Document:

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                                                                    Exhibit 10.2

                                 VIDAMED, INC.

                             AMENDED AND RESTATED
                                1992 STOCK PLAN
                    (as amended effective January 4, 2001)

     1.  Purposes of the Plan. The purposes of this Stock Plan are to attract
         ---------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

     2.  Certain Definitions. As used herein, the following definitions shall
         --------------------
apply:

         (a)  "Administrator" means the Board or any of its Committees appointed
               -------------
pursuant to Section 4 of the Plan.

         (b)  "Board" means the Board of Directors of the Company.
               -----

         (c)  "Code" means the Internal Revenue Code of 1986, as amended.
               ----

         (d)  "Committee" means the Committee appointed by the Board of
               ---------
Directors in accordance with paragraph (a) of Section 4 of the Plan.

         (e)  "Common Stock" means the Common Stock of the Company.
               ------------

         (f)  "Company" means VidaMed, Inc., a Delaware corporation.
               -------

         (g)  "Consultant" means any person, including an advisor, who is
               ----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

         (h)  "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Board, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
<PAGE>

         (i)  "Employee" means any person, including officers and directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

         (j)  "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended.

         (k)  "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

              (i)    If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for the Common Stock at the end of
the regular trading session, which as of the effective date of this Plan is 4:00
p.m. New York City time, as reported in The Wall Street Journal or such other
source as the Board deems reliable (or, if no shares were traded or quoted on
such date, as of the next preceding date on which there was such a trade or
quote);

              (ii)   If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or other over-the-counter market in which
closing sale prices are available, its Fair Market Value shall be the closing
sales price for the Common Stock at the end of the regular trading session,
which as of the effective date of this Plan is 4:00 p.m. New York City time, and
if no closing sale prices are available, its Fair Market Value shall be the mean
of the high and low bid and asked prices for the Common Stock at the end of the
regular trading session, as reported in The Wall Street Journal or such other
source as the Board deems reliable (or, if no shares were traded or quoted on
such date, as of the next preceding date on which there was such a trade or
quote); or

              (iii)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

         (l)  "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code.

         (m)  "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

         (n)  "Option" means a stock option granted pursuant to the Plan.
               ------

         (o)  "Optioned Stock" means the Common Stock subject to an Option.
               --------------

         (p)  "Optionee" means an Employee or Consultant who holds an
               --------
outstanding Option.

         (q)  "Parent" means a "parent corporation", whether now or hereafter
               ------
existing, as defined in Section 424(e) of the Code.

         (r)  "Plan" means this Vidamed, Inc. 1992 Stock Plan.
               ----
<PAGE>

         (s)  "Share" means a share of the Common Stock, as adjusted in
               -----
accordance with Section 12 of the Plan.

         (t)  "Subsidiary" means a "subsidiary corporation", whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.  Stock Subject to the Plan. Subject to the provisions of Section 12 of
         --------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 6,200,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

         If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan; provided, however, that Shares that have been
actually issued under the Plan upon exercise of an Option shall not be returned
to the Plan and shall not become available for future distribution under the
Plan.

     4.  Administration of the Plan.
         --------------------------

         (a)  Procedure.
              ---------

                (i)  Administration With Respect to Directors and Officers. With
                     -----------------------------------------------------
respect to grants of Options to Employees who are also officers or directors of
the Company subject to Section 16(b) of the Exchange Act, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in compliance
with Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended
to qualify thereunder as a discretionary plan.

               (ii)  Multiple Administrative Bodies. If permitted by Rule 16b-3,
                     ------------------------------
the Plan may be administered by different bodies with respect to directors,
non-director officers and Employees who are neither directors nor officers.

              (iii)  Administration With Respect to Consultants and Other
                     ----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who are
---------
neither directors nor officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of California
corporate and securities laws and of the Code (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint
<PAGE>

new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws.

         (b)  Powers of the Administrator. Subject to the provisions of the Plan
              ---------------------------
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:

                 (i)  to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

                (ii)  to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;

               (iii)  to determine whether and to what extent Options are
granted hereunder;

                (iv)  to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

                 (v)  to approve forms of agreement for use under the Plan;

                (vi)  to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation or waiver of
forfeiture restrictions regarding any Option or other award and/or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator shall determine, in its sole discretion);

               (vii)  to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock; and

              (viii)  to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted.

         (c)  Effect of Committee's Decision. All decisions, determinations and
              ------------------------------
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.

     5.  Eligibility.
         -----------

         (a)  Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.

         (b)  Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all
<PAGE>

plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonstatutory Stock Options.

         (c)  For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

         (d)  The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.

     6.  Term of Plan. The Plan shall become effective upon the earlier to occur
         ------------
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.

     7.  Term of Option. The term of each Option shall be the term stated in the
         --------------
Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.

     8.  Option Exercise Price and Consideration.
         ---------------------------------------

         (a)  The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:

               (i)  In the case of an Incentive Stock Option

                    (A)  granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                    (B)  granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.

              (ii)  In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.

         (b)  The following limitations shall apply to grants of Options to
Employees:

               (i)  No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than seventy-five percent (75%) of the Shares
reserved for issuance under the Plan.
<PAGE>

               (ii)  The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.

              (iii)  If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option will be counted against the limit
set forth in Section 8(b)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

         (c)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (4) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (5) any
combination of the foregoing methods of payment, or (6) such other consideration
and method of payment for the issuance of Shares to the extent permitted under
Applicable Laws. In making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company (Section 315(b) of the California
Corporation law).

     9.  Exercise of Option.
         ------------------

         (a)  Procedure for Exercise; Rights as a Stockholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.

              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, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

              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.
<PAGE>

         (b)  Termination of Employment. In the event of termination of an
              -------------------------
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only within three (3)
months (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

         (c)  Disability of Optionee. Notwithstanding the provisions of Section
              ----------------------
9(b) above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his disability, the Optionee
may, but only within twelve (12) months from the date of such termination (but
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

         (d)  Death of Optionee. In the event of the death of an Optionee, the
              -----------------
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

         (e)  Rule 16b-3. Options granted to persons subject to Section 16(b) of
              ----------
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

         (f)  Buyout Provisions. The Administrator may at any time offer to buy
              -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made; provided however that the offer to
buy out shares that are exercisable shall be at a price greater than or equal to
the Fair Market Value of such shares and the offer to buy out shares that are
not exercisable shall be at a price greater than or equal to the then exercise
price of the shares subject to the Option.

    10.  Non-Transferability of Options. An Option may not be sold, pledged,
         ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

    11.  Adjustments Upon Changes in Capitalization or Merger.
         ----------------------------------------------------
<PAGE>

         (a)  Changes in Capitalization. Subject to any required action by the
              -------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

         (b)  Dissolution or Liquidation. In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.

         (c)  Merger or Asset Sale. In the event of a merger of the Company with
              --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right shall be substituted by the successor corporation or Parent or Subsidiary
of the successor corporation. The Administrator may, in lieu of such assumption
or substitution, provide for the Optionee to have the right to exercise the
Option as to all or a portion of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If the Administrator makes an
Option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option shall be fully exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option or right confers
the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

    12.  Time of Granting Options. The date of grant of an Option shall, for all
         ------------------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
<PAGE>

    13.  Amendment and Termination of the Plan.
         -------------------------------------

         (a)  Amendment and Termination. The Board may at any time amend, alter,
              -------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required.

         (b)  Effect of Amendment or Termination. Any such amendment or
              ----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

    14.  Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
         ----------------------------------
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange or quotation system upon which the Shares
may then be listed or quoted, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

         As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

    15.  Reservation of Shares. The Company, during the term of this Plan, will
         ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

         The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

         If the Optioned Stock covered by an Option exceeds, as of the date of
grant, the number of Shares which may be issued under the Plan without
additional stockholder approval, such Option shall be void with respect to such
excess Optioned Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 13(a) of the Plan.

    16.  Agreements. Options shall be evidenced by written agreements in such
         ----------
form as the Board shall approve from time to time.

    17.  Stockholder Approval. Continuance of the Plan shall be subject to
         --------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such
<PAGE>

stockholder approval shall be obtained in the degree and manner required under
applicable state and federal law.

    18.  Financial Reports. The Company shall furnish each Optionee with at
         -----------------
least such financial statements, reports and other information as the Company
sends or makes available on an annual basis to the holders of its Common Stock.<PAGE>

                                                                    Exhibit 10.3

                                  VIDAMED, INC.

                              AMENDED AND RESTATED
                            1995 DIRECTOR OPTION PLAN
                      (As amended through January 4, 2001)

     1.  Purposes of the Plan. The purposes of this 1995 Director Option Plan
         --------------------
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.

         All options granted hereunder shall be nonstatutory stock options.

     2.  Definitions. As used herein, the following definitions shall apply:
         -----------

         (a) "Board" means the Board of Directors of the Company.
              -----

         (b) "Code" means the Internal Revenue Code of 1986, as amended.
              ----

         (c) "Common Stock" means the Common Stock of the Company.
              ------------

         (d) "Company" means VidaMed, Inc., a Delaware corporation.
              -------

         (e) "Continuous Status as a Director" means the absence of any
              -------------------------------
interruption or termination of service as a Director.

         (f) "Director" means a member of the Board.
              --------

         (g) "Employee" means any person, including officers and Directors,
              --------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.

         (h) "Exchange Act" means the Securities Exchange Act of 1934, as
              ------------
amended.

         (i) "Fair Market Value" means, as of any date, the value of Common
              -----------------
Stock determined as follows:

             (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for the Common Stock at the end of
the regular trading session, which as of the effective date of this Plan is 4:00
p.m. New York City time, as reported in The Wall Street Journal or such other
source as the Board deems reliable (or, if no shares were traded or quoted on
such date, as of the next preceding date on which there was such a trade or
quote);

             (ii)  If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or other over-the-counter market in which
closing sale prices are available, its
<PAGE>

Fair Market Value shall be the closing sales price for the Common Stock at the
end of the regular trading session, which as of the effective date of this Plan
is 4:00 p.m. New York City time, and if no closing sale prices are available,
its Fair Market Value shall be the mean of the high and low bid and asked prices
for the Common Stock at the end of the regular trading session, as reported in
The Wall Street Journal or such other source as the Board deems reliable (or, if
no shares were traded or quoted on such date, as of the next preceding date on
which there was such a trade or quote); or

             (iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.

         (j) "New Outside Director" means an Outside Director who becomes a
              --------------------
Director after the effective date of this Plan.

         (k) "Option" means a stock option granted pursuant to the Plan.
              ------

         (l) "Optioned stock" means the Common Stock subject to an Option.
              --------------

         (m) "Optionee" means an Outside Director who receives an Option.
              --------

         (n) "Outside Director" means a Director who is not an Employee.
              ----------------

         (o) "Parent" means a "parent corporation," whether now or hereafter
              ------
existing, as defined in Section 424(e) of the Code.

         (p) "Plan" means this VidaMed, Inc. 1995 Director Option Plan.
              ----

         (q) "Share" means a share of the Common Stock, as adjusted in
              -----
accordance with Section 10 of the Plan.

         (r) "Subsidiary" means a "subsidiary corporation," whether now or
              ----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.

     3.  Stock Subject to the Plan. Subject to the provisions of Section 10 of
         -------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is three hundred thousand (300,000) Shares (the "Pool") of Common
Stock. The Shares may be authorized but unissued. or reacquired Common Stock.

         If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
fixture grant under the Plan; provided, however, that Shares that have actually
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution under the Plan.

     4.  Administration and Grants of Options Under the Plan.
         ---------------------------------------------------

         (a) Procedure for Grants. The provisions set forth in this Section 4(a)
             --------------------
shall not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:

                                       2
<PAGE>

             (i)   No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.

             (ii)  Each New Outside Director shall be automatically granted an
Option to purchase twenty thousand (20,000) Shares (a "First Option') on the
date on which such person first becomes a Director, whether through election by
the stockholders of the Company or appointment by the Board to fill a vacancy.

             (iii) After a First Option has been granted to a New Outside
Director, such individual and each Outside Director shall thereafter be
automatically granted an Option to purchase five thousand (5,000) Shares (a
"Subsequent Option") on the first business day of each calendar year, if on such
date, he or she shall have served on the Board for at least six (6) months.

             (iv)  Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 16 hereof

             (v)   The terms of a First Option granted hereunder shall be as
follows:

                   (A) the term of the First Option shall be ten (10) years.

                   (B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof

                   (C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option. In the event
that the date of grant of the First Option is not a trading day, the exercise
price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.

                   (D) the First Option shall become exercisable as to 10,000 of
the shares subject to the First Option on the date of grant and as to the
remaining 10,000 shares on the first year anniversary of the date of grant.

             (vi)  The terms of a Subsequent Option granted hereunder shall be
as follows:

                   (A) the term of the Subsequent Option shall be ten (10)
years.

                   (B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof

                   (C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option. In the
event that the date of grant of the First Option is not a trading day, the
exercise price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.

                   (D) the Subsequent Option shall become exercisable as to all
of the shares subject to the Subsequent Option on the date of grant.

                                       3
<PAGE>

             (vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the stockholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.

     5.  Eligibility. Options may be granted only to Outside Directors. All
         -----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof An Outside Director who has been granted an Option may, if he
is otherwise eligible, be granted an additional Option or Options in accordance
with such provisions.

         The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.

     6.  Term of Plan. The Plan shall become effective upon the earlier to occur
         ------------
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
often (10) years unless sooner terminated under Section 11 of the Plan.

     7.  Form of Consideration. The consideration to be paid for the Shares to
         ---------------------
be issued upon exercise of an Option, including the method of payment. shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.

     8.  Exercise of Option.
         ------------------

         (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
             -----------------------------------------------
hereunder shall be exercisable at such times as are set forth in Section 4
hereof: provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

         An Option may not be exercised for a fraction of a Share.

         An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate

                                       4
<PAGE>

for the number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan.

         Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

         (b) Rule 16b-3. Options granted to Outside Directors must comply with
             ----------
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions, arid
other transactions by Outside Directors that otherwise could be matched with
Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.

         (c) Termination of Continuous Status as a Director. In the event an
             ----------------------------------------------
Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three (3) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

         (d) Disability of Optionee. In the event Optionee's Continuous Status
             ----------------------
as a Director terminates as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her
Option, but only within twelve (12) months from the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of termination, or if he or she does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.

         (e) Death of Optionee. In the event of an Optionees death, the
             -----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

     9.  Non-Transferability of Options. The Option may not be sold, pledged,
         ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee. only by the Optionee.

     10. Adjustments Upon Changes in Capitalization. Dissolution. Merger. Asset
         ----------------------------------------------------------------------
Sale or Change of Control.
-------------------------
                                       5
<PAGE>

         (a) Changes in Capitalization. Subject to any required action by the
             -------------------------
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

         (b) Dissolution or Liquidation. In the event of the proposed
             --------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action.

         (c) Merger or Asset Sale. In the event of a merger of the Company with
             --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option
shall be substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option. each
outstanding Option shall become fully vested and exercisable, including as to
Shares as to which it would not otherwise be exercisable. If an Option becomes
fully vested and exercisable in the event of a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph. the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares).

     11. Amendment and Termination of the Plan.
         -------------------------------------

         (a) Amendment and Termination. Except as set forth in Section 4, the
             -------------------------
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.

         (b) Effect of Amendment or Termination. Any such amendment or
             ----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

                                       6
<PAGE>

     12. Time of Granting Options. The date of grant of an Option shall, for all
         ------------------------
purposes, be the date determined in accordance with Section 4 hereof.

     13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
         ----------------------------------
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

         As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

         Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

     14. Reservation of Shares. The Company, during the term of this Plan, will
         ---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     15. Option Agreement. Options shall be evidenced by written option
         ----------------
agreements in such form as the Board shall approve.

     16. Stockholder Approval. Continuance of the Plan shall be subject to
         --------------------
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.

                                       7

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