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SCHEDULE 14A
(Rule(RULE 14a-101)
Proxy Statement Pursuant to SectionINFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act ofOF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x][X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ][X] Preliminary Proxy Statement [ ] Confidential, for use of [x] Definitive Proxy Statement the
Commission only
[ ] Definitive Additional MaterialsOnly (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-ll(c)14a-11(c) or Rule 14a-12
INTEGRATED SURGICAL SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
INTEGRATED SURGICAL SYSTEMS, INC.- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x][X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:___________________________
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(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 0-11:1____________________________
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(4) Proposed maximum aggregate value of transaction:______________
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(5) Total fee paid:__________________
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials. 2
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-ll(a)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:$______________
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_________________- --------------------------------------------------------------------------------
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_________________- --------------------------------------------------------------------------------
(4) Date Filed:
__________________- --------------------------------------------------------------------------------
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INTEGRATED SURGICAL SYSTEMS, INC.
------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
------APRIL 27, 1999
To the Stockholders of Integrated Surgical Systems, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Integrated Surgical Systems, Inc., a Delaware corporation (the "Company"), will
be held on May 14, 1997,April 27, 1999, at the Hyatt Regency, 1209 L Street,
Sacramento,Company's executive offices, 1850 Research
Park Drive, Davis, California 95814,95616-4884, at the hour of 9:00 A.M., for the
following purposes:purposes.
1. To elect six Directors of the Company to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified.
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the authorized capital stock by increasing the
number of authorized shares of common stock from 15 million to 50
million shares.
3. To approve the issuance upon conversion of the Company's Series A
Convertible Preferred Stock of more than 1,127,674 shares of common
stock, representing 20% of the outstanding shares of common stock on the
date of the sale of the Series A Convertible Preferred Stock, as
required by Nasdaq rules.
4. To approve the issuance upon conversion of the Company's Series B
Convertible Preferred Stock of more than 1,148,807 shares of common
stock, representing 20% of the outstanding shares of common stock on the
date of the sale of the Series B Convertible Preferred Stock, as
required by Nasdaq rules.
5. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountantsauditors for the year ending December 31, 1997.
3.1999.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 8, 1997March 17, 1998 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
A list of stockholders entitled to vote at the Annual Meeting will be open
to examination by any stockholder for any purpose germane to the meeting, at the
executive offices of the Company, 1850 Research Park Drive, California
95616-4884, for a period of ten days prior to the Annual Meeting. Such list also
shall be available during the Annual Meeting.
By Order of the Board of Directors
Michael J. TomczakMARK W. WINN
Secretary
Sacramento,Davis, California
April 15, 1997March 26, 1999
IMPORTANT:
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY, AND RETURN IT TO THE COMPANY. THE PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED, AND STOCKHOLDERS EXECUTING PROXIES MAY ATTEND
THE MEETING AND VOTE IN PERSON SHOULD THEY SO DESIRE.
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INTEGRATED SURGICAL SYSTEMS, INC.
829 WEST STADIUM LANE
SACRAMENTO,1850 RESEARCH PARK DRIVE
DAVIS, CALIFORNIA 95834
(916) 646-3487
------95616-4884
(530) 792-2600
------------------------
PROXY STATEMENT
------------------------------
The Board of Directors of Integrated Surgical Systems, Inc. (the "Company")
presents this Proxy Statement and the enclosed proxy card to all stockholders
and solicits their proxies for the Annual Meeting of Stockholders to be held on
May 14, 1997.Tuesday, April 27, 1999. The record date of this proxy solicitation is April 8, 1997.March 17,
1999. All proxies duly executed and received will be voted on all matters
presented at the Annual Meeting in accordance with the instructions given by
such proxies. In the absence of specific instructions, proxies so received will
be voted forFOR the named nominees for election to the Company's Board of Directors
(Proposal 1), FOR the amendment to the Company's Restated Certificate of
Incorporation to increase the authorized capital stock by increasing the number
of authorized shares of Common Stock from 15 million to 50 million shares
(Proposal 2), FOR the approval of the issuance upon conversion of the Company's
Series A Convertible Preferred Stock of more than 1,127,674 shares of Common
Stock, representing 20% of the outstanding shares of Common Stock on the date of
the sale of the Series A Convertible Preferred Stock, as required by the rules
of The Nasdaq Stock Market, Inc. (Proposal 3), FOR the approval of the issuance
upon conversion of the Company's Series B Convertible Preferred Stock of more
than 1,148,807 shares of Common Stock, representing 20% of the outstanding
shares of Common Stock on the date of the sale of the Series B Convertible
Preferred Stock, as required by Nasdaq rules (Proposal 4), and forFOR ratification
of the appointment of Ernst & Young LLP as the Company's independent accountantsauditors
for the year ending December 31, 1997.1999 (Proposal 5). The Board of Directors does
not anticipate that any of its nominees will be unavailable for election and
does not know of any matters that may be brought before the Annual Meeting other
than those listed onin the Notice of the Annual Meeting.
In the event that any other matter should come before the Annual Meeting or
that any nominee is not available for election, the persons named in the
enclosed proxy will have discretionary authority to vote all proxies not marked
to the contrary with respect to such matter in accordance with their best
judgment. A proxy may be revoked at any time before being voted by sending a new
proxy bearing a later date or a revocation notice to the Company at the above
address, attn: Secretary, or by notifying the Secretary of the Company at the
Annual Meeting. The Company is soliciting these proxies and will pay the entire
expense of solicitation which will be made by use of the mails. This Proxy
Statement is being mailed on or about April 15, 1997.March 26, 1999.
The total number of shares of common stock, $.01 par value ("Common Stock"), of the CompanyStock outstanding as of April 8, 1997,March 17,
1999, was 3,366,0285,744,037 shares. The Common Stock is the only outstanding class of
securities of the Company entitled to vote. Each share of Common Stock has one
vote. Only stockholders of record as of the close of business on April 8, 1997March 17, 1999
will be entitled to vote at the Annual Meeting or any adjournments thereof.
The affirmative vote by holders of a plurality of the votes cast for the
election of directors at the Annual Meeting is required for the election of
Directors. The affirmative vote by the majority of the votes present at the
Annual Meeting and entitled to vote is required to approve the ratificationissuance of more
than 1,127,674 shares of Common Stock upon conversion of the appointmentSeries A
Convertible Preferred Stock and the issuance of more than 1,148,807 shares of
Common Stock upon conversion of the Series B Convertible Preferred Stock, and
the ratification of Ernst & Young LLP. The affirmative vote of a majority of the
outstanding shares of Common Stock is required for approval of the amendment to
the Company's Restated Certificate of Incorporation to increase the authorized
capital stock by increasing the number of authorized shares of Common Stock from
15 million to 50 million shares. All proxies will be counted for determining the
presence of a quorum. Votes withheld in connection with the election of one or
more nominees for Director will not be counted as votes cast for such
individuals.individuals and shares represented by proxies which are marked "abstain" for any
other Proposal on the proxy card and proxies which are marked to deny
discretionary authority on all other matters
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will only be counted for the purpose of determining the presence of a quorum on
such proposals. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in the vote totals.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's principal office, 829 West Stadium Lane,
Sacramento,1850 Research Park Drive, Davis,
California 95834,95616-4884 during business hours, for a period of ten (10) days prior
to the Annual Meeting for examination by any stockholder. Such list shall also
be available at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock at March 17, 1999 by (i) each
stockholder known by the Company to be a beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each executive officer of the Company listed in the Summary Compensation
Table (see Proposal 1) and (iv) all directors and officers as a group.
AMOUNT AND
NATURE OF PERCENTAGE OF
BENEFICIAL COMMON STOCK
NAME OWNERSHIP(1) BENEFICIALLY OWNED(2)
- ---- ------------ ---------------------
International Business Machines Corporation................. 2,274,066(3) 28.31%
Old Orchard Road, Armonk, N.Y. 10504
EJ Financial Investments V, L.P. ........................... 1,039,792 18.10%
225 East Deerpath Road, Suite 250
Lake Forest, IL 60045
Sutter Health and Sutter Health Venture Partners, L.P. ..... 467,607(4) 8.14%
One Capitol Mall
Sacramento, CA 95814
Ramesh C. Trivedi(5)........................................ 338,510(6) 5.57%
John N. Kapoor(7)........................................... 1,039,792(8) 18.10%
James C. McGroddy(9)........................................ 47,365(10) *
Paul A.H. Pankow(11)........................................ 9,163(12) *
Patrick G. Hays(13)......................................... 5,250(14) *
Gerald D. Knudson(15)....................................... 5,250(14) *
Mark Winn (5)............................................... 1,000(16)* *
All directors and officers as a group (7 persons)........... 1,446,330 23.64%
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws, where applicable.
(2) For purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on March 17, 1999, any security
which such person or group of persons has the right to acquire within 60
days after such date is deemed to be outstanding for the purpose of
computing the percentage ownership for such person or persons, but is not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(3) Includes warrants to purchase 2,206,479 shares of Common Stock at an
exercise price of $0.01 per share exercisable until December 31, 2005, and
warrants to purchase 67,587 shares of Common Stock at an exercise price of
$0.07 per share exercisable until December 31, 2000. which warrants are
presently exercisable.
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(4) Includes 449,538 shares of Common Stock owned by Sutter Health and 18,069
shares of Common Stock beneficially owned by Sutter Health Venture Partners
L.P. ("Sutter Partners"), an affiliate of Sutter Health.
(5) Address is c/o the Company, 1850 Research Park, Davis, California
95616-4884
(6) Includes 4,000 shares owned by Dr. Trivedi and 334,510 shares that he may
acquire upon exercise of stock options exercisable within 60
days -- 316,907 shares at an exercise price of $0.07 per share and 17,603
shares at an exercise price of $3.00 per share. Dr. Trivedi may acquire an
additional 102,397 shares upon exercise of stock options that become
exercisable over the remaining term of the options at an exercise price of
$3.00 per share.
(7) Address is c/o EJ Financial Enterprises, 225 E. Deer Path Road, Suite 250,
Lake Forest, Illinois 60045.
(8) Represents shares of Common Stock owned by EJ Financial Investments V,
L.P., a limited partnership of which Mr. Kapoor is the managing general
partner. Mr. Kapoor disclaims beneficial ownership of such shares.
(9) Address is 200 Business Park Drive, Armonk, New York 10504.
(10) Includes 26,000 shares owned by Dr. McGroddy, 1,000 shares beneficially
owned by his daughter, and 20,365 shares that he may acquire upon exercise
of stock options exercisable within 60 days -- 16,032 shares at an exercise
price of $5.00 per share, 833 shares at an exercise price of $5.625 and
3,500 shares at an exercise price of $3.9375. Dr. McGroddy may acquire an
additional 11,770 shares upon exercise of stock options that become
exercisable over the remaining term of the options at exercise prices
ranging from $5.00 to $5.625.
(11) Address is 7840 East Lake Carlos Drive N.E., Carlos, Minnesota 56319.
(12) Represents shares that Mr. Pankow may acquire upon exercise of stock
options exercisable within 60 days -- 2,028 shares at an exercise price of
$2.07 per share, 1,666 shares at an exercise price of $5.625 per
share,1,969 shares at an exercise price of $5.00 per share, and 3,500
shares at an exercise price of $3.9375 per share. Mr. Pankow may acquire an
additional 2,207 shares upon exercise of stock options that become
exercisable over the remaining term of the options at exercise prices
ranging from $2.07 to $5.00 per share.
(13) Address is c/o Blue Cross/Blue Shield Association, 225 North Michigan, 9th
Floor, Chicago, Illinois 60601-7680.
(14) Represents shares that he may acquire upon exercise of options exercisable
within 60 days -- 1,750 shares at an exercise price of $5.625 per share and
3,500 shares at an exercise price of $3.9375. He may acquire an additional
1,750 shares issuable upon exercise of stock options that become
exercisable over the remaining term of the options an exercise price of
$5.625 per share.
(15) Address is c/o Sterling Diagnostic Imaging, Inc., 10 South Academy Street,
Greenville, South Carolina 29602.
(16) Represents shares owned by Mr. Winn. Does not include 45,000 shares that
Mr. Winn may acquire upon exercise of options exercisable within 60 days at
an exercise price of $3.00 per share. None of these options are exercisable
within 60 days.
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ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Directors to be elected at the Annual Meeting will serve until the next
Annual Meeting of Stockholders and until their successors are duly elected and
qualified. Proxies not marked to the contrary will be voted "FOR" the election
to the Board of Directors of the following six persons, all of whom with the exception of Gerald D. Knudson and Patrick G. Hays, are
incumbent Directors.
The following table setsSet forth below is certain information as of March 17, 1999 concerning each
nominee for Director, including his age, present principal occupation and
business experience during the nominees:past five years and the period he has served as a
director.
Name Age Position
----------------------- -----DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND RELATED INFORMATION SINCE
- ---- --- ------------------------------------------------------- --------
Ramesh C.
Trivedi 57Trivedi.......... 59 Chief Executive Officer of the Company since November November
1995; consultant to the Company from February 1995 1995
until November 1995; Principal of California Biomedical
Consultants (an international consulting firm) from
1987 to November 1995; President and a DirectorChief Executive
Officer of DigiRad Corporation (a medical imaging
company) from 1985 to 1986.
James C.
McGroddy(1)(2) 59McGroddy......... 61 Chairman of the Board of Directors of the Company since November
November 1995; self-employed consultant since 1997; 1995
Senior Vice President and Special Advisor to the
Chairman of IBM from January 1996 through December
1996; Senior Vice President of Research of IBM from May
1989 to December 1995; Director of Paxar Corporation (a
manufacturer of apparel identification and related
printing products) since January 1998.
John N. Kapoor(1)(2) 52 DirectorKapoor..... 55 President of EJ Financial Enterprises, Inc (a December
healthcare consulting and investment company) since 1995
April 1990; Chairman of Option Care, Inc. (a franchiser
of home infusion therapy businesses) since October
1990; Chairman of Unimed Pharmaceuticals, Inc. (a
specialty pharmaceutical company) since 1990; Chief
Executive Officer and Chairman of Akorn, Inc. (a
manufacturer and distributor of ophthalmic products)
since May 1996; and Chairman of NeoPharm, Inc. (cancer
drug research and development company).
Paul A.H. Pankow(1)(2) 67 DirectorPankow... 69 President of PAP Consulting (business and technical May 1995
consulting firm) since March 1995; held various
positions with 3M Corporation, including Vice President
and Chief Executive Officer of its Imaging Systems
Division, from September 1959 to March 1995.
Gerald D.
Knudson 53 DirectorKnudson.......... 55 Executive Vice President of Sterling Diagnostic May 1997
Imaging, Inc. (manufacturer and distributor of medical
diagnostic imaging products) since January 1997;
President, Medical Systems Division of Polaroid
(manufacturer of medical diagnostic imaging printers
and film) from 1994 to 1996; Chief Executive Officer of
Resonex, Inc. (manufacturer of MRI systems) from 1988
to 1994.
Patrick G. Hays 54 Director
(1) Member of Compensation Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
BIOGRAPHICAL INFORMATION ABOUT NOMINEES
Ramesh C. Trivedi, Ph.D., has been Chief Executive Officer, President and
a Director of the Company since November 1995, and served as a consultant to
the CompanyHays.... 56 President and Chief Executive Officer of Blue Cross and May 1997
Blue Shield Association (national coordinating body for
the United States' sixty-two community-based and
independent Blue Cross and Blue Shield Plans) since
February 1996; President and Chief Executive Officer of
Sutter Health (vertically integrated provider of health
services in northern California) from February 1995 until November 1995. Dr. Trivedi founded
California Biomedical Consultants in 1987, an international consulting firm.
From 1985 to 1986, Dr. Trivedi was the President and Chief Executive Officer
of DigiRad Corporation, a medical imaging company. From 1978 to 1984, he was
the director of business development of Syva Company and the General Manager
of Synaco, Inc., divisions of Syntex Corporation, a pharmaceutical company.
From 1972 to 1978, Dr. Trivedi was the head of the product management group
at the Worthington division of Millipore Corporation, a membrane filtration
company, and the head of the chemistry group of the Diagnostic Division of
Pfizer, Inc. from 1971 to 1972. Dr. Trivedi received a Ph.D. in Chemical
Engineering from Lehigh University in 1970 and an MBA from Pepperdine
University in 1981.
James C. McGroddy, Ph.D., has been Chairman of the Board of Directors of
the Company since November 1995. Dr. McGroddy was employed by IBM from 1965
to December 31, 1996. From January 1, 1996 he served as Senior Vice President
and Special Advisor to the Chairman of IBM. From May 1989 to December 31,
1995, Dr. McGroddy was Senior Vice President of Research of IBM with
responsibility for approximately 2,500 technical professionals in IBM's seven
research laboratories around the world. He was a member of IBM's Worldwide
Management Council. Dr. McGroddy has been involved in the development of the
Company since its inception in October 1990, initially as an advisor and
since November 1995 as a Director. Dr. McGroddy received a Ph.D. in physics
from the University of Maryland in 1965.
John N. Kapoor, Ph.D., has been a Director of the Company since December
1995. Dr. Kapoor founded EJ Financial Enterprises, Inc., a healthcare
consulting and investment company, in March 1990, of which he is currently
President. Since October 1990, Dr. Kapoor has been Chairman of Option Care,
Inc., a home health care provider franchisor. Dr. Kapoor has been the
Chairman of Unimed Pharmaceuticals, Inc., a specialty pharmaceutical company
since 1990. Since May 1996, Dr. Kapoor has been Chief Executive Officer of
Akorn, Inc., a manufacturer and distributor of ophthalmic products, of which
Dr. Kapoor also serves as Chairman. In addition, Dr. Kapoor serves as
Chairman of NeoPharm, Inc., a cancer drug research and development company.
Dr. Kapoor also served as Chairman of Lyphomed, Inc., a pharmaceutical
company, from 1983 to 1990, and was a Director of Lunar Corp., a manufacturer
and marketer of x-ray and ultrasound systems, from May 1990 to April 1996.
Dr. Kapoor received a Ph.D. in medicinal chemistry from State University of
New York in 1970.
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Paul A.H. Pankow has been a Director of the Company since May 1995. Since
March 1995, Mr. Pankow has been President of PAP Consulting, a business and
technical consulting firm. From September 1959 to February 1995, Mr. Pankow held
various positions with 3M Corporation, most recently as a Vice President of the
Medical Imaging Systems Division (1982-1986) and as Staff Vice President,
Special Programs and Government Research and Development Programs (1987-1995).
He served as Chairman of the Optoelectronic Industry Development Association
(1994-1995) and is currently a member of several other industry boards. Mr.
Pankow received a B.S. in mechanical engineering and business administration
from the University of Minnesota in 1956.
Gerald D. Knudson has been nominated as a Director. Since January 1997,
Mr. Knudson has been Executive Vice President of Sterling Diagnostic Imaging,
Inc., a manufacturer and distributor of medical diagnostic imaging products.
From 1994 to 1996, Mr. Knudson was President, Medical Systems Division of
Polaroid which manufactured medical diagnostic imaging printers and film.
From 1988 to 1994, Mr. Knudson was Chief Executive Officer of Resonex, Inc.,
a manufacturer of MRI systems. Previously, Mr. Knudson held various executive
and marketing positions in the life science industry since 1966. Mr. Knudson
received a B.A. in Biology from Augustana College in 1965.
Patrick G. Hays has been nominated as a Director. Since February 1995, Mr.
Hays has been President and Chief Executive Officer of Blue Cross and Blue
Shield Association, the national coordinating body for the United States'
sixty-two community based and independent Blue Cross and Blue Shield Plans,
collectively, the United States' largest insurer. From 1980 to 1995
Mr. Hays
was President and Chief Executive Officer of Sutter Health, a vertically
integrated provider of health services in northern California. Previously,
Mr. Hays held various administrative and executive positions with healthcare
providers since 1971. Mr. Hays received a Master's degree in Healthcare
Administration from the University of Minnesota in 1971.
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On August 16, 1992, a lawsuit was filed against Dr. Kapoor in the United
States District Court for the Northern District of Illinois by Fujisawa
Pharmaceutical Co., Ltd. and Fujisawa USA, Inc. ("Fujisawa"). The complaint
alleged that Dr. Kapoor, while President and Chief Executive Officer of
Lyphomed, Inc., a company acquired by Fujisawa, violated provisions of the
Federal securities laws and the Racketeer Influenced and Corrupt Organizations
Act (RICO), and also asserted certain state law claims. The factual basis of the
complaints alleges that Dr. Kapoor filed false applications for generic drug
approvals with the FDA on behalf of Lyphomed, Inc. On July 25, 1996, the
complaint was dismissed in part, and Dr. Kapoor was granted summary judgment on
the remaining claims. On August 22, 1996, Fujisawa filed
a noticeJune 16, 1997, the Court of appeal ofAppeals for the dismissal7th Circuit
reversed the District Court's order dismissing the RICO and summary judgment decision.state law claims and
remanded the case to the District Court. Dr. Kapoor vigorously denies the
allegations and filed a complainthas asserted counterclaims against Fujisawa in
Illinois state court on August 27, 1996 claimingfor breach of
contract, defamation of character and other state law claims.
All directors hold office until the annual meeting of stockholders of the
Company following their election andor until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and serve at
its discretion.
INFORMATION ABOUT THE BOARD OF DIRECTORS,
COMMITTEES OF THE BOARD, AND EXECUTIVE OFFICERS
MEETINGS OF THE BOARD OF DIRECTORS AND INFORMATION REGARDING COMMITTEES
The Board of Directors has two standing committees, an Audit Committee and
a Compensation Committee.
The Audit Committee is composed of Dr. McGroddy, Dr. Kapoor (Chairman), Mr. Hays and Mr.
Pankow. The duties of the Audit Committee include recommending the engagement of
independent auditors, reviewing and considering actions of management in matters
relating to audit functions, reviewing with independent auditors the scope and
results of its audit engagement, reviewing reports from various regulatory
authorities, reviewing the system of internal controls and procedures of the
Company, and reviewing the effectiveness of procedures intended to prevent
violations of law and regulations. The Audit Committee held no meetingsone meeting in 1996.1998.
The Company's Compensation Committee is composed of Dr. McGroddy
(Chairman), Dr. Kapoor and Mr. Pankow.Knudson. The duties of this Committee are to
recommend to the Board remuneration for officers of the Company, to determine
the number and issuance of options pursuant to the Company's stock option plans
and to recommend the establishment of and to monitor a compensation and
incentive program for all executives of the Company. The Compensation Committee
held four meetingfive meetings in 1996.
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1998.
The Board of Directors held threeseven meetings in 1996.1998. All six of the
Directors attended at least 75% of the total number of Board meetings and
of the meetings of committees on which they served.served during the period they served
thereon in 1998.
The Company has adopted a policy of compensatingpays independent directors in
the amount ofDirectors $7,500 annually andper annum, plus $500 additional for each
Board of Directors meeting attended in person and $250 for each telephonic Board of
Directors meeting attended.attended by telephone. Members who serve on either the Audit
or Compensation Committees are to be paid $300 for each meeting attended in person and
$150 for each telephonic
meeting attended.attended by telephone. Committee chairmen also are to be paid a fee of
$500 per annum. The Company willIndependent Directors (other than Dr. Kapoor) also grant independent members of the Board of Directorsreceive
annually ten year non-qualified stock options to purchase 3,500 shares of the
Company's Common Stock at an exercise price equal to the greaterfair market value of
the fair
market valueCommon Stock on the date of issue or $5.00 per share.
No member of the Compensation Committee was an officer or employee of the
Company or of any of its subsidiaries during the prior year or was formerly
an officer of the Company or of any of its subsidiaries. None of the
Executive Officers of the Company has served on the Board ofgrant.
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The following table sets forth information concerning stock options granted
to independent Directors or
Compensation Committee during the last fiscal year of any other entity, any
of whose officers served either on the Board of Directors of the Company or
on the Compensation Committee of the Company.
On July 26, 1996, Mr. Pankow was granted an option to purchase 2,704
shares of Common Stock at an exercise price of $2.07 per share. Onsince January 24, 1997, Dr. McGroddy was granted an option to purchase 25,000 shares of
Common Stock at an exercise price of $5.00 per share.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names and business backgrounds of executive officers and other
significant employees of the Company who are not nominees for Director are as
follows:
Michael J. Tomczak, 41, has been Vice President and Chief Financial
Officer of the Company since October 1991 and Secretary since September 1996.
From September 1988 to October 1991, Mr. Tomczak served as a Senior Manager
of Ernst & Young LLP, directing its Entrepreneurial Services Group in the
Sacramento office. From September 1985 to September 1988, Mr. Tomczak served
as Vice President of Finance for Valley Industries, a manufacturer of
automotive products. Mr. Tomczak became a certified public accountant in
Michigan in 1981 and in California in 1989. He received a B.A. from Western
Michigan University in 1979.
Peter Kazanzides, Ph.D., 35, a co-founder of the Company, has been an
employee of the Company since November 1990 and Director of Robotics and
Software of the Company since December 1995. He received Sc.B., Sc.M., and
Ph.D. degrees in electrical engineering from Brown University in 1983, 1985,
and 1988, respectively. His dissertation focused on force control and
multiprocessor systems for robotics. He performed post-doctoral research in
surgical robotics from March 1989 to March 1990 at the IBM T.J. Watson
Research Center.
Brent D. Mittelstadt, 37, a co-founder of the Company, has been an
employee of the Company since November 1990 and Director of Biomedical
Applications of the Company since December 1995. He began research in
surgical robotics in 1986 as a visiting research scientist at the IBM T.J.
Watson Research Center and is responsible for much of the early development
of CT guided robotic systems for total hip replacement surgery. Mr.
Mittelstadt received a B.S. in Biology from the University of Arizona in
1984.1, 1998.
NUMBER OF SHARES UNDERLYING EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED PER SHARE DATE
---- --------------------------- -------------- ----------
James C. McGroddy........................... 3,500 $3.93 1/23/08
Paul A. H. Pankow........................... 3,500 $3.93 1/23/08
Patrick G. Hays............................. 3,500 $3.93 1/23/08
Gerald D. Knudson........................... 3,500 $3.93 1/23/08
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE NOMINEES FOR
DIRECTORS IN THE
FOREGOING PROPOSAL 1
4
EXECUTIVEDIRECTOR NAMED ABOVE (PROPOSAL 1)
SUMMARY COMPENSATION SUMMARY COMPENSATIONTABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each other executive officer
and certain other management personnel of the Company whose salary and bonus exceeded $100,000 for the year ended
December 31, 1996 exceeded $100,000
(collectively, the "Named Executives and Certain Other Management").1998.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------------------------------------------------- Long-Term
Compensation
Other Securities
Annual Underlying
Name and Principal Position Year Salary Compensation Options
------------------------------------- ------ ---------- -------------- --------------LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS
--------------------------- ---- -------- --------------- ------------
Ramesh C. Trivedi 1996 $264,000 $50,000 316,907Trivedi................................ 1998 $279,840 $42,501 120,000
Chief Executive Officer and President Wendy Shelton-Paul(1)1997 $264,000 $50,400 20,000
1996 $120,000 $30,000 30,415
Vice President of Medical Affairs
Michael J. Tomczak 1996 $112,060 $30,000 30,415
Vice President and$264,000 $50,000 316,907
Mark W. Winn..................................... 1998 $118,833 -- --
Chief Financial Officer Peter Kazanzides 19961997(1) $ 80,080 $30,000 77,726
Director of Robotics and Software
Brent Mittelstadt 199638,333 $ 76,670 $30,000 77,726
Director of Biomedical Applications8,316 45,000
- ---------------------
(1) Dr. Shelton-Paul resigned from her position as Vice President of Medical
Affairs effective December 31, 1996 and is not standing for election as a
Director at the Annual Meeting.
EMPLOYMENT AGREEMENTS
On December 8, 1995,Mr. Winn commenced employment with the Company entered into an employment agreement withon September 2, 1997.
EMPLOYMENT AGREEMENT
Dr. Ramesh C. Trivedi serves as the Company's Chief Executive Officer and
President.
ThePresident pursuant to an employment agreement is terminable at will by either
party. Pursuant to the
employment agreement, Dr. Trivedi is to receive anTrivedi's annual salary of $264,000is $279,840 ($22,00023,320 per month), plus out-of-pocket expenses. Dr. Trivedi's employment
agreement provides for the grant of options to purchase 316,907 shares of the
Company's Common Stock, at an exercise price of $0.07 per share, which were
granted in February 1996.. Upon
termination by the Company, other than for cause (as defined in the employment
agreement), Dr. Trivedi is entitled to receive his monthly salary for a period
of nineeighteen months following the date of termination and consulting fees (at his then prevailing consulting rate) for
three months of consulting services to be rendered during the 12 months
following such termination.
None of the other Named Executives and Certain Other Management has an
employment agreement with the Company.6
10
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 19951998 Stock Option Plan to Dr. Trivedi Dr.
Shelton-Paul, Mr. Tomczak, Dr. Kazanzides, and Mr. MittelstadtWinn
(collectively, the "Named Executive Officers") during the fiscal year ended
December 31, 1996.
5
1998.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
Percent of
Number of Total
Shares Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted(1)(3) Fiscal Year(3) Share(2) Date
- --------------------- ------------- -------------- -----------PERCENT OF
NUMBER OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR SHARE(2) DATE
---- ---------- ------------ --------- ----------
Ramesh C. Trivedi ... 316,907 41.7% $0.07 2/16/06
Wendy Shelton-Paul .. 30,415 4.3% $0.07 2/16/06
Michael J. Tomczak .. 30,415 4.3% $0.07 2/16/06
Peter Kazanzides .... 77,726 11.0% $0.07 2/16/06
Brent D. Mittelstadt 77,726 11.0% $0.07 2/16/06Trivedi..................................... 120,000 16.6% $3.00 8/27/08
Mark W. Winn.......................................... 45,000 6.2% $3.00 8/27/08
- ---------------------
(1) Stock options are granted at the discretion of the Compensation Committee of
the Company's Board of Directors. Stock options have a 10-year term and vest
periodically over a period not to exceed five years.
(2) The Compensation Committee of the Company's Board of Directors may elect to
reduce the exercise price of any option to the current fair market value of
the Common Stock if the value of the Common Stock has declined from the date
of grant.
(3) Does not include the options previously outstanding under the Company's
1991 Stock Option Plan which were repriced on February 16, 1996.
The following table summarizes for each of the Named Executives and
Certain Other ManagementExecutive Officers the
total number of unexercised options, if any, held at December 31, 1996,1998, and the
aggregate dollar value of in-the-money, unexercised options, held at December
31, 1996.1998. The value of the unexercised, in-the-money options at December 31,
1996,1998, is the difference between their exercise or base price and the value of
the underlying Common Stock on December 31, 1996, at an assumed1998. The closing sale price of $5.00the
Common Stock on The Nasdaq SmallCap Market on December 31, 1998 was $3.125 per
share.
6
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES
Shares Acquired Number of Securities Value of Unexercised
Upon Exercise Underlying In-The-Money
of Options Unexercised Options Options at
During Fiscal 1996 at December 31. 1996 DecemberSHARES ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
UPON EXERCISE UNDERLYING IN-THE-MONEY
OF OPTIONS UNEXERCISED OPTIONS OPTIONS AT
DURING FISCAL 1997 AT DECEMBER 31, 1996
---------------------- -------------------------------- --------------------------------
Value
Name Number Realized Exercisable Unexercisable Exercisable Unexercisable1997 DECEMBER 31, 1997
------------------- -------- ------------------------------------- ---------------------------
VALUE
NAME NUMBER REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------- --------- ----------- ------------- -------------------------- ------------- ---------------
Ramesh C. Trivedi . -- -- 163,559 153,348 $806,346 $756,006
Wendy Shelton-Paul -- -- 40,553 57,449 $199,926 $283,224
Michael J. Tomczak -- -- 64,620 33,850 $318,577 $166,881
Peter Kazanzides .. -- -- 19,822 78,884Trivedi..................... None None 334,510 102,397 $985,754(1) $12,800(2)
Mark W. Winn.......................... None None 0 45,000 0 $ 97,722 $388,898
Brent D. Mittelsta -- -- 19,960 79,014 $ 98,403 $390,5395,625(3)
REPORT ON- ---------------
(1) Represents value of options to purchase 316,907 shares at an exercise price
of $0.07 per share and options to purchase 17,603 shares at an exercise
price of $3.00 per share.
(2) Represents value of options to purchase 102,397 shares at an exercise price
of $3.00 per share.
(3) Represents value of options to purchase 45,000 shares at an exercise price
of $3.00 per share.
7
11
REPRICING OF OPTIONS
Market Exercise Length of
Number of Price of Price of Original
Securities Stock at Stock at Option Term
Underlying Time of Time of Remaining
Reprice/ Options Repricing Repricing New at Date of
Regrant Repriced or or or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
--------------------- ----------LENGTH OF
NUMBER OF MARKET EXERCISE ORIGINAL
SECURITIES PRICE OF PRICE OF OPTION TERM
UNDERLYING STOCK AT STOCK AT REMAINING
OPTIONS TIME OF TIME OF NEW AT DATE OF
REPRICE/ REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME REGRANT DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- ---- ------------ ----------- ------------ -------------- -------- ------------- ----------- ----------- ---------- --------------
Wendy Shelton-Paul .. 2/16/96 67,587 $ .888 $4.88 $ .07 9.25 years
Michael J. Tomczak .. 2/16/96 43,932 $ .888 $4.88 $ .07 9.25 years
Michael J. Tomczak .. 2/16/96 6,759 $ .888 $7.84 $ .07 8.00 years
Michael J. Tomczak .. 2/16/96 13,308 $ .888 $7.84 $ .07 6.50 years
Michael J. Tomczak .. 2/16/96 4,056 $ .888 $7.84 $ .07 6.00 years
Peter Kazanzides .... 2/16/96 3,380 $ .888 $4.88 $ .07 9.25 years
Peter Kazanzides .... 2/16/96 1,014 $ .888 $7.84 $ .07 8.00 years
Peter Kazanzides .... 2/16/96 4,420 $ .888 $7.84 $ .07 6.50 years
Peter Kazanzides .... 2/16/96 12,166 $ .888 $3.33 $ .07 6.00 years
Brent D. Mittelstadt 2/16/96 3,380 $ .888 $4.88 $ .07 9.25 years
Brent D. Mittelstadt 2/16/96 1,352 $ .888 $7.84 $ .07 8.00 years
Brent D. Mittelstadt 2/16/96 4,350 $ .888 $7.84 $ .07 6.50 years
Brent D. Mittelstadt 2/16/96 12,166 $ .888 $3.33 $ .07 6.00 yearsRamesh C. Trivedi.............. 8/28/98 120,000 $3.00 20,000@$6.13 $3.00 8 yrs. 7 mos.
100,000@$4.75 9 yrs. 6 mos.
Mark W. Winn................... 8/28/98 45,000 $3.00 25,000@$8.25 $3.00 9 yrs. 1 mo.
20,000@$4.875 9 yrs. 8 mos.
The Compensation Committee of the Board of Directors approved the
replacement of these options to Dr. Shelton-Paul, Mr. Tomczak, Dr.
Kazanzides,Trivedi and Mr. MittelstadtWinn, and options to other
employees of the Company, at an exercise price of $.07$3.00 per share, having
concluded that the principal purpose of the Company's stock option program
(i.e., to provide an equity incentive to employees to remain in the employment
of the Company and to work diligently in its best interests) would not be
achieved for those employees holding options exercisable above the market price
of the Common stock.
PROPOSAL 2. AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED CAPITAL STOCK BY INCREASING THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 15 MILLION TO 50 MILLION.
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized capital stock by increasing the number of authorized shares of Common
Stock from 15,000,000 to 50,000,000 shares.
The Company is presently authorized to issue 15,000,000 shares of Common
Stock and 1,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock"). As of March 17, 1999, there were 5,744,037 shares of Common
Stock outstanding and an additional 8,761,996 shares of Common Stock reserved
for issuance upon conversion of the Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock, and upon exercise of outstanding warrants
and options granted pursuant to the Company's stock options plans. As of March
17, 1999, there were 3,300 shares of Series A Convertible Preferred Stock and
1,500 shares of Series B Convertible Preferred Stock outstanding.
The additional 35,000,000 shares of Common Stock to be authorized would
provide needed flexibility for future financial and capital requirements so that
proper advantage could be taken of favorable market conditions and possible
business acquisitions, and in the event the market price of the Common Stock
decreases from present levels, for issuance upon conversion of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock.
In connection withAdditional shares of Common Stock would also be available to the granting of these replacement options,
participating option holders agreed not to exercise any optionCompany for
a period
of six months from the date of such regrant.
STOCK OPTION PLAN
On December 13, 1995,stock dividends or splits should the Board of Directors adopted,decide that it would be
desirable, in light of market conditions then prevailing, to broaden the public
ownership of, and stockholders
approved,to enhance the 1995 Stock Option Plan (the "Plan").market for, the shares of the Company's Common
Stock. The Plan isadditional shares would be available for issuance for these and other
purposes, subject to the laws of Delaware and Nasdaq rules, at the discretion of
the Company's Board of Directors without, in most cases, the delays and expenses
attendant to obtain further stockholder approval.
Although the Company's Board of Directors does not consider the proposed
amendment to the Company's Restated Certificate of Incorporation to be administeredan
antitakeover proposal, the ability to issue additional shares of Common Stock
could also be used to discourage hostile takeover attempts of the Company. Among
other things, the additional shares could be privately placed thereby diluting
the stock ownership of persons seeking to obtain control of the Company, or the
Board could adopt a stockholders' rights plan that would provide for the
issuance of additional shares of Common Stock in the event of certain purchases
not approved by the Board of Directors.
Although the Board of Directors or a committee thereof. The Plan is
currently administered byhas no current plans to propose measures to
the Compensation CommitteeCompany's stockholders that may have the effect of discouraging takeovers,
such measures may be proposed if warranted from time to time in the judgment of
the Board of Directors. The Plan, as initially adopted, authorizedIn addition, the CompanyBoard of Directors may, from time to
grant
stock purchase rights and/time,
8
12
adopt other measures or optionsenter into agreements that could have the effect of
discouraging takeovers, but that do not require stockholder approval.
Approval of this amendment to acquire an aggregatethe Restated Certificate of 1,108,949Incorporation
requires approval by a majority of the outstanding shares of Common Stock
entitled to directors, employees (including officers) and
consultantsvote thereon. As a result, any shares not voted (whether by
abstention, broker non-vote or otherwise) will have the same effect as a vote
against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED CAPITAL STOCK BY
INCREASING THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 15 MILLION TO 50 MILLION SHARES (PROPOSAL 2)
PROPOSAL 3. TO APPROVE THE ISSUANCE UPON CONVERSION OF SERIES A CONVERTIBLE
PREFERRED STOCK OF MORE THAN 1,127,674 SHARES OF COMMON STOCK, AS
REQUIRED BY NASDAQ RULES.
Nasdaq rules require the Company to obtain stockholder approval for the
issuance of securities involving the sale of 20% or more of its Common Stock at
less than fair market value. Nasdaq may delist the securities of any issuer that
fails to obtain such stockholder approval before the issuance of such
securities.
On September 10, 1998, the Company sold 3,520 shares of the Company ("Plan participants"). On September 16, 1996,Company's
Series A Convertible Preferred Stock, together with warrants to purchase 44,000
shares of its Common Stock at an exercise price above the Board of Directorsthen market value of
the Company adopted, and stockholders approved,Common Stock, to two institutional investors for an amendmentaggregate purchase price
of $3,520,000. The Series A Convertible Preferred Stock is convertible into
shares of Common Stock, at the option of the holder thereof, subject to certain
limitations discussed below. The number of shares of Common Stock into which the
Series A Convertible Preferred Stock may be converted is equal to $1,000 times
the number of shares to be converted, divided by the conversion price. The
conversion price is equal to the Plan, increasinglower of $4.97 and 85% of the lowest sale price
of the Common Stock on the Nasdaq SmallCap Market during the five trading days
preceding the date of conversion. There is no minimum conversion price.
Consequently, the lower the market price of the Common Stock, the greater the
number of shares of Common Stock covered by the Plan to 1,249,070 shares.
7
Asholders of December 31, 1996, there were outstanding options to purchase an
aggregate of 925,859 shares granted pursuantthe Series A Convertible
Preferred Stock will receive upon conversion. No holder may convert the Series A
Convertible Preferred Stock to the Plan and options to
purchase anextent such conversion would result in the
holders in the aggregate of 21,325 shares granted pursuant to the Company's 1991
Stock Option Plan, which was terminated in December 1995. At December 31,
1996, options to purchase an aggregate 292,366acquiring more than 1,127,674 shares of Common Stock,
were
available for grant under the Plan. No stock purchase rights have been
granted pursuant to the Plan.
The Plan authorizes the issuance of incentive stock options ("ISOs"), as
defined in Section 422Arepresenting 20% of the Internal Revenue Codenumber of 1986, non-qualified
stock options ("NQSOs",shares of Common Stock outstanding on the date
upon which the shares of Series A Convertible Preferred Stock were issued,
unless and together with ISOs, "Options")until such issuance is approved by stockholders.
The conversion price and stock purchase
rights ("SPRs"). Consultants and directors who are not also employeesthe number of shares of Common Stock that may be
acquired upon conversion of the Series A Convertible Preferred Stock is subject
to adjustment in the event of a stock split, stock dividend, reorganization or
reclassification. In addition, if prior to January 14, 2000 the Company are eligibleissues
shares of Common Stock (or securities convertible into, or exercisable or
exchangeable, for Common Stock) at less than the conversion price in a
transaction exempt from the registration requirements of the Securities Act and
the Company grants the purchasers of only NQSOs and/such shares or SPRs. The exerciseother securities the right
to demand registration of such shares, the conversion price of each ISO may notthe Series A
Convertible Preferred Stock will be less than 100%adjusted to such lower price.
The conversion, or the potential conversion, of the fairSeries A Convertible
Preferred Stock at a discount of approximately 15% of the then prevailing market
valueprice of the Common Stock atand the time of grant, except that in the case of a grant to an employee
who owns 10% or more of the outstanding stock of the Company or a subsidiary
or parent of the Company (a "10% Stockholder"), the exercise price may not be
less than 110% of the fair market value on the date of grant. The aggregate
fair market valueimmediate resale of the shares coveredof Common Stock
acquired upon conversion into the public market may depress the market price of
the Common Stock and will have a dilutive impact on other stockholders.
If this proposal is not approved by ISOs granted understockholders, upon any conversion that,
together with prior conversions, would result in the Plan that
become exercisable by a Plan participantissuance of more than
1,127,674 shares of Common Stock but for the first time20% limitation discussed above, the
Company will be required to pay the holder requesting conversion an amount in
any calendar
year is subjectcash equal to a $100,000 limitation. The exercisethe closing price of each NQSO is
determined by the Board, or committee thereof, in its discretion, provided
that the exercise price of a NQSO is not less than 85% of the fair market
value of the Common Stock on the date of grant.conversion
times the number of shares in excess of 1,127,674 shares. The Board, or Committee
thereof, shall determineCompany's ability
to make such cash payments will depend on its available cash resources at the
termtime of a request for conversion. The payment of such amounts instead of the
Optionsissuance of shares of Common Stock upon conversion may adversely affect the
liquidity and SPRs; provided, however,
that in no event may an Option have a termfinancial condition of the Company.
9
13
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE ISSUANCE OF MORE THAN
1,127,674 SHARES OF COMMON STOCK UPON CONVERSION OF THE
SERIES A CONVERTIBLE PREFERRED STOCK, AS REQUIRED
BY NASDAQ RULES (PROPOSAL 3)
PROPOSAL 4. TO APPROVE THE ISSUANCE UPON CONVERSION OF SERIES B CONVERTIBLE
PREFERRED STOCK OF MORE THAN 1,148,807 SHARES OF COMMON STOCK, AS
REQUIRED BY NASDAQ RULES.
Nasdaq rules require the Company to obtain stockholder approval for the
issuance of securities involving the sale of 20% or more than ten (10) years (no
more than five (5) years with respect to ISOs granted to a 10% Stockholder).
Any Option which is granted shall be vested and exercisableof its Common Stock at such time as
determined by the Board, or committee thereof, but in no event at a rate
less than 20% per year. A recipientfair market value. Nasdaq may delist the securities of an SPR must exerciseany issuer that
fails to obtain such right withinstockholder approval before the period, not to exceed thirty (30) days from the dateissuance of grant, determined by
the Board, or committee thereof. The Board, or committee thereof, may reserve
tosuch
securities.
On March , 1999, the Company upon the grant of an SPR, an option to repurchase upon a Plan
participant's termination of employment, any stock acquired upon his exercisesold 1,500 shares of the SPRCompany's Series B
Convertible Preferred Stock together with warrants to purchase 18,750 shares of
its Common Stock, to two institutional investors for an aggregate purchase price
of $1,500,000. The Series B Convertible Preferred Stock is convertible into
shares of Common Stock, at the SPR exercise price. Any such repurchase option shall lapse
at a rate of not less than 20% per year commencing on the date of the Plan
participant's purchase. Options and SPRs granted underholder thereof, commencing July ,
1999, subject to certain limitations discussed below. The number of shares of
Common Stock into which the Plan are not
transferable, other than by will or by the laws of descent and distribution.
No stock options or SPRsSeries B Convertible Preferred Stock may be
granted under the Plan after December 12,
2005.
Subjectconverted is equal to the provisions of the Plan, the Board, or a committee thereof,
has the authority to determine the individuals to whom the stock options or
SPRs are to be granted,$1,000 times the number of shares to be coveredconverted, divided
by each option or
SPR, the exerciseconversion price. The conversion price is equal to the typelower of option,$
and 85% of the exercise period,lowest sale price of the restrictions, if any,Common Stock on the exerciseNasdaq SmallCap
Market during the five trading days preceding the date of conversion. There is
no minimum conversion price. Consequently, the lower the market price of the
option or SPR,Common Stock, the terms forgreater the payment of the exercise price and other terms and conditions. Payments by
holders of options or SPRs upon exercise of an option may be made (as
determined by the Board or a committee thereof) in cash or such other form of
payment as may be permitted under the Plan, including without limitation, by
promissory note or by deliverynumber of shares of Common Stock.
In February 1996,Stock the Compensation Committeeholders of
the Board of Directors
authorizedSeries B Convertible Preferred Stock will receive upon conversion. No holder
may convert the grant of optionsSeries B Convertible Preferred Stock to purchase anthe extent such
conversion would result in the holders in the aggregate of 242,746acquiring more than
1,148,807 shares of Common Stock, at an exercise price of $0.07 per share, to certain officers,
directors and employeesrepresenting 20% of the Company pursuant to the Company's 1995 Stock
Option Plan, including options to purchase 67,587 shares granted to Dr. Wendy
Shelton-Paul, Vice Presidentnumber of Medical Affairs of the Company, and options
to purchase 68,055 shares granted to Michael J. Tomczak, Vice President and
Chief Financial Officer of the Company, options to purchase 20,980 shares
granted to Peter Kazanzides, Director of Robotics and Software and options to
purchase 21,248 shares granted to Brent D. Mittelstadt, Director of
Biomedical Applications. These options were issued in replacement of options
previously granted pursuant to the Company's 1991 Stock Option Plan, with
exercise prices ranging from $3.33 to $7.84 per share, surrendered for
cancellation.
SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock at March 14, 1997 by (i)
each stockholder known by the Company to be a beneficial owner of more than
five percent of the outstanding Common Stock, (ii) each director of the
Company and each Named Executive and Certain Other Management named in the
Summary Compensation Table above and (iii) all directors, executive officers
and certain other management personnel as a group.
8
Amount and Percentage of
Nature of Common Stock
Beneficial Beneficially
Name Ownership Owned(1)(2)
- ---- -------------- --------------------
International Business Machines Corp. ........................... 2,274,066(4) 40.32%(5)
Old Orchard Road
Armonk, NY 10504
EJ Financial Investments V, L.P. ................................ 1,039,792 30.89%
225 East Deer Path Road
Suite 250
Lake Forest, IL 60045
Sutter Health and Sutter Health Venture ......................... 611,607(6) 18.17%
Partners, L.P.
One Capitol Mall
Sacramento, CA 95814
Ramesh C. Trivedi (3) ........................................... 175,355(7) 4.95%(8)
John N. Kapoor .................................................. 1,039,792(9) 30.89%
James J. McGroddy (3) ........................................... 21,000(10) 0.62%
Paul A.H. Pankow (3) ............................................ 1,127(7) 0.03%(11)
Wendy Shelton-Paul (3) .......................................... 89,290(12) 2.61%(13)
Mike Tomczak (3) ................................................ 71,407(7) 2.08%(14)
Peter Kazanides (3) ............................................. 41,784(15) 1.23%(16)
Brent Mittelstadt (3) ............................................ 45,046(17) 1.32%(18)
All directors,executive officers and certain other management as
a group (8 persons) ............................................ 1,463,801(19) 39.10%(20)
- ------
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws, where applicable. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on
March 14, 1997, any security which such person or group of persons has
the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for
such person or persons, but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Except as otherwise stated, calculated on the basis of 3,366,028 shares of
Common Stock outstanding on the date upon which the shares of Series B
Convertible Preferred Stock were issued, unless and outstanding.
(3) Addressuntil such issuance is
c/oapproved by stockholders.
The conversion price and the Company, 829 West Stadium Lane, Sacramento, California
95834.
(4) Includes warrants to purchase 2,079,584number of shares of Common Stock at an
exercise price of $0.01 per share exercisable until December 31, 2005,
warrants to purchase 67,587 shares of Common Stock at an exercise price
of $0.07 per share exercisable until December 31, 2000, and warrants to
purchase 126,895 shares of Common Stock at an exercise price of $0.01 per
share exercisable until December 31, 2005, all of which warrants are
presently exercisable.
(5) Calculated on the basis of 5,640,094 shares of Common Stock issued and
outstanding.
(6) Includes 593,538 shares of Common Stock owned by Sutter Health and 18,069
shares of Common Stock beneficially owned by Sutter Health Venture
Partners I, L.P., an affiliate of Sutter Health.
(7) Represents shares issuablethat may be
acquired upon the exercise of stock options exercisable
within 60 days, at an exercise price of $0.07 per share.
(8) Calculated on the basis of 3,541,383 shares of Common Stock issued and
outstanding.
(9) Represents shares of Common Stock owned by EJ Financial Investments V,
L.P., a limited partnership of which Mr. Kapoor is the managing general
partner. Mr. Kapoor disclaims beneficial ownership of such shares.
9
(10) Includes 20,000 shares of Common Stock owned by Dr. McGroddy and 1,000
shares of Common Stock beneficially owned by his daughter.
(11) Calculated on the basis of 3,367,155 shares of Common Stock issued and
outstanding.
(12) Includes 50,410 shares issuable upon exercise of stock options
exercisable within 60 days, at an exercise price of $0.07 per share.
(13) Calculated based upon 3,416,438 shares of Common Stock issued and
outstanding.
(14) Calculated based upon 3,437,435 shares of Common Stock issued and
outstanding.
(15) Includes 39,452 shares issuable upon exercise of stock options
exercisable within 60 days at no exercise price of $0.07 per share.
(16) Calculated based upon 3,405,480 shares of Common Stock issued and
outstanding.
(17) Includes 39,605 shares issuable upon exercise of stock options
exercisable within 60 days at an exercise price of $0.07 per share.
(18) Calculated based upon 3,405,633 shares of Common Stock issued and
outstanding.
(19) Includes 377,356 shares of Common Stock issuable upon exercise of
options exercisable within 60 days, at exercise prices ranging from
$0.07 to $2.07 per share.
(20) Calculated based upon 3,743,384 shares of Common Stock issued and
outstanding.
COMPLIANCE WITH 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, Directors and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, Directors and ten percent stockholders are
required by regulation to furnish the Company with copies of all Section
16(a) forms they file. Based on the Company's copies of such forms received,
or written representations from certain reporting persons that no Form 5's
were required for those persons, the Company believes that, during 1996,
Officers, Directors and greater than ten percent beneficial owners complied
with all applicable filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
DECEMBER 1995 RECAPITALIZATION
Pursuant to a Series D Preferred Stock and Warrant Purchase Agreement (the
"1995 Stock Purchase Agreement") dated as of December 21, 1995, the Company
effected the recapitalization described below.
The Company effected a one-for-five reverse stock split of its capital
stock, and all outstanding shares of Series B and Series C Preferred Stock
were converted into shares of Common Stock. Upon conversion of the Series B Convertible Preferred Stock is subject
to adjustment in the Company issued 30,482event of a stock split, stock dividend, reorganization or
reclassification. In addition, if prior to the earlier of the first anniversary
of the date upon which a registration statement for the resale of the shares of
Common Stock to each of
Sutter Health and the Kapoor Trust, or a total of 60,964 shares. In addition,
the Company issued 8,955 shares of Common Stock to each of Sutter Health and
the Kapoor Trust, or a total of 17,910 shares, in exchange for the
cancellation of all accumulated dividends on the Series B Preferred Stock.
Uponthat may be acquired upon conversion of the Series C Preferred Stock, the Company issued 89,604
shares. In addition, the Company issued 19,512 shares of Common Stock to
Sutter Health and 3,169 shares of Common Stock to Keystone, or a total of
22,681 shares, in exchange for the cancellation of all accumulated dividends
on the Series C Preferred Stock.
As part of the recapitalization, IBM received a warrant to purchase
126,895 shares of Common Stock, at an exercise price of $0.01 per share,
which expires on December 31, 2005, in exchange for the cancellation of the
IBM Note in the principal amount of $3,000,000 and accrued interest thereon
of $1,224,373. In addition, the expiration date of the warrant issued to IBM
in connection with the formation of the Company was extended until December
31, 2000.
Pursuant to the 1995 Stock Purchase Agreement, EJ Financial Investments V,
L.P. ("EJ Financial") purchased 693,195 shares of Series D Preferred Stock
for an aggregate purchase price of $666,667 ($0.96 per share), and IBM
purchased a warrant to purchase 1,386,390 shares of Series D Preferred Stock,
exercisable at
10
any time prior to December 31, 2005, at an exercise price of $0.01 per share,
for an aggregate purchase price of $1,333,333 ($0.96 per warrant). In
addition, EJ Financial received an option to purchase an additional 346,597
shares of Series D Preferred Stock, on the same terms it purchased the Series
DB Convertible
Preferred Stock and IBM received an option to purchasethe warrants to purchase
an additional 693,194 shares of Series D Preferred being hereinafter referred
to collectively as the "Standby Options"). On February 19, 1996, each of EJ
Financial and IBM exercised its Standby Option, as requiredis declared effective by the terms
thereof, sinceSecurities and
Exchange Commission and the closing of a registered firm commitment underwritten
secondary offering of the Company's securities, the Company was unable to obtain alternative financing on
substantially the same terms as the Standby Options prior to the expiration
thereof.
As part of the recapitalization of the Company, Sutter Health, Sutter
Health Venture Partners and Keystone received warrants to purchase 390,888
shares, 11,899 shares and 43,300 shares, of Common Stock, respectively, at an
exercise price of $0.74 per share, in consideration for their consent to the
terms of the recapitalization, including the sale of the Series D Preferred
Stock. Sutter Health, Sutter Health Venture Partners and Keystone agreed to
amend these warrants to permit payment of the exercise price by surrender of
a portion of the warrants in lieu of payment of the cash exercise price.
Accordingly, on August 25, 1996, Sutter Health and Sutter Health Venture
Partners received 449,374 shares and 13,680 shares of Common Stock,
respectively (or 63,200 fewer shares and 1,924 fewer shares, respectively,
than they would have received if the exercise price had been paid in cash)
and on October 29, 1996, Keystone received 49,777issues shares of
Common Stock (or 7,002 fewer sharessecurities convertible into, or exercisable or exchangeable
for, Common Stock) at less than it would have received if the exerciseconversion price had been
paid in cash.)
In connection witha transaction exempt
from the recapitalizationregistration requirements of the Company,Securities Act and the Company granted stockholders who did not purchasegrants
the purchasers of such shares or other securities the right to demand
registration of such shares, the conversion price of the Series DB Convertible
Preferred Stock will be adjusted to such lower price.
The conversion, or warrants to purchasethe potential conversion, of the Series DB Convertible
Preferred Stock rights to purchase Series D
Preferred Stock on the same terms and conditions as those shares purchased
under the 1995 Stock Purchase Agreement, which rights expired unexercised on
March 5, 1996.
REGRANT OF LOWER-EXERCISE PRICE OPTIONS TO REPLACE PRIOR GRANTS
In February 1996, the Compensation Committeeat a discount of approximately 15% of the Boardthen prevailing market
price of Directors
authorized the grantCommon Stock and the immediate resale of options to purchase an aggregate of 242,736the shares of Common Stock
at an exerciseacquired upon conversion into the public market may depress the market price of
$0.07 per share,the Common Stock and will have a dilutive impact on other stockholders.
If this proposal is not approved by stockholders, upon any conversion that,
together with prior conversions, would result in the issuance of more than
1,148,807 shares of Common Stock but for the 20% limitation discussed above, the
Company will be required to certain officers,
directors, and employeespay the holder requesting conversion an amount in
cash equal to the closing price of the Company pursuantCommon Stock on the date of conversion
times the number of shares in excess of 1,148,807 shares. The Company's ability
to make such cash payments will depend on its available cash resources at the
Company's 1995 Stock
Option Plan, including options to purchase 67,587 shares granted to Dr. Wendy
Shelton-Paul, Vice Presidenttime of Medical Affairsa request for conversion. The payment of such amounts instead of the
Company, options to
purchase 68,055issuance of shares granted to Michael J. Tomczak, Vice Presidentof Common Stock upon conversion may adversely affect the
liquidity and Chief Financial Officerfinancial condition of the Company, options to purchase 20,980 shares
granted to Peter Kazanzides, Director of Robotics and Software and options to
purchase 21,248 shares granted to Brent D. Mittelstadt, Director of
Biomedical Applications. These options were issued in replacement of options
previously granted pursuant to the Company's 1991 Stock Option Plan, with
exercise prices ranging from $3.33 to $7.84 per share, surrendered for
cancellation. See the table captioned "Repricing of Options" above.Company.
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14
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE ISSUANCE OF MORE THAN
1,148,807 SHARES OF COMMON STOCK UPON CONVERSION OF THE
SERIES B CONVERTIBLE PREFERRED STOCK, AS REQUIRED
BY NASDAQ RULES (PROPOSAL 3)
PROPOSAL 2.5. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
public
accountants,auditors, to continue as the Company's auditors and to audit the books of
account and other recordsconsolidated
financial statements of the Company for the fiscal year ending December 31,
1997.1999. Ernst & Young LLP has audited the Company's financial statements since the
fiscal year ended December 31, 1991. They have no financial interest, either
direct or indirect, in the Company. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting to respond to appropriate questions
from stockholders and to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS IN THE FOREGOING PROPOSAL 2(PROPOSAL 3)
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except the matters set forth in the Notice of Annual Meeting and
described in this Proxy Statement. Unless otherwise directed, all shares
represented by Board of Directors' Proxiesproxies will be voted in favor of the
proposals of the Board of Directors described in this Proxy Statement. If any
other matters come before the Annual Meeting, the persons named in the
accompanying Proxy will vote on those matters according to their best judgment.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and business backgrounds of the executive officers and
other significant employees of the Company who are not nominees for Director are
as follows:
MARK W. WINN, 48, has been Chief Financial Officer and Secretary of the
Company since September 1997. Mr. Winn served as the Senior Vice President and
Chief Financial Officer of Research Medical, Inc. (a manufacturer and developer
of specialty cardiovascular and pharmaceutical products) from November 1991 to
August 1997. Mr. Winn was the Vice President and Chief Financial Officer of Gory
Associated Industries (a south Florida building products manufacturer) from 1984
to 1991.
LELAND WITHERSPOON, 46, has been Vice President, Engineering since April
1997. Mr. Witherspoon was Director Product Research and Development for Sorin
Biomedicals, Inc. (a developer and manufacturer of cardiopulmonary and
cardiovascular products) from February 1992 to April 1997. He was Manager of
Research and Development for Pfizer/Shiley (a developer and manufacturer of
cardiopulmonary and cardiovascular equipment and disposables) from February 1992
to April 1997. Mr. Witherspoon held various technical and management positions
with Xerox Medical Systems (a manufacturer and developer of diagnostic medical
electronic and mechanical systems) from March 1979 to October 1990.
PETER KAZANZIDES, PH.D., 36, a co-founder of the Company, has been an
employee of the Company since November 1990 and Director of Robotics and
Software of the Company since December 1995. He received Sc.B., Sc.M., and Ph.D.
degrees in electrical engineering from Brown University in 1983, 1985, and 1988,
respectively. His dissertation focused on force control and multiprocessor
systems for robotics. He performed post-doctoral research in surgical robotics
from March 1989 to March 1990 at the IBM T.J. Watson Research Center.
HANS WEYENSCHENK, 48, has been Director of Marketing, Orthopaedics, of the
Company since February 1997. Prior thereto, he was employed by Vitatron Medical,
Inc., a wholly-owned subsidiary of
11
15
Medtronic, Inc. (a manufacturer of cardiac products), as Director of Marketing,
Communications and Services from 1996 to February 1997 and Director of
International Sales from 1987 to 1995.
MARK JENSEN, 51, joined the Company as Director of Quality Systems in July
1998. Prior to joining the Company, he held Quality/Regulatory management
positions with Medtronic, Inc., Nellcor Puritan Bennett (a developer and
marketer of products for the diagnosis, monitoring and treatment of respiratory
disorders), and Novo Nordisk A/S (a biotech based manufacturer and distributor
of pharmaceutical and industrial enzyme products) in Copenhagen Denmark.
SCOTT M. BURKHART, 44, has been Director of Sales and Marketing since
January 1999. Prior to joining the Company, he served as Vice President of Sales
for Instromedix (manufacturer of cardiac telemedicine products) from 1988 to
1999 and as Marketing Manager Imaging Systems Division -- 3M Company from 1978
to 1984.
RD HIBBERT, 50, has been Director, Clinical and Regulatory Affairs since
February 1998. Prior to joining the Company, he was Director, Clinical and
Regulatory Affairs of Research Medical, Inc. from August 1985 to February 1998.
CERTAIN TRANSACTIONS
On October 29, 1997, the Company amended warrants to purchase 2,079,584
shares of Series D Preferred Stock owned by IBM so that they were exercisable
for an equal number of shares of Common Stock and on such other terms of
conditions stated in such warrants. In April 1998, the Company amended warrants
to purchase 2,274,066 shares of Common Stock owned by IBM to permit IBM to
exercise those warrants without payment of cash for a lesser number of shares,
based upon the difference between market price of the Common Stock at the time
of exercise and the exercise prices. In consideration for such cashless exercise
rights, IBM agreed to limit sales of shares acquired upon exercise of warrants
to the volume limitations of Rule 144, whether or not applicable, and granted
the Company a right of first refusal with respect to such sales.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers, Directors and persons who own more than ten percent of a registered
class of the Company's equity securities within specified time periods to file
certain reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, Directors and ten percent stockholders are
required by regulation to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of copies of such reports received by
the Company and written representations from such persons concerning the
necessity to file such reports, the Company is not aware of any failures to file
reports or report transactions in a timely manner during the fiscal year ended
December 31, 1998.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this Proxy
Statement, the enclosed Proxy and other materials, and the cost of soliciting
Proxies with respect to the Annual Meeting, will be borne by the Company. The
Company will request banks and brokers to solicit their customers who
beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expenses of
such solicitations. The original solicitation of Proxiesproxies by mail may be
supplemented by telephone and telegram by officers and other regular employees
of the Company, but no additional compensation will be paid to such individuals.
STOCKHOLDER PROPOSALS
No person who intends to present a proposal for action at a forthcoming
stockholders' meeting of the Company may seek to have the proposal included in
the proxy statement or form of proxy for such meeting unless that person (a) is
a record beneficial owner of at least 1% or $1,000 in market value of shares of
12
16
Common Stock, has held such shares for at least one year at the time the
proposal is submitted, and such person shall continue to own such shares through
the date on which the meeting is held, (b) provides the Company in writing with
his name, address, the number of shares held by him and the dates upon which he
acquired such shares with documentary support for a claim of beneficial
ownership, (c) notifies the Company of his intention to appear personally at the
meeting or by a qualified representative under Delaware law to present his
proposal for action, and (d) submits his proposal timely. A proposal to be
included in the proxy statement or proxy for the Company's next annual meeting
of stockholders, will be submitted timely only if the proposal has been received
at the Company's principal executive office no later than December 16, 1997.November 26, 1999. If
the date of such meeting is changed by more than 30 calendar days from the date
such meeting is scheduled to be held under the Company's By-Laws, or if the
proposal is to be presented at any meeting other than the next annual meeting of
stockholders, the proposal must be received at the Company's principal executive
office at a reasonable time before the solicitation of proxies for such meeting
is made.
Even if the foregoing requirements are satisfied, a person may submit only
one proposal with a supporting statement of not more than 500 words, if the
latter is requested by the proponent for inclusion in the proxy materials, and
under certain circumstances enumerated in the Securities and Exchange
Commission's rules relating to the solicitation of proxies, the Company may be
entitled to omit the proposal and any statement in support thereof from its
proxy statement and form of proxy.
AVAILABLE INFORMATIONFORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998
Copies of the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 19961998 as filed with the Securities and Exchange Commission,
including the financial statements, can be obtained without charge by
stockholders (including beneficial owners of the Company's Common Stock) upon
written request to Michael J. Tomczak,Mark W. Winn, the Company's Secretary, Integrated Surgical
Systems, Inc., 829 West Stadium Lane, Sacramento,,1850 Research Park Drive, Davis, California 9583495616-4884 or on the
Commission's Web Site at www.sec.gov.
By Order of the Board of Directors
Michael J. Tomczak,Mark W. Winn, Secretary
Sacramento,Davis, California
April 15, 1997
12March 26, 1999
13
APPENDIX I -- PROXY CARD17
INTEGRATED SURGICAL SYSTEMS, INC.
829 West Stadium Lane
Sacramento, California 958341550 RESEARCH PARK DRIVE
PROXY DAVIS, CALIFORNIA 95616-4884
The undersigned, a holder of Common Stock of Integrated Surgical
Systems, Inc.INTEGRATED SURGICAL SYSTEMS,
INC., a Delaware corporation (the "Company"), hereby appoints MICHAEL
J. TOMCZAKDR. RAMESH C.
TRIVEDI and MARK W. WINN, and each of them, the proxy of the undersigned, with
full power of substitution, to attend represent and vote for the undersigned,
all of the shares of the Company which the undersigned would be entitled to
vote, at the Annual Meeting of Stockholders of the Company to be held on May 14, 1997April
27, 1999 and any adjournments thereof, as follows:
1. The election of six Directors of the Company to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below.
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH OR OTHERWISE STRIKE OUT HIS OR HER NAME BELOW)
Ramesh C. Trivedi, James C. McGroddy, John N. Kapoor, Paul A.H. Pankow, Gerald
D. Knudson and Patrick G. Hays
2. The approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the authorized capital stock by increasing the number
of authorized shares of Common Stock from 15 million to 50 million shares.
[ [ [
] FOR ] AGAINST ] ABSTAIN
3. The approval of the issuance of more than 1,127,674 shares of Common Stock
upon conversion of Series A Convertible Preferred Stock, as required by Nasdaq
rules.
[ [ [
] FOR ] AGAINST ] ABSTAIN
4. The approval of the issuance of more than 1,148,807 shares of Common Stock
upon conversion of Series B Convertible Preferred Stock, as required by Nasdaq
rules.
[ [ [
] FOR ] AGAINST ] ABSTAIN
5. The ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountantsauditors for the year ending December 31, 1997.1999.
[ [ [
] FOR [ ] AGAINST [ ] ABSTAIN
3.
6. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
(continued, and to be signed, on other side)
18
(continued from other side)
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereby, said proxies are authorized to
vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE OTHER SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE SIX DIRECTORS NAMED IN PROPOSAL 1 AND FOR THE
ADOPTION OF PROPOSALS 2, 3, 4 AND 3,5, AND AS SAID PROXIES SHALL DEEM ADVISABLE ON
SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of a copy of the Notice of Annual Meeting
dated April 15, 1997March 26, 1999 relating to the Annual Meeting.
Date: , 1999
----------------------------------
Signature(s) of Stockholder(s)------------------------------------
------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
The signature(s) hereon should
correspond exactly with the name(s)
of the Stockholder(s) appearing on
the Stock Certificate. If stock is
jointly held, all joint owners
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If signer is a
corporation, please sign the full
corporate name, and give title of
signing officer.
Date: ____________________, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF INTEGRATED SURGICAL
SYSTEMS, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.