuance of 7,129,221 additional shares. In January, we sold 5,300,000
shares of common stock to Medtronic and 1,160,000 to existing shareholders. The
purchase price per share of common stock was $1.73, which represented a premium
to the average closing price for the five days preceding the sale. The
investors, including Medtronic, received warrants to purchase 1,938,000 shares
of common stock at an exercise price of $1.80 per share. The warrants have a
term of five years. In February 2000,we sold 106,648 shares of common stock to
MC Medical, Inc. at a per share price of $2.81, which was the average purchase
price five days preceding the sale. We issued 78,272 shares of common stock on
the exercise of outstanding warrants, 42,334 shares of common stock in
employment-related settlements and 441,967 shares of common stock under employee
stock option and purchase plans.
Page 7 of 16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following is a discussion and analysis of VidaMed's consolidated financial
condition and results of operations for the three months ended March 31, 2000
and 1999. We also discuss certain factors that may affect our prospective
financial condition and results of operations. This section should be read in
conjunction with the Condensed Consolidated Financial Statements and related
Notes in Item 1 of this report and the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, which has been filed with the Securities and
Exchange Commission and is available from the Company at no charge.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
This report contains, in addition to historical information, forward-looking
statements that are based on current expectations and beliefs but involve a
number of risks and uncertainties that could cause actual results to differ
materially form those anticipated in the forward-looking statements. Some of the
factors that could cause actual results to differ are discussed below in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the "Risk Factors" discussion that follows. You should also
refer to the risk factors described in our annual report on Form 10-K for the
year ended December 31, 1999, which has been filed with the Securities and
Exchange Commission and is available from VidaMed at no charge. The
forward-looking statements included in this report are made only as of the date
hereof, and we undertake no obligation to publicly revise or update them to
reflect subsequent events or circumstances.
Overview
Since its founding in 1992, VidaMed has been engaged in the design, development
and marketing of urological systems, primarily focused on the treatment of the
enlarged prostate or benign prostatic hyperplasia, commonly known as BPH.
International sales of the patented TUNA System commenced in late 1993, and
commercial sales began in the United States in late 1996, after we received FDA
clearance. In 1997 the TUNA System was sold to office-based urology practices in
the U.S., assuming that after receiving FDA clearance, third-party
reimbursement, including Medicare, would be approved for those locations.
In mid-1998, Medicare announced that approval of any new office-based or
ambulatory surgery center procedures, would be delayed until at least mid-2000
due to Y2K compliance issues. As a result, Medicare reimbursement for the TUNA
procedure was made available only for procedures performed in hospital-based
settings, and required individual state-by-state approval.
Starting in late 1998 and throughout 1999, we focused our sales and
marketing efforts on obtaining the required individual state Medicare
reimbursement approvals and implementing of a new U.S. hospital-based "fee-per-
use" sales and marketing model. Under this model, an entire TUNA System is
placed in a hospital at no charge to the hospital. Revenue is generated by
selling a single-use component needed for each TUNA Procedure performed. Once
the procedure is performed the single-use component is discarded and a new
component must be purchased for the next procedure.
As of March 31, 2000, 47 states have approved hospital-based Medicare
reimbursement coverage for the TUNA procedure. Recently, the Health Care Finance
Administration, which administers Medicare, proposed a new fixed rate or
"prospective payment system" for hospital-based procedures, to
Page 8 of 16
<PAGE>
be implemented on July 1, 2000, that may cause a reduction in our current fee-
per-use pricing. The prospective payment system is expected to be easier to
administer than the current "reasonable cost basis" Medicare reimbursement
system. Although the full effect of the prospective payment system on our
current pricing structure is unknown at this time, we believe that the
simplified administration of Medicare reimbursement could accelerate our sales.
We cannot predict, however, whether an accelerated sales cycle and any related
increased revenues will offset any required price reductions.
To achieve widespread acceptance of the TUNA Procedure, we believe that
Medicare reimbursement will need to be available for in physician offices and in
ambulatory surgery centers. If Medicare reimbursement coverage becomes available
in those settings, we expect the number of procedures performed will increase.
We do not, however, expect that Medicare reimbursement in those alternative
sites will be approved until at least mid to late 2000, if at all. The failure
to receive Medicare reimbursement coverage at adequate reimbursement rates for
procedures performed in physician offices and ambulatory surgery centers, or a
failure to continue to receive adequate Medicare reimbursement for procedures
performed in hospitals, could have a material adverse effect on our future
revenues and results of operations.
Results of Operations
Net revenue for the three months ended March 31, 2000 was $2,524,000, an
increase of $1,487,000 or 143% from $1,037,000 in the same period in 1999. Net
revenue in the first quarter of 2000 increased 17% from $2,156,000 in the three
months ended December 31, 1999. The difference is due primarily to increasing
acceptance of our fee-per-use program.
Cost of product sold for the three months ended March 31, 2000 was $767,000, a
decrease of 8% or $66,000 from $833,000 for the three months ended March 31,
1999. Despite lower product sales in the first quarter of 1999 as compared to
2000, overall cost of product sold were higher in the first quarter of 1999 due
to manufacturing expenditures incurred in transferring the manufacturing of our
single-use catheters from our Fremont facility to Zeiss Humphrey Systems, our
contract manufacturer.
Gross margin expressed as a percentage of sales in the three months ended March
31, 2000 was 70%, up from 20% for the three months ended March 31, 1999. This
improvement in gross margin is primarily attributed to the introduction and
acceptance of the fee-per-use program in early 1999. Gross margin for the three
months ended March 31, 2000 and December 31,1999 were $1,757,000 and $1,391,000,
respectively. This increase of $366,000 is primarily attributed to the increased
volume in our U.S. based fee-per-use program.
Research and development (R & D) expenses included expenditures for regulatory
compliance and clinical trials. Clinical trial costs consist largely of payments
to clinical investigators, product for clinical trials, and costs associated
with initiating and monitoring clinical trials. R&D expenses decreased 4% to
$783,000 in the three months ended March 31, 2000, from $814,000 in the three
months ended March 31, 1999. The decrease was primarily due to reduced clinical
activity in 2000. R&D expenses for the first quarter of 2000 decreased $13,000
from $798,000 in the three months ended December 31,1999.
Selling, general and administrative (SG&A) expenses for the three months ended
March 31, 2000 was $3,265,000, an increase of $761,000 or 30%, compared to
expenditures of $2,504,000 in the in the same period in 1999. The difference is
do to expansion of the sales and marketing departments to increase revenues from
the fee-per-use program. SG&A expenses for the first quarter of 2000 increased
$330,000 from $2,935,000 in the three months ended December 31, 1999. This is
attributed to higher sales
Page 9 of 16
<PAGE>
commissions, higher effective employer payroll tax rates and one-time charges to
SG&A for outside consultants.
Other income/expense for the three months ended March 31, 2000, increased to
$153,000 in net income compared to an expense for the comparable period in 1999
of $42,000. Other income is primarily composed of interest income and expense.
Other income/expense in the three months ended December 31, 1999 was a net
expense of $150,000. This change is a result of additional interest income
realized in the first quarter of 2000.
History of Operating Losses
We have incurred significant operating losses since our inception in 1992 and,
as of March 31,2000, had an accumulated deficit of approximately $102.2 million.
We expect to continue to incur operating losses through the end of the year 2000
as we expend funds on sales and marketing activities, clinical trials in support
of reimbursement approvals and research and development. Our future
profitability depends on numerous factors, including:
. our success in promoting the fee-per-use program;
. our success in achieving market acceptance of the TUNA Procedure;
. our success in obtaining and maintaining necessary regulatory
clearances;
. the extent to which Medicare and other healthcare payors approve
reimbursement of the costs of TUNA Procedures performed in hospitals,
doctors' offices and ambulatory surgery centers; and
. the amount of reimbursement provided and the effects of the proposed
"prospective payment system" on our future revenues
Liquidity and Capital Resources
For the quarter ended March 31, 2000, our cash and cash equivalents
increased by $9.4 million to $12.2 million, compared to $2.7 million at December
31, 1999. The increase is due primarily to $11.2 million received from the
private placement of our common stock and warrants during the quarter, offset by
operating expenses incurred in the normal course of business.
While management believes that the proceeds of the equity financing in the
first quarter, plus revenues from the fee-per-use program will be sufficient to
fund operations at current levels through the end of fiscal 2000, additional
financing may be required to fund operations at current levels in 2001. If
required, management will pursue, and believes it can obtain, financing to fund
operations at current levels in 2001. Additional financing may not be available,
or if available, may not be on favorable terms.
If additional financing is unavailable, management believes that it would
be able to fund operations into fiscal 2001 by scaling back research and
development, clinical trials, expansion into the office-based market and other
areas of discretionary spending. Reductions in those areas could have a
Page 10 of 16
<PAGE>
material adverse effect on our long-term opportunities to develop new and
competitive products, obtain necessary governmental approvals of those products
and develop additional markets for our products.
We have a line of credit with Transamerica Technology Finance, a
division of Transamerica Corporation. The facility is secured by our assets and
consists of a revolving accounts receivable-based credit line of up to $3
million and a $2.5 million equipment term loan. The term loan was funded in full
as of December 31, 1998, at an interest rate of 12% per year. Repayment of that
loan is amortized over a three-year period, with the first monthly payment
having been made in December 1998 and continuing monthly thereafter. We may be
able to obtain additional debt financing from Transamerica, but we cannot give
any assurance that we will be able to do so or that the terms of the financing
would be favorable. Collaborative arrangements, if necessary to raise additional
funds, may require us to relinquish rights to certain of our technologies or
products. Our failure to raise capital when needed could have a material adverse
effect on our business, financial condition and results of operation.
As of March 31, 2000, we had borrowed approximately $505,0000 against the
Transamerica revolving accounts receivable-based line at a rate of 10.5% per
year.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (Statement
133), which is required to be adopted in the first quarter of the year ending
December 31, 2001. Management does not anticipate that the adoption of Statement
133 will have a significant effect on our results of operations or our financial
position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No.101 (SAB 101). SAB 101 summarizes certain areas of the
views of the SEC staff in applying generally accepted accounting principles to
revenue recognition in financial statements. We believe that our current revenue
recognition principles comply with SAB 101.
RISK FACTORS
Our business, results of operations and financial condition are subject to the
following risk factors in addition to those described above under "Results of
Operations" and "Liquidity and Capital Resources" and in our annual report on
Form 10-K for the year ended December 31, 1999.
Our Future Revenues Are Subject to Uncertainties Regarding Healthcare
Reimbursement and Reform
The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of healthcare costs to contain or
reduce costs of health care may affect our future revenues and profitability. In
the United States, given recent federal and state government initiatives
directed at lowering the total cost of health care, the U.S. Congress and state
legislatures will likely continue to focus on healthcare reform including the
reform of Medicare and Medicaid systems, and on the cost of medical products and
services.
Our ability to commercialize the TUNA Procedure successfully will depend in
part on the extent to which the users of our products obtain appropriate
reimbursement for the cost of the TUNA Procedure. Third-party payors are
increasingly challenging the prices charged for medical products and services.
Also, legislative proposals to reform health care or reduce government insurance
programs, coupled with the trend toward managed health care in the United States
and the concurrent growth of organizations
Page 11 of 16
<PAGE>
such as HMOs, which organizations could control or significantly influence the
purchase of healthcare services and products, may all result in lower prices for
or rejection of our products. The cost containment measures that healthcare
payors and providers are instituting and the effect of health care reform could
cause reductions in the amount of reimbursement available to users of our
products, and could materially adversely affect our ability to operate
profitably.
If Coverage Is Not Approved for Procedures Performed Outside of Hospitals, or if
the Amount of Coverage Is Inadequate, We Will Not Be Able to Achieve Widespread
Acceptance of the Tuna Procedure
To achieve widespread acceptance of the TUNA Therapy, we believe that
reimbursement will need to be available for procedures performed outside of the
hospital setting, in physician offices and ambulatory surgery centers. In
addition, the amount of reimbursement for TUNA Procedures performed in those
locations must be adequate. Medicare has not yet approved reimbursement for the
costs of supplies, equipment and overhead outside of hospital settings. In 1998,
Medicare announced that it would delay consideration of coverage in physician
offices and ambulatory surgery centers while it reviewed its Y2K compliance
issues. Medicare is now behind schedule in many areas, and we do not expect that
coverage for procedures performed at these alternative sites will be approved
until at least mid to late 2000. When and if reimbursement is approved, it most
likely will be subject to a prospective payment system. Under this system,
ambulatory surgery centers and physician offices will be allowed a flat rate of
reimbursement for each TUNA Procedure performed, and will need to manage their
costs of supplies, equipment and overhead to fit within the approved payment.
The amount of reimbursement allowed for a TUNA Procedure under a prospective
payment system has not been determined. As a result of these factors, we can
give no assurance that procedures performed in physician offices and ambulatory
surgery centers will generate significant revenue for us in the United States.
If coverage becomes available for procedures performed in physician
offices and ambulatory surgery centers, we expect that the number of procedures
performed will increase. The amount of reimbursement could decrease, however,
and is likely to decrease under the "prospective payment system" and the
decrease could be substantial. We cannot predict whether the amount of
reimbursement, when and if it is approved, will be deemed adequate by physicians
and patients or whether our revenues from procedures performed outside of
hospitals will be sufficient to cover our operating expenses.
We Offer One Product Line
The VidaMed TUNA System consists of a radio frequency generator, a reusable
handle, a disposable cartridge and an optical telescope. If a material problem
develops with any one or more of those components, our revenues would likely
suffer because we do not have other products to rely on. Possible problems
include, but are not necessarily limited to, malfunctions, failure to comply
with or changes in governmental regulations, product recalls, product
obsolescence, injunctions resulting from litigation, inability to protect our
intellectual property, invalidity of our patents or shortages of one or more of
the components of the system.
We Rely on Contract Manufacturers for the Majority of Our Manufacturing Needs
We outsource the manufacture of the disposable cartridge and most other
components of the TUNA System, and we rely on contract manufacturers to supply
our components in sufficient quantities, in compliance with regulatory
requirements and at an acceptable cost. Manufacturers often encounter
difficulties in scaling up production of new products, including problems
involving production yields, product recalls, quality control and assurance,
component supply and lack of qualified personnel. If any
Page 12 of 16
<PAGE>
of our manufacturers experience production problems, we may not be able to
locate an alternate manufacturer promptly. Delays in production could adversely
affect the success of our fee-per-use program and our future revenues.
Impact of Year 2000
In prior years, we discussed the nature and progress of our plans to
become Y2K ready. In late 1999, we completed our remediation and testing of
systems. We experienced no significant disruption in mission critical
information technology and non-information technology systems. We will continue
to monitor our mission critical computer applications and those of our
customers, suppliers and vendors throughout the year 2000 to ensure that any
latent Y2K matters that may arise are addressed promptly.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to interest rate risk on the investments of our excess cash.
The primary objective of our investment activities is to preserve principal
while at the same time maximize yields without significantly increasing risk. To
achieve this objective, we invest in highly liquid and high quality debt
securities. To minimize the exposure due to adverse shifts in interest rates, we
invest in short-term securities with maturities of less than one year. Due to
the nature of our short-term investments, we have concluded that we doe not have
a material market risk exposure.
PART II: OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Management Changes
On March 20, 2000, in connection with a January 2000 equity investment in
the Company by Medtronic Asset Management, Inc., a subsidiary of Medtronic,
Inc., Michael Ellwein was appointed to the Board of Directors. Mr. Ellwein
currently is Vice President and Chief Development Officer of Medtronic, Inc.
(NYSE:MDT), where he is responsible for mergers, acquisitions, divestitures,
joint ventures, strategic alliances and licensing opportunities.
On April 6, 2000, Steve Williams, formerly Vice President of Operations
for Zeiss Humphrey Systems, was appointed Chief Operating Officer. We have a
manufacturing agreement with Zeiss Humphrey Systems, which runs through 2001, to
produce the VidaMed PROVu disposable cartridge.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.24 [Form of] Severance Agreement (Change in Control) between
VidaMed and Randy D. Lindholm and VidaMed and John F. Howe and
VidaMed and Steve J. Williams
10.25 Amendment Agreement renewing debt financing agreement between
the Company and Transamerica Business Credit Corporation, dated
January 7, 2000
27.1 Financial Data Schedule
Page 13 of 16
<PAGE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March
31, 2000.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIDAMED, INC.
Date: May 12, 2000 By: /s/ Randy D. Lindholm
---------------------- --------------------------------
Randy D. Lindholm
President, Chief Executive Officer
Date: May 12, 2000 By: /s/ John F. Howe
----------------------- --------------------------------
John F. Howe
VP Finance, Chief Financial Officer
(Principal Financial and Accounting
Officer)
Page 14 of 16
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
10.24 [Form of] Severance Agreement (Change in
Control) between VidaMed and Randy D.
Lindholm, VidaMed and John F. Howe, and
VidaMed and Steve Williams
10.25 Amendment Agreement renewing debt financing
agreement between the Company and
Transamerica Business Credit Corporation,
dated January 7, 2000
Page 16 of 16
<PAGE>
EXHIBIT 10.24
SEVERANCE AGREEMENT
This Severance Agreement dated as of December 21, 1999 (the "Agreement"),
is entered into between VidaMed, Inc., a corporation organized under the laws of
the State of Delaware (the "Company") and _________ (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat or the occurrence of a Change in Control can result in
significant distractions to its key management personnel because of the
uncertainties inherent in such a situation;.
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change of
Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of December 21,
-----------------
1999 and shall continue in effect unless and until terminated in accordance with
Section 3 below.
2. Definitions
-----------
2.1 Accrued Compensation. For purposes of this Agreement, "Accrued
--------------------
Compensation" shall mean an amount which shall include all
amounts earned or accrued through the "Termination Date" (as
hereinafter defined) but not paid as of the Termination Date,
including (i) base salary (ii) reimbursement for reasonable and
necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, and
(iii) vacation pay.
2.2 Base Amount. For purposes of this Agreement, "Base Amount"
-----------
shall mean the greater of the Executive's annual base salary (a)
at the rate in effect on the Termination Date or (b) at the
highest rate in effect at any time during the ninety (90) day
period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the employee
benefit plans of the Company or any other agreement or
arrangement.
<PAGE>
2.3 Bonus Amount. For purposes of this Agreement, "Bonus
------------
Amount" shall mean the greatest of: (a) 100% of the annual
bonus payable to the Executive under the Company's cash
bonus incentive plan for the fiscal year in which the
Termination Date occurs; (b) the annual bonus paid or
payable to the Executive under the Company's cash bonus
incentive plan for the full fiscal year ended prior to the
fiscal year during which the Termination Date occurred; (c)
the annual bonus paid or payable to the Executive under the
Company's cash bonus incentive plan for the full fiscal
year ended prior to the fiscal year during which a Change
in Control occurred; (d) the average of the annual bonuses
paid or payable to the Executive under the Company's cash
bonus incentive plan during the three full fiscal years
ended prior to the fiscal year during which the Termination
Date occurred; or (e) the average of the annual bonuses
paid or payable to the Executive under the Company's cash
bonus incentive plan during the three full fiscal years
ended prior to the fiscal year during which the Change in
Control occurred.
2.4 Executive Indebtedness. For purposes hereof, "Executive
----------------------
Indebtedness" shall mean the balance, including principal
and all accrued interest, of the Company's loan(s) to the
Executive, if any, as set forth on Exhibit A attached
hereto, together with a copy of the documentation of each
such loan, all of which shall be incorporated into this
Agreement by this reference.
2.5 Cause. For purposes of this Agreement, a termination of
-----
employment is for "Cause" if the basis of the termination
is fraud, misappropriation, embezzlement or willful
engagement by the Executive in misconduct which is
demonstrably and materially injurious to the Company and
its subsidiaries taken as a whole (no act, or failure to
act, on the part of the Executive shall be considered
"willful" unless done, or omitted to be done, by the
Executive not in good faith and without a reasonable belief
that the action or omission was in the best interests of
the Company and its subsidiaries); provided however that
-------- -------
the Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered
to the Executive a written notice from the Company and a
copy of a resolution duly adopted by the affirmative vote
of all of those members of the Company's Board of Directors
who are not then employees of the Company at a meeting of
the Board called and held for the purpose (after reasonable
notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be
heard before the Board), finding that, in the good faith
opinion of the Board, the Executive was guilty of the
conduct set forth in the first sentence of this Section 2.5
and specifying the particulars thereof in detail.
2.6 Change in Control. For purposes of this Agreement, a
-----------------
"Change in Control" shall mean any of the following events:
(a) An acquisition (other than directly from the Company)
of any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term is used for
purposes of Section 13(d) or 14(d) of the Securities
Exchange Act 1934, as amended (the "1934 Act")) immediately
after which such Person has "Beneficial Ownership" (within
the meaning of
<PAGE>
Rule 13d-3 promulgated under the 1934 Act) of twenty-five
percent (25%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided,
--------
however, that in determining whether a Change in Control
-------
has occurred, Voting Securities which are acquired in an
"Non-Control Acquisition" (as hereinafter defined) shall
not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an
acquisition by (1) an employee benefit plan (or a trust
forming a part thereof) maintained by (A) the Company or
(B) any corporation or other Person of which a majority of
its voting power or its equity securities or equity
interest is owned directly or indirectly by the Company (a
"Subsidiary"), (2) the Company or any Subsidiary, or (3)
any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);
(b) The individuals who are members of the Board as of the
date this Agreement is approved by the Board (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that if
-------- -------
the appointment, election or nomination for election by the
Company's stockholders, of any new director is approved by
a vote of a least two-thirds of the Incumbent Board, such
new director shall, for purposes of this Agreement, be
considered a member of the Incumbent Board; provided,
--------
further, however, that no individual shall be considered a
------- -------
member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(c) Completion by the Company, following approval by
stockholders of the Company, of:
(1) A merger, consolidation or reorganization
involving the Company, unless such merger,
consolidation or reorganization satisfies the
conditions set forth below:
(i) the stockholders of the Company immediately
before such merger, consolidation or
reorganization, own immediately following such
merger, consolidation or reorganization, directly
or indirectly, at least fifty-one percent (51%) of
the combined voting power of the outstanding
voting securities of the corporation resulting
from such merger or consolidation of
reorganization (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the Voting Securities immediately
before such merger, consolidation or
reorganization;
(ii) the individuals who were members of the
Incumbent Board immediately prior to the execution
of the agreement providing for such merger,
consolidation or reorganization constitute at
least a majority of the members of the board of
directors of the Surviving Corporation; and
<PAGE>
(iii) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any
trust forming a part thereof) maintained by the
Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior
to such merger, consolidation or reorganization,
had Beneficial Ownership of twenty-five percent
(25%) or more of the then outstanding voting
Securities) has Beneficial Ownership of twenty-
five percent (25%) or more of the combined voting
power of the Surviving Corporation's then
outstanding voting securities;
A transaction described in subsections (i), (ii) and (iii) above shall
herein be referred to as a "Non-Control Transaction";
(2) A complete liquidation or dissolution of the Company; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, provided, however, that, if
-------- -------
a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
than a Change in Control shall occur.
2.7 Company. For purposes of this Agreement, the "Company" shall
-------
mean VidaMed, Inc., and its subsidiaries and shall include VidaMed's
"Successors and Assigns" (as hereinafter defined).
2.8 Disability; Disabled. For purposes of this Agreement,
--------------------
"Disability" or "Disabled" shall mean a physical or mental infirmity
which impairs the Executive's ability to substantially perform the
Executive's duties with the Company for a period of one hundred eighty
(180) consecutive days and the Executive has not returned to full time
employment prior to the Termination Date.
2.9 Termination Date. For purposes of this Agreement, the
----------------
Executive's " Termination" date shall mean the date of occurrence of
the Change in Control or such other date upon which the Company and
the Executive may mutually agree in writing.
2.10 Pro Rata Bonus: For purposes of this Agreement, "Pro Rata Bonus"
--------------
shall mean the amount equal to the bonus amount multiplied by a
fraction, the numerator of which is the number of days in the calendar
year through the termination date, and the denominator of which is
365.
2.11 Successors and Assigns. For purposes of this Agreement,
----------------------
"Successors and Assigns" shall mean any Person or other entity
acquiring all or substantially all of the assets and
<PAGE>
business of the Company (including this Agreement) whether by
operation of law or otherwise.
3. Occurrence of a Change in Control
---------------------------------
3.1 Change in Control. If, during the term of this Agreement, the Company
-----------------
undergoes a Change in Control, then assuming that, but for such Change in
Control, the Executive would remain in the employ of the Company, the
Executive shall be entitled to the following compensation and benefits:
(a) Upon the occurrence of the Change in Control, if the Executive
elects to terminate his or her position with the Company, the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a pro rata bonus;
(ii) the Company shall pay the Executive as severance pay and
in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal to
the Base Amount plus the bonus amount;
(iii) for twelve (12) months after the Termination Date (the
"Continuation Period"), the Company shall, at its expense,
continue on behalf of the Executive and the Executive's
dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits provided (A) to the
Executive at any time during the 90-day period prior to the
Change in Control or at any time thereafter or (B) to other
similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section
3.1(a)(iii) during the Continuation Period shall be no less
favorable to the Executive and the Executive's dependents and
beneficiaries than the most favorable of such coverages and
benefits during any of the periods referred to in clauses (A) and
(B) above. The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce
the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and
benefits of the combined benefit plans are no less favorable to
the Executive than the coverages and benefits required to be
provided hereunder. This subsection (iii) shall not be
interpreted so as to limit any benefits to which the Executive or
the Executive's dependents or beneficiaries may be entitled under
any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits;
(iv) the restrictions on any outstanding equity incentive
awards, including stock options and restricted stock, granted to
the Executive under the Company's 1992 Stock Option Plan or under
any other incentive plan or arrangement shall lapse and the
Executive shall be 100% vested in all such incentive award(s)
and, in the case of stock options, such stock options shall be
immediately exercisable;
<PAGE>
(v) the Company will forgive the Executive Indebtedness.
(vi) In the event of Involuntary Termination, the Company will
provide outplacement services to the Executive in an amount not
to exceed $15,000.
(b) The amounts provided for in Section 3.1(a)(i) and (ii) shall be
paid in a single lump sum cash payment within forty-five (45) days
after the Termination Date (or earlier, if required by applicable
law).
(c) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in
any subsequent employment except as provided in Section 3.1(a)(iii)
and 3.2(b).
3.2 General
-------
(a) The severance pay and benefits provided for in this Section 3
shall be in lieu of any other severance or termination pay to which
the Executive may be otherwise entitled under any Company severance or
termination plan, program, practice or arrangement.
(b) The Executive's entitlement to any compensation or benefits
(other than severance or termination pay) shall be determined in
accordance with the Company's employee benefit plans (including the
plans listed on Appendix A) and other applicable programs, policies
and practices then in effect.
3.3 Termination for Cause. In the event that the Company terminates
---------------------
Executive's employment for Cause, Executive will not be entitled to
any severance payments, Change in Control payments or other payments
or benefits pursuant to this Agreement.
3.4 Termination for Reasons Other than Cause. This Agreement shall be
----------------------------------------
terminated under any of the following circumstances:
(a) In the event that the Executive is Disabled and has not returned
to full-time employment with the Company and is not substantially
performing his or her duties for the Company prior to a Change in
Control; or,
(b) In the event that the Board and the Executive mutually determine
that it is in the best interests of both parties to terminate this
Agreement and execute a document terminating this Agreement by mutual
written consent.
4. Excise Tax Limitation
---------------------
(a) Notwithstanding anything contained in this Agreement, in the
event that any payment or benefit (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), to the Executive or for the Executive's benefit paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, the
Executive's employment with the Company or a Change in Control (a
"Payment" or "Payments") would be subject to the
<PAGE>
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), the
Payments shall be reduced (but not below zero) if and to the extent
necessary so that no Payment to be made or benefit to be provided to
the Executive shall be subject to the Excise Tax (such reduced
Payments being hereinafter referred to as the "Limited Payment
Amount"). Unless the Executive shall have given prior written notice
specifying a different order to the Company to effectuate the Limited
Payment Amount, the Company shall reduce or eliminate the Payments by
first reducing or eliminating cash payments and then by reducing those
payments or benefits which are not payable in cash, in each case in
reverse order beginning with payments or benefits which are to be paid
the farthest in time from the Determination (as hereinafter defined).
Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive's rights and
entitlements to any benefits or compensation.
(b) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount and the amount of such Limited
Payment Amount shall be made, at the Company's expense, by the
accounting firm that is the Company's independent accounting firm as
of the date of the Change in Control (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation, to
the Company and the Executive within twenty (20) days of the
Termination Date if applicable, or such other time as requested by the
Company or by the Executive (provided the Executive reasonably
believes that any of the Payments may be subject to the Excise Tax),
and if the Accounting Firm determines that there is substantial
authority (within the meaning of Section 6662 of the Code) that no
Excise Tax is payable by the Executive with respect to a Payment or
Payments, it shall furnish the Executive with an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with
respect to any such Payment or Payments. Within ten (10) days of the
delivery of the Determination to the Executive, the Executive shall
have the right to dispute the Determination (the "Dispute"). If there
is no Dispute, the Determination shall be binding, final and
conclusive upon the Company and the Executive subject to the
application of Section 4(c) below.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made
to, or provided for the benefit of, the Executive either will be
greater (an "Excess Payment") or less (an "Underpayment") than the
amounts provided for by the limitations contained in Section 4(a). If
it is established pursuant to a final determination of a court or an
Internal Revenue Service ("IRS") proceeding which has been finally and
conclusively resolved that an Excess Payment has been made, such
Excess Payment shall be deemed for all purposes to be a loan to the
Executive made on the date the Executive received the Excess Payment
and the Executive shall repay the Excess Payment to the Company on
demand (but not less than ten (10) days after written notice is
received by the Executive) together with interest on the Excess
Payment at the "Applicable Federal Rate" (as defined in Section
1274(d) of the Code) from the date of the Executive's receipt of such
Excess Payment until the date of such repayment. In the event that it
is determined by (i) the Accounting Firm, the Company (which shall
include the position taken by the Company, or together with its
consolidated group, on its federal income tax) or the IRS, (ii)
pursuant to a determination by a court, or (iii) upon the resolution
to the Executive's satisfaction of the Dispute that an Underpayment
has occurred, the Company shall pay an amount equal to
<PAGE>
the Underpayment to the Executive within ten (10) days of such
determination or resolution, together with interest on such amount at
the Applicable Federal Rate from the date such amount would have been
paid to the Executive until the date of payment.
5. Successors: Binding Agreement
-----------------------------
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company
shall require any Successors and Assigns to expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession
or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's
beneficiaries or legal representatives, except by will or by the laws
of descent and distribution. This Agreement shall inure to the benefit
of, and be enforceable by, the Executive's legal personal
representative.
6. Fees and Expenses. The Company shall pay all legal fees and related
-----------------
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with the
Dispute whether as a result of any applicable government taxing authority
proceeding, audit or otherwise) or by any other plan or arrangement maintained
by the Company under which the Executive is or may be entitled to receive
benefits, and (c) the Executive's hearing before the Board as contemplated in
Section 2.4 of this Agreement; provided, however, that the circumstances set
-------- -------
forth in clauses (a) and (b) occurred on or after a Change in Control.
7. Notice. For the purposes of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other, provided that all notices to
the Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company. All notices and communications shall be deemed to have
been received on the date of delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall be effective
only upon receipt.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or further participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.
9. Settlement of Claims. The Company's obligation to make the payments
--------------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
<PAGE>
10. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
11. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of California without giving
effect to the conflicts of law principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in Alameda County in the State of California.
12. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceablity or any provision shall not
affect the validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, if any,
understanding and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
14. Counterparts. This Agreement may be executed in two counterparts, each
------------
of which will be deemed an original, but both of which taken together will
constitute one and the same instrument.
15. Legal Counsel. Each party to this Agreement acknowledges that such
-------------
party has had the opportunity to review this Agreement and to consult legal
counsel before entering into this Agreement, and agrees that he/she has either
sought such legal counsel or has intentionally declined to do so.
I.
II.
III.
IV. SIGNATURE PAGE TO FOLLOW
<PAGE>
SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the date and year first above written.
VIDAMED, INC. EXECUTIVE
By:_____________________________ __________________________
Name
Its: ___________________________
<PAGE>
EXHIBIT 10.25
TBCC
Amendment Agreement
Borrower: VidaMed, Inc.,
a Delaware corporation
Address: 46107 Landing Parkway
Fremont, CA 94538
Date: January 7, 2000
THIS AMENDMENT AGREEMENT (this "Amendment") is entered into as of the above
date, between the above borrower (the "Borrower"), having its chief executive
office and principal place of business at the address shown above, and
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation ("TBCC"),
having its principal office at 9399 West Higgins Road, Suite 600, Rosemont,
Illinois 60018 and having an office at 15260 Ventura Blvd., Suite 1240, Sherman
Oaks, California 91403. TBCC and Borrower agree to amend and supplement the Loan
and Security Agreement between them, dated October 20, 1998, as amended (as
amended, the "Loan Agreement"), as follows. (This Amendment, the Loan Agreement,
any prior written amendments to the Loan Agreement signed by TBCC and Borrower,
and all other written documents and agreements between TBCC and Borrower, are
referred to herein collectively as the "Loan Documents." Capitalized terms used
but not defined in this Amendment shall have the meanings set forth in the Loan
Agreement.)
1. Amendments. Effective the Closing Date (as defined below), the
Maturity Date set forth at Section 4 of the Schedule to the Loan Agreement shall
be amended as follows: the date "January 31, 2000" shall be deleted and the date
"December 31, 2000" shall be inserted in its place.
V. Conditions Precedent. The effectiveness of the foregoing amendment
shall be subject to the conditions precedent that TBCC shall have
received (i) a non-refundable amendment fee of $15,000, which shall be
payable on the execution hereof by Borrower, and (ii) warrants to
purchase $150,000 in shares of common stock of the Borrower exercisable
for five years at an exercise price per share equal to the lower of
$1.94 and the price per share of the Borrower's common stock on the
date hereof, and otherwise in form and substance reasonably
satisfactory to TBCC. The date of satisfaction of the foregoing
conditions precedent is the "Closing Date."
VI. Representations True. To induce TBCC to enter into this Amendment,
Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 4 of the Loan
Agreement. For the purposes of this Section 4 each reference in Section
4 of the Loan Agreement to "this Agreement," and the words "hereof,"
"herein,"
<PAGE>
"hereunder," or words of like import in such Section, shall mean and
be a reference to the Loan Agreement as amended by this Amendment.
VII. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
ILLINOIS.
VIII. General Provisions. TBCC's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in
connection herewith shall not be deemed to create a course of dealing
or otherwise create any express or implied duty by it to provide any
other or further amendments, consents or waivers in the future. This
Amendment, the Loan Agreement, and the other Loan Documents set forth
in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between
the parties with respect to the subject hereof. Except as herein
expressly amended and supplemented, all of the terms and provisions of
the Loan Agreement and the other Loan Documents shall continue in full
force and effect and the same are hereby ratified and confirmed. This
Amendment forms part of the Loan Agreement and the terms of the Loan
Agreement are incorporated herein by reference.
Borrower: TBCC:
VIDAMED, INC. TRANSAMERICA BUSINESS CREDIT CORPORATION
By_______________________________ By_____________________________________
Title____________________________ Title__________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,173
<SECURITIES> 0
<RECEIVABLES> 2,880
<ALLOWANCES> 1,127
<INVENTORY> 349
<CURRENT-ASSETS> 14,665
<PP&E> 8,980
<DEPRECIATION> 6,554
<TOTAL-ASSETS> 17,192
<CURRENT-LIABILITIES> 4,270
<BONDS> 829
0
0
<COMMON> 29
<OTHER-SE> 12,064
<TOTAL-LIABILITY-AND-EQUITY> 17,192
<SALES> 2,524
<TOTAL-REVENUES> 2,524
<CGS> 767
<TOTAL-COSTS> 4,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (2,138)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,138)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
