<PAGE>   1
 
                                 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
                               (AMENDMENT NO.   )
 
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 Commission Only
     (as permitted by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material under Rule 14a-12
 

                         Radiance Medical Systems, Inc.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

 
--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
[X]  No fee required.
 
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
     (1)  Title of each class of securities to which transaction applies:
 
          ----------------------------------------------------------------------
 
     (2)  Aggregate number of securities to which transaction applies:
 
          ----------------------------------------------------------------------
 
     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):
 
          ----------------------------------------------------------------------
 
     (4)  Proposed maximum aggregate value of transaction:
 
          ----------------------------------------------------------------------
 
     (5)  Total fee paid:
 
          ----------------------------------------------------------------------
 
[ ]  Fee paid previously with preliminary materials.
 
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1)  Amount Previously Paid:
 
          ----------------------------------------------------------------------
 
     (2)  Form, Schedule or Registration Statement No.:
 
          ----------------------------------------------------------------------
 
     (3)  Filing Party:

          ----------------------------------------------------------------------
 
     (4)  Date Filed:
 
          ----------------------------------------------------------------------

<PAGE>   2


                                [RADIANCE LOGO]

                         13900 ALTON PARKWAY, SUITE 122
                            IRVINE, CALIFORNIA 92618
              
                                   ----------


                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                             TO BE HELD JUNE 5, 2001

                                   ----------


To the Stockholders of Radiance Medical Systems, Inc.:

        You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Radiance Medical Systems, Inc. ("Radiance" or the
"Company") on June 5, 2001 at 9:00 a.m., California time. The Annual Meeting
will be held at the Company's offices at 13900 Alton Parkway, Suite 122, Irvine,
California 92618.

        At the Annual Meeting, you will be asked to consider and vote upon the
following matters:

        1.  To elect three individuals to serve a three year term as Class III
            members of the Company's Board of Directors from the following
            nominees: William G. Davis, Michael R. Henson and Jeffrey H. Thiel.

        2.  To ratify the selection of PricewaterhouseCoopers LLP as the
            Company's independent auditors for the current fiscal year ending
 
           December 31, 2001.

        You also may be asked to consider and vote on other business that may
properly come before the Annual Meeting.

        Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying
postage-paid reply envelope. By returning the proxy, you can help Radiance avoid
the expense of duplicate proxy solicitations and possibly having to reschedule
the Annual Meeting if a quorum of the outstanding shares is not present or
represented by proxy. If you decide to attend the Annual Meeting and wish to
change your proxy vote, you may do so simply by voting in person at the Annual
Meeting.


May 2, 2001                                     MICHAEL R. HENSON
                                                Chairman of the Board


<PAGE>   3

                                [RADIANCE LOGO]

                         13900 ALTON PARKWAY, SUITE 122
                            IRVINE, CALIFORNIA 92618

                                   ----------


                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                             TO BE HELD JUNE 5, 2001

                                   ----------

         NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Radiance Medical Systems, Inc., a Delaware corporation ("Radiance" or the
"Company"), will be held on June 5, 2001 at 9:00 a.m. at the Company's offices
at 13900 Alton Parkway, Suite 122 Irvine, California 92618, for the following
purpose:

         1.  To elect three individuals to serve a three year term as Class III
             members of the Company's Board of Directors from the following
             nominees: William G. Davis, Michael R. Henson and Jeffrey H. Thiel.
 
         2.  To ratify the selection of PricewaterhouseCoopers LLP as the
             Company's independent auditors for the current fiscal year ending
 
            December 31, 2001.
 
         3.  To transact such other business as may properly come before the
             meeting.

         The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

         The Board of Directors has fixed the close of business on April 20,
2001 as the record date for the determination of stockholders entitled to notice
of and to vote at this Annual Meeting and at any continuation or adjournment
thereof.

                                              By Order of the Board of Directors

                                              STEPHEN R. KROLL
                                              Secretary


Irvine, California
May 2, 2001

ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN
YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.


<PAGE>   4

                                [RADIANCE LOGO]

                         13900 ALTON PARKWAY, SUITE 122
                            IRVINE, CALIFORNIA 92618

                                   ----------


                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                             TO BE HELD JUNE 5, 2001

                                   ----------

                                 PROXY STATEMENT

                                   ----------

                 INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

         The enclosed proxy is solicited on behalf of the Board of Directors of
Radiance Medical Systems, Inc. ("Radiance" or the "Company") for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on June 5, 2001
at 9:00 a.m. at the Company's offices at 13900 Alton Parkway, Suite 122, Irvine,
California 92618, at which time stockholders of record on April 20, 2001 will be
entitled to vote. On April 20, 2001, Radiance had 13,072,643 outstanding shares
of its Common Stock ("Common Stock"). Stockholders of record on such date are
entitled to one vote for each share of Common Stock held on all matters to be
voted upon at the Annual Meeting.

         Radiance intends to mail this proxy statement and the accompanying
proxy card on or about May 2, 2001 to all stockholders entitled to vote at the
Annual Meeting. Radiance's principal executive offices are located at 13900
Alton Parkway, Suite 122, Irvine, California 92618. The telephone number at that
address is (949) 457-9546.

VOTING

         The presence in person or by proxy of the holders of a majority of the
Common Stock issued and outstanding constitutes a quorum for the transaction of
business at the Annual Meeting. Each stockholder of record is entitled to one
vote for each share of Common Stock held as of the record date on each matter to
be voted on at the Annual Meeting. Directors are elected by the affirmative vote
of a plurality of votes cast at the Annual Meeting; therefore, broker non-votes
and abstentions or votes that are withheld will be excluded entirely from the
vote and have no effect on the outcome. Ratification of the selection of
PricewaterhouseCoopers LLP as the Company's independent public auditors, and
approval of any other matter that properly comes before the Annual Meeting, must
be accomplished by the affirmative votes of a majority of the shares present or
represented and entitled to be voted at the Annual Meeting. If shares are not
voted by a broker who is the record holder of the shares present at the Annual
Meeting, or if shares are not voted in other circumstances in which proxy
authority is defective or has been withheld with respect to any matter, these
non-voted shares will be counted for quorum purposes but are not deemed to be
present or represented for purposes of determining whether stockholder approval
of that matter has been obtained.


                                       2



<PAGE>   5

         Shares of Common Stock represented by a properly executed proxy
received in time for the Annual Meeting will be voted as specified therein,
unless the proxy previously has been revoked. Unless otherwise specified in the
proxy, the persons named therein will vote FOR the election of each of the
director nominees. As to any other business properly submitted to stockholders
at the Annual Meeting, the persons named in the proxy will vote as recommended
by the Board of Directors or, if no recommendation is given, in its discretion.

REVOCABILITY OF PROXIES

         Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of Radiance at Radiance's principal
executive office, a written notice of revocation or a new duly executed proxy
bearing a date later than the date indicated on the previous proxy, or it may be
revoked by the holder of record attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.

SOLICITATION

         Radiance will bear the entire cost of proxy solicitation, including
costs of preparing, assembling, printing and mailing this proxy statement, the
proxy card and any additional material furnished to stockholders. Copies of the
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others, to forward to such beneficial owners. Radiance may, if deemed necessary
or advisable, retain a proxy solicitation firm to deliver solicitation materials
to beneficial owners and to assist the Company in collecting proxies from such
individuals. Radiance may reimburse persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitation by directors, officers or other
regular employees of Radiance. No additional compensation will be paid to
directors, officers or other regular employees for such services.



                                       3


<PAGE>   6

 
                                PROPOSAL NO. 1

                              ELECTION OF DIRECTORS

         The Board of Directors currently consists of eight members, divided
into three classes approximately equal in size. Each class of directors is
elected for three-year terms on a staggered term basis, so that each year the
term of office of one class will expire and the terms of office of the other
classes will continue for periods of one and two years, respectively. The
nominees for election at this year's Annual Meeting will serve as Class III
Directors, with a term expiring at the Annual Meeting of Stockholders to be held
in 2004. Each director is elected to serve until the expiration of his term.

         The nominees for election as Class III Directors at this year's Annual
Meeting are William G. Davis, Michael R. Henson and Jeffrey H. Thiel. The
nominees for election to the Board of Directors at the Annual Meeting currently
are directors of the Company. Mr. Davis has served as a director since January
1995, Mr. Henson has served as a director since February 1995 and Mr. Thiel has
served as a director since January 2001.

         The Board of Directors will vote all proxies received by them FOR the
nominees listed below unless otherwise instructed in writing on such proxy. The
three (3) candidates receiving the highest number of affirmative votes of shares
entitled to vote at the Annual Meeting will be elected directors of Radiance. In
the event any nominee is unable to or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for an additional nominee
who shall be designated by the current Board of Directors to fill the vacancy.
As of the date of this Proxy Statement, the Board of Directors is not aware of
any nominee who is unable or will decline to serve as director. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in favor of the nominees
listed below. The Board of Directors does not have a nominating committee.



                                       4

<PAGE>   7

INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS

         Set forth below, as of March 15, 2001, for each nominee and for each
director of Radiance is information regarding his age, position(s) with
Radiance, the period he has served as a director, any family relationship with
any other director or executive officer of Radiance, and the directorships
currently held by him in corporations whose shares are publicly registered.

                        NOMINEES FOR CLASS III DIRECTORS


<TABLE>
<CAPTION>
       NAME, AGE AND                                 PRINCIPAL OCCUPATION AND
  FIRST YEAR AS DIRECTOR                               BUSINESS EXPERIENCE
  ----------------------           -------------------------------------------------------------
<S>                                <C>
William G. Davis, 69, 1995         Mr. Davis is an independent business consultant. From 1957 to
                                   1984, Mr. Davis was employed by Eli Lilly and Company, a
                                   diversified healthcare company, where he served as Executive Vice
                                   President, Eli Lilly International Corporation, from 1972 to
                                   1975, Executive Vice President, Pharmaceutical Division, from
                                   1975 to 1982, and President, Medical Instrument Systems Division,
                                   from 1982 until his retirement in 1984.

Michael R. Henson, 55, 1995        Mr. Henson joined the Company in February 1992 as President,
                                   Chief Executive Officer and Chairman of the Board of Directors.
                                   He currently serves the Company as Chairman of the Board of
                                   Directors. From June 1997 until March 1999, Mr. Henson served
                                   Chairman of the Board, Chief Executive Officer and President of
                                   the (former) Radiance Medical Systems, Inc., and as Chairman of
                                   the Board of the Company.  Prior to joining the Company, Mr.
                                   Henson served as the Chief Executive Officer of Endosonics
                                   Corporation from 1988 to February 1995, and as Chairman of the
                                   Board from February 1993 to November 1996. From April 1983 to
                                   February 1988, Mr. Henson served as President and Chief Executive
                                   Officer of Trimedyne, Inc., a manufacturer of medical lasers and
                                   catheters. Mr. Henson also serves on the board of directors of
                                   other, private medical device companies including Endologix,
                                   Inc., Anchor Medical Technologies, Inc. Endometics, Inc., and
                                   Micrus Corporation. Mr. Henson is also a director of the
                                   Cardiovascular Research Foundation and the managing partner of
                                   JAIC-Henson Medfocus Fund LLC, a medical venture capital fund.

Jeffrey H. Thiel, 45, 2001         Mr. Thiel joined the Company in October 1996 and presently serves
                                   as President and Chief Executive Officer and is a member of our
                                   Board of Directors. He served as President and Chief Operating
                                   Officer from September 1999 to December 2000. From February 1999
                                   to September 1999, Mr. Thiel served as Executive Vice President,
                                   and from October 1996 to February 1999 as Vice President,
                                   Operations. From May 1995 to October 1996, Mr. Thiel served as
                                   Director of Operations of BEI Medical Systems. Mr. Thiel also
                                   serves on the board of directors of Micrus Corporation.
</TABLE>



                                        5


<PAGE>   8

                                CLASS I DIRECTORS


<TABLE>
<CAPTION>
         NOMINEE, AGE AND                             PRINCIPAL OCCUPATION AND
      FIRST YEAR AS DIRECTOR                            BUSINESS EXPERIENCE
      ----------------------                          ------------------------
<S>                                   <C>
Maurice Buchbinder, M.D., 47, 1999    Dr. Buchbinder, was a co-founder and member of the board of
                                      directors of the (former) Radiance from August 1997 to January
                                      1999. Since 1995, Dr. Buchbinder has served as the Director of
                                      Interventional Cardiology at Sharp Memorial Hospital, San Diego,
                                      California and as the Director of Interventional Cardiology at
                                      the Foundation for Cardiovascular Research, Scripps Memorial
                                      Hospital, La Jolla, California. From 1985 to 1995, Dr. Buchbinder
                                      served at various intervals as the Professor of Medicine and the
                                      Associate Professor of Medicine, Cardiology Division, USCD
                                      Medical Center, San Diego, California.  Dr. Buchbinder is Board
                                      certified, Diplomat, from the American Board of Cardiovascular
                                      Diseases and the American Board of Internal Medicine.

Jeffrey F. O'Donnell, 41, 1999        Mr. O'Donnell has served as President and Chief Executive Officer
                                      of PhotoMedex since November 1999. From March 1999 to November
                                      1999, Mr. O'Donnell served as the President and Chief Executive
                                      Officer of X-Site Medical. Mr. O'Donnell served as our President
                                      from January 1998 until March 1999, and Chief Executive Officer
                                      from June 1998 until March 1999. From November 1995 to January
                                      1998, Mr. O'Donnell served as our Vice President, Sales and
                                      Marketing. From January 1994 to May 1995, Mr. O'Donnell served as
                                      the President and Chief Executive Officer of Kensey Nash
                                      Corporation, a diversified medical device company. Mr. O'Donnell
                                      is a member of the board of directors of PhotoMedex and Escalon 
                                      Medical Corporation, a manufacturer and distributor of cardiovascular 
                                      and ophthalmology devices.

Gerard von Hoffmann, 43, 1996         Mr. von Hoffmann has been with the law firm of Knobbe, Martens,
                                      Olson & Bear LLP, Radiance's patent counsel, since 1986 and has
                                      been a partner since 1989. Mr. von Hoffman also serves on the
                                      board of directors of two privately-held medical device
                                      companies, Anchor Medical Technologies, Inc. and NeoMatrix, Inc.
</TABLE>



                                       6


<PAGE>   9
                               CLASS II DIRECTORS


<TABLE>
<CAPTION>

        NAME, AGE AND                            PRINCIPAL OCCUPATION AND
   FIRST YEAR AS DIRECTOR                          BUSINESS EXPERIENCE
   ----------------------                        ------------------------
<S>                                 <C>

Franklin D. Brown, 57, 1997         Mr. Brown is the Chairman and Chief Executive Officer of
                                    Endologix, Inc. From October 1994 until the sale of the company
                                    in September 1997, Mr. Brown served as Chairman, President and
                                    Chief Executive Officer at Imagyn, Medical Inc. From 1986 until
                                    the sale of the company in 1994, Mr. Brown served as President
                                    and Chief Executive Officer of Pharmacia Deltec, Inc. an
                                    ambulatory drug delivery company. Mr. Brown also serves on the
                                    boards of directors of Anchor Medical Technologies, Inc.,
                                    Endologix, Inc., Ablation Technologies, Inc., and Qualigen
                                    Corporation.

Edward M. Leonard, 59, 1996         Mr. Leonard has been a Managing Director of Broadview
                                    International LLC, an investment bank specializing in mergers and
                                    acquisitions for information technology companies, since
                                    September 1997. From 1978 to September 1997, Mr. Leonard was a
                                    partner in the law firm of Brobeck, Phleger & Harrison.
</TABLE>


THE BOARD OF DIRECTORS AND ITS COMMITTEES

         The Board of Directors met 7 times during the year ended December 31,
2000. Each Director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by all Committees of the Board on which such Director served. The
Board of Directors does not have a nominating committee.

         Audit Committee

         Radiance has a standing Audit Committee composed of Messrs. Edward M.
Leonard, William Davis and Gerard von Hoffmann. The Audit Committee operates
under a written charter adopted by the Board of Directors, a copy of which is
attached to the Proxy Statement as Exhibit A. The Audit Committee primarily is
responsible for approving the services performed by the Company's independent
public accountants and for reviewing and evaluating the Company's accounting
principles and reporting practices and its system of internal accounting
controls. All members of the Audit Committee are non-employee directors and
satisfy suggested Securities and Exchange Commission and National Association of
Securities Dealers standards with respect to independence, financial expertise
and experience. The Audit Committee met 6 times during the year ended December
31, 2000. To ensure independence, the Audit Committee also meets separately with
the Company's independent public accountants and members of management.


                                       7


<PAGE>   10

         REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

         Management is responsible for Radiance's internal controls and the
financial reporting process. Our independent auditors are responsible for
performing an independent audit of our consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report on
our financial statements. The Audit Committee's responsibility is to monitor and
oversee these processes.

         In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that Radiance's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Audit Committee discussed with the
independent auditors matters required to be discussed by Statement on Auditing
Standards No. 61 (Communi-cations with Audit Committees).

         Our independent auditors also provided to the Audit Committee the
written disclosure required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent auditors the auditing firm's independence. The
Committee also considered whether non-audit services provided by the independent
auditors during the last fiscal year were compatible with maintaining the
independent auditors' independence.

         Based upon the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the representation of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in Radiance's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 filed with the Securities
and Exchange Commission.

                                                  Members of the Audit Committee

                                                  Gerard von Hoffman
                                                  William G. Davis
                                                  Edward M. Leonard

         Compensation Committee

         Radiance has a standing Compensation Committee which met 4 times during
the year ended December 31, 2000. For the 2000 fiscal year, this Committee
consisted of Franklin D. Brown, Jeffrey O'Donnell and Maurice Buchbinder, M.D.
The Committee administers the Company's 1996 Option/Issuance Plan (the "1996
Option Plan") and other employee plans, and reviews and acts on matters relating
to compensation levels and benefit plans for key executives of Radiance. The
Compensation Committee has the power and authority to make stock option grants
under the 1996 Option Plan to the Company's officers.


                                       8


<PAGE>   11

REMUNERATION

         Non-employee directors each receive a fee of $1,000 per quarter, $1,000
for each Board meeting attended and reimbursement for certain travel expenses
and other out-of-pocket costs. Members of Committees of the Board each receive
an additional fee of $500 for each Committee meeting attended. Non-employee
Board members are eligible to receive periodic option grants under the Automatic
Option Grant Program in effect under the Company's 1996 Stock Option/Stock
Issuance Plan. Each individual who first becomes a non-employee Board member,
whether elected by the stockholders or appointed by the Board, automatically
will be granted, at the time of such initial election or appointment, an option
to purchase 5,000 shares of Common Stock at the fair market value per share of
Common Stock on the grant date. Each option has a maximum term of ten years. On
the date of each Annual Meeting of Stockholders, each individual who is to
continue to serve as a non-employee Board member after the Annual meeting will
receive an additional option grant to purchase 5,000 shares of Common Stock,
provided such individual has been a member of the Board for at least six months.

         Each initial option grant vests four over years, and each annual option
grant vests upon the completion of one year of Board service. The option grants
also vests immediately upon the optionee's death or permanent disability or an
acquisition of the Company by merger or asset sale or a hostile change in
control of the Company.

         Mr. von Hoffmann, a member of the Company's Board of Directors, is a
partner at Knobbe, Martens, Olson & Bear LLP, which serves as Intellectual
Property Counsel to the Company.

         Officers are appointed to serve, at the discretion of the Board of
Directors, until their successors are appointed. There are no family
relationships among executive officers or directors of Radiance. There are no
arrangements or understandings involving any director or any nominee regarding
such person's status as a director or nominee.


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         The members of the Board of Directors, the executive officers of
Radiance and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 which requires them to file reports with respect
to their ownership of the Common Stock and their transactions in such Common
Stock. Based upon (i) the copies of Section 16(a) reports that Radiance received
from such persons for their 2000 fiscal year transactions in the Common Stock
and their Common Stock holdings and/or (ii) the written representations received
from one or more of such persons that no annual Form 5 reports were required to
be filed by them for the 2000 fiscal year, Radiance believes that all reporting
requirements under Section 16(a) for such fiscal year were met in a timely
manner by its executive officers, Board members and greater than ten-percent
stockholders, except for the following: (i) Mr. Henson reported on a Form 5 but
failed to file a Form 4 with respect to 3,125 shares of Common Stock pursuant to
the exempt exercise of a stock option under the Company's stock option plan.

C
ERTAIN TRANSACTIONS

         On November 3, 1998, the Company signed a merger agreement with the
(former) Radiance Medical Systems, Inc. ("RMS"), pursuant to which RMS agreed to
merge with and into a wholly-owned subsidiary of the Company. The merger was
approved by the stockholders of the Company and completed on January 14, 1999.
Pursuant to the Merger, the Company paid the former stockholders of RMS $3.00
for each share of RMS preferred stock and $2.00 for each share of RMS common
stock, for a total consideration of approximately $7.0 million, excluding the
value of RMS common stock options to be provided to RMS optionholders in
exchange for their RMS common


                                       9


<PAGE>   12

stock options. The consideration was paid by delivery of an aggregate of
1,900,157 shares of Company Common Stock, and $0.7 million in cash to certain
RMS stockholders who elected cash. Options for 546,250 shares of RMS common
stock, with an exercise price of $0.065 per share, accelerated and vested
immediately prior to the completion of the Merger. Of these, 1,250 were
exercised, and holders received the same consideration for their shares of RMS
Common Stock as other holders of RMS Common Stock. The options not exercised
prior to the completion of the Merger were assumed by the Company and converted
into options to purchase $2.00 of Company common stock at the same exercise
price, which resulted in the conversion of an aggregate of 317,775 share of the
Company's Common Stock.

         In addition, the former RMS stockholders and optionholders may receive
product development milestone payments of $2.00 for each share of RMS preferred
stock and $3.00 for each share of RMS common stock. The milestone payments may
be increased up to 30%, or reduced or eliminated if the milestones are reached
earlier or later, respectively, than the milestone target dates. The milestones
represent important steps in the United States Food and Drug Administration and
European approval process which the Company determined was critical to bringing
the Company's technology to the marketplace. The Company did not achieve its
initial three milestones which had target dates of April 30, 1999, June 30, 2000
and September 30, 2000, respectively. Therefore, potential product development
milestone payments have been reduced to $.4615 per share for preferred stock and
$.6923 for common stock.

         Michael R. Henson, currently the Chairman of the Board of the Company,
served as Chairman of the Board and Chief Executive Officer of RMS from June
1998 until March 1999. Prior to the merger, Mr. Henson owned 300,000 shares of
RMS Common Stock, acquired in June 1998 for $0.065 per share in return for
agreeing not to take a salary from RMS. Mr. Henson also owned 15,500 shares of
Radiance Series A Preferred Stock, and options to purchase 135,000 shares of
Radiance Common Stock. In addition, Mr. Henson's wife owned options to purchase
an additional 40,000 shares of Radiance Common Stock. As a result of the merger,
Mr. Henson and his wife received an aggregate of 194,143 shares of the Company's
common stock, and depending upon the achievement by the Company of the final
product development milestone, are entitled to receive up to an additional
104,122 shares of the Company's common stock. In addition, pursuant to the
merger, options held by Mr. Henson and his wife were converted into an aggregate
of 102,040 options to purchase shares of the Company's common stock at an
exercise price of $0.11.

         Maurice Buchbinder, M.D., who was appointed to the Board of Directors
of the Company after completion of the merger, was the largest stockholder in
RMS (other than the Company) and owned 769,230 shares of Series A Preferred
Stock of RMS and options to purchase 160,000 shares of Common Stock of RMS.. In
addition, Dr. Buchbinder was a director of RMS. As a result of the merger, Dr.
Buchbinder received an aggregate of 693,000 shares of the Company's common
stock, and depending upon the achievement by the Company of the final product
development milestone, is entitled to receive up to an additional 139,871 shares
of the Company's common stock. In addition, pursuant to the merger, Dr.
Buchbinder's options were converted into 93,294 options to purchase shares of
the Company's common stock at an exercise price of $0.11. In addition to
receiving the merger consideration in exchange for his capital stock of RMS, the
Company agreed to appoint Dr. Buchbinder the Medical Director of the Company for
a period of four years on a consulting basis, pursuant to which he received a
grant of an option to purchase 50,000 shares of the Company's common stock at an
exercise price of $3.63.


                                       10

<PAGE>   13

         Prior to the merger, Gerard von Hoffmann, a director of the Company,
owned 16,000 shares of Radiance Series A Preferred Stock and options to purchase
20,000 shares of Radiance Common Stock. As a result of the merger, Mr. von
Hoffmann received an aggregate of 14,414 shares of the Company's common stock,
and depending upon the achievement by the Company of the product development
milestones, is entitled to receive up to an additional 34,868 shares of the
Company's common stock. In addition, pursuant to the merger, Mr. von Hoffmann's
options were converted into 11,661 options to purchase shares of the Company's
common stock at an exercise price of $0.11.

         Jeffrey O'Donnell, currently a director who also served as Chief
Executive Officer and President of Radiance from June 1998 until March 1999, and
Jeffery Thiel, currently President and Chief Executive Officer, each had options
to purchase 5,000 shares of RMS Common Stock that were granted by the Board of
Directors of RMS in exchange for providing certain management services relating
to research and development, regulatory, manufacturing and marketing.

         Other than the officer loan described below under Executive
Compensation and Related Information and the RMS transaction described above,
the Company was not involved in any transaction during the fiscal year ended
December 31, 1998 in which a director, officer or greater than 5% stockholder
had a direct or indirect material interest involving an amount in excess of
$60,000.

R
ECOMMENDATION OF THE BOARD OF DIRECTORS

 
        THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE
NOMINEES NAMED ABOVE.



                                       11

<PAGE>   14


                                 PROPOSAL NO. 2

                RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

         The Board of Directors, on recommendation of Radiance's management, has
selected PricewaterhouseCoopers LLP to continue as independent auditors for the
2001 fiscal year. Radiance is asking the stockholders to ratify the selection by
the Board of Directors of Pricewaterhouse- Coopers LLP as independent auditors
to audit the consolidated financial statements of Radiance for the fiscal year
ending December 31, 2001 and to perform other appropriate services. A
representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting to respond to stockholders' questions, and that representative
will be given an opportunity to make a brief presentation to the stockholders if
he or she so desires and will be available to respond to appropriate questions.
Radiance has been advised by PricewaterhouseCoopers LLP that neither that firm
nor any of its associates has any material relationship with Radiance nor any
affiliate of Radiance.

AUDIT FEES

         Audit fees billed or expected to be billed to Radiance by
PricewaterhouseCoopers LLP for the audit of our financial statements for the
fiscal year ended December 31, 2000 and for reviews of our financial statements
included in our quarterly reports on Form 10-Q for the last fiscal year totaled
$67,000, of which $24,300 had been billed by 12/31/00.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

         No fees were billed or are expected to be billed to Radiance by
PricewaterhouseCoopers LLP for services provided during the last fiscal year for
the design and implementation of financial information systems.

ALL OTHER FEES

         Fees billed or expected to be billed to Radiance by
PricewaterhouseCoopers LLP for all other non-audit services, including our
secondary offering and tax-related services, provided during the last fiscal
year totaled $177,000. The Audit Committee has considered whether the provision
of non-audit services is compatible with maintaining PricewaterhouseCoopers
LLP's independence and believes that the provision of such services is
compatible with maintaining their independence.

T
HE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.



                                       12

<PAGE>   15

                                     GENERAL

      SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

         The following table sets forth certain information known to Radiance
regarding the ownership of Radiance's Common Stock as of March 15, 2001 by (i)
each stockholder known to Radiance to be a beneficial owner of more than five
percent (5%) of Radiance's Common Stock, (ii) each director and nominee for
director, (iii) the Named Executive Officers (as such term is defined under the
caption "Executive Compensation and Related Information") and (iv) all current
directors and officers of Radiance as a group.

                                                   NUMBER OF
                                                     SHARES           PERCENT OF
                                                  BENEFICIALLY       OUTSTANDING
NAME AND ADDRESS                                    OWNED(1)          SHARES(2)
----------------                                  ------------       -----------
William Harris Investors(3)                         772,205             5.9%
  Two North La Salle Street, Suite 400
  Chicago, IL 60602

Michael R Henson(4)                                 588,434             4.5%
  13900 Alton Parkway, Ste. 122
  Irvine, CA 92618

Joseph Bishop (5)                                    37,971              *

Franklin D. Brown(6)                                 42,500              *

Maurice Buchbinder, M.D.(7)                         855,357             6.5
  13900 Alton Parkway, Ste. 122
  Irvine, CA 92618

William G. Davis(8)                                  50,430              *

Gerard von Hoffmann(9)                               75,429              *

Stephen R. Kroll(10)                                112,933              *

Edward M. Leonard(11)                                71,192              *

Jeffrey F. O'Donnell(12)                            249,289             1.9

Edward F. Smith III(13)                               2,588              *

Jeffrey H. Thiel(14)                                135,012             1.0

All directors and officers as a group             2,301,056            16.5%
  (13 persons)(15)

Total Principal Stockholders                      3,813,161            29.2%


                                       13


<PAGE>   16

--------------
  *  Represents beneficial ownership of less than 1%.

 (1) The number of shares of Common Stock beneficially owned includes any shares
     issuable pursuant to stock options that may be exercised within 60 days
     after March 15, 2001. Shares issuable pursuant to such options are deemed
     outstanding for computing percentage of the person holding such options but
     are not deemed to be outstanding for computing the percentage of any other
     person.

 (2) Applicable percentages are based on 13,067,226 shares plus the number of
     shares such individual can acquire within 60 days of March 15, 2001.

 (3) Pursuant to a Schedule 13G filed with the Commission on February 12, 2001,
     William Harris Investors reported that it had shared voting and sole
     dispositive power over 772,205 shares.

 (4) Include 72,292 shares subject to options exercisable within 60 days after
     March 15, 2001.

 (5) Includes 32,646 shares subject to options exercisable within 60 days after
     March 15, 2001.

 (6) Includes 37,500 shares subject to options exercisable within 60 days after
     March 15, 2001.

 (7) Includes 152,357 shares subject to options exercisable within 60 days after
     March 15, 2001.

 (8) Includes 43,500 shares subject to options exercisable within 60 days after
     March 15, 2001. Mr. Davis shares voting and investment power with his
     spouse as co-trustee with respect to 6,930 shares held in a revocable
     trust.

 (9) Includes 37,500 shares subject to options exercisable within 60 days after
     March 15, 2001.

(10) Includes 87,813 shares subject to options exercisable within 60 days after
     March 15, 2001. Mr. Kroll shares voting and investment power with his
     spouse as co-trustee with respect to 25,120 shares, which are held in a
     revocable trust.

(11) Includes 37,500 shares subject to options exercisable within 60 days after
     March 15, 2001. Mr. Leonard shares voting and investment power as a
     beneficiary with respect to 22,807 shares held in a retirement trust. Mr.
     Leonard disclaims beneficial ownership with respect to 200 shares held by
     his spouse and 3,000 shares held as custodian for his minor children under
     the Uniform Gift to Minors Act.

(12) Includes 244,478 shares subject to options exercisable within 60 days after
     March 15, 2001.

(13) Includes 20,521 shares subject to options exercisable within 60 days after
     March 15, 2001.

(14) Includes 110,231 shares subject to options exercisable within 60 days after
     March 15, 2001. Mr. Thiel shares voting and investment power with his
     spouse as co-trustee with respect to 24,781 shares, which are held in a
     revocable trust.

(15) Includes 904,672 shares subject to options exercisable within 60 days after
     March 15, 2001.



                                       14

<PAGE>   17

                 EXECUTIVE COMPENSATION AND RELATED INFORMATION

         The following table sets forth the salary and bonus earned for the
three fiscal years ended December 31, 2000, by the Company's Chief Executive
Officer, Mr. Thiel and executive officers whose salary and bonus for the 2000
fiscal year exceeded of $100,000. All the individuals named in the table are
referred to in this Proxy Statement as the "Named Executive Officers."


                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                           ANNUAL COMPENSATION
                                                   -----------------------------------
                                                                               SHARES
    NAME AND                                                                 UNDERLYING
PRINCIPAL POSITION                        YEAR     SALARY(1)      BONUS(2)     OPTIONS
------------------                        ----     ---------      --------   ----------
<S>                                       <C>      <C>            <C>        <C>
Michael R. Henson(*)                      2000      345,046(3)     92,400     135,000
   Chairman of the Board,                 1999      264,000        84,480     123,125
   Chief Executive Officer                1998      220,000        77,000      55,000

Jeffrey H. Thiel(**)                      2000      178,286        58,500     248,000
   President, Chief Executive             1999      173,092        41,542     173,000
   Officer                                1998      132,692        26,640      98,000

Stephen R. Kroll(***)                     2000      177,300        52,750     160,000
   Vice President, Finance and            1999      173,846        41,723     145,000
   Administration, Chief Financial        1998      108,462        21,697      60,000
   Officer and Secretary

Edward F. Smith III,Phd(****)             2000      149,259        31,500      65,000
   Vice President, Research and           1999       30,692         7,000      55,000
   Development                            1998           --            --          --

Brett A. Trauthen(*****)                  2000      128,285        32,500      70,000
   Vice President, Clinical Affairs       1999      105,192        21,011     100,816
                                          1998           --            --          --
</TABLE>


---------------

(*)       Mr. Henson served as the Chief Executive Officer of the Company from
          January thru June 1998 and from March 1999 through December 2000.

(**)      Mr. Thiel was elected Chief Executive Officer effective January 1,
          2001 and has served as President and Chief Operating Officer since
          October 1999. Previously he held the position of Executive Vice
          President, Operations.

(***)     Mr. Kroll was hired by the Company as Vice President, Finance and
          Administration, Chief Financial Officer and Secretary in April 1998.

(****)    Dr. Smith was hired by the Company as Vice President, Research and
          Development in 1999.

(*****)   Mr. Trauthen joined the Company as Vice President, Clinical
          Development in January 1999 following our merger with the former
          Radiance.

(1)       Includes amounts contributed by the Named Executive Officers to the
          Company's 401(K) Plan.

(2)       Represents amounts paid in subsequent fiscal year for work performed
          in prior fiscal year.

(3)       Includes payment of $81,286 of accrued vacation.



                                       15

<PAGE>   18

STOCK OPTIONS

         The following table provides information with respect to the stock
option grants made during the 2000 fiscal year under the Company's 1996 Stock
Option/Stock Issuance Plan to the Named Executive Officers. No stock
appreciation rights were granted during such fiscal year to the Named Executive
Officers.

                        OPTION GRANTS IN LAST FISCAL YEAR


<TABLE>
<CAPTION>

                                                INDIVIDUAL GRANTS
                            ----------------------------------------------------------        POTENTIAL REALIZABLE
                                            % OF TOTAL                                           VALUE AT ASSUMED
                              NUMBER OF       OPTIONS                                         ANNUAL RATES OF STOCK
                             SECURITIES      GRANTED TO                                         PRICE APPRECIATION
                             UNDERLYING      EMPLOYEES       EXERCISE OR                         FOR OPTION TERM
                              OPTION         IN FISCAL       BASE PRICE     EXPIRATION       ------------------------
      NAME                   GRANTED(1)       YEAR(2)         ($/SH)(3)        DATE          5%($)(4)       10%($)(4)
      ----                   ----------     -----------      -----------    ----------       --------       ---------
<S>                          <C>            <C>              <C>            <C>              <C>            <C>
Michael R. Henson              15,000             5              7.00          6/5/10        $ 66,034       $167,343

Jeffrey H. Thiel               15,000             5              7.00          6/5/10          66,034        167,343
                               60,000            21              6.38        11/13/10         240,552        609,606

Stephen R. Kroll               15,000             5              7.00          6/5/10          66,034        167,343

Edward F. Smith III            10,000             4              7.00          6/5/10          44,023        111,562

Brett Trauthen                 10,000             4              7.00          6/5/10          44,023        111,562

</TABLE>


------------------
(1)  The option listed in the table was granted under the Company's 1996 Stock
     Option/Stock Issuance Plan. The options have a maximum term of ten years
     measured from the date of grant. Twenty-five percent (25%) of the options
     are exercisable upon the optionee's completion of one year of service
     measured from the date of grant, and the balance are exercisable in a
     series of successive equal monthly installments upon the optionee's
     completion of each additional month of service over the next 36 months
     thereafter.

(2)  Based upon options granted for an aggregate of 282,000 shares to employees
     in 2000, including the Named Executive Officers.

(3)  The exercise price may be paid in cash, in shares of the Company's 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 also may finance the option exercise by loaning the
     optionee sufficient funds to pay the exercise price for the purchased
     shares, together with any federal and state income tax liability incurred
     by the optionee in connection with such exercise. The Compensation
     Committee of the Board of Directors, as the Plan Administrator of the
     Company's 1996 Stock Option/Stock Issuance Plan, has the discretionary
     authority to reprice the options through the cancellation of those options
     and the grant of replacement options with an exercise price based on the
     fair market value of the option shares on the grant date.

(4)  The 5% and 10% assumed annual rates of compounded stock price appreciation
     are mandated by rules of the Securities and Exchange Commission. There can
     be no assurance provided to any executive officer or any other holder of
     the Company's securities that the actual stock price appreciation over the
     option term will be at the assumed 5% and 10% levels or at any other
     defined level. Unless the market price of the Common Stock appreciates over
     the option term, no value will be realized from the option grants made to
     the executive officers.



                                       16

<PAGE>   19

OPTION EXERCISES AND HOLDINGS

         The table below sets forth information concerning the exercise of
options during the 1999 fiscal year and unexercised options held by the Named
Executive Officers as of the end of such year. No stock appreciation rights were
exercised by the Named Executive Officers during such fiscal year or were
outstanding at the end of that year.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES
                            SHARES        AGGREGATE        UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                           ACQUIRED         VALUE             OPTIONS AT FY-END          OPTIONS AT FY-END($)(2)
                          ON EXERCISE      REALIZED       --------------------------   --------------------------
     NAME                   EXERCISE        ($)(1)        EXERCISABLE  UNEXERCISABLE   EXERCISABLE  UNEXERCISABLE
     ----                 -----------     ---------       -----------  -------------   -----------  -------------
<S>                       <C>             <C>             <C>          <C>             <C>          <C>
Michael R. Henson            3,125          17,187           60,834        74,166         24,135       25,520
Jeff Thiel                       0               0           93,457       154,543         44,011       43,335
Stephen R. Kroll                 0               0           73,749        86,251         60,161       72,929
Edward F. Smith III              0               0           14,792        50,208              0            0
Brett Trauthen                   0               0           23,125        46,875         19,766       21,484
</TABLE>


--------------------
(1)  Based on the fair market value on the date of exercise less the exercise
     price payable for such shares.

(2)  Based on the fair market value of the Company's Common Stock at year-end,
     $4.94 per share, less the exercise price payable for such shares.



                                       17

<PAGE>   20

MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS

         Radiance has entered into employment agreements, which include change
of control provisions with 7 of its senior executives including Mr. Henson, Mr.
Thiel and the other named Executive Officers. The agreements are for a term of
one year and are "evergreen" so that the remaining term is always one year.
Under the terms of the agreements, the officers are granted a base salary which
may be increased subject to review annually by the Compensation Committee of the
Board of Directors. The agreements also specify the officers participation
percentage in the incentive compensation plan of the Company and rights to
participate in other benefit plans. Pursuant to the employment agreements, Mr.
Henson is not entitled to a bonus. Mr. Thiel is entitled to earn a bonus of up 
to 35% of base salary. Mr. Kroll is entitled to earn a bonus of up to 30% of 
base salary, and Mssrs. Smith and Trauthen are entitled to earn bonuses of up to
25% of base salary.

         Pursuant to the agreements, the Company may terminate each officer at
any time upon at least thirty (30) days written notice. If such termination is
without cause, each such Officer is entitled to received a severance amount
equal to his then current base salary payable for the remainder of the term and
all of his stock options shall accelerate and automatically vest by one
additional year, and such options otherwise shall be exercisable in accordance
with their terms. In addition, the agreements provide that in the event of a
change of control or acquisition of the Company during the term of his
employment, all options shall vest in full and all rights of the Company to
repurchase restricted stock shall terminate. In addition, each officer's
compensation and benefits will be continued for 1 year following termination. A
change of control is triggered by: (i) the acquisition by any person of
beneficial ownership of 50% or more of the voting power of the Company's
outstanding securities pursuant to a transaction which the Board of Directors
does not recommend to the stockholders; (ii) a change in the majority of the
incumbent members of the Board of Directors (unless such change is approved by a
majority of the incumbent members); (iii) a merger of the Company pursuant to
which more than 50% of the voting power is transferred to a third party, in a
transaction approved by the stockholders; and (iv) the sale, transfer or other
disposition of substantially all of the Company's assets in complete liquidation
or dissolution of the Company, in a transaction approved by the stockholders.

OFFICER LOANS

         On January 24, 1997, the Company loaned $100,000 to Jeffrey H. Thiel,
the Company's President. The note was secured by a second deed of trust on Mr.
Thiel's home and has a five-year term with interest compounding semi-annually at
6%. The principal and interest will be due January 24, 2002.

C
OMPENSATION COMMITTEE REPORT

         The Compensation Committee of the Board of Directors makes
recommendations to the full Board with respect to the base salary and bonuses to
be paid to the Company's executive officers each fiscal year. In addition, the
Compensation Committee has the authority to administer the Radiance 1996 Stock
Option/Stock Issuance Plan with respect to option grants and stock issuances
made thereunder to officers and other key employees. The following is a summary
of the policies of the Compensation Committee which affect the compensation paid
to executive officers, as reflected in the tables and text set forth elsewhere
in this Proxy Statement.

         General Compensation Policy. The Company's compensation policy is
designed to attract and retain qualified key executives critical to the
Company's success and to provide such executives with performance-based
incentives tied to the achievement of Company milestones. One of the
Compensation Committee's primary objectives is to have a substantial portion of
each officer's total


                                       18

<PAGE>   21

compensation contingent upon the Company's performance as well as upon the
individual's contribution to the success of Radiance as measured by his personal
performance. Accordingly, each executive officer's compensation package is
comprised primarily of three elements: (i) base salary which reflects individual
performance and expertise and is designed to be competitive with salary levels
in the industry; (ii) variable performance awards payable in cash and tied to
the Company's achievement of certain goals; and (iii) long-term stock-based
incentive awards which strengthen the mutuality of interests between the
executive officers and the Radiance stockholders.

         Factors. The principal factors which the Compensation Committee
considered in establishing the components of each executive officer's
compensation package for the 2000 fiscal year are summarized below. However, the
Committee may in its discretion apply different factors, particularly different
measures of financial performance, in setting executive compensation for future
fiscal years.

         Base Salary. The base salary levels for the executive officers were
established by the Board for the 2000 fiscal year on the basis of the following
factors: personal performance, the estimated salary levels in effect for similar
positions at a select group of companies with which the Company competes for
executive talent, and internal comparability considerations. Although the
Compensation Committee reviewed various compensation surveys, the Board did not
rely upon any specific survey for comparative compensation purposes. Instead,
the Board made its decisions as to the appropriate market level of base salary
for each executive officer on the basis of its understanding of the salary
levels in effect for similar positions at those companies with which the Company
competes for executive talent. Base salaries will be reviewed by the
Compensation Committee on an annual basis, and adjustments will be made in
accordance with the factors indicated above.

         Annual Incentive Compensation. The Radiance Employee Bonus Plan
provides the Board of Directors with discretionary authority to award cash
bonuses to executive officers and employees in accordance with recommendations
made by the Compensation Committee. The Compensation Committee's recommendations
are based upon the extent to which financial and performance targets
(established semi-annually by the Compensation Committee) are met and the
contribution of each such officer and employee to the attainment of such
targets. For fiscal year 2000, the performance targets for each of the Named
Executive Officers included gross sales, cash flow, engineering product goals
and regulatory submission goals. The weight given to each factor varied from
individual to individual.

         Long-Term Incentive Compensation. The 1996 Stock Option/Stock Issuance
Plan also provides the Board with the ability to align the interests of the
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage Radiance from the perspective of an owner
with an equity stake in the business. The number of shares subject to each
option grant is based upon the officer's tenure, level of responsibility and
relative position in Radiance. The Company has established general guidelines
for making option grants to the executive officers in an attempt to target a
fixed number of unvested option shares based upon the individual's position with
the Company and their existing holdings of unvested options. However, the
Company does not adhere strictly to these guidelines and will vary the size of
the option grant made to each executive officer as it feels the circumstances
warrant. Each grant allows the officer to acquire shares of Radiance Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time (up to 10 years from the date of grant). The option
normally vests in periodic installments over a four-year period, contingent upon
the executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she remains
in the Company's employ and the market price of the Company's Common Stock
appreciates over the option term.


                                       19

<PAGE>   22

         CEO Compensation. The Compensation Committee set the base salary for
Michael R. Henson, the Company's Chief Executive Officer during 2000, and
Jeffrey H. Thiel, the Company's Chief Executive Officer commencing January 1,
2001, at a level which is designed to provide a salary competitive with salaries
paid to chief executive officers of similarly-sized companies in the industry
and commensurate with each such individual's experience. Mr. Henson's experience
in the industry as a chief executive officer of various companies during a
period of over fifteen years, and Mr. Thiel's experience at the Company and his
work on several corporate transactions during the fiscal year, were important
factors in setting the total compensation for each individual. The Compensation
Committee did not intend to have the base salary component of compensation
affected to any significant degree by Company performance. The Company granted
Mr. Henson and Mr. Thiel, 15,000 and 75,000 options respectively, both as
recognition of their service to the Company during the fiscal year and as an
incentive to participate in the success and increased value of the Company, and
to align their interests with the long-term interest of the Company's
stockholders.

         Compliance With Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction
to publicly held corporations for compensation exceeding $1 million paid to
certain of the corporation's executive officers. The limitation applies only to
compensation which is not considered to be performance-based. The
non-performance based compensation to be paid to the Company's executive
officers for the 2000 fiscal year did not exceed the $1 million limit per
officer, nor is it expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal 2001 will exceed that limit.
The Company's 1996 Stock Option/Stock Issuance Plan is structured so that any
compensation deemed paid to an executive officer in connection with the exercise
of option grants made under that plan will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Compensation Committee has decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Compensation Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.


                                             COMPENSATION COMMITTEE

                                             Franklin D. Brown
                                             Maurice Buchbinder, MD
                                             Jeffrey F. O'Donnell


                                       20


<PAGE>   23

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The members of the Compensation Committee in fiscal 2000 were Maurice
Buchbinder, M.D; Franklin D. Brown and Jeffrey F. O'Donnell. Jeffrey F.
O'Donnell served as the Company's President and Chief Executive Officer until
March 1999. Dr. Buchbinder served as the Medical Director of the Company on a
consulting basis, pursuant to which he received in January 1999 a grant of an
option to purchase 50,000 shares of the Company's common stock at an exercise
price of $3.63 per share. In February 2000 he received a grant of an option to
purchase 30,000 shares at an exercise price of $6.59 per share. No other member
of the Compensation Committee was at any time during the 2000 fiscal year or at
any other time an officer or employee of Radiance.

         No executive officer of Radiance served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.


                                       21


<PAGE>   24

STOCK PERFORMANCE GRAPH

         The graph depicted below shows Radiance's stock price as an index
assuming $100 invested on June 19, 1996 (the date of Radiance's initial public
offering), along with the composite prices of companies listed on the CRSP Total
Return Index for National Association of Securities Dealers Automated Quotation
("Nasdaq") Stock Market and the Hambrecht & Quist Incorporated Total Return
Index for Healthcare Technology Companies (Excluding Biotechnology). This
information has been provided to Radiance by Hambrecht & Quist Incorporated.

                   JP MORGAN H&Q INDEX PRODUCTS AND SERVICES:
                       2001 PROXY PERFORMANCE GRAPH DATA
                              MONTHLY DATA SERIES
                                  ACTUAL PRICES

                                                  JP Morgan
                                                     H&Q
            Radiance                              Healthcare
            Medical           Nasdaq Stock        Excluding
Dates       Systems            Market-U.S.         Biotech
-----       -------           ------------        ----------
######       12.00              388.722             622.29         
Jun-96       12.25              391.219             626.60         
Jul-96       12.75              356.396             573.92         
Aug-96       15.00              376.421             611.37         
Sep-96       15.25              405.205             687.63         
Oct-96       13.00              400.701             651.84         
Nov-96       12.25              425.541             671.95         
Dec-96       13.00              425.181             691.89         
Jan-97       10.25              455.348             729.63         
Feb-97       10.75              430.146             717.64         
Mar-97       10.00              402.095             657.22         
Apr-97        7.13              414.631             671.78         
May-97        7.75              461.591             738.29         
Jun-97        7.88              475.783             786.79         
Jul-97        9.06              525.909             830.12         
Aug-97        7.75              525.122             788.53         
Sep-97        8.00              556.242             824.65         
Oct-97        6.75              527.263             783.90         
Nov-97        5.50              530.048             798.53         
Dec-97        5.50              520.755             824.54         
Jan-98        4.25              537.248             826.16         
Feb-98        4.81              587.731             902.56         
Mar-98        5.16              609.454             937.56         
Apr-98        6.00              619.756             967.13         
May-98        6.63              585.322             928.87         
Jun-98        5.56              626.275             955.25         
Jul-98        5.06              618.968             937.63         
Aug-98        3.38              496.275             779.66         
Sep-98        3.88              565.127             843.23         
Oct-98        3.06              589.955             888.14         
Nov-98        4.13              649.938             942.34         
Dec-98        3.06              734.376            1001.88        
Jan-99        3.69              840.971             958.36         
Feb-99        4.25              765.661             931.07         
Mar-99        4.13              823.596             954.53         
Apr-99        3.00              850.128             955.85         
May-99        2.75              826.583             951.09         
Jun-99        2.94              900.956             979.51         
Jul-99        3.00              884.708             957.09         
Aug-99        5.25              922.119             937.85         
Sep-99        6.75              923.386             846.10         
Oct-99        5.13              997.393             830.81         
Nov-99        5.50             1118.741             876.73         
Dec-99        4.94             1364.746             875.33         
Jan-00        7.50             1314.116             902.82         
Feb-00        9.00              1563.80             881.60         
Mar-00        9.50             1531.672             928.87         
Apr-00        8.75             1288.290             990.00         
May-00        9.03             1132.880            1030.66        
Jun-00        8.50             1331.669            1128.14        
Jul-00       11.75             1259.521            1143.66        
Aug-00       13.81             1408.339            1181.99        
Sep-00       11.63             1225.310            1253.11        
Oct-00        8.63             1124.218            1293.55        
Nov-00        5.94              866.770            1319.77        
Dec-00        5.00              821.146            1369.34        


                                       22

<PAGE>   25

                   JP MORGAN H&Q INDEX PRODUCTS AND SERVICES:
                        2001 PROXY PERFORMANCE GRAPH DATA
                               MONTHLY DATA SERIES


         SCALED PRICES: Stock and index prices scaled to 100 at 6/19/96

                                                      JP Morgan
                                                         H&Q
               Radiance                               Healthcare
               Medical           Nasdaq Stock         Excluding
Dates          Systems            Market-U.S.          Biotech
-----          -------           ------------         ----------
######          100.00              100.00              100.00
Jun-96          102.08              100.64              100.69
Jul-96          106.25               91.68               92.23
Aug-96          125.00               96.84               98.24
Sep-96          127.08              104.24              110.50
Oct-96          108.33              103.08              104.75
Nov-96          102.08              109.47              107.98
Dec-96          108.33              109.38              111.18
Jan-97           85.42              117.14              117.25
Feb-97           89.58              110.66              115.32
Mar-97           83.33              103.44              105.61
Apr-97           59.38              106.67              107.95
May-97           64.58              118.75              118.64
Jun-97           65.63              122.40              126.43
Jul-97           75.52              135.29              133.40
Aug-97           64.58              135.09              126.71
Sep-97           66.67              143.10              132.52
Oct-97           56.25              135.64              125.97
Nov-97           45.83              136.36              128.32
Dec-97           45.83              133.97              132.50
Jan-98           35.42              138.21              132.76
Feb-98           40.10              151.20              145.04
Mar-98           42.97              156.78              150.66
Apr-98           50.00              159.43              155.41
May-98           55.21              150.58              149.27
Jun-98           46.35              161.11              153.50
Jul-98           42.19              159.23              150.67
Aug-98           28.13              127.67              125.29
Sep-98           32.29              145.38              135.50
Oct-98           25.52              151.77              142.72
Nov-98           34.38              167.20              151.43
Dec-98           25.52              188.92              161.00
Jan-99           30.73              216.34              154.00
Feb-99           35.42              196.97              149.62
Mar-99           34.38              211.87              153.39
Apr-99           25.00              218.70              153.60
May-99           22.92              212.64              152.84
Jun-99           24.48              231.77              157.40
Jul-99           25.00              227.59              153.80
Aug-99           43.75              237.22              150.71
Sep-99           56.25              237.54              135.96
Oct-99           42.71              256.58              133.51
Nov-99           45.83              287.80              140.89
Dec-99           41.15              351.09              140.66
Jan-00           62.50              338.06              145.08
Feb-00           75.00              402.29              141.67
Mar-00           79.17              394.03              149.27
Apr-00           72.92              331.42              159.09
May-00           75.26              291.44              165.62
Jun-00           70.83              342.58              181.29
Jul-00           97.92              324.02              183.78
Aug-00          115.10              362.30              189.94
Sep-00           96.88              315.21              201.37
Oct-00           71.88              289.21              207.87
Nov-00           49.48              222.98              212.08
Dec-00           41.67              211.24              220.05

Note: Assumes $100 invested on 6/19/96 in Radiance and in the CRSP Total Return
      Index for Nasdaq Stock Market and the H&Q Total Return Index for
      Healthcare Technology Companies (Excluding Biotechnology). Assumes
      Reinvestment of Dividends on a daily basis.

         Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 which might incorporate future filings, including this
Proxy Statement, the preceding Compensation Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated by
reference into any of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.

                                       23

<PAGE>   26

                             DEADLINE FOR RECEIPT OF
                  STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING

         Any Stockholder desiring to submit a proposal for action at the 2002
Annual Meeting of Stockholders should arrange for such proposal to be delivered
to Radiance at its principal place of business no later than January 6, 2002, in
order to be considered for inclusion in Radiance's proxy statement relating to
that meeting. Matters pertaining to such proposals, including the number and
length thereof, the eligibility of persons entitled to have such proposals
included and other aspects are regulated by the Securities Exchange Act of 1934,
Rules and Regulations of the SEC and other laws and regulations.

         Rule 14a-4(c)(1) governs Radiance's use of its discretionary proxy
voting authority with respect to a stockholder proposal which is not addressed
in Radiance's proxy statement. The rule provides that if a proponent of a
proposal fails to notify Radiance at least 45 days prior to the month and day of
mailing of the prior year's proxy statement, then Radiance will be allowed to
use its discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement.

         With respect to Radiance's 2001 Annual Meeting of Stockholders, if
Radiance is not provided notice of a stockholder proposal, which the stockholder
has not previously sought to include in Radiance's proxy statement, by March 26,
2001, Radiance will be allowed to use its voting authority as outlined.

                                 OTHER BUSINESS

         The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.

                                             BY ORDER OF THE BOARD OF DIRECTORS

                                             Stephen R. Kroll
                                             Secretary


May 2, 2001

                                       24

<PAGE>   27

                                                                       EXHIBIT A

            CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

                                       OF

                         RADIANCE MEDICAL SYSTEMS, INC.

I. AUDIT COMMITTEE PURPOSE

The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:

o   Monitor the integrity of the Company's financial reporting process and
    systems of internal controls regarding finance and accounting.

o   Monitor the Company's compliance with financial regulatory requirements.

o   Monitor the independence and performance of the Company's independent
    auditors.

o   Provide an avenue of communication among the independent auditors,
    management and the Board of Directors.

The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.

While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations.

II. AUDIT COMMITTEE COMPOSITION AND MEETINGS

Audit Committee members shall meet the independence and experience requirements
of the requirements of the Nasdaq National Market. The Audit Committee shall be
comprised of three or more directors as determined by the Board, each of whom
shall be independent nonexecutive directors, free from any relationship that
would interfere with the exercise of his or her independent judgment. All
members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial statements,
at least one member of the Committee shall have accounting or related financial
management expertise.


                                       A-1


<PAGE>   28

Audit Committee members shall be appointed by the Board on recommendation of the
Board of Directors, or the Nominating Committee if one exists. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.

The Committee shall meet as frequently as circumstances dictate. The Committee
should meet privately in executive session at least annually with management,
the independent auditors, and as a committee, to discuss any matters that the
Committee or each of these groups believe should be discussed.

III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES

The Audit Committee responsibilities and duties shall include the following:

REVIEW PROCEDURES

1. Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with SEC regulations.

2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and independent
auditors of significant issues regarding accounting principles, practices and
judgments.

3. In consultation with management and the independent auditors consider the
integrity of the Company's financial reporting processes and controls. Review
significant findings prepared by the independent auditors together with
management's responses.

4. Review with financial management and the independent auditors the company's
quarterly financial results prior to the release of earnings and/or the
company's quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting principles and any
items required to be communicated by the independent auditors in accordance with
SAS 61 as amended (see item 8). The Chair of the Committee or other designated
member may represent the entire Audit Committee for purposes of this review.



                                      A-2

<PAGE>   29

INDEPENDENT AUDITORS

5. The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the independence
and performance of the auditors and annually recommend to the Board of Directors
the appointment of the independent auditors or approve any discharge of auditors
when circumstances warrant.

6. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the Company
that could impair the auditors' independence.

7. Prior to releasing the year-end earnings, discuss the results of the audit
with the independent auditors. Discuss certain matters required to be
communicated to audit committees in accordance with AICPA SAS 61, as amended.

8. Determine, as regards to new transactions or events, the auditors' reasoning
for the appropriateness of the accounting principles and disclosure practices
adopted by management.

9. Inquire as to the auditors' views about how the Company's choices of
accounting principles and disclosure practices may affect members and public
views and attitudes about the Company.

OTHER AUDIT COMMITTEE RESPONSIBILITIES

10. Annually prepare a report to shareholders as required by the SEC. The report
should be included in the Company's annual proxy statement and shall state
whether the Audit Committee have:

o   Reviewed and discussed the audited financial statements with management;

o   Discussed with the independent auditors the matters required to be discussed
    by SAS 61 as amended; and

o   Received certain disclosures from the auditors regarding their independence
    as required by the ISB 1, and state whether the Audit Committee recommended
    to the Board of Directors that the audited financial statements be included
    in the annual report filed with the SEC based upon such disclosure.

11. Review financial and accounting personnel succession planning within the
company.

12. Perform any other activities consistent with this Charter, the Company's
by-laws, and governing law, as the Committee or the Board deems necessary or
appropriate.

13. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.



                                      A-3

<PAGE>   30


                                      PROXY

                         RADIANCE MEDICAL SYSTEMS, INC.

                  ANNUAL MEETING OF STOCKHOLDERS, JUNE 5, 2001
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         The undersigned revokes all previous proxies, acknowledges receipt of
the notice of annual meeting of stockholders to be held on June 5, 2001 and the
proxy statement and appoints Michael R. Henson and Stephen R. Kroll, or either
of them, the proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Radiance Medical Systems, Inc. ("Radiance") which
the undersigned is entitled to vote, either on his or her own behalf or on
behalf of an entity or entities, at the Annual Meeting of Stockholders of
Radiance to be held at the Company's offices at 13900 Alton Parkway, Suite 122,
Irvine, California 92618 on Tuesday, June 5, 2001 at 9:00 a.m., and at any
adjournment or postponement thereof, and to vote in their discretion on such
other business as may properly come before the Annual Meeting and any
postponement or adjournment thereof.


                  (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
--------------------------------------------------------------------------------
                            - FOLD AND DETACH HERE -


             Please mark your votes as indicated in [X] this example

1. ELECTION OF DIRECTORS INSTRUCTION: To withhold authority to vote for any
   individual nominee mark the "EXCEPTIONS" box, and strike a line through the
   nominee's name in the list below:

                             WILLIAM G. DAVIS
                             MICHAEL R. HENSON
                             JEFFREY H. THIEL

                                   WITHHOLD
         FOR                      AUTHORITY
     all nominees                to vote for
     listed below                all nominees                EXCEPTIONS
 
         [ ]                         [ ]                        [ ]

2. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR FISCAL
   YEAR 2001.

         FOR                       AGAINST                    ABSTAIN

         [ ]                         [ ]                        [ ]

The Board of Directors recommends a vote FOR each of the director nominees
listed above and FOR the other proposal set forth above. This Proxy, when
properly executed will be voted as specified above. This Proxy will be voted FOR
Proposal 2 and FOR each of the nominees listed under Proposal No. 1 if no
specification is made. THIS PROXY WILL ALSO BE VOTED AT THE DISCRETION OF THE
PROXY HOLDER ON SUCH MATTERS OTHER THAN THE TWO SPECIFIC ITEMS AS MAY COME
BEFORE THE MEETING.

PLEASE RETURN YOUR EXECUTED PROXY TO RADIANCE'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO RADIANCE, ATTENTION: SECRETARY.

Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:


--------------------------------------------------------------------------------
               (Print name(s) as it (they) appear on certificate)


Dated:                         Signature(s):
      -----------------------               ------------------------------------

Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer. If a partnership, please
sign in the partnership name by an authorized person.

--------------------------------------------------------------------------------
                            - FOLD AND DETACH HERE -