SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
RITA Medical Systems, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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previously. Identify the previous filing by registration statement number, or
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RITA MEDICAL SYSTEMS, INC.
967 N. Shoreline Blvd.
Mountain View, California 94043
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Notice of Annual Meeting of Stockholders
to be held June 13, 2001
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On Wednesday, June 13, 2001, RITA Medical Systems, Inc., a Delaware
corporation (the "Company"), will hold its Annual Meeting of Stockholders at
Venture Law Group, located at 2775 Sand Hill Road, Menlo Park, California
94025. The Meeting will begin at 9:00 a.m. local time.
Only stockholders who owned stock at the close of business on April 25,
2001 can vote at the Meeting or any adjournment that may take place. At the
Meeting we will:
. Elect two (2) Class I directors to serve until the annual meeting of the
Company's stockholders for the year ending December 31, 2004;
. Approve the amendment of the Company's 2000 Directors' Stock Option Plan
to increase the number of nonstatutory stock options than can be granted
to nonemployee directors on an annual basis;
. Ratify the appointment of PricewaterhouseCoopers LLP as our independent
accountants for the current fiscal year; and
. Transact any other business properly brought before the Meeting.
You can find more information about each of these items, including the
nominees for directors, in the attached Proxy Statement.
Our Board of Directors recommends that you vote in favor of each of the
three proposals outlined in this Proxy Statement.
We cordially invite all stockholders to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, please mark, date, sign and return the enclosed proxy card as promptly
as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
At the Meeting, we will also report on our business results and other
matters of interest to stockholders.
By Order of the Board of Directors,
/s/ Donald Stewart
______________________________________
Donald Stewart, Chief Financial
Officer and Vice President,
Finance and Administration
Menlo Park, California
May 9, 2001
RITA Medical Systems, Inc.
967 N. Shoreline Blvd.
Mountain View, California 94043
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PROXY STATEMENT
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FOR THE
2001 ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 2001
Our Board of Directors is soliciting proxies for the 2001 Annual Meeting of
Stockholders. This Proxy Statement contains important information for you to
consider when deciding how to vote on the matters brought before the Meeting.
Please read it carefully.
The Board set April 25, 2001 as the record date for the Meeting.
Stockholders of record who owned our common stock on that date are entitled to
vote at and attend the Meeting, with each share entitled to one vote.
14,361,810 shares of common stock were outstanding on the record date.
Voting materials, which include this Proxy Statement, a proxy card and the
2000 Annual Report, will be mailed to stockholders on or about May 9, 2001.
In this Proxy Statement:
. "We," "us," "our" and the "Company" refer to RITA Medical Systems, Inc.
. "Annual Meeting" or "Meeting" means our 2001 Annual Meeting of
Stockholders
. "Board of Directors" or "Board" means our Board of Directors
. "SEC" means the Securities and Exchange Commission
We have summarized below important information with respect to the Annual
Meeting.
Time And Place Of The Annual Meeting
The Annual Meeting is being held on Wednesday, June 13, 2001 at 9:00 a.m.
local time at Venture Law Group, located at 2775 Sand Hill Road, Menlo Park,
California 94025.
All stockholders who owned shares of our stock as of April 25, 2001, the
record date, may attend the Annual Meeting.
Purpose Of The Proxy Statement And Proxy Card
You are receiving a Proxy Statement and proxy card from us because you owned
shares of our common stock on April 25, 2001, the record date. This Proxy
Statement describes issues on which we would like you, as a stockholder, to
vote. It also gives you information on these issues so that you can make an
informed decision.
When you sign the proxy card, you appoint Barry Cheskin and Donald Stewart
as your representatives at the Meeting. Barry Cheskin and Donald Stewart will
vote your shares, as you have instructed them on the proxy card, at the
Meeting. This way, your shares will be voted whether or not you attend the
Annual Meeting. Even if you plan to attend the Meeting it is a good idea to
complete, sign and return your proxy card in advance of the Meeting just in
case your plans change.
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Proposals To Be Voted On At This Year's Annual Meeting
You are being asked to vote on:
. The election of directors to serve on our Board of Directors.
. An amendment to the Company's 2000 Directors' Stock Option Plan;
. The ratification of our appointment of PricewaterhouseCoopers LLP as our
independent accountants for the current fiscal year.
The Board of Directors recommends a vote FOR each proposal.
Voting Procedure
You may vote by mail
To vote by mail, please sign your proxy card and return it in the enclosed,
prepaid and addressed envelope. If you mark your voting instructions on the
proxy card, your shares will be voted as you instruct.
You may vote in person at the Meeting.
We will pass out written ballots to anyone who wants to vote at the Meeting.
If you hold your shares in street name, you must request a legal proxy from
your stockbroker in order to vote at the Meeting. Holding shares in "street
name" means your shares of stock are held in an account by your stockbroker,
bank, or other nominee, and the stock certificates and record ownership are not
in your name. If your shares are held in "street name" and you wish to attend
the Annual Meeting, you must notify your broker, bank or other nominee and
obtain the proper documentation to vote your shares at the Annual Meeting.
You may change your mind after you have returned your proxy.
If you change your mind after you return your proxy, you make revoke your
proxy at any time before the polls close at the Meeting. You may do this by:
. signing another proxy with a later date, or
. voting in person at the Annual Meeting.
Multiple Proxy Cards
If you received more than one proxy card, it means that you hold shares in
more than one account. Please sign and return all proxy cards to ensure that
all your shares are voted.
Quorum Requirement
Shares are counted as present at the Meeting if the stockholder either:
. is present and votes in person at the Meeting, or
. has properly submitted a proxy card.
A majority of our outstanding shares as of the record date must be present
at the Meeting (either in person or by proxy) in order to hold the Annual
Meeting and conduct business. This is called a "quorum."
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Consequences of Not Returning Your Proxy; Broker Non-Votes
If your shares are held in your name, you must return your proxy (or attend
the Annual Meeting in person) in order to vote on the proposals. If your shares
are held in street name and you do not vote your proxy, your brokerage firm may
either:
. vote your shares on routine matters, or
. leave your shares unvoted.
Under the rules that govern brokers who have record ownership of shares that
are held in "street name" for their clients, brokers may vote such shares on
behalf of their clients with respect to "routine" matters (such as the election
of directors or the ratification of auditors), but not with respect to non-
routine matters (such as a proposal submitted by a stockholder). If the
proposals to be acted upon at any meeting include both routine and non-routine
matters, the broker may turn in a proxy card for uninstructed shares that vote
FOR the routine matters, but expressly states that the broker is not voting on
non-routine matters. This is called a "broker non-vote."
Broker non-votes will be counted for the purpose of determining the presence
or absence of a quorum, but will not be counted for the purpose of determining
the number of votes cast.
We encourage you to provide instructions to your brokerage firm by voting
your proxy. This ensures that your shares will be voted at the Meeting.
Effect Of Abstentions
Abstentions are counted as shares that are present and entitled to vote for
the purposes of determining the presence of a quorum and as votes AGAINST for
purposes of determining the approval of any matter submitted to the
stockholders for a vote.
Required Vote
Assuming a quorum is present, the two nominees receiving the highest number
of yes votes will be elected as directors. The ratification of the independent
accountants will require the affirmative vote of a majority of shares present
in person or represented by proxy at the Meeting.
Vote Solicitation; No Use Of Outside Solicitors
RITA Medical Systems, Inc. is soliciting your proxy to vote your shares at
the Annual Meeting. In addition to this solicitation by mail, our directors,
officers, and other employees may contact you by telephone, Internet, in person
or otherwise to obtain your proxy. These persons will not receive any
additional compensation for assisting in the solicitation. We will also request
brokerage firms, nominees, custodians and fiduciaries to forward proxy
materials to the beneficial owners. We will reimburse these entities and our
transfer agent for their reasonable out-of-pocket expenses in forwarding proxy
materials. We have not retained the services of a proxy solicitor.
Voting Procedures
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
a representative of U.S. Stock Transfer Corporation, our transfer agent, who
will act as the Inspector of Election. The Inspector will also determine
whether a quorum is present at the Annual Meeting.
The shares represented by the proxy cards received, properly marked, dated,
signed and not revoked, will be voted at the Annual Meeting. If the proxy card
specifies a choice with respect to any matter to be acted on, the shares will
be voted in accordance with that specified choice. Any proxy card which is
returned but not
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marked will be voted FOR each of the director nominees, FOR each of the other
proposals discussed in this Proxy Statement, and as the proxy holders deem
desirable for any other matters that may come before the Meeting. Broker non-
votes will not be considered as voting with respect to any matter for which the
broker does not have voting authority.
We believe that the procedures to be used by the Inspector to count the
votes are consistent with Delaware law concerning voting of shares and
determination of a quorum.
Publication Of Voting Results
We will announce preliminary voting results at the Meeting. We will publish
the final results in our quarterly report on Form 10-Q for the second quarter
of 2001, which we will file with the SEC. You can get a copy by contacting our
Investor Relations Department at (650) 314-3400 or the SEC at (800) 732-0330
for the location of the nearest public reference room, or through the EDGAR
system at www.sec.gov.
Other Business
We do not know of any business to be considered at the 2001 Annual Meeting
other than the proposals described in this proxy statement. However, if any
other business is properly presented at the Annual Meeting, your signed proxy
card gives authority to Barry Cheskin and Donald Stewart to vote on such
matters at their discretion.
Proposals For 2002 Annual Meeting
To have your proposal included in our proxy statement for the 2002 Annual
Meeting, you must submit your proposal between February 12, 2002 and March 14,
2002 to Donald Stewart c/o RITA Medical Systems, Inc., 967 N. Shoreline Blvd.,
Mountain View, California 94043.
If you submit a proposal for the 2002 Annual Meeting after March 25, 2002,
management may or may not, at their discretion, present the proposal at the
meeting, and the proxies for the 2002 Annual Meeting will confer discretion on
the management proxy holders to vote against your proposal.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation requires that the Board of Directors is
divided into three classes, with staggered three-year terms. The Class I
directors, whose terms expire at the Annual Meeting are Scott Halsted and Janet
Effland, the Class II directors whose terms expire at the Company's 2002 Annual
Meeting of Stockholders are Gordon Russell and John Gilbert and the Class III
directors whose terms expire at the Company's 2003 Annual Meeting of
Stockholders are Vincent Bucci, Barry Cheskin and a vacancy which will be
filled at a later date. You only elect one class of directors at each annual
meeting. The other class continues to serve for the remainder of its three-year
term. The Class I directors are nominees for re-election at the Annual Meeting.
Each nominee has consented to serve an additional three-year term.
Vote Required
If a quorum is present, the two nominees receiving the highest number of
affirmative votes of shares entitled to be voted for them will be elected as
directors for the ensuing year. Unless marked otherwise, proxies received will
be voted FOR the election of each of the two nominees named held. If additional
people are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in a way that will ensure that as many as
possible of the nominees listed above are elected. If this happens, the
specific nominees to be voted for will be determined by the proxy holders.
Nominees for the Board of Directors
The names of the nominees, their ages as of March 12, 2001 and certain other
information about them are set forth below:
Director
Name of Nominee Age Principal Occupation Since
--------------- --- -------------------- --------
Janet Effland...... 52 Managing Director of Patricof & Co. October 1999
Ventures
Scott Halsted (1).. 41 General Partner and Principal at Morgan May 1998
Stanley, Dean Witter Venture Partners
--------
(1)Member of the compensation committee.
Janet Effland has served as a member of our Board since October 1999. She
has held the position of Managing Director of Patricof & Co. Ventures, Inc., a
venture capital firm, since April 1988. Ms. Effland is also a director of
various private companies. Ms. Effland holds a B.S. and a J.D. from Arizona
State University, and she attended Harvard Business School's Program for
Management Development.
Scott Halsted has served as a member of our Board since May 1998. He has
held the positions of General Partner and Principal of Morgan Stanley Dean
Witter Venture Partners, a venture capital firm, since February 1997 and prior
to that he was Vice President from January 1992 to January 1997. Mr. Halsted is
also a director of Intuitive Surgical, Inc. and various private companies. Mr.
Halsted holds an A.B. and a B.S. in Biomechanical Engineering from Dartmouth
College and an M.M. from the Kellogg Graduate School of Management at
Northwestern University.
5
The names of the Class II and Class III directors, their ages as of March
12, 2001 and certain other information about them are set forth below:
Director
Name of Nominee Age Principal Occupation Since
--------------- --- -------------------- --------
Vincent Bucci (1)(2).. 47 President, Health Policy Associates, March 1999
Inc.
Barry Cheskin......... 40 Chief Executive Officer and President May 1997
of RITA Medical Systems, Inc.
John Gilbert (2)...... 64 Retired Vice Chairman of Keravision, May 2000
Inc. and Vice President of Sales at
Ethicon, Inc.
Gordon Russell (1).... 68 Retired from position as General August 1994
Partner at Sequoia Capital
--------
(1) Member of the compensation committee.
(2) Member of the audit committee.
Vincent Bucci has served as a member of our Board since March 1999. Mr.
Bucci holds the position of President of Health Policy Associates, Inc., a
consulting company, since 1992. Mr. Bucci holds a B.A. from Bates College and a
J.D. in Public Law and an M.A. in Government, both from Georgetown University.
Barry Cheskin has served as our President and Chief Executive Officer and
has been a member of our Board since May 1997. Prior to joining us, he held
various positions at Datascope Corp, a medical device company. He was
President, Collagen Products Division and Corporate Vice President from May
1994 to April 1997, General Manager, Vasoseal/Bioplex Division from November
1992 to May 1994, and Director, Corporate Business Development from April 1992
to November 1992. Mr. Cheskin holds a B.S. in Mechanical Engineering from
Massachusetts Institute of Technology, an M.S. in Mechanical Engineering from
Stanford University, and an M.B.A. from Columbia University.
John Gilbert has served as a member of our Board since May 2000. From 1992
to July 1999 he served as Vice Chairman of Keravision, Inc., a medical device
company. Prior to that, Mr. Gilbert retired from Johnson & Johnson in 1992
after 30 years where he served as Vice President of Sales at Ethicon, Inc.,
Vice President of Johnson & Johnson International and Vice Chairman of Iolab
Corporation. Mr. Gilbert is also a director of STAAR Surgical Company. Mr.
Gilbert holds a B.S. from Texas A&M University.
Gordon Russell has served as a member of our Board since August 1994. From
1979 to January 2000, he held the position of General Partner at Sequoia
Capital, a venture capital firm, specializing in high technology and
healthcare. Mr. Russell is also a director of Fusion Medical, Inc. and various
private companies. He holds an A.B. from Dartmouth College.
There are no family relationships among any of the directors or executive
officers of the Company.
Meetings And Committees Of The Board Of Directors
During the last fiscal year (the period from December 31, 1999 through
December 31, 2000 ), the Board met six times. Each director attended at least
75% of all Board and applicable committee meetings during this time with the
exception of director Gordon Russell, who attended four of the six meetings of
the entire Board. The Board has a Compensation Committee and an Audit
Committee.
Scott Halsted, Vincent Bucci and Gordon Russell are members of the
Compensation Committee. The Compensation Committee held one meeting during the
last fiscal year. The functions of the Compensation Committee are to establish
and administer our policies regarding annual executive salaries and cash
incentives and long-term equity incentives. The Compensation Committee
administers our 2000 Stock Plan, 2000 Employee Stock Purchase Plan and our 2000
Directors' Stock Option Plan.
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The Audit Committee is comprised of the following directors: Vincent Bucci
and John Gilbert. The Audit Committee held no meetings during the last fiscal
year, however, in connection with our initial public offering, our outside
auditors met with the full Board to review the financial statements filed with
our Registration Statement on Form S-1. The functions of the Audit Committee
are to recommend the engagement of the independent public accountants, to
monitor the effectiveness of the audit effort, and to monitor our financial and
accounting organization and its system of internal accounting controls. The
Audit Committee has a written charter, which is attached as Appendix A to this
proxy statement.
Director Compensation
Nonemployee directors are not compensated for Board meetings attended but
are reimbursed for reasonable and customary travel expenses.
All nonemployee directors are eligible to participate in the 2000 Directors'
Stock Option Plan. Employee directors and nonemployee directors are eligible to
participate in the 2000 Stock Plan. Employee directors are eligible to
participate in the 2000 Employee Stock Purchase Plan. Under the 2000 Directors'
Plan, when a nonemployee director first becomes a director, he or she receives
a nonstatutory stock option to purchase 25,000 shares of the Company's common
stock. This option shall vest at a rate of 1/48 of the total number of shares
subject to such option per month. Thereafter, on the date of each annual
meeting of the Company's stockholders, each director who has been a member of
the Board for at least six months will be granted a nonstatutory stock option
to purchase 5,000 shares of the Company's common stock. In addition,
nonemployee directors who were members of the Board on the effective date of
our initial public offering will be granted an additional nonstatutory stock
option to purchase 2,000 shares of the Company's common stock. These options
shall vest at a rate of 100% of the total number of shares subject to such
option on the one-year anniversary of the grant date. Therefore, John Gilbert
was granted an option to purchase 25,000 shares of the Company's common stock
when he joined the Board in 2000, and on the date of the Annual Meeting each of
the Company's nonemployee directors will be granted an option to purchase 7,000
shares of the Company's common stock. All options granted under the Directors'
Plan are for a ten-year term and shall be adjusted to reflect any stock splits,
stock dividends, combinations or similar transactions. The exercise price of
the options must be at least 100% of the fair market value of the common stock
on the Nasdaq National Market on the date the option was granted. The options
may be exercised only (1) while the individual is serving as a director on the
Board, (2) within 6 months after termination by death or disability, or (3)
within 3 months after the individual's term as director ends.
Employee directors receive no additional compensation for serving on the
Board of Directors.
Recommendation of the Board:
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 1
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PROPOSAL NO. 2
ADOPTION OF AMENDMENT TO THE COMPANY'S 2000 DIRECTORS' STOCK OPTION PLAN
You are being asked to approve the amendment of the 2000 Directors' Stock
Option Plan (the "Directors' Plan") to increase the number of nonstatutory
stock options than can be granted to nonemployee directors under the plan on an
annual basis.
The Directors' Plan was originally adopted by the board of directors in May
2000 and approved by the Company's stockholders in June 2000. As of December
31, 2000, a total of 500,000 shares of Common Stock were reserved for issuance
under the Directors' Plan. As of December 31, 2000, no options were outstanding
and 500,000 shares remained available for future option grant and purchase
pursuant to the Directors' Plan. Unless terminated earlier by the board of
directors, the Directors' Plan will terminate in July 2010.
The Directors' Plan provides for the grant of nonstatutory stock options to
our nonemployee directors. It is designed to work automatically and not to
require administration; however, to the extent administration is necessary, it
will be provided by the Board of Directors.
The Board of Directors believes that, in order to provide an incentive for
directors to continue to serve and to assist us in recruiting highly qualified
individuals when vacancies occur on the Board of Directors, it is necessary to
grant options to purchase common stock to such persons pursuant to the
Directors Plan. Accordingly, we are asking the stockholders to approve the
amendment of the Directors' Plan.
In March 2001, the Board adopted, subject to stockholder approval, an
amendment to the Directors' Plan to increase the number of options granted to
nonemployee directors on an annual basis. The Directors' Plan currently
provides that, each person who becomes a nonemployee director of the Company
will be granted a nonstatutory stock option to purchase 25,000 shares of common
stock on the date on which the individual first becomes a member of our Board.
This initial grant will vest monthly over four years. Thereafter, on the date
of each annual shareholder meeting, each nonemployee director will be granted a
nonstatutory stock option to purchase 5,000 shares of common stock, if on the
date of that meeting, the nonemployee director has been a member of the Board
for at least six months. Nonemployee directors who were members of the
Company's Board on the effective date of the Company's intial public offering
will be granted an additional nonstatutory stock option to purchase 2,000
shares of common stock. Each of these subsequent grants will fully vest on the
one-year anniversary of the date of the option grant. The amendment to the
Directors' Plan provides that on the date of each annual shareholder meeting,
each nonemployee director will be granted a nonstatutory stock option to
purchase 10,000 shares of common stock, if on the date of that meeting, the
nonemployee director has been a member of the Board for at least six months.
The vesting schedule for the subsequent grants will remain unchanged.
The purpose of the amendment to the Directors' Plan is to allow the Company
to provide nonemployee directors with an initial incentive to join the
Company's Board and an ongoing incentive to remain on the Board which is
competitive with other companies in the medical device industry. If the Company
is unable to attract and retain the best available individuals for service on
its Board, the Company's ability to meet its business objectives could suffer.
The Board believes that the amendment to the Directors' Plan increasing the
number of options available for grant to its nonemployee directors is in the
best interests of the Company.
Required Vote
The approval of the amendment to the Directors' Plan requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present at the Annual Meeting in person or by proxy and entitled
to vote.
8
Directors' Plan Summary
The following summary sets forth the principal features of the Directors'
Plan. The summary is not a complete description of all the provisions of the
Directors' Plan. If you wish to obtain a copy of the actual plan document,
please send a written request to Donald Stewart at the Company's principal
offices at 967 N. Shoreline Blvd., Mountain View, California 94043.
General
The Directors' Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Directors' Plan is designed to work
automatically and not to require administration; however, to the extent
administration is necessary, it will be provided by the Board.
Purpose
The purposes of the Directors' Plan are to attract and retain the best
available individuals for service as directors of the Company, to provide
additional incentive for directors to continue to serve the Company as
directors and to encourage their continued service on the Board.
Grant and Exercise of Option
The Directors' Plan provides that the maximum number of shares for which
options may be granted under the Directors' Plan is 500,000 (the "Pool").
However, the Directors' Plan does not specify a maximum or minimum number of
shares for which options may be granted to any one nonemployee director so long
as the total number of shares so granted does not exceed the Pool. The
Directors' Plan does specify the number of shares that may be included in any
grant and the method of making a grant. The Directors' Plan currently provides
that each person who becomes a nonemployee director after the completion of the
initial public offering will be granted: (1) a nonstatutory stock option to
purchase 25,000 shares of common stock on the date on which such individual
first becomes a member of our Board and (2) an additional option to purchase
5,000 shares of Common Stock on the date of each annual shareholder meeting,
provided that the new director has been a member of the Board for at least 6
months as of the meeting date. Nonemployee directors who were members of the
Company's Board on the effective date of the Company's initial public offering
will be granted an additional nonstatutory stock option to purchase 2,000
shares of common stock. No option granted under the Directors' Plan is
transferable by the optionee other than by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order, and each
option is exercisable, during the lifetime of the optionee, only by such
optionee or permitted transferee.
The initial grant to a new director under the Directors' Plan vests monthly
over four years and each subsequent grant fully vests on the one year
anniversary of the date of the option grant. If a nonemployee director ceases
to serve as a director for any reason other than death or disability, he or she
may, but only within 90 days after the date he or she ceases to be a director,
exercise options granted under the Directors' Plan. If he or she does not
exercise the option within such 90-day period, the option shall terminate. If a
director's service terminates as a result of his or her total and permanent
disability or death, or if a director dies within three months following
termination for any reason, the director or his or her estate will have 12
months after the date of termination or death, as applicable, to exercise
options that were vested as of the date of termination.
Exercise Price and Term
The exercise price of all stock options granted under the Directors' Plan
shall be equal to the fair market value of a share of the Company's Common
Stock (defined as the closing sale price of the Company's Common Stock on the
Nasdaq National Market on the date of grant of the option, as reported in The
Wall Street Journal) on the date of grant of the option. Options granted under
the Directors' Plan have a term of ten (10) years.
9
Capital Changes
In the event any change is made in the Company's capitalization, such as a
stock split or stock dividend, that results in an increase or decrease in the
number of shares of Common Stock outstanding without receipt of consideration
by the Company, appropriate adjustment shall be made to the number of shares
subject to outstanding options under the Directors' Plan, the number of shares
that will be automatically granted on an initial or annual basis to directors,
the number of shares authorized for issuance under the Pool, and the price per
share of Common Stock covered by outstanding options.
The Directors' Plan provides that, in the event of a dissolution or
liquidation of the Company, a sale of all or substantially all of the Company's
assets, or a merger, consolidation or other capital reorganization of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option shall be substituted by the successor
corporation or parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the outstanding options or to
substitute equivalent options, in which case the options shall terminate upon
the consummation of the transaction to the extent not previously exercised. In
connection with any acquisition, each director holding options under the
Directors' Plan will have the right to exercise his or her options immediately
before the consummation of the merger as to all shares underlying the options.
Amendment and Termination of the Directors' Plan
The Board may amend or terminate the Directors' Plan, provided that, 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 approval
of the shareholders to such amendments to the extent required by such law or
regulation. If not terminated earlier, the Directors' Plan will have a term of
ten (10) years.
U.S. Federal Income Tax Information
The following is a brief summary of the effect of federal income taxation
with respect to the grant and exercise of options under the Directors' Plan,
does not purport to be complete, and does not discuss the income tax laws of
any municipality, state or foreign country in which an optionee may reside. We
advise all eligible directors to consult their own tax advisors concerning tax
implications of option grants and exercises and the disposition of stock
acquired upon such exercises under the Directors' Plan.
Options granted under the Directors' Plan are nonstatutory stock options. An
optionee will not recognize any taxable income at the time he or she is granted
a nonstatutory stock option. However upon its exercise, the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the option price. Because the optionee is
a director, the date of taxation (and the date of measurement of taxable
ordinary income) may be deferred unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code. Upon
resale of such shares by the optionee, any difference between the sale price
and the exercise price, to the extent not recognized as ordinary income as
provided above, will be treated as capital gain (or loss) and will be long-term
capital gain if the optionee has held the shares more than one year. For
individual taxpayers, the current U.S. federal income tax rate on long-term
capital gains is 20%, whereas the maximum rate on other income is 39.6%.
Capital losses for individual taxpayers are allowed under U.S. tax laws in full
against capital gains plus $3,000 of other income. We will be entitled to a tax
deduction in the amount and at the time that the optionee recognizes ordinary
income with respect to shares acquired upon exercise of a nonstatutory stock
option.
Recommendation of the Board of Directors:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
10
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has recommended, and the Board has approved, the
appointment of PricewaterhouseCoopers LLP as our independent accountants.
PricewaterhouseCoopers LLP has served as our independent accountants since
1994. In the event that ratification of this selection of accountants is not
approved by a majority of the shares of Common Stock voting at the Annual
Meeting in person or by proxy, the Board will review its future selection of
auditors.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting. This representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
Recommendation of the Board:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
11
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company with respect
to the beneficial ownership of the Company's common stock, as to (i) each
person who is known to the Company to beneficially own more than 5% of the
Company's common stock, (ii) each of the Company's directors, (iii) each of the
Company's Named Executive Officers (as defined hereafter), and (iv) all
directors and executive officers as a group. The information set forth below is
as of March 12, 2001.
Amount and
Nature of Percent of
Beneficial Common
5% Stockholders, Directors, Names Executive Officers Ownership Stock
and Directors and Executive Officers as a Group (1) (1)(2)
---------------------------------------------------- ---------- ----------
Entities Affiliated with Patricof & Co. Ventures, Inc.
(3).................................................... 1,963,635 13.7%
2100 Geng Road, Suite 150
Palo Alto, CA 94303
Entities Affiliated with Morgan Stanley Dean Witter
Venture Partners (4)................................... 1,636,362 11.4
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Entities Affiliated with BankAmerica Ventures (5)....... 872,727 6.1
950 Tower Lane, Suite 700
Foster City, CA 94404
Entities Affiliated with Sequoia Capital (6)............ 825,808 5.7
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Janet Effland (3)....................................... 1,963,635 13.7
Scott Halsted (4)....................................... 1,636,362 11.4
Barry Cheskin (7)....................................... 676,562 4.6
Daniel Balbierz (8)..................................... 109,044 *
Marilynne Solloway (9).................................. 106,851 *
Gordon Russell (10)..................................... 97,375 *
Ronald Steckel (11)..................................... 87,669 *
David Martin (12)....................................... 48,750 *
Vincent Bucci (13)...................................... 24,625 *
John Gilbert (14)....................................... 5,729 *
All directors and executive officers as a group (13
persons) (15).......................................... 4,895,424 32.6%
--------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as
indicated in the other footnotes to this table.
(2) In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options or warrants held by that person that are currently exercisable or
exercisable within 60 days after March 12, 2001 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. Beneficial
ownership calculations for 5% stockholders are based on publicly filed
13D's or 13G's, which 5% stockholders are required to file with the SEC,
and which generally set forth ownership interests as of December 31, 2000.
12
(3) Includes 1,607,489 shares, 336,623 shares and 19,523 shares held by APA
Excelsior V, L.P., The P/A Fund III, L.P. and Patricof Private Investment
Club II, L.P., respectively. Janet Effland, a director of RITA, is a
Managing director of Patricof & Co. Ventures, Inc. Ms. Effland disclaims
beneficial ownership of the shares held by these entities except to the
extent of her proportional interest in the entities.
(4) Includes 1,435,988 shares, 137,874 shares and 62,500 shares held by Morgan
Stanley Venture Partners III, L.P., Morgan Stanley Ventures Investors III,
L.P. and The Morgan Stanley Venture Partners Entrepreneur Fund, L.P.,
respectively. Scott Halsted, a director of RITA, is a general partner of
Morgan Stanley Dean Witter Venture Partners. Mr. Halsted disclaims
beneficial ownership of the shares held by these entities except to the
extent of his proportional interest in the entities.
(5) Includes 130,909 shares and 741,818 shares held by Bank of America
Ventures and BA Venture Partners IV, respectively.
(6) Includes 751,491 shares, 41,289 shares, 23,138 shares and 9,890 shares
held by Sequoia Capital VI, Sequoia Technology Partners VI, Sequoia 1995,
L.L.C. and Sequoia XXIV, respectively.
(7) Includes 327,065 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
(8) Includes 77,047 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
(9) Includes 43,661 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
(10) Includes 15,156 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001. Also includes 82,219 shares held by The
Gordon Russell Trust, of which Mr. Russell is trustee. Mr. Russell
disclaims beneficial ownership of the shares held by this entity except to
the extent of his proportional interest in the entity. Excludes shares
held by entities affiliated with Sequoia Capital, of which Mr. Russell is
a former general partner. Mr. Russell disclaims beneficial ownership of
such shares except to the extent of his proportional interest in these
entities.
(11) Includes 66,645 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
(12) Includes 48,750 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
(13) Includes 7,500 shares issuable upon exercise of options exercisable within
60 days of March 12, 2001.
(14) Includes 5,729 shares issuable upon exercise of options exercisable within
60 days of March 12, 2001.
(15) Includes 662,573 shares issuable upon exercise of options exercisable
within 60 days of March 12, 2001.
13
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation paid by the Company for services
rendered during the Company's two preceding fiscal years to (a) the individual
who served as the Company's Chief Executive Officer during the fiscal year
ended December 31, 2000; and (b) the four other most highly compensated
individuals who served as executive officers of the Company during the fiscal
year ended December 31, 2000 (the "Named Executive Officers").
Summary Compensation Table
Annual Compensation Long Term Compensation
-------------------------------- -------------------------
Securities
Other Annual Restricted Underlying
Fiscal Salary Bonus Compensation Stock Award(s) Options
Name & Principal Position Year ($)(1) ($) ($) ($)(2) (#)
------------------------- ------ -------- ------- ------------ -------------- ----------
Barry Cheskin............ 2000 $228,000 $76,380(3) $77,569(6) 49,500(10) 68,982
President, Chief 1999 217,000 -- 51,000(7) -- 63,079
Executive Officer and
Director
Daniel Balbierz.......... 2000 171,180 42,850(3) 6,539(8) 12,624(10) 33,000
Vice President, Research 1999 161,250 -- -- -- --
and Development
Marilynne Solloway....... 2000 166,620 41,700(3) 7,267(8) 14,028(10) 33,000
Chief Financial Officer 1999 157,031 -- -- -- --
and Vice President,
Finance and
Administration
Ronald Steckel........... 2000 165,300 41,375(3) 5,762(8) 11,124(10) 33,000
Vice President, 1999 155,625 10,000(4) -- -- --
Operations
David Martin............. 2000 131,260 25,000(5) 72,454(9) -- 180,000
Vice President, Global 1999 -- -- -- -- --
Sales
--------
(1) Includes amounts deferred under our 401(k) plan.
(2) The value of the restricted stock awards, based on the December 29, 2000
closing price of $8.50 were as follows:
. Barry Cheskin's 49,500 shares of common stock have an aggregate value
of $420,750.
. Daniel Balbierz's 12,624 shares of common stock have an aggregate
value of $107,304.
. Marilynne Solloway's 14,028 shares of common stock have an aggregate
value of $119,238.
. Ronald Steckel's 11,124 shares of common stock have an aggregate
value of $94,554.
(3) These bonuses were earned in 2000 and paid in 2001.
(4) Mr. Steckel received a $30,000 signing bonus of which $10,000 was earned
and paid in 1999.
(5) Mr. Martin received a $50,000 signing bonus of which $25,000 was earned
and paid in 2000.
(6) Mr. Cheskin received a $42,000 housing allowance, which terminated
December 31, 2000, a $9,000 auto allowance, $928 in relocation
reimbursements and $25,641 in forgiven principal and interest for 2000 on
the notes described in footnote (10) below.
(7) Mr. Cheskin received a $42,000 housing allowance, a $9,000 auto allowance,
and a $26,075 relocation reimbursement. In lieu of his 1999 cash bonus,
the board of directors allowed Mr. Cheskin to receive his housing
allowance through December 31, 2000.
(8) These amounts represent forgiven principal and interest for 2000 on the
notes described in footnote (10) below.
(9) This amount reflects commissions on sales earned in 2000. Of this amount,
$35,646 was paid in 2000.
14
(10) The figures shown represent restricted common stock purchased for $1.67
per share. Consideration for the shares was provided by each officers in
the form of a full recourse note bearing an interest rate of 8% compounded
semi-annually. No dividends have been paid on these shares and it is not
anticipated that any dividends will be paid in the future. Our right to
repurchase these shares will lapse with respect to one quarter of the
shares on each January 1 from 2001 through 2004, barring earlier
termination of employment. One quarter of each officer's note plus accrued
interest will be forgiven on each January 1 from 2001 through 2004,
provided that the officers are still employed by us. The per share market
value of the common stock was $8.50 on December 29, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
Individual Grants (1)
-----------------------------------------------------------------
Potential
Realizable Value
Percent of at Assumed Annual
Total Rates of Stock
Number of Options Price
Securities Granted to Exercise Appreciation For
Underlying Employees in of Base Option Term (2)
Options/SARs Fiscal Year Price Expiration -----------------
Name Granted (#) (%)(3) ($/sh)(4) Date 5% ($) 10% ($)
---- ------------ ------------ --------- ---------- -------- --------
Barry Cheskin........... 68,983(5) 7.14% $1.00 1/25/10 $ 43,383 $109,941
Daniel Balbierz......... 33,000(6) 3.41 1.00 1/25/10 20,754 52,594
Marilynne Solloway...... 33,000(6) 3.41 1.00 1/25/10 20,754 52,594
Ronald Steckel.......... 18,000(6) 1.86 1.00 1/25/10 11,320 28,687
15,000(6) 1.55 3.33 5/1/10 31,413 79,607
David Martin............ 180,000(6) 18.62 1.67 3/24/10 189,046 479,079
--------
(1) No stock appreciation rights were granted to the Named Executive Officers
in the last fiscal year. The options have a 10-year term, but are subject
to earlier termination in connection with termination of employment.
(2) The potential realizable value illustrates value that might be realized
upon exercise of the options immediately prior to the expiration of their
terms, assuming the specified compounded rates of appreciation of the
market price per share for the date of grant to the end of the option term.
Actual gains, if any, on stock option exercise are dependent upon a number
of factors, including the future performance of the Common Stock and the
timing of option exercises, as well as the optionees' continued employment
throughout the vesting period. There can be no assurance that the amounts
reflected in this table will be achieved.
(3) The Company granted stock options representing 966,689 shares to employees
in the last fiscal year.
(4) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company
may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the federal
and state income tax liability incurred by the optionee in connection with
such exercise.
(5) Option vests at the rate of 50% on May 5, 1997 and 2.0833% on each monthly
anniversary beginning on June 5, 1999.
(6) Options vest at the rate of 12.5% on the six month anniversary of the
vesting commencement date and 2.0833% each month thereafter.
15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the fiscal year ended
December 31, 2000. In addition, the table sets forth the number of shares
covered by stock options as of the fiscal year ended December 31, 2000, and the
value of "in-the-money" stock options, which represents the positive spread
between the exercise price of a stock option and the market price of the shares
subject to such option at the end of the fiscal year ended December 31, 2000.
Shares Value of Unexercised In-the-
Acquired on Value Number of Unexercised Options Money Options at Fiscal Year
Exercise Realized at Fiscal Year End (#) End ($)
Name (#) ($)(1) Exercisable/Unexercisable (2) Exercisable/Unexercisable (3)
---- ----------- -------- ----------------------------- -----------------------------
Barry Cheskin........... 60,000 $670,367 261,742/65,323 $1,994,164/$507,201
Daniel Balbierz......... 18,000 198,000 62,437/59,813 468,278/448,598
Marilynne Solloway...... 49,162 540,782 31,284/59,818 234,630/448,635
Ronald Steckel.......... 9,900 108,900 55,437/60,903 410,675/426,876
David Martin............ -- -- 33,750/146,250 230,625/999,376
--------
(1) Based on our initial public offering price of $12.00 per share.
(2) No stock appreciation rights (SARs) were outstanding during fiscal 2000.
(3) Based on the $8.50 per share closing price of the Company's Common Stock on
The Nasdaq Stock Market on December 29, 2000, less the exercise price of
the options.
Certain Relationships and Related Party Transactions
Employment Agreements
We have entered into employment agreements with the executive officers set
forth below, which provide for the payment of severance or the acceleration of
unvested stock, options and warrants in certain circumstances.
Barry Cheskin. Mr. Cheskin's agreement provides that in the event Mr.
Cheskin's employment with us is involuntarily terminated without cause, which
would include constructive termination, all unvested shares held by Mr. Cheskin
will immediately vest and Mr. Cheskin will receive monthly severance payments,
equal to 1/12 of his annual base salary until the earlier of (i) twelve months
after his termination date or (ii) such time as he commences full-time
employment at another company. In addition, in the event of a change in control
of the company, immediately upon consummation of the transaction, seventy five
percent (75%) of any unvested shares held by Mr. Cheskin will immediately vest.
Ron Steckel. Mr. Steckel's agreement provides that if we terminate his
employment without cause, he will receive continued payment of his base salary
for the earlier of (i) six months after his termination date or (ii) such time
as he commences full-time employment with another company.
David Martin. Mr. Martin's agreement provides that if, after the six-month
anniversary of his employment with us, we terminate his employment without
cause, he will receive continued payment of his base salary for the earlier of
(i) twelve months after his termination date or (ii) such time as he commences
full-time employment with another company.
Change of Control Agreements
In addition, we have entered into change of control agreements with our
officers that provide the following benefits upon the sale or merger of RITA.
In the event that we consummate a change of control transaction, 50 percent of
any unvested options held by our officers shall become fully vested and
immediately exercisable and
16
repurchase rights retained by us with respect to 50 percent of the restricted
stock held by our officers shall immediately lapse. In addition, on each one
month anniversary following the effective date of a change of control
transaction, 1/12th of the remaining unvested options held by our officers
shall become fully vested and immediately exercisable and repurchase rights
retained by us with respect to 1/12th of any remaining restricted stock held by
our officers shall immediately lapse.
If the officer is involuntarily terminated within twelve (12) months of the
change of control transaction, all unvested options held by our officers shall
become fully vested and immediately exercisable and all repurchase rights
retained by us with respect to the restricted stock held by our officers shall
immediately lapse. If the officer voluntarily resigns or is terminated for
cause after the change of control, then the officer is not entitled to any
acceleration of the vesting of options or lapse of repurchase rights with
respect to restricted stock.
Indemnification of Directors and Executive Officers
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against a number of liabilities that may
arise by reason of their status or service as officers or directors (other than
liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers or persons controlling us pursuant to the foregoing provisions, we
have been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
17
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the Compensation Committee Report, the Audit Committee Report and
the Stock Performance Graph shall not be deemed to be incorporated by reference
into any such filings.
Compensation Committee Report on Executive Compensation
The following is a report of the Compensation Committee of the Board of
Directors describing the compensation policies applicable to the Company's
executive officers during the fiscal year that ended December 31, 2000. The
Compensation Committee is responsible for establishing and monitoring our
general compensation policies and compensation plans, as well as the specific
compensation levels for executive officers. It also makes recommendations to
the Board of Directors concerning the granting of options under our 2000 Stock
Plan. Executive officers who are also directors have not participated in
deliberations or decisions involving their own compensation.
General Compensation Policy
Under the supervision of the Board of Directors, our compensation policy is
designed to attract and retain qualified key executives critical to our growth
and long term success. It is the objective of the Board of Directors to have a
portion of each executive's compensation contingent upon our performance as
well as upon the individual's personal performance. Accordingly, each executive
officer's compensation package is comprised of three elements: (i) base salary
which reflects individual performance and expertise, (ii) variable bonus awards
payable in cash and tied to the achievement of certain performance goals that
the Board of Directors establishes from time to time for the Company and (iii)
long term stock-based incentive awards which are designed to strengthen the
mutuality of interests between the executive officers and our stockholders.
The summary below describes in more detail the factors which the Board of
Directors considers in establishing each of the three primary components of the
compensation package provided to the executive officers.
Base Salary
The level of base salary is established primarily on the basis of the
individual's qualifications and relevant experience, the strategic goals for
which he or she has responsibility, the compensation levels at similar
companies and the incentives necessary to attract and retain qualified
management. Base salary is adjusted each year to take into account the
individual's performance and to maintain a competitive salary structure.
Company performance does not play a significant role in the determination of
base salary.
Cash-Based Incentive Compensation
Cash bonuses are awarded on a discretionary basis to executive officers on
the basis of their success in achieving designated individual goals and our
success in achieving specific company-wide goals, such as revenue growth and
earnings.
Long Term Incentive Compensation
We have utilized our stock option plans to provide executives and other key
employees with incentives to maximize long term stockholder values. Awards
under this plan by the Board of Directors take the form of stock options
designed to give the recipient a significant equity stake and thereby closely
align his or her interests with those of our stockholders. Factors considered
in making such awards include the individual's position, his or her performance
and responsibilities, and internal comparability considerations. In addition,
the Board of Directors has established certain general guidelines in making
option grants to the executive officers in an attempt to target a fixed number
of unvested option shares based upon each individual's position and his
18
or her existing holdings of unvested options. However, the Board of Directors
is not required to adhere strictly to these guidelines and may vary the size of
the option grant made to each executive officer as it determines the
circumstances warrant.
Each option grant allows the executive officer to acquire shares of common
stock at a fixed price per share (the fair market value on the date of grant)
over a specified period of time (up to 10 years). The options typically vest in
periodic installments over a four year period, contingent upon the executive
officer's continued employment with us. Accordingly, the option will provide a
return to the executive officer only if he or she remains in our service, and
then only if the market price of the Common Stock appreciates over the option
term.
Compensation of the Chief Executive Officer
Barry Cheskin has served as the Company's President and Chief Executive
Officer since May 1997. His base salary for the fiscal year ended December 31,
2000 was $228,000.
The factors discussed above in "Base Salaries," "Cash-Based Incentive
Compensation" and "Long Term Incentive Compensation" were also applied in
establishing the amount of Mr. Cheskin's salary and stock option grant.
Significant factors in establishing Mr. Cheskin's compensation were the
achievement of the Company's revenue goals, the development and implementation
of clinical initiatives designed to demonstrate applicability of our technology
to new organs and the closing of our initial public offering.
Deductibility of Executive Compensation
The Compensation Committee has considered the impact of Section 162(m) of
the Internal Revenue Code adopted under the Omnibus Budget Reconciliation Act
of 1993, which section disallows a deduction for any publicly held corporation
for individual compensation exceeding $1 million in any taxable year for the
CEO and four other most highly compensated executive officers, respectively,
unless such compensation meets the requirements for the "performance-based"
exception to Section 162(m). As the cash compensation paid by the Company to
each of its executive officers is expected to be below $1 million and the
committee believes that options granted under the 2000 Stock Plan to such
officers will meet the requirements for qualifying as performance-based, the
committee believes that Section 162(m) will not affect the tax deductions
available to the Company with respect to the compensation of its executive
officers. It is the Compensation Committee's policy to qualify, to the extent
reasonable, its executive officers' compensation for deductibility under
applicable tax law. However, the Company may from time to time pay compensation
to its executive officers that may not be deductible.
The Compensation Committee of the Board of Directors of RITA Medical Systems,
Inc.:
Scott Halsted
Vincent Bucci
Gordon Russell
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Scott Halsted, Vincent Bucci and Gordon Russell. No member of the committee or
executive officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
19
AUDIT COMMITTEE REPORT
The Audit Committee of the RITA Board of Directors is composed of two
independent directors and operates under a written charter adopted by the Board
of Directors in May 2000, which is included in this proxy statement as Appendix
A. The members of the Audit Committee are Vincent Bucci and John Gilbert. Both
of the members of the Audit Committee are independent as defined by the Nasdaq
Marketplace Rules.
The Audit Committee recommends to the Board of Directors, subject to
stockholder ratification, the selection of an accounting firm to be engaged as
the Company's independent accountants. The independent accountants are
responsible for performing an independent audit of the Company's financial
statements in accordance with generally accepted auditing standards and to
issue a report thereon. Management is responsible for our internal controls and
the financial reporting process. The Audit Committee is responsible for
monitoring and overseeing these processes.
The Audit Committee held no meetings during the fiscal year 2000. The Audit
Committee had a year end meeting in February 2001 with management and our
independent public accountants, PricewaterhouseCoopers LLP. Management
represented to the Audit Committee that our financial statements were prepared
in accordance with generally accepted accounting principles. The Audit
Committee reviewed and discussed the audited financial statements for fiscal
year 2000 with management and the independent accountants.
The Audit Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees.
The Audit Committee has received and reviewed the written disclosures and
the letter from the independent accountants, PricewaterhouseCoopers LLP as
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. Additionally, the Audit Committee has
discussed with PricewaterhouseCoopers LLP the issue of its independence from
RITA.
Based on its review of the audited financial statements and the various
discussions noted above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
The Audit Committee of the Board of Directors of RITA Medical Systems, Inc.:
Vincent Bucci
John Gilbert
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL ACCOUNTANT
During the fiscal year ended December 31, 2000, and during 2001 for the
Audit Fees, PricewaterhouseCoopers LLP, our independent auditor and principal
accountant, billed the fees set forth below.
Audit Fees......................................................... $113,100
Financial Information Systems Design and Implementation Fees....... $ 0
--------
All Other Fees (Initial Public Offering)........................... $350,300
--------
20
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return data
for the Company's stock since July 27, 2000 (the date on which the Company's
stock was first registered under Section 12 of the Securities Exchange Act of
1934, as amended) to the cumulative return over such period of (i) the Nasdaq
National Market Composite Index and (ii) the JP Morgan H & Q Healthcare--
Excluding Biotechnology Index. The graph assumes that $100 was invested on July
27, 2000, the date on which the Company completed the initial public offering
of its Common Stock, in the Common Stock of the Company and in each of the
comparative indexes. The graph further assumes that such amount was initially
invested in the Common Stock of the Company at a per share price of $12.00, the
price to which such stock was first offered to the public by the Company on the
date of its initial public offering, and reinvestment of any dividends. The
stock price performance on the following graph is not necessarily indicative of
future stock price performance.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
--------
* Assumes $100 invested on July 27, 2000 in stock or index, including
reinvestment of dividends. Fiscal year ending December 31, 2000.
RITA MEDICAL SYSTEMS, INC. DELAWARE
Cumulative Total Return
-------------------------------------------------
7/27/00 7/00 8/00 9/00 10/00 11/00 12/00
------- ------ ------ ------ ------ ------ ------
RITA Medical Systems, Inc... 100.00 103.65 90.63 92.97 102.08 91.67 70.83
The Nasdaq National Market
Composite.................. 100.00 97.94 109.52 109.52 87.43 67.41 63.79
JP Morgan H & Q Healthcare--
Excluding Biotechnology.... 100.00 99.59 102.93 109.12 112.64 114.92 119.24
21
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, our executive
officers and persons who own more than 10% of the common stock (collectively,
"Reporting Persons") to file initial reports of ownership and changes in
ownership of our common stock. Reporting Persons are required by SEC
regulations to furnish us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on our review of the copies of such reports
received or written representations from certain Reporting Persons that no
other reports were required, we believe that during its fiscal year ended
December 31, 2000, all Reporting Persons complied with all applicable filing
requirements.
Other Matters
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Donald Stewart
_____________________________________
Donald Stewart
Chief Financial Officer and Vice
President, Finance and
Administration
May 9, 2001,
Menlo Park, California
22
Appendix A
RITA MEDICAL SYSTEMS, INC.
Charter for the Audit Committee
of the Board of Directors
Purpose
The purpose of the Audit Committee established by this charter will be to
make such examinations as are necessary to monitor the corporate financial
reporting and the internal and external audits of RITA Medical Systems, Inc.
(the "Company"), to provide to the Board of Directors (the "Board") the results
of its examinations and recommendations derived therefrom, to outline to the
Board improvements made, or to be made, in internal accounting controls, to
nominate independent auditors, to supervise the finance function of the Company
(which will include, among other matters, the Company's investment activities)
and to provide the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters which
require Board attention.
The Audit Committee will undertake those specific duties and
responsibilities listed below, and such other duties as the Board from time to
time may prescribe.
Charter Review
The Audit Committee will review and reassess the adequacy of this charter at
least once per year. This review is initially intended to be conducted at the
first Audit Committee meeting following the Company's Annual Meeting of
Stockholders, but may be conducted at any time the Audit Committee desires to
do so. Additionally, to the extent and in the manner that the Company is
legally required to do by the rules of the Securities and Exchange Commission
(the "SEC"), this charter (as then constituted) shall be publicly filed.
Membership
The Audit Committee must be comprised of at least three members of the
Board. Such members will be elected and serve at the pleasure of the Board. The
members of the Audit Committee will not be employees of the Company. Each
member of the Audit Committee shall be an "independent director," as defined by
and to the extent required by the Rules of the National Association of
Securities Dealers, Inc. ("NASD").
Further, each member of the Audit Committee must be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement, or must become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. Additionally, at least one member of the Audit Committee must have
past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. Notwithstanding the
foregoing, one director who is not independent, as defined in the NASD Rules,
and who is not a current employee or an immediate family member of such
employee, may be appointed to the Audit Committee, if the board, under
exceptional and limited circumstances, determines that membership on the Audit
Committee by the individual is required by the best interests of the Company
and its stockholders, and the Board discloses, in the next annual proxy
statement subsequent to such determination, the nature of the relationship and
the reasons for that determination.
Meetings
The Audit Committee will meet separately with the Chief Executive Officer
and separately with the Chief Financial Officer of the Company at least
quarterly to review the financial affairs of the Company. The Audit
A-1
Committee will meet with the independent auditors of the Company upon the
completion of the annual audit, and at such other times as it deems
appropriate, to review the independent auditors' examination and management
report.
Responsibilities
The responsibilities of the Audit Committee shall include:
1. Nominating the independent auditors for annual approval by the Board
and ratification by the stockholders;
2. Reviewing the plan for the audit and related services at least
annually;
3. Reviewing audit results and annual and interim financial statements;
4. Ensuring the receipt of, and reviewing, a written statement from the
Company's auditors delineating all relationships between the auditor
and the Company, consistent with Independence Standards Board Standard
1;
5. Reviewing and actively discussing with the Company's auditors any
disclosed relationship or service that may impact the objectivity and
independence of the auditor;
6. Taking, or recommending that the Board take, appropriate action to
oversee the independence of the outside auditor;
7. Overseeing the adequacy of the Company's system of internal accounting
controls, including obtaining from the independent auditors management
letters or summaries on such internal accounting controls;
8. Overseeing the effectiveness of the internal audit function;
9. Overseeing the Company's compliance with the Foreign Corrupt Practices
Act;
10. Overseeing the Company's compliance with SEC requirements for
disclosure of auditor's services and Audit Committee members and
activities; and
11. Overseeing the Company's finance function, which may include the
adoption from time to time of a policy with regard to the investment of
the Company's assets.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board delegates to it.
Finally, the Audit Committee shall ensure that the Company's auditors
understand both (i) their ultimate accountability to the Board and the Audit
Committee, as representatives of the Company's stockholders; and (ii) the
Board's and the Audit Committee's ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the Company's independent
auditors (or to nominate the outside auditor to be proposed for stockholder
approval in any proxy statement).
Reports
The Audit Committee will to the extent deemed appropriate record its
summaries of recommendations to the Board in written form that will be
incorporated as a part of the minutes of the Board. To the extent required, the
Audit Committee will also prepare and sign a Report of the Audit Committee for
inclusion in the Company's proxy statement for its Annual Meeting of
Stockholders.
A-2
Appendix B
RITA MEDICAL SYSTEMS, INC.
2000 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors 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.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or a merger, consolidation or other capital reorganization
of the Company with or into another corporation, or any other transaction or
series of related transactions in which the Company's stockholders immediately
prior thereto own less than 50% of the voting stock of the Company (or its
successor or parent) immediately thereafter.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means RITA Medical Systems, Inc., a Delaware
-------
corporation.
(f) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "Director" means a member of the Board.
--------
(h) "Employee" means any person, including any officer or Director,
--------
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.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(j) "Option" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(k) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(l) "Optionee" means an Outside Director who receives an Option.
--------
(m) "Outside Director" means a Director who is not an Employee.
----------------
(n) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 2000 Directors' Stock Option Plan.
----
(p) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(q) "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 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 500,000 Shares of Common Stock (the "Pool"). 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 has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder 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 individual who becomes an Outside Director after the
Effective Date of this Plan, as determined in accordance with Section 6 hereof,
shall be automatically granted an Option to purchase 25,000 Shares (the "Initial
-------
Option") on the date on which such person first becomes an Outside Director,
------
whether through election by the stockholders of the Company or appointment by
the Board of Directors to fill a vacancy. An Outside Director who previously
was an Employee shall not receive a grant under this Section 4(b)(ii).
B-2
(iii) On the date of each Annual Meeting of the Company's
shareholders immediately following which an Outside Director is serving on the
Board, and provided that, as of such date, he or she shall have served on the
Board for at least six (6) months, each eligible Outside Director shall be
automatically granted an Option to purchase 10,000 Shares (the "Annual Option").
An Outside Director who previously was an Employee shall be eligible to receive
grants under this Section 4(b)(iii).
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
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.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each Initial Option granted hereunder shall
be as follows:
(1) each Initial Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of each Initial Option,
determined in accordance with Section 8 hereof;
(3) each Initial Option shall vest and become exercisable
at the rate of 1/48 of the Shares subject to the Initial Option on each monthly
anniversary of the date of grant of the Initial Option.
(vii) The terms of each Annual Option granted hereunder shall be
as follows:
(1) each Annual Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of each Annual Option,
determined in accordance with Section 8 hereof;
B-3
(3) each Annual Option shall vest and become exercisable
at the rate of one hundred percent (100%) of the Shares subject to the Annual
Option on the day before the first anniversary of the date of grant of the
Annual Option.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
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(b) above. An Outside Director who has been granted an Option may, if
he or she 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; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating
B-4
to the Company's initial public offering of securities (the "Effective Date").
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board; provided however that in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing sales price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
--------
Street Journal, or if there is a public market for the Common Stock but the
--------------
Common Stock is not traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
------------------------
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System).
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. 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(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below 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 8(c) 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
B-5
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 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.
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 Continuous Status as a Director. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee: (A)
-----------------
during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, 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 of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the
Plan.
B-6
10. Nontransferability 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 or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii),
(iii) and (iv) above, 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 (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) 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.
(b) Change of Control. In the event of any transaction that qualifies
-----------------
as a Change of Control and notwithstanding whether or not outstanding Options
are assumed, substituted for or terminated in connection with the transaction,
the vesting of each outstanding Option shall accelerate in full such that each
Optionee shall have the right to exercise his or her Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable, immediately prior to consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Change of Control, each Optionee would be entitled to
receive upon exercise of an Option the same number and kind of shares of stock
or the same amount of property, cash or securities as the Optionee would have
been entitled to receive upon the occurrence of such transaction if the Optionee
had been, immediately prior to such transaction, the holder of the number of
Shares of Common Stock covered by the Option at such time (after giving effect
to any adjustments in the number of Shares covered by the Option as provided for
in this Section 11); provided however that if such consideration received in the
transaction 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 exercise of the Option to be
solely
B-7
common stock of the successor corporation or its Parent equal to the Fair Market
Value of the per Share consideration received by holders of Common Stock in the
transaction.
(c) Certain Distributions. In the event of any distribution to the
---------------------
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
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(b) hereof.
Notice of the determination shall be given to each Outside Director 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 amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, 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 approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee 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. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the
---------------
Company in consultation with its legal counsel.
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 law.
B-8
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.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Stockholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the stockholders of the Company.
Such stockholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
B-9
RITA MEDICAL SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barry Cheskin and Donald Stewart, and each
of them individually, each with full power of substitution, as attorney, agent
and proxy to represent the undersigned at the 2001 Annual Meeting of
Stockholders (the "Annual Meeting") of RITA Medical Systems, Inc. (the
"Company") to be held at Venture Law Group located at 2775 Sand Hill Road, Menlo
Park, CA 94025 at 9:00 a.m. local time, on Wednesday, June 13, 2001, or at any
adjournment thereof, with all power which the undersigned would possess if
personally present, and to vote all shares of stock of the Company which the
undersigned may be entitled to vote at said Annual Meeting in the manner set
forth below. The Board of Directors unanimously recommends your vote FOR all
matters set forth below.
1. ELECTION OF DIRECTORS FOR all nominees listed below [_] WITHHOLD AUTHORITY [_]
(unless name of nominee is crossed out)
Janet Effland Scott Halsted
2. APPROVAL of the adoption of the amendment to the Company's 2000 Directors' Stock Option Plan to provide for an increase
in the number of shares of Common Stock granted on an annual basis to the Company's non-employee directors.
FOR [_] AGAINST [_] ABSTAIN [_]
3. RATIFICATION of the selection of PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending
December 31, 2001.
FOR [_] AGAINST [_] ABSTAIN [_]
4. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF.
(continued and to be signed on reverse side)
(continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR NAMED IN PROPOSAL (1) AND
FOR PROPOSALS (2) AND (3) AS DESCRIBED HEREIN, AND WILL CONFER THE AUTHORITY SET
FORTH IN PARAGRAPH 4.
Receipt is hereby acknowledged of the Notice of Meeting and Proxy Statement
dated May 9, 2001, as well as a copy of the Company's Annual Report for the
fiscal year ended December 31, 2000.
Dated: __________________________, 2001
_______________________________________
_______________________________________
(signature of stockholder)
Please sign your name exactly as it appears
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please
give title. Each joint owner is requested
to sign. If a corporation, partnership or
other entity, please sign by an authorized
officer or partner.
Whether or not you plan to attend the Annual Meeting, please complete, date,
sign and return this proxy in the envelope provided.