-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J+sHcCC6pPBPsfjNqj4QGyQFbur3PrQoRxr1mPgcfHx2zHCf+bfMcBKyQHqmdUrb 17TKKblRBueigfUvX2t1WA== /in/edgar/work/20000810/0000929624-00-001115/0000929624-00-001115.txt : 20000921 0000929624-00-001115.hdr.sgml : 20000921 ACCESSION NUMBER: 0000929624-00-001115 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIDAMED INC CENTRAL INDEX KEY: 0000929900 STANDARD INDUSTRIAL CLASSIFICATION: [3841 ] IRS NUMBER: 770314454 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26082 FILM NUMBER: 690173 BUSINESS ADDRESS: STREET 1: 46107 LANDING PARKWAY STREET 2: SUITE 101 CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5104924900 MAIL ADDRESS: STREET 1: 46107 LANDING PARKWAY STREET 2: STE 101 CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 0001.txt FORM 10-Q 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 June 30, 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 30,283,088 as of June 30, 2000. VIDAMED, INC. INDEX
PART I. FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Statements - unaudited Condensed consolidated balance sheets - June 30, 2000 and December 31, 1999 3 Condensed consolidated statements of operations - three months ended June 30, 2000 and 1999 and six months ended June 30, 2000 and 1999 4 Condensed consolidated statements of cash flows - six months ended June, 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 14 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 15 Financial Data Schedule 16
2 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VidaMed, Inc. Condensed Consolidated Balance Sheets (In thousands)
June 30, 2000 December 31, 1999 ------------------- ---------------------- (Unaudited) (*) Assets Current assets: Cash and cash equivalents $ 10,870 $ 2,748 Accounts receivable 1,267 1,443 Inventories 405 415 Other current assets 623 531 ------------------- ---------------------- Total current assets $ 13,165 $ 5,137 Property and equipment, net 2,480 2,017 Other assets, net 101 166 ------------------- ---------------------- Total assets $ 15,746 $ 7,320 =================== ====================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 1,023 $ 461 Accrued liabilities 2,269 2,558 Deferred revenue 118 272 Notes payable, current portion 1,426 1,394 ------------------- ---------------------- Total current liabilities $ 4,836 $ 4,685 Notes payable, long-term portion 516 1,030 Stockholders' equity: Capital stock 114,879 101,725 Accumulated deficit (104,485) (100,120) ------------------- ---------------------- Total stockholders' equity 10,394 1,605 ------------------- ---------------------- Total liabilities and stockholder's equity $ 15,746 $ 7,320 =================== ======================
* 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. 3 VidaMed, Inc. Condensed Consolidated Statement of Operations (In thousands except share and per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---------------- -------------- ------------- -------------- Revenues $ 2,418 $ 1,225 $ 4,944 $ 2,263 Cost of products sold 891 646 1,659 1,480 ---------------- -------------- ------------- -------------- Gross profit (loss) 1,527 579 3,285 783 Operating expenses: Research and development 822 742 1,604 1,555 Selling, general and administrative 2,980 6,247 5,913 3,409 ---------------- -------------- ------------- -------------- Total operating expenses 3,802 4,151 7,851 7,468 ---------------- -------------- ------------- -------------- Loss from operations (2,275) (3,572) (4,566) (6,685) Other income (expense), net 48 87 201 44 ---------------- -------------- ------------- -------------- Net loss $ (2,227) $ (3,485) $ (4,365) $ (6,641) ================ ============== ============= ============== Basic and diluted net loss per share $ (0.07) $ (0.17) $ (0.15) $ (0.33) ================ ============== ============= ============== Shares used in computing basic and diluted net loss per share 30,198,000 20,546,000 29,567,000 20,430,000 ================ ============== ============= ==============
See accompanying notes. 4 VidaMed, Inc. Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited)
Six Months Ended June 30, 2000 1999 ------------- ------------- Cash flows from operating activities: Net loss $ (4,365) $ (6,641) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 882 626 Amortization of warrant interest 58 - Changes in current assets and liabilities: Accounts receivable 176 (508) Inventory 10 337 Other current assets (34) 384 Other assets 65 29 Accounts payable 562 (17) Accrued liabilities (83) (555) Deferred revenue (154) (99) ------------- ------------- Net cash used in operating activities (2,883) (6,444) ------------- ------------- Cash flows from investing activities Expenditures for property and equipment (1,345) (145) ------------- ------------- Net cash provided by (used in) investing activities (1,345) (145) ------------- ------------- Cash flows from financing activities: Principal payments under capital leases - (22) Principal payments on notes payable (482) (55) Net cash proceeds from issuance of common stock 12,832 1,693 ------------- ------------- Net cash provided by financing activities 12,350 1,616 ------------- ------------- Net increase (decrease) in cash and cash equivalents 8,122 (4,973) Cash and equivalents at the beginning of the period 2,748 9,384 ------------- ------------- Cash and equivalents at the end of the period $ 10,870 $ 4,411 ============= ============= Supplemental disclosure of cash flows information: Cash paid for interest $ 227 $ 124 ============= =============
See accompanying notes. 5 VIDAMED, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 June 30, 2000, the statements of operations for the three months and six months ended June 30, 2000 and 1999, and the statements of cash flows for the six months ended June 30, 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 dates 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 June 30, 2000, we had 30,283,088 issued and outstanding shares of common stock, with an additional 4,276,877 options outstanding under employee and director stock option plans, and an additional 3,752,514 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 consist of the following (in thousands): June 30, December 31, 2000 1999 -------- ------------ Raw materials $ 203 $ 147 Work in process 21 39 Finished goods 181 229 -------- ------------ $ 405 $ 415 ======== ============ 6 4. Notes Payable In January 2000, we renewed our debt facility arrangement with Transamerica and in consideration of this renewal we 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. Using a Black Scholes model, the fair value of the warrant was estimated to be $115,980 and is being amortized to interest expense over the life of the debt facility. 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 six months ended June 30, 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 six months ended June 30, 2000, is due to the issuance of 7,321,477 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. During the six months ended June 30, 2000, we issued 78,272 shares of common stock on the exercise of outstanding warrants, an additional 33,713 shares of common stock to existing shareholders, 42,334 shares of common stock in employment-related settlements and 600,510 shares of common stock under employee stock option and purchase plans. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of VidaMed's consolidated financial condition and results of operations for the three months and six months ended June 30, 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 our condensed consolidated financial statements and related notes in Item 1 of this report and 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. "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 from 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, which are 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, we began marketing and selling the TUNA system 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, on a reasonable cost basis, 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 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 June 30, 2000, 47 states have approved hospital-based reasonable cost basis Medicare reimbursement coverage for the TUNA procedure. Under the reasonable cost basis method of reimbursement, we charge the hospital a fee-per-use charge of approximately $2,600 for each TUNA procedure performed, and combined with other direct and indirect overhead costs the hospital incurs in 8 conducting the TUNA procedure, the hospital is reimbursed by Medicare for these reasonable costs. In addition to the hospital, the urologist that performs the TUNA procedure is reimbursed by Medicare approximately $600 per procedure. Effective August 1, 2000, the United States Health Care Finance Administration (commonly referred to as HCFA), which administers Medicare, will replace the reasonable cost basis of reimbursement for outpatient hospital-based procedures, like the TUNA, with a new fixed rate or "prospective payment system". Under this new method of reimbursement, a hospital will receive a fixed reimbursement of approximately $1,875 for each TUNA procedure performed in its facility, although this rate can be higher or lower depending on a wage index factor for each hospital. The urologist performing the Tuna procedure will continue to be reimbursed approximately $600 per procedure. With this change in reimbursement, we will continue to market and sell the TUNA procedure to hospitals on a fee-per-use basis, but our current fee-per-use pricing will need to be reduced. On July 17, 2000, HCFA published new Medicare payment rates and a schedule for implementing minimally invasive heat therapies for the treatment of benign prostatic hyperplasia (commonly known as BPH) in the urologist's office. Coverage for the TUNA procedure is included in the ruling, which is published in the Federal Register and proposed to become effective January 1, 2001, subject to a 60-day comment period. The proposed reimbursement rate (inclusive of the physician's fee) for the TUNA procedure in the urologist's office is estimated to be $2,315 in 2001 and $2,866 beginning January 1, 2002. With the recent changes and proposed changes in the rate and site of care for which Medicare will reimburse the TUNA procedure, our business is in a period of transition. Our business strategy will be to continue to support our hospital-based business while making the preparations necessary to service and accelerate our volume of business in the urologists' office. In both settings, we will continue to focus our marketing and sales efforts on patient awareness and physician advocacy of the TUNA procedure. Results of Operations Net revenue for the three months ended June 30, 2000 was $2,418,000. This represents an increase of $1,193,000, or 97%, from $1,225,000, in the three months ended June 30, 1999. The increase was due primarily to increasing acceptance of our fee-per-use program. Net revenue for the six months ended June 30, 2000 increased 118% to $4,944,000, from $2,263,000 in the same period of 1999. The increase in revenues during the six months ended June 30, 2000 compared to the same period of 1999 was due to our expanded sales and marketing organization and the continued acceptance of our fee-per-use program. Cost of product sold for the three months ended June 30, 2000 was $891,000, an increase of 38% or $245,000 from $646,000 for the three months ended June 30, 1999. The increase was due to higher product sales and increased TUNA generator amortization costs resulting from the placement of more generators in hospitals. For the six months ended June 30, 2000, cost of product sold was $1,659,000, an increase of 12% from $1,480,000 in the first six months of 1999. This increase was due to higher product sales. Gross margin expressed as a percentage of sales for the three months ended June 30, 2000 was 63%, up from 47% for the three months ended June 30,1999. Gross margin expressed as a percentage of sales for the six months ended June 30, 2000 was 66%, up from 35% for the same period in 1999. These improvements in gross margin percentage of sales were due primarily to the increased volume of our fee-per-use program. 9 Research and development (R&D) expenses during the three and six months ended June 30, 2000 included expenditures for regulatory compliance and clinical trials. Clinical trial costs consisted largely of payments to clinical investigators, product for clinical trials, and costs associated with initiating and monitoring clinical trials. R&D expenses increased 11% to $822,000 in the three months ended June 30, 2000 from $742,000 in the three months ended June 30, 1999. The increase was primarily due to product line enhancements on our ProVu generation of products. For the six months ended June 30, 2000, R&D expenses increased 3% to $1,604,000 from $1,555,000 in the first six months of 1999. R&D expenses decreased as a percentage of sales in the three and six months ended June 30, 2000 compared to the corresponding periods in 1999. Selling, general and administrative (SG&A) expenses decreased 13% to $2,980,000 in the three months ended June 30, 2000 from $3,409,000 in the three months ended June 30, 1999. The decrease was primarily due to CEO transition costs incurred during the same period in 1999. For the six months ended June 30, 2000, SG&A expenses increased $334,000, or 6%, from $5,913,000 in 1999 to $6,247,000 in 2000. This increase was primarily due to an increase in sales and marketing personnel and related payroll and other expenses. Other income (expense) for the three months ended June 30, 2000 decreased to $48,000 compared to $87,000 for the same period in the prior year. While interest income increased as a result of a higher average outstanding balance of cash and investments, a charge to interest expense for the value of warrants issued in connection with the renewal of our revolving line of credit resulted in a net reduction in other income (expense). For the six months ended June 30, 2000, other income was $201,000 compared to $44,000 for the six months ended June 30, 1999. Other income is primarily composed of interest income and expense. The increase in interest income was primarily attributable to a higher average outstanding balance of cash and investments resulting from the sale of our common stock to investors in January and February 2000. Our cash balances available for investment were $10.9 million and $4.4 million at June 30, 2000 and 1999, respectively. History of Operating Losses We have incurred significant operating losses since our inception in 1992 and, as of June 30, 2000, had an accumulated deficit of approximately $104.4 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: o our success in achieving market acceptance of the TUNA procedure; o our success in obtaining and maintaining necessary regulatory clearances; o the extent to which Medicare and other healthcare payors approve reimbursement of the costs of TUNA procedures performed in hospitals, urologists' offices and ambulatory surgery centers; o our success in expanding our sales and marketing efforts to sell the TUNA procedure into the urologist office; and o the amount of reimbursement provided and the effects of the proposed in- office reimbursement rates and prospective payment system on our future revenues. 10 Liquidity and Capital Resources For the six months ended June 30, 2000, our cash and cash equivalents increased by $8.2 million to $10.9 million, compared to $2.7 million at December 31, 1999. The increase was due primarily to $11.2 million received from the private placement of our common stock and warrants during the first quarter of 2000, offset by operating expenses incurred in the normal course of business. During the six months ended June 30, 2000, we used $2.9 million in operating activities, primarily as a result of our net loss. We purchased $1.3 million of property and equipment in investing activities. We are financing our 2000 operating and investing activities primarily from $12.9 million received from the issuance of common stock, less $0.5 million used to reduce debt. 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, however, may not be available, or if available, may not be available 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 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 June 30, 2000, we had borrowed approximately $520,0000 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. 11 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 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. For example, effective August 1, 2000, the United States Health Care Finance Administration (commonly referred to as HCFA), which administers Medicare, will replace the reasonable cost basis of reimbursement for outpatient hospital-based procedures, like the TUNA, with a new fixed rate or "prospective payment system". Under this new method of reimbursement, a hospital will receive a fixed reimbursement of approximately $1,875 for each TUNA procedure performed in its facility, although this rate can be higher or lower depending on a wage index factor for each hospital. The urologist performing the Tuna procedure will continue to be reimbursed approximately $600 per procedure. In addition, on July 17, 2000, HCFA published new Medicare payment rates and a schedule for implementing minimally invasive heat therapies for the treatment of BPH in the urologist's office. Coverage for the TUNA procedure is included in the ruling, which is published in the Federal Register and proposed to become effective January 1, 2001, subject to a 60-day comment period. The proposed reimbursement rate (inclusive of the physician's fee) for the TUNA procedure in the urologist's office is estimated to be $2,315 in 2001 and $2,866 beginning January 1, 2002. These cost containment measures that healthcare payors and providers are instituting and the effect of future 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. The TUNA Procedure is a New Therapy and May Not Be Accepted by Physicians, Patients and Healthcare Payors Which Would Severely Harm our Business Physicians will not recommend the TUNA procedure unless they conclude, based on clinical data and other factors, that it is an effective alternative to other methods of enlarged prostate treatment, including more established methods. In particular, physicians may elect not to recommend the TUNA procedure until the long term duration of the relief provided by the procedure has been established. Clinical data for assessing the durability of relief provided by the TUNA therapy in the United States does not extend 12 beyond five years Some physicians may consider five years of clinical data to be sufficient evidence of durability and others may not. As time passes since the first TUNA procedures were performed, and as more procedures are performed, the clinical data will continue to be developed. We are in the process of conducting multi-year patient follow-up studies to assess the durability of the relief provided by the TUNA procedure. We cannot assure you that these studies will support the durability of the relief provided by the TUNA procedure. Even if the clinical efficacy of the TUNA procedure is established, physicians may elect not to recommend the procedure unless acceptable reimbursement from healthcare payors is available. Healthcare payor acceptance of the TUNA procedure will require evidence of its cost effectiveness compared with other therapies for an enlarged prostate, which will depend in large part on the duration of the relief provided by the TUNA procedure. Patient acceptance of the procedure will depend in part on physician recommendations and on other factors, including the degree of invasiveness and the rate and severity of complications associated with the procedure compared with other therapies. Patient acceptance of the TUNA procedure will also depend on the ability of physicians to educate these patients on their treatment choices. Our Success is Dependent on the Sale of Our Only Product, the TUNA System All of our revenues are derived from sales of our Tuna system. 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 suffer because we rely on our TUNA system for all of our revenue and have no other products. 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. Additionally, any factors adversely affecting the pricing of, demand for or market acceptance of our TUNA system, such as competition or technological change, would significantly harm our business. We Rely on Contract Manufacturers for the Majority of Our Manufacturing Needs We outsource the manufacture of the disposable cartridge and most of the 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. We purchase components through purchase orders rather than long-term supply agreements. 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 of our manufacturers experience production problems, we may not be able to locate an alternate manufacturer promptly. The disruption or termination of the supply of components for our TUNA system could cause a significant increase in the costs of these components or an inability to meet demand for our products. Furthermore, if we are required to change the manufacturer of a key component of our TUNA system, we may be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and other applicable regulations and guidelines. The delays associated with verification and other delays in production could adversely affect the success of our fee-per-use program and our future revenues. 13 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 do not have a material market risk exposure. PART II: OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS VidaMed, Inc. held its annual meeting on June 1, 2000. Our stockholders voted on the following: 1. Election of Directors. The election of directors was conducted and the following nominees were elected, with the following vote count:
Votes Votes Name For Withheld ---------------------------- -------------------- -------- Randy D. Lindholm 22,171,569 140,279 Robert Erra 22,167,969 143,879 Elizabeth Davila 22,171,019 140,829 Paulita LaPlante 22,167,119 144,729 Kurt Wheeler 22,173,619 138,229 Michael D. Ellwein 22,173,269 138,579
2. Ratification of Independent Auditors. The stockholders ratified Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2000. There were 22,241,214 votes for and 44,446 against ratification, with 26,188 abstentions. 3. Amendment to 1992 Stock Plan. The stockholders approved an amendment to our 1992 Stock Plan to increase the number of shares of common stock reserved for future issuance under the plan by 1,900,000 shares to a new total of 6,200,000. There were 10,750,694 votes for, and 1,690,802 votes against the amendment, with 113,754 abstentions and 9,756,598 shares not voted. 4. Amendment to 1995 Director Option Plan. The stockholders approved an amendment to our 1995 Director Option Plan to increase the number of shares of common stock reserved for future issuance under the plan by 100,000 to a new total of 300,000. There were 10,851,979 votes for, and 1,580,877 votes against the amendment, with 122,394 abstentions and 9,756,598 shares not voted 14 ITEM 5. OTHER INFORMATION Management Changes On June 28, 2000, Diane M. Anderson, former Director of Global Sales Programs and International Marketing with Marconi Medical Systems, was appointed Vice President of Sales and Marketing. Prior to Marconi, she held progressively responsible selling and sales management positions with General Electric Medical Systems (NYSE: GE). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.26 Amended and Restated 1992 Stock Plan 10.27 Amended and Restated 1995 Director Option Plan 27.1 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 30, 2000. SIGNATURES 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: August 7, 2000 By: /s/ Randy D. Lindholm ------------------------ -------------------------- Randy D. Lindholm President, Chief Executive Officer Date: August 7, 2000 By: /s/ John F. Howe ------------------------- --------------------- John F. Howe VP Finance, Chief Financial Officer (Principal Financial and Accounting Officer) 15 EXHIBIT INDEX Exhibit Number Description - -------------- ----------- 10.26 Amended and restated 1992 Stock Plan, as amended effective June 1, 2000 10.27 Amended and restated 1995 Director Option Plan, as amended effective June 1, 2000 27.1 Financial Data Schedule EX-10.26 2 0002.txt AMENDED AND RESTATED 1992 STOCK PLAN EXHIBIT 10.26 VIDAMED, INC. AMENDED AND RESTATED 1992 STOCK PLAN (as amended effective June 1, 2000) 1 Purposes of the Plan. The purposes of this Stock Plan are to attract and -------------------- retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder. 2 Certain Definitions. As used herein, the following definitions shall ------------------- apply: a "Administrator" means the Board or any of its Committees appointed ------------- pursuant to Section 4 of the Plan. b "Board" means the Board of Directors of the Company. ----- c "Code" means the Internal Revenue Code of 1986, as amended. ---- d "Committee" means the Committee appointed by the Board of Directors in --------- accordance with paragraph (a) of Section 4 of the Plan. e "Common Stock" means the Common Stock of the Company. ------------ f "Company" means VidaMed, Inc., a Delaware corporation. ------- g "Consultant" means any person, including an advisor, who is engaged by ---------- the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not provided that if and in the event the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include directors who are not compensated for their services or are paid only a director's fee by the Company. h "Continuous Status as an Employee" means the absence of any -------------------------------- interruption or termination of the employment relationship by the Company or any Subsidiary. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by 18 contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor. i "Employee" means any person, including officers and directors, employed -------- by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. j "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ k "Fair Market Value" means, as of any date, the value of Common Stock ----------------- determined as follows: i) If the Common Stock is listed on any established stock exchange or a national market system including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported, as quoted on such system or exchange for the last market trading day prior to the time of determination) as reported in the Wall Street Journal or such other source as the Administrator deems reliable; ii) If the Common Stock is quoted on the NASDAQ System (but not on the Nasdaq National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and low asked prices for the Common Stock; or iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. l "Incentive Stock Option" means an Option intended to qualify as an ---------------------- incentive stock option within the meaning of Section 422 of the Code. m "Nonstatutory Stock Option" means an Option not intended to qualify as ------------------------- an Incentive Stock Option. n "Option" means a stock option granted pursuant to the Plan. ------ o "Optioned Stock" means the Common Stock subject to an Option. -------------- p "Optionee" means an Employee or Consultant who holds an outstanding -------- Option. q "Parent" means a "parent corporation", whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. r "Plan" means this Vidamed, Inc. 1992 Stock Plan. ---- s "Share" means a share of the Common Stock, as adjusted in accordance ----- with Section 12 of the Plan. 19 t "Subsidiary" means a "subsidiary corporation", whether now or hereafter ---------- existing, as defined in Section 424(f) of the Code. 3 Stock Subject to the Plan. Subject to the provisions of Section 12 of the ------------------------- Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 6,200,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. i) If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan; provided, however, that Shares that have been actually issued under the Plan upon exercise of an Option shall not be returned to the Plan and shall not become available for future distribution under the Plan. 20 4 Administration of the Plan. -------------------------- a Procedure. --------- i) Administration With Respect to Directors and Officers. With ----------------------------------------------------- respect to grants of Options to Employees who are also officers or directors of the Company subject to Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan intended to qualify thereunder as a discretionary plan, or (B) a Committee designated by the Board to administer the Plan, which Committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the ------------------------------ Plan may be administered by different bodies with respect to directors, non-director officers and Employees who are neither directors nor officers. iii) Administration With Respect to Consultants and Other Employees. -------------------------------------------------------------- With respect to grants of Options to Employees or Consultants who are neither directors nor officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of California corporate and securities laws and of the Code (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. b Powers of the Administrator. Subject to the provisions of the Plan and --------------------------- in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(k) of the Plan; ii) to select the officers, Consultants and Employees to whom Options may from time to time be granted hereunder; iii) to determine whether and to what extent Options are granted hereunder; 21 iv) to determine the number of shares of Common Stock to be covered by each such award granted hereunder; v) to approve forms of agreement for use under the Plan; vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, the share price and any restriction or limitation or waiver of forfeiture restrictions regarding any Option or other award and/or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator shall determine, in its sole discretion); vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock; and viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted. c Effect of Committee's Decision. All decisions, determinations and ------------------------------ interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options. 5 Eligibility. ----------- a Nonstatutory Stock Options may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options. b Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. c For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. d The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time, with or without cause. 6 Term of Plan. The Plan shall become effective upon the earlier to occur of ------------ its adoption by the Board of Directors or its approval by the stockholders of the Company as described in Section 18 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan. 22 7 Term of Option. The term of each Option shall be the term stated in the -------------- Option Agreement; provided, however, that in the case of an Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8 Option Exercise Price and Consideration. --------------------------------------- a The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following: i) In the case of an Incentive Stock Option (1) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (2) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. b The following limitations shall apply to grants of Options to Employees: i) No Employee shall be granted, in any fiscal year of the Company, Options to purchase more than seventy-five percent (75%) of the Shares reserved for issuance under the Plan. ii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 11. iii) If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 11), the canceled Option will be counted against the limit set forth in Section 8(b)(i). For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. c The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash, (2) check, (3) other Shares which (x) in the case of Shares acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (4) delivery of a properly executed exercise notice together with 23 irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, (5) any combination of the foregoing methods of payment, or (6) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company (Section 315(b) of the California Corporation law). 9 Exercise of Option. ------------------ a Procedure for Exercise; Rights as a Stockholder. Any Option granted ----------------------------------------------- hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. (1) An Option may not be exercised for a fraction of a Share. (2) An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. (3) Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. b Termination of Employment. In the event of termination of an Optionee's ------------------------- consulting relationship or Continuous Status as an Employee with the Company (as the case may be), such Optionee may, but only within three (3) months (or such other period of time as is determined by the Board, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option and not exceeding three (3) months after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. c Disability of Optionee. Notwithstanding the provisions of Section 9(b) ---------------------- above, in the event of termination of an Optionee's consulting relationship or Continuous Status as an Employee as a result of his disability, the Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so 24 entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. d Death of Optionee. In the event of the death of an Optionee, the Option ----------------- may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. e Rule 16b-3. Options granted to persons subject to Section 16(b) of the ---------- Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. f Buyout Provisions. The Administrator may at any time offer to buy out ----------------- for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made; provided however that the offer to buy out shares that are exercisable shall be at a price greater than or equal to the Fair Market Value of such shares and the offer to buy out shares that are not exercisable shall be at a price greater than or equal to the then exercise price of the shares subject to the Option. 10 Non-Transferability of Options. An Option may not be sold, pledged, ------------------------------ assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 11 Adjustments Upon Changes in Capitalization or Merger. ---------------------------------------------------- a Changes in Capitalization. Subject to any required action by the ------------------------- stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. 25 b Dissolution or Liquidation. In the event of the proposed dissolution or -------------------------- liquidation of the Company, to the extent that an Option has not been previously exercised, it will terminate immediately prior to the consummation of such proposed action. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. c Merger or Asset Sale. In the event of a merger of the Company with or -------------------- into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option or right shall be substituted by the successor corporation or Parent or Subsidiary of the successor corporation. The Administrator may, in lieu of such assumption or substitution, provide for the Optionee to have the right to exercise the Option as to all or a portion of the Optioned Stock, including Shares as to which it would not otherwise be exercisable. If the Administrator makes an Option exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 12 Time of Granting Options. The date of grant of an Option shall, for all ------------------------ purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 13 Amendment and Termination of the Plan. ------------------------------------- a Amendment and Termination. The Board may at any time amend, alter, ------------------------- suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of the NASD or an established stock exchange), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. 26 b Effect of Amendment or Termination. Any such amendment or termination ---------------------------------- of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 14 Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to ---------------------------------- the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. i) As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 15 Reservation of Shares. The Company, during the term of this Plan, will at --------------------- all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. i) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. ii) If the Optioned Stock covered by an Option exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional stockholder approval, such Option shall be void with respect to such excess Optioned Stock, unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 13(a) of the Plan. 16 Agreements. Options shall be evidenced by written agreements in such form ---------- as the Board shall approve from time to time. 17 Stockholder Approval. Continuance of the Plan shall be subject to approval -------------------- by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law. 18 Financial Reports. The Company shall furnish each Optionee with at least ----------------- such financial statements, reports and other information as the Company sends or makes available on an annual basis to the holders of its Common Stock 27 EX-10.27 3 0003.txt AMENDED AND RESTATED 1995 DIRECTOR OPTION PLAN EXHIBIT 10.27 VIDAMED, INC. AMENDED AND RESTATED 1995 DIRECTOR OPTION PLAN (As amended through June 1, 2000) 1 Purposes of the Plan. The purposes of this 1995 Director Option Plan are to -------------------- attract and retain the best available personnel for service as Outside Directors (as defined herein) of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. All options granted hereunder shall be nonstatutory stock options. 28 2 Definitions. As used herein, the following definitions shall apply: ----------- a "Board" means the Board of Directors of the Company. ----- b "Code" means the Internal Revenue Code of 1986, as amended. ---- c "Common Stock" means the Common Stock of the Company. ------------ d "Company" means VidaMed, Inc., a Delaware corporation. ------- e "Continuous Status as a Director" means the absence of any interruption ------------------------------- or termination of service as a Director. f "Director" means a member of the Board. -------- g "Employee" means any person, including officers and Directors, employed -------- by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company. h "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ i "Fair Market Value" means, as of any date, the value of Common Stock ----------------- determined as follows: i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or; In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. j "New Outside Director" means an Outside Director who becomes a Director -------------------- after the effective date of this Plan. k "Option" means a stock option granted pursuant to the Plan. ------ l "Optioned Stock" means the Common Stock subject to an Option. -------------- 29 m "Optionee" means an Outside Director who receives an Option. -------- n "Outside Director" means a Director who is not an Employee. ---------------- o "Parent" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. p "Plan" means this VidaMed, Inc. 1995 Director Option Plan. ---- q "Share" means a share of the Common Stock, as adjusted in accordance ----- with Section 10 of the Plan. r "Subsidiary" means a "subsidiary corporation," whether now or hereafter ---------- existing, as defined in Section 424(f) of the Internal Revenue Code of 1986. 3 Stock Subject to the Plan. Subject to the provisions of Section 10 of the ------------------------- Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is three hundred thousand (300,000) Shares (the "Pool") of Common Stock. The Shares may be authorized but unissued. or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for fixture grant under the Plan; provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan. 4 Administration and Grants of Options under the Plan. --------------------------------------------------- a Procedure for Grants. The provisions set forth in this Section 4(a) -------------------- shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. All grants of Options to Outside Directors under this Plan shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors. ii) Each New Outside Director shall be automatically granted an Option to purchase thirteen thousand three hundred thirty four (13.334) Shares (a "First Option') on the date on which such person first becomes a Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy. Each Outside Director shall be automatically granted an Option to purchase thirteen thousand three hundred thirty four (13,334) Shares (a "First Option') on the effective date of this Plan, as determined in accordance with Section 6 hereof. iii) After a First Option has been granted to a New Outside Director or Outside Director, such individual shall thereafter be automatically granted an Option to purchase three thousand three hundred thirty four (3,334) Shares (a "Subsequent Option") on the first business day of 30 each calendar year, if on such date, he shall have served on the Board for at least six (6) months. iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any exercise of an Option made before the Company has obtained stockholder approval of the Plan in accordance with Section 16 hereof shall be conditioned upon obtaining such stockholder approval of the Plan in accordance with Section 16 hereof v) The terms of a First Option granted hereunder shall be as follows: (A) the term of the First Option shall be ten (10) years. (B) the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Section 8 hereof (C) the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the First Option. In the event that the date of grant of the First Option is not a trading day, the exercise price per Share shall be the Fair Market Value on the next trading day immediately following the date of grant of the First Option. (D) the First Option shall become exercisable as to all of the shares subject to the First Option on the date of grant. vi) The terms of a Subsequent Option granted hereunder shall be as follows: (A) the term of the Subsequent Option shall be ten (10) years. (B) the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Section 8 hereof (C) the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the Subsequent Option. In the event that the date of grant of the First Option is not a trading day, the exercise price per Share shall be the Fair Market Value on the next trading day immediately following the date of grant of the First Option. (D) the Subsequent Option shall become exercisable as to all of the shares subject to the Subsequent Option on the date of grant. vii) In the event that any Option granted under the Plan would cause the number of Shares subject to outstanding Options plus the number of Shares previously purchased under Options to exceed the Pool, then the remaining Shares available for Option grant shall be granted under Options to the Outside Directors on a pro rata basis. No further grants shall be made until such time, if any, as additional Shares become available for grant under the Plan through action of the stockholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder. 31 5 Eligibility. Options may be granted only to Outside Directors. All Options ----------- shall be automatically granted in accordance with the terms set forth in Section 4 hereof An Outside Director who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options in accordance with such provisions. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his or her directorship at any time. 6 Term of Plan. The Plan shall become effective upon the earlier to occur of ------------ its adoption by the Board or its approval by the stockholders of the Company as described in Section 16 of the Plan. It shall continue in effect for a term often (10) years unless sooner terminated under Section 11 of the Plan. 7 Form of Consideration. The consideration to be paid for the Shares to be --------------------- issued upon exercise of an Option, including the method of payment. shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (iv) delivery of a properly executed exercise notice together with such other documentation as the Company and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price, or (v) any combination of the foregoing methods of payment. 8 Exercise of Option. ------------------ a Procedure for Exercise; Rights as a Stockholder. Any Option granted ----------------------------------------------- hereunder shall be exercisable at such times as are set forth in Section 4 hereof: provided, however, that no Options shall be exercisable until stockholder approval of the Plan in accordance with Section 16 hereof has been obtained. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7 of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 32 b Rule 16b-3. Options granted to Outside Directors must comply with the ---------- applicable provisions of Rule 16b-3 promulgated under the Exchange Act or any successor thereto and shall contain such additional conditions or restrictions as may be required thereunder to qualify Plan transactions, arid other transactions by Outside Directors that otherwise could be matched with Plan transactions, for the maximum exemption from Section 16 of the Exchange Act. c Termination of Continuous Status as a Director. In the event an ---------------------------------------------- Optionee's Continuous Status as a Director terminates (other than upon the Optionee's death or total and permanent disability (as defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only within three (3) months from the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of such termination, and to the extent that the Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. d Disability of Optionee. In the event Optionee's Continuous Status as a ---------------------- Director terminates as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but only within twelve (12) months from the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of termination, or if he or she does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. e Death of Optionee. In the event of an Optionees death, the Optionee's ----------------- estate or a person who acquired the right to exercise the Option by bequest or inheritance may exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of death, and to the extent that the Optionee's estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. 9 Non-Transferability of Options. The Option may not be sold, pledged, ------------------------------ assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee. only by the Optionee. 10 Adjustments Upon Changes in Capitalization. Dissolution. Merger. Asset Sale --------------------------------------------------------------------------- or Change of Control. -------------------- a Changes in Capitalization. Subject to any required action by the ------------------------- stockholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each such outstanding Option, and the number of Shares issuable pursuant to the automatic grant provisions of Section 4 hereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by 33 the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. b Dissolution or Liquidation. In the event of the proposed dissolution or -------------------------- liquidation of the Company, to the extent that an Option has not been previously exercised, it will terminate immediately prior to the consummation of such proposed action. c Merger or Asset Sale. In the event of a merger of the Company with or -------------------- into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option shall be substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation does not agree to assume the Option or to substitute an equivalent option. each outstanding Option shall become fully vested and exercisable, including as to Shares as to which it would not otherwise be exercisable. If an Option becomes fully vested and exercisable in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph. the Option shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). 11 Amendment and Termination of the Plan. ------------------------------------- a Amendment and Termination. Except as set forth in Section 4, the Board ------------------------- may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or regulation), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. b Effect of Amendment or Termination. Any such amendment or termination ---------------------------------- of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated. 12 Time of Granting Options. The date of grant of an Option shall, for all ------------------------ purposes, be the date determined in accordance with Section 4 hereof. 13 Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to ---------------------------------- the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be 34 listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 14 Reservation of Shares. The Company, during the term of this Plan, will at --------------------- all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 15 Option Agreement. Options shall be evidenced by written option agreements ---------------- in such form as the Board shall approve. 16 Stockholder Approval. Continuance of the Plan shall be subject to approval -------------------- by the stockholders of the Company at or prior to the first annual meeting of stockholders held subsequent to the granting of an Option hereunder. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law. 35 EX-27.1 4 0004.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JAN-01-2000 JUN-30-2000 10,870 0 2,398 1,131 405 13,165 9,537 7,057 15,746 4,836 1,942 0 0 30 10,364 15,746 4,944 4,944 1,659 1,659 259 16 178 (4,365) 0 (4,365) 0 0 0 (4,365) (0.07) (0.07)
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