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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTEGRATED SURGICAL SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name1433 N. Market Blvd., Suite 1
Sacramento, California 95834
May 15, 2007
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(NameStockholders of
Person(s) FilingIntegrated Surgical Systems, Inc. which will be held at our executive offices
located at 1433 N. Market Blvd., Suite 1, Sacramento, California at 10:00 a.m.,
local time, on June 28, 2007. On the following pages you will find the formal
Notice of Annual Meeting and Proxy Statement, if other thanStatement.
Whether or not you plan to attend the Registrant)
Payment of Filing Fee (Checkmeeting in person, it is important
that your shares be represented and voted at the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)meeting. Accordingly, please
date, sign and 0-11.
(1) Title of each class of securitiesreturn the enclosed proxy card promptly.
I hope that you will attend the meeting, and I look forward 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 0-11:1:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check boxes if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)seeing you
there.
Sincerely,
Ramesh C. Trivedi
Chairman 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:
------------------------------------------------------------------------Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PER THE INSTRUCTIONS INCLUDED WITH YOUR PROXY CARD.
2
INTEGRATED SURGICAL SYSTEMS, INC.
1433 N. Market Blvd., Suite 1
Sacramento, California 95843
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 2000
To the Stockholders of Integrated Surgical Systems, Inc.:
Notice is hereby givenJUNE 28, 2007
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Integrated Surgical Systems, Inc., a Delaware corporation
(the("Integrated Surgical Systems" or the "Company"), will be held on June 28, 2007
at 9:10:00 a.m. on Tuesday, December 12, 2000,am, local time, at the Company'sour executive offices 1850 Research Park Drive, Davis,located at 1433 N. Market
Blvd., Suite 1, Sacramento, California, 95616-4884 for the following purposes:
1. To elect three (3) 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 amendmentsdirector-nominees to the Company's Restated CertificateBoard of Incorporation and Bylaws to eliminate cumulative voting rights with
respect to the election of Directors.
3.Directors;
2. To approve an amendment to the Company'sour Restated Certificate of Incorporation
to increaseeffect a one-for-ten reverse stock split of our common stock;
3. To approve the authorized capital stocksale of the Company
by increasing the numbersubstantially all of authorized shares of Common Stock from 50
millionour assets to 100 million shares.Novatrix
Biomedical, Inc. ("Novatrix");
4. To approve the issuance under an equity line of credit agreement of
more than 3,843,939 shares of Common Stock, representing 19.9%dissolution and liquidation of the outstanding shares of Common Stock onCompany in the date the Company entered
into the equity line of credit agreement, as required by Nasdaq
rules.
5. To approve the adoptionevent
that we are unable to complete an acquisition or similar strategic
transaction within 12 months of the Company's 2000 Long-Term Performance
Plan.
6. To ratifyclosing of the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 2000.
7.To approve the issuance upon conversion of Series H Convertible
Preferred Stock of more than 3,494,298 shares of Common Stock, as
required by Nasdaq rules.
8.Novatrix
transaction;
5. To transact such other business as may properly come before the Annual
Meeting or at any adjournmentsadjournment or postponement thereof.
Only stockholdersStockholders of record at the close of business on October 23, 2000May 25, 2007, are
entitled to notice of, and to vote at, the Annual Meeting or any adjournmentsadjournment or
postponement thereof. A list of such stockholders entitledwill be available at the
Annual Meeting.
All stockholders are cordially invited to voteattend the Annual Meeting. If you
do not expect to be present at the Annual Meeting, will be openyou are requested to examination by any stockholder for any purpose germanefill in,
date and sign the enclosed proxy and mail it promptly in the enclosed envelope
to the meeting,make sure that your shares are represented at the
executive offices of the Company, 1850 Research Park Drive, Davis, California
95616-4884, for a period of ten days prior to the Annual Meeting. Such list also
shall be available duringIn the
event you decide to attend the Annual Meeting in person, you may, if you desire,
revoke your proxy and vote your shares in person.
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the 2007 Annual Meeting, please promptly
complete, sign and date your enclosed proxy card, which is solicited by the
Board of Directors, and return it in the enclosed envelope, or vote
electronically or by phone in accordance with the instructions included with
your proxy card. You may revoke your proxy at any time before it is voted for
you at the Annual Meeting. If you execute a proxy you may still attend the 2007
Annual Meeting, revoke your proxy vote and vote in person.
By Order of the Board of Directors,
LOUIS KIRCHNER
Secretary
Davis,Ramesh C. Trivedi
Chairman and Chief Executive Officer
Sacramento, California
NovemberMay 15, 2007
TABLE OF CONTENTS
General Information About the Annual Meeting................................ 1
PROPOSAL 1: ELECTION OF DIRECTORS........................................... 4
Biographical Information about Nominees............................ 4
Meetings of the Board Of Directors................................. 5
Report on Audited Financial Statements............................. 5
Legal Proceedings Involving Directors, Officers or Affiliates...... 5
Communications from Stockholders................................... 5
Security Ownership of Certain Beneficial Owners and Management..... 6
Executive Compensation............................................. 7
Summary Compensation Table......................................... 7
Outstanding Equity Awards at Fiscal Year-End....................... 7
Equity Compensation Plan Information............................... 8
2000
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 BOARDDirector Compensation.............................................. 9
PROPOSAL 2: ONE-FOR-TEN REVERSE STOCK SPLIT................................ 10
PROPOSAL 3: SALE OF DIRECTORSSUBSTANTIALLY ALL ASSETS............................... 13
Summary Term Sheet................................................. 13
Terms of the Transaction........................................... 14
Background of the Transaction...................................... 19
Regulatory Approvals............................................... 22
Reports, Opinions and Appraisals................................... 22
Shell Company Status............................................... 22
PROPOSAL 4: DISSOLUTION 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.COMPANY..................................... 25
General............................................................ 25
Conduct of Our Liquidation and Dissolution......................... 25
Independent Accountants..................................................... 27
Additional Meeting Information.............................................. 27
Transactions with Related Persons.................................. 27
Section 16(a) Beneficial Ownership Reporting Compliance............ 28
Deadline for Receipt of Stockholder Proposals...................... 28
Available Information.............................................. 28
3
INTEGRATED SURGICAL SYSTEMS, INC.
1850 RESEARCH PARK DRIVE
DAVIS, CALIFORNIA 95616-4884
(530) 792-2600
------------------------1433 N. Market Blvd., Suite 1
Sacramento, California 95834
- --------------------------------------------------------------------------------
PROXY STATEMENT
------------------------
The Board of DirectorsANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 2007
---------------------------------------------------------------------
This proxy statement is furnished to stockholders of Integrated Surgical
Systems, Inc. (the("Integrated Surgical Systems" or the "Company") presents this Proxy Statement andin connection
with the enclosed proxy card to all stockholders
and solicits theirsolicitation of proxies, in the accompanying form, by the Board of
Directors (the "Board") for use in voting at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at 9:00 a.m. on Tuesday, December 12, 2000 at the Company'sour executive offices 1850
Research Park Drive, Davis,located at 1433 N.
Market Blvd., Suite 1, Sacramento, California 95616-4884.on June 28, 2007, at 10:00 a.m.,
local time, and at any adjournment or postponement thereof.
This proxy statement, and the accompanying form of proxy, are first being
mailed to stockholders on or about May 15, 2007.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Purpose of the Annual Meeting
The record date of this proxy
solicitation is October 23, 2000. All proxies duly executedspecific proposals to be considered and received will be
voted on all matters presentedacted upon 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 FOR the named nominees for election to the
Company's Board of Directors (Proposal 1), FOR the approval of amendments of the
Company's Restated Certificate of Incorporation and Bylaws eliminating
cumulative voting rights with respect to the election of Directors (Proposal 2),
FOR the approval of an amendment to the Company's Restated Certificate of
Incorporation increasing the number of shares of Common Stock the Company is
authorized to issue to 100 million shares (Proposal 3), FOR the approval of the
issuance under an equity line of credit agreement of more than 3,843,939 shares
of Common Stock, representing 19.9% of the outstanding shares of Common Stock on
the date the Company entered into the line of credit agreement, as required by
the Nasdaq Stock Market, Inc. (Proposal 4), FOR the approval of the adoption of
the Company's 2000 Long-Term Performance Plan (Proposal 5), FOR the ratification
of the appointment of Ernst & Young LLP as the Company's independent auditors
for the year ending December 31, 2000 (Proposal 6) and FOR the approval of the
issuance upon conversion of Series H Convertible Preferred Stock of more than
3,494,298 shares of Common Stock, as required by Nasdaq rules (Proposal 7). 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 listedare summarized in the accompanying Notice of Annual Meeting.
In the event that any other matter should come before the Annual Meeting or
that any nomineeof
Stockholders. Each proposal is not available for election, the persons nameddescribed in the
enclosedmore detail in this 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.statement.
Record Date and Outstanding Shares
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 November 8, 2000.
The total number of shares of Common Stock, $.01 par value ("Common
Stock"), of the Company outstanding as of October 23, 2000, was 21,495,527
shares. The Common Stock is the only outstanding class of securities of the
Company entitled to vote. Each share of Common StockBoard has one vote. Only
stockholders of record as offixed the close of business on October 23, 2000May 25, 2007 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Only stockholders of record at
the close of business on the Record Date will be entitled to notice of and to
vote at the Annual Meeting or any and all adjournments or postponements thereof.
As of May 25, 2007, Integrated Surgical Systems had issued and outstanding
45,784,089 shares of common stock and 168 shares of Series G Preferred Stock.
The affirmativecommon stock comprises all of the Company's issued and outstanding voting
stock. The Series G Preferred Stock does not have voting rights.
Revocability and Voting of Proxies
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by any of the
following methods:
o by writing a letter delivered to our executive offices, 1433 N. Market
Blvd, Suite 1, Sacramento, California 95834, stating that the proxy is
revoked;
o by submitting another proxy with a later date; or
o by attending the Annual Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by
a broker, bank or other nominee and that stockholder wishes to vote at the
Annual Meeting, the stockholder must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
Unless we receive specific instructions to the contrary or unless such
proxy is revoked, shares represented by each properly executed proxy will be
voted: (i) FOR the election of each of the nominees to the Board, (ii) FOR the
approval of the proposed amendment to our Restated Certificate of Incorporation
to effect a one-for-ten reverse stock split of our common stock; (iii) FOR the
sale of substantially all of our assets to Novatrix Biomedical, Inc.
("Novatrix"); and (iv) with respect to any other matters that may properly come
before the Annual Meeting, at the discretion of the proxy holders. The Company
does not presently anticipate that any other business will be presented for
action at the Annual Meeting.
Voting at the Annual Meeting
Each share of common stock outstanding on the Record Date will be entitled
to one vote on each matter submitted to a vote of the stockholders, including
the election of directors. Cumulative voting by stockholders is permitted, as
described below.
The presence, in person or by proxy, of the holders of a pluralitymajority of the
votes entitled to be cast forby the election of directorsstockholders at the Annual Meeting is necessary
to constitute a quorum. Abstentions and broker "non-votes" are counted as
present and entitled to vote for purposes of determining a quorum. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power for that particular item and has not received instructions from the
beneficial owner.
A plurality of votes cast is required for the election of Directors. In votingdirectors.
Abstentions and broker "non-votes" are not counted for directors, athe purpose of the
election of directors.
The Company's Restated Certificate of Incorporation and Bylaws provide that
each stockholder is entitled to cast three
votes for each share of Common Stock held, one for each of three directors. A
stockholder may cast his votes evenly for all nominees or may cumulate thesesuch stockholder's votes and cast them forgive one
nominee a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
normally entitled, or distribute themthe stockholder's votes on the same principle
among twoas many nominees as the stockholder considers appropriate. This cumulative
voting right may not be exercised unless the nominee's name has been placed in
nomination prior to the voting and one or more nominees.stockholders has given notice at
the Annual Meeting prior to the voting of the stockholder's intent to cumulate
such stockholder's vote. The proxy holders may exercise this cumulative voting
right at their discretion. The candidates receiving the highest number of votes
of the shares entitled to be voted for them up to the number of directors to be
elected by such shares are elected.
The affirmative vote of a majority of the outstanding shares of Common
Stockcommon stock
outstanding as of the Record Date is required for approval of Proposal Two,
Proposal Three and Proposal Four. Abstentions will have the amendmentssame effect as a
vote "against" Proposal Two, Proposal Three and Proposal Four, whereas broker
non-votes are not considered to have been voted on Proposal Two, Proposal Three
or Proposal Four.
2
Solicitation
The cost of solicitation of proxies will be borne by the Restated CertificateCompany. Such
solicitation will be made by mail and may also be made by the Company's officers
and employees personally or by telephone, facsimile, Internet or telegram
without additional compensation. The Company may also reimburse brokers,
dealers, banks, voting trustees or their nominees for their reasonable expenses
in sending proxies, proxy material and annual reports to beneficial owners. The
Company has retained The Altman Group, Inc., 1200 Wall Street, 3rd Floor,
Lyndhurst, New Jersey 07071 to aid in the solicitation of Incorporationproxies. The Altman
Group will solicit proxies by personal interview, telephone, facsimile and Bylawsmail,
and may request brokerage houses and other nominees and fiduciaries or
custodians to eliminate cumulative voting, and for approvalforward soliciting materials to beneficial owners of the amendmentCompany's
stock. For these services, the Company will pay a fee of approximately $15,000
plus out-of-pocket expenses.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board has nominated directors currently serving on the Board, Ramesh C.
Trivedi, Michael J. Tomczak and Peter B. Mills, to the Restated Certificate of Incorporation to increase the
authorized capital
4
stockserve as directors of the
Company until the next annual meeting of stockholders of the Company and until
their successors are duly elected and qualified or until their earlier death,
resignation, retirement, disqualification or removal. Although management has no
reason to believe that the nominees will not be available as candidates, should
such a situation arise, proxies may be voted for the election of such other
persons as the holders of the proxies may, in their discretion, determine.
Directors are elected by increasing the number of authorized Shares of Common
Stock from 50 million to 100 million shares. The affirmative vote by the
majoritya plurality of the votes presentcast at the Annual
Meeting, and entitled to vote is
required to approve the issuance of more than 3,843,939 shares of Common Stock
under the equity line of credit agreement, to approve the adoption of the
Company's 2000 Long-Term Performance Plan, to ratify the appointment of Ernst &
Young LLP, and to approve the issuance of more than 3,494,298 shares of Common
Stock upon conversion of Series H Convertible Preferred Stock. All proxieseither in person or by proxy. Votes that are withheld will be counted for determiningexcluded
entirely form the presence of a quorum. Votes withheld in
connection withvote and will have no effect.
Nominee Information
The following table sets forth information regarding the election of one or more nominees for
Director will not be
countedelection as votes cast for such 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 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 executive offices, 1850 Research Park Drive, Davis,
California 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.
CHANGE IN CONTROL
On December 14, 1999, the Company issued and sold to ILTAG International
Licensing Holding S.A.L. ("ILTAG"), Bernd Herrmann and Urs Wettstein an
aggregate of 2,922,396 shares of Common Stock and three-year warrants to
purchase an additional 11,700,000 shares of Common Stock pursuant to a Stock and
Warrant Purchase Agreement dated as of October 1, 1999. The purchase price for
the shares and warrants was $4 million. The exercise price of the warrants is
$1.02656 per share. The sale was approved by the Company's stockholders at a
special meeting on December 14, 1999. ILTAG purchased one-half of the shares and
warrants and Messrs. Herrmann and Wettstein each purchased one-quarter of the
shares and warrants. As of October 23, 2000 the purchasers owned 2,922,396
shares representing approximately 13.6% of the outstanding Common Stock, and
warrants to acquire an additional 5,000,000 shares.
ILTAG is a Lebanese company that invests in health care and information
technology companies. Bernd Herrmann is a German venture capitalist who was an
asset manager at Deutsche Bank A.G. and Commerzbank A.G. Urs Wettstein is a
Swiss tax and accounting consultant. As a condition of the sale, Jamesdirectors:
Name Age Position
- ---- --- --------
Ramesh C. McGroddy, Paul A.H. Pankow, Gerald D. Knudson and Patrick G. Hays resigned from
the Company's Board of Directors immediately prior to the closing of the sale,
and were replaced by Messrs. Herrmann, Wettstein and Falah Al-Kadi, the ViceTrivedi 67 President, Chief Executive Officer, Chairman of
the Dogmoch Group of Companies ("Dogmoch"), an affiliate of ILTAG
that provides consulting and support services to over 20 German companies doing
business in countries throughout the Middle East. Dr.Board
Michael J. Tomczak 52 Director
Peter B. Mills 52 Director
Ramesh C. Trivedi has been our President and Chief Executive Officer and a
director of our company since 1995. Prior to joining us, Dr. Trivedi was a
principal of California Biomedical Consultants, an international consulting
firm, and from 1985 to 1986 he served as the president and chief executive
officer of DigiRad Corporation, a medical imaging company.
Michael J. Tomczak was appointed to serve as a Director of the Company in
September 2006. Mr. Tomczak is currently a partner of Tomczak & Co CPA, LLP,
which primarily provides consulting and accounting services to small businesses.
He served as Vice President, Chief Financial Officer and Secretary for the
Company from 1991 until 1997. Mr. Tomczak served as Retail Technology
International, Inc.'s (RTI) Chief Executive Officer and President from 2002
until its sale to Island Pacific, Inc in 2004 and was co-owner during that same
time period. RTI was a developer of point-of-sale software and Island Pacific is
a developer of retail management software. Mr. Tomczak was also Chairman of
RTI's Board of Directors during that same period and had previously served as
RTI's Chief Financial Officer from 2001. Upon the sale of RTI to Island Pacific,
he became its President and Chief Operating Officer until 2005. Mr. Tomczak was
a member of Island Pacific's Board of Directors from 2004 until 2005. Prior to
joining the Company, Mr. Tomczak served as director of Ernst & Young's
Sacramento office's Entrepreneurial Services Group. Mr. Tomczak holds a Bachelor
of Business Administration degree from Western Michigan University and is a
Certified Public Accountant in California.
Peter B. Mills was appointed to fill the
remaining vacancy on the Board. Since,serve as a resultDirector of the sale,Company in September
2006. Mr. Mills is Vice President of Sales at Speck Design, a leading product
design firm with offices in Palo Alto, California and Shanghai, China. He has
spent 15 years selling sophisticated industrial robotics and automation systems
with Adept Technology, the purchasers
obtained controlleading U.S. manufacturer of industrial robots, and
Hewlett-Packard Company. He has also served as the Vice President of Sales at
Softchain, an enterprise supply chain software company acquired in 2001. Mr.
Mills has significant experience with respect to the design and manufacturing
needs of a variety of industries including medical devices, disk drives,
consumer products, food packaging, printers, computers and networking, and
semiconductor equipment. He has extensive international business experience in
Japan, Singapore, and Korea. Mr. Mills earned an MBA from Harvard Business
School and a B.A. in engineering, cum laude, from Dartmouth College.
4
Meetings of the Board of Directors
and effective voting controlDuring fiscal year 2005, there were no meetings of the Company,Board. Actions by
unanimous written consent of the sale resultedDirectors were taken on two occasions.
During fiscal year 2006, there were no meetings of the Board. Actions by
unanimous written consent of the Directors were taken on four occasions.
During fiscal year 2007, there were three meetings of the Board. A quorum
of directors was present, either in a change in control.
Messrs. Wettstein and Herrmann resigned fromperson or telephonically for all of the
meetings.
Report of the Board of Directors on our Audited Financial Statements
We believe that each member of our board has the expertise and experience to
adequately serve our stockholders' interests while serving as directors.
We note that management is responsible for the preparation and integrity of our
financial statements, as well as establishing appropriate internal controls and
financial reporting processes. Most & Company LLP is responsible for performing
an independent audit of our financial statements and issuing a report on such
financial statements. Our directors' responsibility is to monitor and oversee
these processes.
We reviewed the audited financial statements of our company for the year ended
December 31, 2006 and met with both management and the independent auditors,
separately and together, to discuss such financial statements. Our non-employee
directors also were given the opportunity to meet separately with the
independent auditors. Management and the auditors have represented to us that
the financial statements were prepared in June
2000. In addition,accordance with generally accepted
accounting principles in June 2000 ILTAG, Bernd Herrmannthe United States. We also received written disclosures
and Urs Wettstein agreeda letter from our auditors regarding their independence from us, as required
by Independence Standards Board Standard No. 1 and discussed with the auditors
such auditors' independence with respect to surrender an aggregate of 5,700,000 warrantsall services that our auditors
rendered to us. We also discussed with the auditors any matters required to be
discussed by Statement on Auditing Standards No. 61, as amended by Statement on
Auditing Standards No. 90. Based upon these reviews and discussions, we
authorized and directed that the audited financial statements be included in our
Annual Report on Form 10-KSB for the year ended December 31, 2006.
Respectfully submitted,
Ramesh C. Trivedi
Michael J. Tomczak
Peter B. Mills
Legal Proceedings Involving Directors, Officers or Affiliates
There are no legal proceedings ongoing as to exercise an aggregate of
2,000,000which any director, officer or
affiliate of the remaining 6,000,000 warrants as follows: 500,000 warrants by
eachCompany, any owner of September 5, October 5, November 5, and December 5, 2000, provided the
market pricerecord or beneficially of more than five
percent of any class of voting securities of the Common Stock was not less than $1.03, the exercise priceCompany, or any associate of
any such director, officer, affiliate of the warrants. These 2,000,000 warrantsCompany, or security holder, is a
party adverse to us or any of our subsidiaries or has a material interest
adverse to us or any of our affiliates.
Communications from Stockholders
The Board has in place a process for stockholders to send communications to
the Board. Specifically, the Board will expirereview and give appropriate attention to
communications submitted by stockholders and other interested parities, and will
respond if they are not exercisedand as appropriate. Stockholders may send communications to the Board
by those dates.delivering such communications to the Company's principal executive offices
located at 1433 N. Market Blvd., Suite 1, Sacramento, California 95834.
5
MANAGEMENT
Executive Officers and Other Key Personnel
The remaining 4,000,000 warrants are exercisable until December 14,
2002. Sincefollowing tables set forth certain information with respect to the
closing market priceexecutive officers and other key personnel of the Common Stock has been less than
$1.03 since August 1, 2000, noneCompany:
Executive Officers
Name Age Position
- ---- --- --------
Ramesh C. Trivedi 67 President and Chief Executive Officer
Charles J. Novak 60 Secretary, VP of these warrants have been exercised and
500,000Finance & Administration
Leland W. Witherspoon 56 VP of these warrants expired on each of September 5, 2000 and October 5,
2000.
2
5Research & Development
David H. Adams 62 Chief Financial Officer
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownershipindicates how many shares of Common Stock at October 16, 2000common stock were beneficially
owned, as of May 31, 2007, by (i)(1) each stockholderperson known by the Companyus to be a beneficialthe owner of
more than five percent5% of the outstanding shares of common stock, (2) each Director, (3)
our Chief Executive Officer, Chief Financial Officer and each of our other three
most highly compensated officers and (4) all Directors and executive officers as
a group. In general, "beneficial ownership" includes those shares a Director or
executive officer has sole or shared power to vote or transfer (whether or not
owned directly), and rights to acquire common stock through the exercise of
stock options that are exercisable currently or become exercisable within 60
days. Except as indicated otherwise, the persons named in the table below have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. We based our calculation of the percentage owned on
45,784,089 shares outstanding on May 31, 2007. In calculating the Percentage of
Outstanding Shares Owned in the column below, we added shares that may be
acquired within 60 days both to the other shares that the person owns and to the
number of shares outstanding. The address of each of the Directors and executive
officers listed below is c/o Integrated Surgical Systems, Inc., 1433 N. Market
Blvd., Suite 1, Sacramento, CA 95834.
Amount and Nature Percentage of
of Beneficial Common Stock
(ii) each director, (iii) each executive officer
listed in the Summary Compensation Table (see Proposal 1) and (iv) allOwnership (1) Beneficially
Name (3) ------------- Owned (2)
- -------- ---------
Ramesh C. Trivedi 757,000 (4) 1.63
Leland W. Witherspoon 536,484 (5) *
Charles J. Novak 230,952 (6) *
David H. Adams 125,000 (7) *
Michael J. Tomczak 37,500 (8) *
Peter B. Mills 22,500 (9) *
All directors and officers as a group.
AMOUNT AND PERCENTAGE OF
NATURE OF COMMON STOCK
BENEFICIAL BENEFICIALLY
NAME OWNERSHIP(1) OWNED(2)
- ---- ------------ -------------
International Business Machines Corporation................. 2,274,066(3) 9.72%
Old Orchard Road, Armonk, N.Y. 10504
EJ Financial Investments V, L.P............................. 1,039,792 4.92%
225 East Deer Path Road, Suite 250
Lake Forest, IL 60045
ILTAG International Licensing Holding S.A.L................. 3,961,198(4) 16.76%
Adnan Al Hakim Street
Assaf Bldg.
P.O. Box 135660
Beirut, Lebanon
Ramesh C. Trivedi(5)........................................ 402,318(6) 1.87%
John N. Kapoor(7)........................................... 1,039,792(8) 4.92%
Falah Al-Kadi(9)............................................ 3,961,198(10) 16.76%
Urs Wettstein............................................... 1,980,599(11) 8.85%
Gartenstrasse 33
8002 Zurich, Switzerland
Bernd Herrmann(13).......................................... 1,980,599(11) 8.85%
37 Avenue des Papalins, MC-8000 Monaco
All directors and officers as a group (5 persons)........... 5,403,308 20.37%
group (6 persons) 1,709,436 3.60
- -------------------------
* 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 October 16, 2000,Includes any security
whichsecurities that such person or group of persons has the
right to acquire within 60 days after such date is deemedpursuant to be outstanding for the purpose of
computing the percentage ownership for such personoptions, warrants, conversion
privileges 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 2,206,479rights.
(2) Based on 45,784,089 shares of Common Stock at an
exercise pricecommon stock outstanding as of $0.01 per share exercisable until DecemberMay 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.
(4) Includes warrants to purchase 2,500,000 shares of Common Stock at an
exercise price of $1.027 per share, with 250,000 exercisable until November
5, 2000, 250,000 exercisable until December 5, 2000, and the balance of
2,000,000 exercisable until December 14, 2002.
(5)2007.
6
(3) Address is c/o the Company, 1850 Research Park, Davis,Integrated Surgical Systems, Inc., 1433 N. Market Blvd.,
Suite 1, Sacramento, California 95616-4884.
(6)95834.
(4) Includes 4,000 shares owned by Dr. Trivedi and 398,318750,000 shares that heDr. Trivedi may acquire upon exercise of stock
options exercisable within 60 days -316,907
shares at an exercise price of $0.07$0.04 per share, 75,201share.
(5) Includes 525,000 shares that Mr. Witherspoon may acquire upon exercise of
stock options exercisable within 60 days at an exercise price of $3.00$0.04 per
share and 6,210share.
(6) Includes 116,666 shares that Mr. Novak may acquire upon exercise of stock
options exercisable within 60 days at an exercise price of $0.10$0.04 per share. Dr. Trivedishare
and 114,286 shares that may acquire 44,799 additional sharesbe acquired upon exercise of stock options
exercisable within 60 days at an exercisable price of $0.035 per share.
(7) Includes 75,000 shares that becomeMr. Adams may acquire upon exercise of stock
options exercisable over the remaining term
of the optionswithin 60 days at an exercise price of $3.00$0.04 per share
and 50,000 shares that may be acquired upon exercise of stock options
exercisable within 60 days at an exercisable price of $0.031 per share.
(7) Address is c/o EJ Financial Enterprises, 225 E. Deer Path Road, Suite 250,
Lake Forest, Illinois 60045.
3
6
(8) RepresentsIncludes 22,500 shares that Mr. Tomczak may acquire upon exercise of Common Stock owned by EJ Financial Investments V,
L.P., a limited partnershipstock
options exercisable within 60 days at an exercise price of which$0.04 per share.
(9) Includes 22,500 shares that Mr. Kapoor is the managing general
partner. Mr. Kapoor disclaims beneficial ownershipMills may acquire upon exercise of such shares.
(9) Address is c/o Dogmoch Groupstock
options exercisable within 60 days at an exercise price of Companies, Adnan Al Hakim St., Assaf Bldg.,
P.O. Box 135660, Beirut, Lebanon.
(10) Represents shares and warrants owned by ILTAG, an affiliate of Dogmoch of
which Mr. Al Kadi is Vice-Chairman.
(11) Includes 1,250,000 warrants to purchase shares of Common Stock at $1.027$0.04 per share, with 125,000 exercisable until November 5, 2000, 125,000
exercisable until December 5, 2000 and the balance of 1,000,000 exercisable
until December 14, 2002.
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. Unless nominees other than those listed below are nominated at the
Annual Meeting, proxies not marked to the contrary will be voted "FOR" the
election to the Board of Directors of the following three (3) persons, all of
whom are incumbent Directors. If nominees other than those listed below are
nominated at the Annual Meeting, proxies not marked to the contrary may be voted
cumulatively for the election of less than all of the nominees for Director, at
the discretion of the persons named in the accompanying proxy. In the event any
of the three nominees for Director shall become unavailable for election for any
presently unforeseen reason, it is the intention of the persons in the
accompanying proxy to vote for an alternate nominee who will be designated by
the Board of Directors.
Set forth below is certain information as of October 18, 2000 concerning
each nominee for Director, including his age, present principal occupation and
business experience during the past five years and the period he has served as a
director.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION AND RELATED INFORMATION SINCE
- ---- --- -------------------------------------------- --------
Ramesh C. Trivedi.................... 61 Chief Executive Officer of the Company since November
November 1995; consultant to the Company 1995
from February 1995 until November 1995;
Principal of California Biomedical
Consultants (an international consulting
firm) since 1987; President and Chief
Executive Officer of DigiRad Corporation (a
medical imaging company) from 1985 to 1986.
Falah Al Kadi........................ 50 Chairman of the Board of Directors since December
January 2000. Vice Chairman of the Dogmoch 1999
Group of Companies since 1994.
John N. Kapoor....................... 56 President of EJ Financial Enterprises, Inc December
(a healthcare consulting and investment 1995
company); 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;
Chairman of NeoPharm, Inc. (a cancer drug
research and development company).
4
7
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 Chiefshare.
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
complaint alleges that Dr. Kapoor filed false applications for generic drug
approvals with the FDA on behalf of Lyphomed, Inc. Dr. Kapoor countersued, and
in 1999, the litigation was settled on terms mutually acceptable to the parties.
The terms of the settlement are subject to a confidentiality agreement.
All directors hold office until the annual meeting of stockholders of the
Company following their election or until their successors are duly elected and
qualified.
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. Kapoor (Chairman) and Mr. Al-Kadi.
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 the 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 two meetings in
1999.
TheSummary Compensation Committee is composed of Dr. Kapoor and Mr. Al-Kadi
(Chairman). The duties of the Compensation 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 did not
hold any meetings in 1999.
The Board of Directors held 13 meetings in 1999. Dr. Kapoor and Dr. Trivedi
attended at least 75% of the total number of Board meetings and meetings of
committees on which they served during the period they served thereon in 1999.
There were no meetings of the Board of Directors or any committee of which Mr.
Al-Kadi was a member held after December 14, 1999, the date he became a member
of the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE NOMINEES FOR
DIRECTOR NAMED ABOVE (PROPOSAL 1)
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8
SUMMARY COMPENSATION TABLETable
The following table sets forthsummarizes the compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each other executive officer
whose salary and bonus exceeded $100,000 for the year ended December 31, 1999.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTION
- --------------------------- ---- -------- ------------ ------------
Ramesh C. Trivedi.............................. 1999 $279,840 $48,281(1) 6,210
Chief Executive Officer and President 1998 $279,840 $42,501(1) 120,000
1997 $264,000 $50,400(1) 20,000
Mark W. Winn................................... 1999 $126,500 $ -- --
Chief Financial Officer 1998 $118,833 $ -- --
1997(2) $ 38,333 $ -- 45,000
- ---------------
(1) Represents expense allowances paid in accordance with the executive
officer's employment contract.
(2) Mr. Winn's employment commenced with the Company on September 2, 1997 and
ended on December 31, 1999.
EMPLOYMENT AGREEMENT
Dr. Ramesh Trivedi serves as executive officer and president of the Company
pursuant to an employment agreement terminable at will by either party. Dr.
Trivedi's annual salary is $279,840 ($23,320 per month). If his employment is
terminated without cause, Dr. Trivedi is entitled to receive his monthly salaryNamed Executive Officers
for a period of eighteen months following the date of termination.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1998 stock option plan to Dr. Trivedi and Mr. Winn
(collectively, the "Named Executive Officers") during the fiscal year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)2006. The Named Executive Officers are
the Company's Chief Executive Officer, Chief Financial Officer and the three
other most highly compensated executive officers in 2006 ranked by their total
compensation as set forth in the table below ("the Named Executive Officers"):
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN PRICE PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR SHARE(2) DATE
- ---- ---------- ----------- --------- ----------
Non-Equity
Option Incentive Plan All Other
Name and Principal Position Year Salary Awards Compensation Compensation Total
- --------------------------- ---- ------ ------ ------------ ------------ -----
Ramesh C. Trivedi............................... 6,210 3.7% $0.10 8/16/09
MarkTrivedi 2006 $241,060 $32,200 - $11,774 $285,034
President and Chief
Executive Officer
Leland W. Winn.................................... -- -- -- --
- ---------------
(1) Stock options are granted at the discretion of the Compensation Committee of
the 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 Board of Directors may elect to reduce the
excise 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.
The following table summarizes for eachWitherspoon 2006 142,828 22,540 - - 165,368
Vice President, Research
and Engineering
Charles J. Novak 2006 99,251 - - - 99,251
Vice President, Finance
& Administration
David H. Adams 2006 89,835 3,220 - - 93,055
Chief Financial Officer
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning shares of our common stock
covered by exercisable and unexercisable options held by the Named Executive
Officers the
total number of unexercised options, if any, held at December 31, 1999, and the
aggregate dollar value of in-the-money, unexercised options, held at December
31, 1999. The value of the unexercised, in-the-money options at December 31,
1999, is the difference between their exercise or base price and the value of
the underlying
6
9
Common Stock on December 31, 1999. The closing sale price of the Common Stock on
the Nasdaq SmallCap Market on December 31, 1999 was $1.6562 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
SHARES ACQUIRED
UPON NUMBER OF SECURITIES VALUE OF UNEXERCISED
EXERCISE OF OPTIONS UNDERLYING IN-THE-MONEY
DURING FISCAL 1999 UNEXERCISED OPTIONS OPTIONS AT
-------------------- AT DECEMBER 31, 1999 DECEMBER 31, 1999
VALUE ---------------------------- ----------------------------
NAME NUMBER REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE2006:
7
Option Awards Stock Awards
---------------------- -------------------------------------------
Equity
Incentive
Plan
Awards:
Equity
Equity Incentive Market or
Incentive Plan Plan Awards: Payout
Awards: Value of
Market Number of Unearned
Number of Number of Value Unearned Shares,
Number of Number of Securities Shares or of Shares Shares, Units Units or
Securities Securities Underlying Units or Units of or Other Rights Other
Underlying Underlying Unexercised of Stock Stock That That Have Not Rights
Unexercised Unexercised Unearned Option Option That Have Have Not Vested That Have
Options Options Options Exercise Expiration Not Vested Vested Not Vested
Price Date
(#) (#) (#) ($) (#) (#) (#) ($)
Name Exercisable Unexercisable
- ---- ------- --------- ----------- ------------- ----------- -------------
------------------------------------------------------------------------------------------------------------------------------------
Ramesh C.
Trivedi...... None None 374,852 68,265 $512,342(1) 0
MarkTrivedi 166,667 833,333 none $0.04 11/01/2011 none none none none
Leland W.
Winn........... None None 15,000 30,000 0 0Witherspoon 116,667 583,333 none $0.04 11/01/2011 none none none none
David H.
Adams 16,667 83,33 none $0.04 11/01/2011 none none none none
Equity Compensation Plan Information Table
The table below provides information, as of December 31, 2006, concerning
securities authorized for issuance under our equity compensation plans:
(a) (b) (c)
Plan Category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under
warrants and rights rights equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans
approved by security holders 247,908 $1.54 1,622,038 (1)
Equity compensation plans not
approved by security holders 2,400,000(2) $0.04 -0-
----------- ----- -----
Total 2,647,908 $0.18 1,622,038
========= ===== =========
8
- ----------
(1) Includes the Company's 1998 Stock Option Plan and its 2000 Stock Award Plan
as of March 31, 2007.
(2) Consists of: (i) 100,000 warrants issued for consulting services which
expire in May 2007 and have an exercise price of $0.06 per share; (ii)
300,000 warrants for consulting which expire in July 2014 and have an
exercise price of $0.0625 per share and 1,800,000 shares to officers of the
Corporation and have and exercise price of $0.04 per share which will
expire in November 2011.
Director Compensation
As more fully described below, the following table summarizes the compensation
during 2006 for each of our non-employee directors:
- -----------------------------------------------------------------------------------------------------------------------
Name Fees Earned or Stock Option Non-Equity Change in Pension All Other Total
Paid in Cash Awards Awards Incentive Plan Value and Compensation
Compensation Nonqualified
Deferred
Compensation
Earnings
- -----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
- -----------------------------------------------------------------------------------------------------------------------
Michael J Tomczak $1,875 - $966 - - - $2,841
Peter B Mills $1,875 - $966 - - - $2,841
- -----------------------------------------------------------------------------------------------------------------------
Our directors are appointed for a one-year term to hold office until our next
annual meeting of stockholders and until their successors have been duly elected
and qualified, unless removed from office in accordance with our by-laws. Our
non-employee directors receive a quarterly fee of $1,875 and periodic grants to
purchase shares of our common stock.
RECOMMENDATION:
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1.
9
- ---------------
(1) Represents value of options to purchase 316,907 shares at an exercise price
of $0.07 per share and options to purchase 6,210 shares at an exercise price
of $0.10 per share.
CERTAIN TRANSACTIONS
In November 1999, the Company entered into a distribution agreement that
gave Spark 1(st) Vision GmbH & Co. KG, a German company, the exclusive right to
distribute the Company's products in Europe, the Middle East and Africa through
2003. Under the agreement, Spark 1(st) Vision was obligated to purchase a
minimum of 24 ROBODOC systems during 2000 and 32 ROBODOC systems during 2001. It
also was required to pay the Company $200,000 per month for the first six months
of 2000, $300,000 per month for the remainder of 2000, and $400,000 per month
for 2001, offset by the purchase price of products purchased. Spark 1(st)
Vision's liability to the Company under the agreement was limited to $1 million,
exclusive of the minimum purchase obligation. Spark 1(st) Vision is controlled
by Manfred Schmitt, a German venture capitalist. At the time the Company entered
into the distribution agreement, Mr. Schmitt beneficially owned slightly more
than five percent of the Company's Common Stock.
In May 2000, the Company terminated the agreement with Spark 1(st) Vision.
The Company received approximately $1,000,000 from Spark 1(st) Vision in
settlement of its obligations under the agreement.
PROPOSAL 2. AMENDMENTS TO THE COMPANY'S RESTATED CERTIFICATENO. 2
EFFECTUATION OF INCORPORATION
AND BYLAWS TO ELIMINATE CUMULATIVE VOTING RIGHTS WITH RESPECT TO THE
ELECTIONA ONE-FOR-TEN REVERSE
STOCK SPLIT OF DIRECTORS.
Article 10 of the Company's Restated Articles of Incorporation and Section
2.9 of the Company's Bylaws presently permit stockholders to cumulate votes in
the election of directors. The Board of Directors recommends that cumulative
voting no longer be employed in the election of directors as it is cumbersome
and may be confusing to stockholders.
Cumulative voting permits holders of shares of Common Stock to cast, for
any one or more nominees for the Board, a number of votes equal to the product
of the number of shares such stockholder owns and the number of nominees
proposed for election to the Board. Thus, by casting all their votes for one
nominee, minority stockholders may succeed in electing one or more nominees to
the Board who would not otherwise have received sufficient votes to be elected.
The Board of Directors believes, however, that the benefit of allowing minority
stockholders the possibility of electing representatives is outweighed by the
burden and expense of administering cumulative voting for a public company and
the risk that an individual may seek to be elected to the Board of Directors
merely to disrupt Board proceedings.
Approval of these amendments to the Restated Certificate of Incorporation
and Bylaws requires approval by a majority of the outstanding shares of Common
Stock entitled to vote thereon. As a result, any shares not
7
10
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 AMENDMENTS TO THE RESTATED CERTIFICATE OF
INCORPORATION AND BYLAWS TO ELIMINATE CUMULATIVE VOTING RIGHTS WITH
RESPECT TO THE ELECTION OF DIRECTORS (PROPOSAL 2)
PROPOSAL 3. AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED CAPITAL STOCK BY INCREASING THE NUMBER OF
AUTHORIZED SHARES OFOUR COMMON STOCK
FROM 50 MILLION TO 100 MILLION.
TheOur Board of Directors has adopted subjecta resolution to stockholder approval,approve an amendment to the Company'sour
Restated Certificate of Incorporation to increase the
authorized capitaleffect a one-for-ten reverse stock
split of the Company by increasing the number of authorized
shares of Common Stock from 50,000,000 to 100,000,000 shares.
The Company is presently authorized to issue 50,000,000 shares of Common
Stock and 1,000,000 shares of preferred stock ("Preferred Stock"), each with par
value $.01 per share. As of October 23, 2000, there were 21,495,527 shares of
Common Stock outstanding and an additional 21,572,889 shares of Common Stock
reserved for issuance upon conversion of the preferred stock and upon exercise
of outstanding warrants and options granted pursuant to the Company's stock
options plans. The remainder of the 50,000,000 shares authorized have been
reserved for issuance under the equity line of credit. As of October 23, 2000,
there were a total of 1,343 shares of Series G and Series H convertible
preferred stock outstanding and an additional 984,730 shares of preferred stock
available for issuance.
The additional 50,000,000 shares of Common Stock to be authorized would be
available for issuance under our equity line of credit and 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. Additional shares of Common Stock would also be available to the
Company for stock dividends or splits should the Board of Directors decide that
it would be desirable, in light of market conditions then prevailing, to broaden
the public ownership of, and to enhance the market for, the shares of the
Company's Common Stock. The additional 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 considercommon stock. If the proposed amendment is approved by
stockholders, an amended certificate of incorporation reflecting the proposed
amendment will be filed with the Secretary of State of the State of Delaware.
Purpose for Approving the One-for-Ten Reverse Stock Split
We are asking stockholders to approve a pro-rata reverse split of our
common stock, by which up to each ten shares would become one share. Fractional
shares will be rounded up to the Company's Restated Certificate of Incorporation to be an
antitakeover proposal, the ability to issue additional shares of Common Stock
could also be used to discourage hostile takeover attemptsnext whole share. The effective date of the
Company. Among
other things,reverse split will be within thirty days following the additional shares could be privately placed thereby diluting
the stock ownership of persons seeking to obtain controldate of the Company, or the
Board could adoptAnnual
Meeting. This is not a stockholders' rights plan that would provide for the
issuance of additional shares of Common Stock in the event of certain purchases"going private" transaction, and no stockholders will be
reduced to less than one share. This action will not approved by the Board of Directors.
Although the Board of Directors has no current plans to propose other
measures to the Company's stockholders that may have the effect of discouraging
takeovers apart from those included in the proposed amendmentsreducing
our stockholders to the Company's
Amended Certificate of Incorporation, such additional measures may be proposed
if warranted from time to time in the judgment of the Board of Directors. In
addition, the Board of Directors may, from time to time, adopt other measures or
enter into agreements that could have the effect of discouraging takeovers, but
that do not require stockholder approval.
8
11
Approval of thisless than 300. This requires an amendment to the Restated
Certificate of Incorporation requires approvalto accomplish the reverse split.
We believe the recent per share price of our common stock has had a
negative effect on the marketability of the existing shares as well as the
amount and percentage of transaction costs paid by a majorityindividual stockholders, and
it impairs the potential ability of the Company to raise capital by issuing new
shares due to the low price.
We believe that the reverse split will be advantageous to us and to all
stockholders, because it may provide the opportunity for higher share prices
based upon fewer shares.
Stockholders should note that, after the reverse split, the number of our
authorized shares will remain unchanged, while the number of issued and
outstanding shares of Common Stock
entitledthe Company will be reduced by the factor of the reverse,
i.e. up to one for ten shares. It is important to realize that the issuance of
additional shares is in the discretion of the Board of Directors, in its best
business judgment, and our stockholders will have no right to vote thereon.on future
issuances of shares except in the event of a merger or in the event that the
Company trades on an exchange that requires stockholder approval for certain
share issuances. This means that, effectively, our stockholders will have no
ability or capacity to prevent dilution by the issuance of substantial amounts
of additional shares for consideration that could be considerably less than what
our existing stockholders paid for their shares. In many events, control of the
Company could effectively be changed by issuances of shares without stockholder
approval.
We have no plans as of the date hereof to issue any newly available shares.
There are no pending private offerings of shares, nor are there any pending
acquisitions for which shares may be contemplated to be issued.
As a general rule, potential investors who might consider making
investments in the Company will refuse to do so when the Company has a large
number of shares issued and outstanding with no equity. In other words, the
"dilution" which new investors would suffer would discourage them from
investing, as general rule of experience. A reduction in the total outstanding
shares may make our capitalization structure more attractive, although there can
be no assurance that this will be the case.
While our acceptability for ultimate listing on one of the NASDAQ markets
or an exchange is presently remote, we believe that it is in the interests of
the Company to adjust our capital structure in the direction of conformity with
the NASDAQ structural requirements. At the current date, even with the proposed
changes, we would not meet NASDAQ criteria. NASDAQ requirements change
frequently. There is no assurance that the proposed changes will meet NASDAQ
requirements or any other exchange when, and if, we are otherwise qualified.
There is no assurance that we will qualify for NASDAQ or any other exchange at
any time in the future, if at all.
10
Once the reverse split has occurred, management believes that the Company
may be better capitalized to seek equity financing, because of the lower
likelihood of high dilution. There is no assurance that the Company will have
any success in seeking equity financing.
Future Dilutive Transactions
The Company may effect transactions having a potentially adverse impact
upon the Company's stockholders pursuant to the authority and discretion of
management to complete share issuances without submitting any proposal to the
stockholders for their consideration. Holders of the Company's securities should
not anticipate that the Company will furnish such holders with any documentation
concerning any such proposed issuance prior to the completion of the
transaction, except as may otherwise be required by the federal securities laws.
All determinations involving share issuances, with limited exceptions, are in
the discretion and business judgment of the Board of Directors.
The issuance of additional shares in future transactions will allow the
following types of actions or events to occur without the current stockholders
being able to effectively prevent such actions or events:
1. Substantial dilution may occur due to the issuance of additional
shares of common stock. The percentage ownership of the Company by the
existing stockholders may be significantly diluted;
2. Control of the Company by stockholders may change due to new
issuances;
3. Business plans and operations may change; and
4. Mergers, acquisitions, or divestitures may occur which are approved by
the holders of the newly issued shares.
It is possible that the Company may acquire other assets or compatible
business opportunities through the issuance of common stock of the Company.
Although the terms of any such transaction cannot be predicted, this could
result in substantial additional dilution in the equity of those who were
stockholders of the Company prior to such issuance. There is no assurance that
any future issuance of shares will be approved at a price or value equal to or
greater than the price which a prior stockholder has paid, or at a price greater
than the then current market price. Typically, unregistered shares are issued at
less than market price due to their illiquidity and restricted nature as a
result of, among other things, the extended holding period and sales limitations
to which such shares are subject.
There can be no assurance that the market price for our common stock,
immediately or shortly after the proposed amendment, if approved, will rise, or
that any rise which may occur will be sustained. Market conditions are outside
of the Company's control, and are influenced by investor attitudes and external
conditions.
Fractional Shares
Fractional shares will be rounded up to the next whole share.
The reverse stock split may leave certain stockholders with one or more
"odd lots" of new common stock, i.e., stock in amounts of less than 100 shares.
These odd lots may be more difficult to sell or require greater transaction cost
per share to sell than shares in even multiples of 100. There are frequently
situations where transaction costs for odd lots in penny stocks exceed the net
proceeds realized from a sale of the odd lot, effectively rendering the odd lot
valueless to the holder.
Possible Effects of the Reverse Stock Split on Capital Stock
The common stock after giving effect to the reverse split will not voted (whetherbe
different from the common stock held by abstention, broker non-vote or otherwise)the Company's stockholders prior to the
reverse split. The stockholders will have the same effectrelative rights following the
effective date of the reverse split as they had prior thereto, except to the
extent the proportion of shares that they own is affected by the issuance of
fractional shares.
11
RECOMMENDATION:
The Board of Directors Unanimously Recommends That You Vote
FOR the Effectuation of a One-For-Ten Reverse Stock Split of our Common Stock
Described in Proposal 2.
12
PROPOSAL NO. 3
SALE OF SUBSTANTIALLY ALL OF OUR ASSETS TO
NOVATRIX BIOMEDICAL, INC.
INFORMATION ABOUT THE TRANSACTION
Summary Term Sheet
o The Company has agreed to sell substantially all of our assets to
Novatrix Biomedical, Inc. ("Novatrix").
o The Board of Directors has determined that the sale of substantially
all of our assets to Novatrix is advisable and in the best interest of
our stockholders.
o The aggregate purchase price for the sale is a range from $3 million
to $4 million, depending upon when the Company obtains stockholder
approval for the transaction.
o Novatrix has also agreed to loan us up to $4.75 million as follows:
o $2.7 million upon the execution of the loan agreement funded as
of July 28, 2006;
o $1 million funded as of March 15, 2007; and
o $$350,000 per month for a maximum of three months commencing July
1, 2007.
o If our stockholders do not approve the asset sale by September 30,
2007, the Company shall grant an exclusive license in the Asian
markets of its ROBODOC Surgical Assistant System to Novatrix in
exchange for a one-time royalty payment of $100,000.
o We also granted a security interest in our assets to Novatrix as
security for repayment of the loans.
Contact Information
Seller:
Integrated Surgical Systems, Inc.
1433 N. Market Blvd., Suite 1
Sacramento, CA 95834
Phone: (916) 285-9943
Fax: (916) 285-9104
Purchaser:
Novatrix Biomedical, Inc.
16259 Laguna Canyon Rd.
Irvine, CA 92618
Attention: Dr. Soonkap Hahn
Phone: (949) 502-6780
Fax: (949) 502-6786
Business Conducted
Integrated Surgical Systems, Inc.
The Company designs, manufactures, sells and services image-directed,
computer-controlled robotic software and hardware products for use in orthopedic
surgical procedures. The Company was incorporated in Delaware in 1990.
13
Novatrix Biomedical, Inc.
Novatrix, based in Irvine California, was established to acquire and
commercialize novel medical devices. The first product was the Labor Assister
which facilitates childbirth by shortening the duration of second stage labor
and reducing operative interventions. Novatrix was incorporated in California in
December 2004.
In February 2006, Novatrix sold substantially all of its assets to Curexo Inc.
in exchange for a 48% undivided interest ($24,000,000) in a $50,000,000
convertible bond (the "Bond") issued by Curexo and payable to Novatrix
stockholders. The Bond is convertible at the par value thereof into common stock
of Curexo at the price of $5.41 per share. Forty percent (40%) of the Bond, in
the principal amount of $9,600,000, has been converted. The remainder of the
Bond is convertible on the achievement of certain milestones (the "Milestones").
On the achievement of certain of the Milestones, 30% of the Bond, in the
principal amount of $7,200,000, will be convertible in February of 2008. Subject
to the achievement of certain additional Milestones, the remaining 30% of the
Bond, in the principal amount of $7,200,000, will be convertible in February of
2009. Proceeds from the sale of shares issuable upon conversion of the
$9,600,000 portion of the Bond are anticipated to be utilized to finance the
acquisition described hereon.
Terms of the Transaction
Description of the Transaction
On August 4, 2006, we entered into an Asset Purchase Agreement with
Novatrix Biomedical, Inc. ("Novatrix"), as amended, pursuant to which we agreed
to sell substantially all of our assets to Novatrix (the "Asset Purchase
Agreement" amended as of April 23, 2007). As consideration for the sale,
Novatrix shall pay, in cash, the aggregate purchase price equal to:
a. $4,000,000 in the event that stockholder approval is obtained on or
before June 30, 2007;
b. $3,500,000 in the event that stockholder approval is obtained on or
before July 31, 2007;
c. $3,250,000 in the event that stockholder approval is obtained on or
before August 31, 2007; or
d. $3,000,000 in the event that stockholder approval is obtained on or
before September 30, 2007.
Also on August 4, 2006, we entered in to a Loan Agreement and Secured
Promissory Note, as amended on April 23, 2007 (the "Loan Agreement") with
Novatrix pursuant to which Novatrix has agreed to loan us $350,000 per
month for a maximum of three months commencing July 1, 2007.
The Loan Agreement provides that upon the consummation of the sale of
assets contemplated by the Asset Purchase Agreement, Novatrix will meet its
obligations to us by providing the balance of any loans due to us to fund its
own working capital in equal amounts for the purpose of developing the ROBODOC
and ORTHODOC products. In addition, the Loan Agreement provides that upon the
approval by our stockholders of the asset sale, all of our obligations to repay
amounts owing under the Loan Agreement shall be extinguished.
The Loan Agreement further provides that in the event that approval by the
Company's stockholders of the asset sale does not occur by September 30, 2007,
the Company shall grant an exclusive license in the Asian markets of its ROBODOC
Surgical Assistant System to Novatrix in exchange for a one-time royalty payment
of $100,000.
Simultaneously with the execution and delivery of the Asset Purchase
Agreement and Loan Agreement, the parties entered into a security agreement
pursuant to which we granted a security interest in our assets to Novatrix as
security for repayment of our obligations under the Loan Agreement (the
"Security Agreement").
14
The Asset Purchase Agreement
Assets to be Sold or Assigned
-----------------------------
o all accounts receivable, notes receivable and other receivables;
o all inventories and work-in-progress, and all rights to collect from
customers (and to retain) all fees and other amounts payable;
o all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible Assets;
o all advertising and promotional materials;
o all Proprietary Assets;
o all rights under our contracts;
o all Governmental Authorizations; and
o all claims and causes of action, and all rights of indemnity, warranty
rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery.
Purchase Price
--------------
The purchase price is as follows:
o Cash at closing equal to:
o $4 million in the event that stockholder approval is obtained on
or before June 30, 2007;
o $3.5 million in the event that stockholder approval is obtained
after June 30, 2007 but on or before July 31, 2007;
o $3.25 million in the event that stockholder approval is obtained
after July 31, 2007 but on or before August 31, 2007; or
o $3 million in the event that stockholder approval is obtained
after August 31, 2007 but on or before September 30, 2007.
o Novatrix's continued funding of the Company of an amount equal to
$350,000 for up to the earlier of three months beginning July 1, 2007,
and the first day of each successive month thereafter until the
earlier of (i) September 1, 2007 or (ii) such time as stockholder
approval has been obtained. for the development of the Company's
business.
Representations and Warranties
------------------------------
The Asset Purchase Agreement contains standard representations and
warranties, including those relating to:
o corporate organization;
o financial statements;
o absence of changes;
o title to assets;
o receivables and inventory;
15
o proprietary assets;
o contracts;
o compliance with laws;
o employee matters;
o benefit plans;
o environmental matters;
o insurance; and
o brokers.
Covenants
---------
The Asset Purchase Agreement contains certain pre-closing covenants,
including:
o access and investigation;
o operation of business between signing and closing;
o no-shop;
o confidentiality; and
o best efforts.
Closing of the Proposed Asset Sale
----------------------------------
We expect to close the proposed asset sale following the satisfaction or
waiver of all of the conditions to each party's obligations under the Asset
Purchase Agreement.
Termination of the Asset Purchase Agreement
-------------------------------------------
We and Novatrix may terminate the Asset Purchase Agreement by mutual
written consent, or if there is a material breach of any of our representations,
warranties, covenants or obligations. In addition, Novatrix can terminate, at
Novatrix's sole discretion, if the closing has not taken place on or before
September 30, 2007 (other than as a vote
againstresult of any failure on 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 50 MILLION
TO 100 MILLION SHARES (PROPOSAL 3)
PROPOSAL 4. TO APPROVE THE ISSUANCE UNDER AN EQUITY LINE OF CREDIT AGREEMENT OF
MORE THAN 3,843,939 SHARES OF COMMON STOCK, AS REQUIRED BY NASDAQ
RULES.
Nasdaq rules requirepart of
Novatrix to comply with or perform its covenants and obligations under the Asset
Purchase Agreement).
The Loan Agreement
The Amended Loan Agreement (the "Loan Agreement") extends, from June 30,
2007 to September 30, 2007, the deadline for the Company to obtain stockholder
approval for the issuanceasset transaction in order to avoid being obligated to grant an
exclusive license to Novatrix in the Asian markets for the Company's ROBODOC and
ORTHODOC systems. It also reduces the time, from six months to three months,
that the Company has to repay outstanding loans due to Novatrix in the event
that stockholder approval is not obtained.
The Loan Agreement provides for a $4,750,000 loan in three tranches as
follows:
o $2.7 million upon the execution thereof funded as of securities involvingJuly 28, 2006;
o $1 million funded as of March 15, 2007; and
o $350,000 per month commencing July 1, 2007 until the earlier of (i)
September 1, 2007 or (ii) stockholder approval.
The Loan Agreement also provides that upon the earlier to occur of (i)
stockholder approval of the proposed asset sale of the Company's assets to
Novatrix or (ii) material default by Novatrix of any of its obligation under the
Asset Purchase Agreement or the Loan Agreement, the Company's obligations to
make further payments under the Loan Agreement will immediately terminate, and
the Security Agreement and the secured interest held by Novatrix in the
Company's assets will terminate.
16
Upon the closing of the asset sale pursuant to the Asset Purchase
Agreement, all of the obligations of Novatrix to advance funds to the Company
will automatically be converted into obligations of Novatrix to fund its own
working capital in identical amounts, which funds may expressly be used only for
development of the ROBODOC and OTHODOC products.
The Loan Agreement further provides that in the event approval by the
Company's stockholders of the asset sale does not occur by September 30, 2007,
the Company shall grant an exclusive license in the Asian markets of its ROBODOC
Surgical Assistant System to Novatrix in exchange for a one-time royalty payment
of $100,000.
The Security Agreement
The Security Agreement grants a security interest in all of the Company's
assets to Novatrix securing performance of the Company's obligation to repay its
obligations under the Loan Agreement. The Security Agreement provides that upon
any "event of default," Novatrix may at any time, without notifying the Company
of its intention to do so, take steps to transfer and assign the Company's
assets to Novatrix.
An event of default consists of the following:
o failure by the Company forthwith to pay or perform any of its
obligations under the Loan Agreement;
o failure to pay any principal amount due under the Loan Agreement or
any accrued interest within three (3) months from the date of a
stockholders meeting of the Company in which the asset sale is not
approved;
o voluntary bankruptcy, reorganization, insolvency, etc. of the Company;
or
o involuntary bankruptcy petition being filed against the Company.
The License Agreement
The License Agreement becomes effective only upon the failure of the
Company's stockholders to approve the asset sale on or before September 30,
2007. In such event, the Company would grant an exclusive, transferable license
to Novatrix to all intellectual property, including patents and trademarks,
associated with the ROBODOC Surgical Assistant System and the ORTHODOC
Pre-Surgical Planning Workstation System.
The term of the License Agreement is the longer of ten years or the life of
the patents included in the intellectual property to be licensed. The license
fee payable by Novatrix to the Company is $100,000.
The License Agreement provides an annual maintenance fee of $10,000 payable
by Novatrix in order to provide updates, bug-fixes and new releases to the
license software.
Consideration to Security Holders
Unlike a merger transaction in which security holders receive cash or stock
consideration in exchange for the cancellation of their shares, the proposed
transaction is an asset sale for cash; accordingly, security holders will not be
receiving any direct consideration from the proceeds thereof, and will retain
their shares in the Company.
Reasons for Engaging in the Transaction
ISS ceased operations in June 2005 after sustaining operating losses for
several years and having been unable to find a source of capital. The Company
was effectively insolvent and required immediate and substantial funding in
order to resume operations, which it did only after securing the financing from
Novatrix, in the form of substantial loans, pursuant to the transaction
described in this proxy. Novatrix conditioned the transaction on ISS agreeing to
settle with existing creditors, which settlement was accomplished at
approximately 17 cents to the dollar.
17
The Board has determined that, absent the Company's financial relationship with
Novatrix, ISS lacks the financial strength to fully exploit the technologies,
products and markets it has developed over the years. Furthermore, ISS does not
have access to the financial capital markets to secure sufficient funds to
continue as a going concern. As a result, the Board has carefully considered
various options, including the filing of a petition in bankruptcy, and
unanimously agreed that the proposed transaction described in this proxy is the
best option available for ISS stockholders.
What will ISS do with the money received from the sale of 20%assets to Novatrix?
- -----------------------------------------------------------------------------
ISS intends to acquire all or morepart of an existing company which will offer ISS
an opportunity for future growth and potential for an appreciation in its value
for stockholders.
How will ISS implement the proposed plan?
- -----------------------------------------
The Board intends to retain one of its Common Stock at
less than fair market value. Nasdaq may delistofficers or an outside consultant who
will assist the Company in its continuing obligations under the federal
securities of any issuerlaws and, in conjunction with an investment banker, evaluate various
merger, acquisition or strategic alliance opportunities and then present their
recommendations to the Board for review and approval. ISS estimates that failsit will
take up to obtain12 months to conclude this process. While no assurance can be given
that such stockholder approval before the issuance of such
securities.
The Company has entered into an equity line of creditopportunities will be available, or if available, on favorable terms,
ISS believes there are numerous opportunities. If no agreement for the
sale of $12,000,000 of our common stockis reached with
Triton West Group, Inc. Under the
termsrespect to a suitable opportunity within 12 months of the agreement, the Company may sell shares of common stock over a
three-year period to Triton at a price equal to 85%closing of the
lowest closing bid
price duringNovatrix transaction, it is presently anticipated that the nine trading days commencing two trading days priorCompany's assets,
including all cash on hand, will be distributed to the deliverystockholders of ISS on a
purchase noticepro rata basis. See Proposal Four of this Proxy.
Consequences of Stockholders' Failure to Triton. The maximum dollar amount of sharesApprove Novatrix Transaction
- ---------------------------------------------------------------------
In the event that may be purchased on each closing date depends upon the average closing bid
price and average trading volume of the common stock for the 30 trading days
preceding the day we deliver a purchase notice to Triton, as indicated by the
chart presented below.
Average Closing
Bid Price of
Common Stock for
Preceding 30 Average Trading Volume For Preceding 30 Trading Days
-----------------------------------------------------------------------------
Trading Days 15,000 - 50,000 50,001 - 100,000 100,001 - 150,000 More than 150,000
MAXIMUM DOLLAR AMOUNT OF SHARES THAT CAN BE SOLD TO TRITON
$0.50 - 1.00 $400,000 $400,000 $600,000 $600,000
1.00 - 3.00 $500,000 $500,000 $750,000 $750,000
3.01 - 4.50 $500,000 $750,000 $750,000 $1,000,000
4.51 - 6.00 $750,000 $750,000 $1,000,000 $1,000,000
6.01 - 7.50 $750,000 $1,000,000 $1,000,000 $1,250,000
7.51 - 9.00 $1,000,000 $1,000,000 $1,250,000 $1,250,000
More than $9.00 $1,000,000 $1,250,000 $1,250,000 $1,500,000
For example, if the average closing bid price of a share of the Company's
common stock is between $0.50 and $1.00, and the average trading volume is more
than 100,000 shares for the 30-day trading period preceding the delivery of a
purchase notice to Triton, the Company can sell up to $600,000 of Common Stock
to Triton. But if the trading volume for that 30-day trading period is more than
15,000 shares but not more than 100,000 shares, the Company can only sell up to
$400,000 of Common Stock to Triton. As illustrated by the table, the amount
available to the Company under the equity line increases as the bid price and
trading volume of the Company's Common Stock increase.
However, if at the time the Company delivers a purchase notice to Triton,
the average closing bid price of a share of common stock has been less than
$0.50 for the preceding 30 trading day period, the Company can only sell up to
$250,000 of common stock to Triton. The minimum amount of shares the Company may
sell to Triton on any closing date is $100,000. The Company may not sell shares
to Triton more often than once every fifteen trading days.
9
12
The Company has issued a warrant to purchase 35,000 shares of Common Stock
to Triton in connection with the agreement. The warrant is exercisable at $0.86
per share during the period commencing March 15, 2001 and ending on September
14, 2003. The equity line of credit agreement limits the number of shares that
may be issued under the line, including shares that may be acquired upon
exercise of warrants, to an aggregate of 3,843,939 shares, representing 19.9% of
the shares outstanding on September 15, 2000, the date the Company entered into
the equity line agreement, until stockholders approve the issuance of shares in
excess of that number. This limitation is required under the corporate
governance rules of the Nasdaq Stock Market, Inc. We will also pay Triton $7,000
at each closing.
If this proposalNovatrix transaction is not approved by stockholders,
Novatrix, in accordance with the CompanyLoan Agreement, will be entitled to (a)
immediately secure the sales, marketing and manufacturing rights for all
products of ISS for the entire Asian market, and (b) make a demand to ISS to
repay the total amount of money advanced by Novatrix since July 2006, currently
$3.7 million, within three months from the date the stockholders decline to
approve the sale of assets to Novatrix.
In addition, a "NO" vote will result in the failure of ISS to receive funds
ranging from $3 million to $4 million (depending upon the date on which the
stockholder meeting is held) as a consideration for the sale of assets to
Novatrix. It is probable that ISS will need to file a petition in bankruptcy
since, based on prior experience, it will not be
ablehave access to sell sharescapital necessary
to repay to Novatrix the loans plus accrued interest, together with sufficient
additional capital to continue as a going concern.
Vote Required for Approval of the Transaction
The proposed asset sale of substantially all of our assets to Novatrix
requires the approval of a majority of our issued and obtain financing under its equity lineoutstanding common stock.
Accounting Treatment of creditthe Proposed Asset Sale
Assuming the stockholders approve, the sale of substantially all of our assets
to Novatrix, the extent suchtransaction would provide gross proceeds of approximately
$7,960,000, consisting of the $4,000,000 in cash and the cancellation of both
the note payable of $3,700,000 and the accrued interest of approximately
$263,000 due to Novatrix. We would also transfer the assets, exclusive of all
cash, of approximately $800,000 to Novatrix. The sale (or issuance of shares upon exercise of warrants issued in
connection with the equity line)assets would result in
a gain of approximately $7,000,000, net of legal fees of approximately $163,000.
18
Federal Income Tax Consequences of the issuanceProposed Asset Sale
We anticipate that the gain for accounting purposes on the sale of more than
3,843,939 shares. Atthe assets
will be classified as a capital gain for Federal income tax purposes, after a
reduction for the recapture of any excess accelerated depreciation taken on the
assets, if any. We further anticipate that the capital gain will be offset by
our Federal net operating loss carryforward, resulting in no significant Federal
income tax. In addition, we anticipate similar treatment under California tax
reporting.
Background of the Transaction
On April 27, 2006, Dr. Ramesh Trivedi received an assumed market priceinitial telephone call
from Dr. Soon Hahn, Chief Executive of $0.50 per share,Novatrix, after having been introduced to
ISS by a third party. The conversation was general in nature, wherein Novatrix
expressed interest in acquiring ISS and providing appropriate funds to proceed
with such an acquisition. Dr. Trivedi expressed the Company
could only receive approximately $1,650,000 under its equity line until such
stockholder approval was obtained. Until stockholder approval is obtained, the
Company may need additional financing since its available cash resources,
together with anticipated cash flows from operations, may not be sufficientCompany's position of having
no funds to continue operations at current levels. Additional financing, if required, may
not be available on acceptable terms, if at all. Ifits operation and no employees but an excellent technology
with great future potential subject only to the Company is unablecompletion of FDA-mandated
clinical studies and clearance by the FDA of the Company's products.
Dr. Hahn stated that he would contact ISS in a few days after further
consideration.
On May 1, 2006, Dr. Hahn called Dr. Trivedi and presented a more specific
proposal, i.e., that ISS would immediately grant Novatrix the rights to
obtain alternative financing on favorable terms,distribute ISS products in Asian markets, and, in the event ISS declared
bankruptcy in the future, it may havewould grant Novatrix worldwide exclusive rights to
reduce
operations, deferits technologies. In return, Novatrix offered to invest up to $2 million for ISS
to restart its research and development projects and reduce staffing. To
obtain alternative financing, the Company may issue Common Stock or debt or
equity securities convertible into shares of Common Stock. Any additional
financing may result in substantial dilutionalso offered to current stockholders. The
purchase of shares by Triton under the equity linetwo ROBODOC
systems at a discount of
approximately 15% of the then prevailing market price of the Common Stock,$900,000 each from ISS. Clarification and the immediate resale of those shares into the public market may depress the
market price of the Common Stockquestions followed this
proposal.
No decisions were made and will have a dilutive impact on other
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE ISSUANCE UNDER THE
EQUITY LINE OF CREDIT AGREEMENT OF MORE THAN 3,843,939 SHARES
OF COMMON STOCK, AS REQUIRED BY NASDAQ RULES (PROPOSAL 4)
PROPOSAL 5. APPROVAL AND ADOPTION OF THE COMPANY'S 2000 LONG-TERM PERFORMANCE
PLAN.
Description of 2000 Long Term Performance Planboth parties agreed to further consider this offer.
On September 21, 2000 the Board of Directors adopted the Company's 2000
Long-Term Performance Plan (the "2000 Plan"). Competition for key employees is
very intense. To secure top talent, the Company needs to have competitive
compensation programs, including equity based awards.
The 2000 Plan provides for stock awards of up to 1,000,000 shares. The 2000
Plan permits the grant of any form of award, including, but not limited to,
stock options, stock appreciation rights ("SAR's")May 11, 2006, Dr. Hahn and stock and cash awards,
whether granted singly, in combination or in tandem. Stock options will be
granted at an exercise price of not less than 100% of fair market value (as
defined in the 2000 Plan) on the date of grant and it is expected that options
and SAR's will typically be granted for periods of 10 years or less. The 2000
Plan also permits the grant of other awards in stock or denominated in units of
stock, which may be subject to restrictions or transfer and/or forfeiture
provisions.
For purposes of determining the number of shares of Common Stock issued
under the 2000 Plan, no shares will be deemed issued until they are actually
delivered to a participant, or such other person in accordance with Section 10
of the 2000 Plan. Shares covered by awards that either wholly or in part are not
earned, or that expire or are forfeited, terminated, canceled, settled in cash,
payable solely in cash or exchanged for other awards shall be available for
future issuance under the 2000 Plan. Further, shares tendered to or withheld by
the Company in connection with the exercise of stock options, or the payment of
tax withholding on any award, will also be available for future issuance under
the 2000 Plan.
The Company intends that the 2000 Plan will be administered by the
Compensation Committee (or any successor committee), which is constituted in
compliance with the rules and regulations issued under the
10
13
federal securities laws and the Internal Revenue Code. In administering the 2000
Plan, the Committee has the full power to select participants, to interpret the
provisions of the plan, to grant waivers of award restrictions, to continue or
accelerate the exercisability, vesting or payment of an award and to adopt such
rules, regulations and guidelines for carrying out the 2000 Plan as the
Committee may deem necessary or proper. The Committee may delegate certain of
its duties, power and authority to officers of the Company, pursuant to such
conditions and limitations as the Committee may establish. The 2000 Plan may not
be amended to increase the maximum number of shares that may be issued under the
2000 Plan (except for adjustments pursuant to Section 14 of the 2000 Plan) or to
permit the granting of stock options or SAR's with exercise or grant prices
lower than those specified in Section 6 of the 2000 Plan without stockholder
approval.
Awards under the 2000 Plan may be made to employees of, and other
individuals providing services to the Company. Participants in the 2000 Plan
will be recommended by their management, and the Committee intends to review and
act on all 2000 Plan grants and awards for officers and certain other senior
management positions.
The 2000 Plan has been designed to meet the requirements of section 162(m)
of the Internal Revenue Code for stock options and SAR's. In addition, the 2000
Plan contains performance criteria for future long-term incentive awards to
qualify those awards for tax deductibility under section 162(m). Those criteria
consist of objective tests based on one or more of the following: earnings, cash
flow, customer satisfaction, revenues, financial return ratios, market
performance, shareholder return and/or value, operating profits, net profits,
earnings per share, profit return and margins, stock price and working capital.
The formula for any such award may include or exclude items to measure the
specific objectives, such as losses from discontinued operations, extraordinary
gains and losses, the cumulative effect of accounting changes, acquisitions or
divestitures, foreign exchange impacts and any unusual, nonrecurring gain or
loss. These terms apply to "covered employees" as defined in section 162(m),
which include the Company's chief executive officer and the four other most
highly compensated executive officers of the Company.
The foregoing summary of the terms and features of the 2000 Plan is
qualified by reference to the 2000 Plan itself.
Other Plans
The Company has two stock option plans -- the 1995 Stock Option Plan and
the 1998 Stock Option Plan. The plans authorize the issuance of incentive stock
options ("ISOs"), as defined in Section 422A of the Internal Revenue Code of
1986, non-qualified stock options ("NQSOs"), and in the case of the 1998 Plan
stock appreciation rights ("SARs", and together with ISOs and NQSOs, "Options"),
and in the case of the 1995 Plan stock purchase rights ("SPRs"). Directors,
employees (including officers) and consultants of the Company are eligible to
participate in the plans. Consultants and directors who are not also employees
of the Company are eligible for grants of only NQSOs and/or SPRs. The plans are
administered, and the terms of Options or SPRs are determined, by the Board
and/or the Compensation Committee. The exercise price of each ISO may not be
less than 85% of the fair market value of the Common Stock at 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 value of the shares
covered by ISOs granted under the plans that become exercisable by a plan
participantDr. Trivedi met for the first time in any calendar year is subjectSunnyvale at
the residence of Dr. Trivedi. At this meeting, Dr. Hahn modified his original
proposal and proposed that Novatrix buy ISS outright. The two parties discussed
this proposal at length as well as the path forward, estimating time to secure
ISS stockholder approval and the costs associated with it, while keeping in mind
that ISS had no cash.
Dr. Hahn and Dr. Trivedi discussed the following:
- the concept and business potential of Robodoc/Orthodoc;
- reasons why ISS discontinued its operation in 2005;
- ongoing commercial activities of Robodoc/Orthodoc in Asia;
- the German lawsuit and its implications to ISS business worldwide;
- why the FDA had not granted an approval when the first clinical trial
was initiated in 1994, more than 12 years ago; and
- will the FDA ever grant the approval, what assurance ISS can give,
would Dr. Trivedi personally work full time without pay until such
time as the approval would be secured, etc.
FDA approval and its uncertainty remained a $100,000
limitation. The exercisemajor concern for Dr. Hahn.
Dr. Trivedi gave a detailed history of the Company's FDA trials and their
status, and offered to work personally without pay for nine months if Novatrix
provided sufficient funds to start and support the clinical trials and all of
their associated costs.
With this assurance, the discussion focused on approximate funds necessary for:
1. Completing the suspended clinical trial to support FDA 510k clearance
in the U.S.; and
2. Recovering the public company status of ISS and gaining stockholders'
approval for the acquisition.
19
When Dr. Trivedi asked what price would Novatrix pay for the acquisition of ISS,
Dr. Hahn indicated that based on the opinions of M&A experts and its own
calculations, a purchase price of ISS (with its then market capitalization of
$250,000 and a NQSO, or a NQSO granted in tandem with an
SAR, maytotal debt of around $3 million) should not be lessmuch more than 85%$1
million. Dr. Hahn informed Dr. Trivedi that the same experts had suggested that
if Novatrix were to be "patient," it could acquire the assets of ISS with clear
title out of bankruptcy for "pennies."
The discussions were adjourned at this point with the understanding that both
parties were still interested in working together and would give the various
proposals further consideration.
On May 26, 2006, a non-disclosure agreement was signed by both parties in order
for ISS to provide confidential information necessary to Novatrix to present an
offer to ISS and facilitate more open dialogue in future discussions.
Subsequently, at the request of Dr. Hahn, ISS provided its unaudited financial
statements for the period beginning with the first quarter of 2005 through the
end of April 2006.
As requested by Dr. Hahn, ISS provided an estimated budget totaling $5 million
to operate the Company for the ensuing 18 months in order to accomplish:
- completion of the fairsuspended clinical trials and submission of a 510K
application to the FDA for the clearance to market valuethe ROBODOC System
in the U.S.;
- completion of the Common Stock ondevelopment of "minimally invasive procedures" to
perform hip and knee surgeries with the date of grant. In no event may an Option have a term of more than ten (10)
years (five (5) years with respect to ISOs granted to a 10% Stockholder) or vest
at a rate less than 20% per year. Options granted underROBODOC system;
- bringing current all the plans are not
transferable, other than by will or by the laws of descentCompany's SEC filings; and
distribution. No
Options or SPRs may be granted under the 1995 Plan after December 12, 2005- completion and no Options may be granted under the 1998 Plan after January 23, 2008.
11
14
Information concerning these plans is presented below:
1995 PLAN 1998 PLAN
--------- ---------
Shares Authorized........................................... 1,249,070 850,000
Options Granted (net of cancelations)....................... 1,245,850 844,498
Options Exercised........................................... 319,048 29,610
Options Available for Grant................................. 3,220 5,502
No SPRs or SARs have been granted under the plans.
The Company also has a 2000 Stock Award Program under which up to 500,000
shares of Common Stock may be granted to employees and consultants (but not
officers and directors)maintenance of the Company. The award program is administeredmanufacturing facilities to build
additional ROBODOC systems.
At the conclusion of the meeting, Dr. Hahn indicated that he would review the
information provided and contact Dr. Trivedi in a few days.
On May 28, 2006, Dr. Hahn informed Dr. Trivedi that he had reviewed the
information provided by ISS. While Dr. Hahn had great concern about certain
critical items such as securing FDA clearance, putting the Board and/orISS team together,
the Compensation Committee. Asoperating budget proposed by ISS, etc. he indicated that Novatrix was
prepared to move forward and continue the discussions for the acquisition of
September 20, 2000, 22,500 shares
have been issuedISS.
On June 1, 2006, a meeting between Dr. Hahn and Dr. Trivedi was held at the
Company's Sacramento facility.
At this meeting, Dr. Hahn requested the following items as a part of the due
diligence process:
- more detailed descriptions of current operations;
- list of employees;
- FDA status;
- IP position;
- list/status of ongoing litigations;
- business plan for 2006 and 2007 and the associated budgets with
milestones and timelines;
- outstanding debt and how to 20 employeesaddress the same; and
49,108 shares have been awarded to 4
consultants.
The Company has approximately 77 employees (3 of whom are also officers)
and two non-employee directors who are eligible for grants or awards under the
plan. The Company is not able to compute the number of consultants eligible, or
who may become eligible, for grants or awards under the plan.
The Company also has an employee stock purchase plan that has not been
implemented. The purchase plan provides that all employees (including officers
and directors who are also employees) who have been- competition in the employ of the Company
and/or corporations in which the Company owns 50% or more of the voting shares
thereof for six months or more, are eligible to participate in the plan.
Participants in the purchase plan will have deducted from their base weekly
salaries a percentage or stated amount thereof to be applied toward the purchase
of shares of Common Stock. The Company will, no less frequently than monthly,
sell or cause to be soldrobotic/orthopedic medical fields.
A detailed discussion was held as to the plan full sharesfor securing stockholder approval,
including time required and cost. Various contingencies were discussed in the
event stockholders did not approve the acquisition.
The meeting was concluded with an agreement to talk further.
20
On June 5, 2006, Dr. Hahn telephoned Dr. Trivedi and informed him that Novatrix
was no longer interested in acquiring the Company but rather all of Common Stockthe assets
of ISS. The main reasons provided by Dr. Hahn for this change were the
outstanding accumulated debt of ISS and potential competitive bids from other
corporations.
Dr. Hahn then proposed to pay $5 million to operate ISS for the next 18 months
so that the Company could reach the above-stated milestones. In return, Novatrix
would acquire all of the assets of ISS with no additional consideration.
Although attractive, given ISS' then financial position, Dr. Trivedi turned the
offer down because it would have left the total debt of approximately $3 million
with ISS and in addition, the stockholders of ISS would not be receiving any
compensation for authorizing the transfer of the assets to Novatrix.
On June 10, 2006, Dr. Trivedi telephoned Dr. Hahn and explained that the
stockholders of ISS were unlikely to approve the sale of assets if there was no
immediate or future potential benefit to them. Various alternative proposals of
ISS were discussed and rejected by Dr. Hahn outright as unacceptable. Dr. Hahn
then agreed to consider an offer of paying an additional $4,000,000 in
consideration to ISS which would provide incentives to the stockholders to
approve the transfer of assets to Novatrix. However, the $5 million to be paid
by Novatrix to ISS to fund continuing operations for the following 18 months
would now be structured as a loan to ISS, which would be forgiven by Novatrix if
ISS stockholders approved the transaction; otherwise, the loan would have to be
repaid with interest by ISS. Dr. Trivedi assured Dr. Hahn that the Company would
make every reasonable effort to secure the approval of its stockholders.
The issue of ISS debt remained unresolved. After further discussions, Dr. Hahn
agreed to consider providing ISS an additional $300,000 to reach a settlement
with all of its creditors. Furthermore, to expedite the SEC filings and secure
the stockholder approval for the transfer of assets, Dr. Hahn agreed to consider
paying an additional $400,000. This would result in an amount
equal18 month budget of $5.7
million including the payment for additional milestones, which would be treated
as a fully repayable demand loan in the event the ISS stockholders failed to
approve the asset transfer.
The discussions concluded with Dr. Hahn agreeing to consider this revised
proposal and respond to ISS promptly.
On June 15, 2006, Dr. Hahn informed Dr. Trivedi that, subject to detailed due
diligence, Novatrix would agree to the then accumulated compensation deductions,ISS proposal upon the conditions that ISS
would (a) secure stockholder approval by no later than March 1, 2007, and (b)
reach a settlement with all of its creditors, who together represent over 80% of
its total debt, within the allocated $300,000. Dr. Trivedi agreed to these
modifications.
Accordingly, an agreement in principle was reached subject to ISS and Novatrix
meeting their commitments. Throughout this discussion period, ISS had
continuously sought the advice and counsel of Snow Becker Krauss P.C., its
corporate counsel. With this understanding, the process of due diligence would
begin immediately and after its completion, legal agreements would be drafted by
the attorneys representing Novatrix.
On June 28, 2006, representatives of Novatrix, including Dr. Hahn and Norman
Orida,, came to visit ISS at its facility in Sacramento to initiate the due
diligence process. Representing ISS were Dr. Trivedi, Lee Witherspoon and David
Adams.
Representatives of Novatrix left the Company's facility with due diligence
material for their review and ISS undertook to deliver additional items
requested by Novatrix. Both parties agreed to complete this task as soon as
possible but in any event no later than July 10, 2006.
During the week of July 3, 2006, there were various telephone calls among the
parties relating to due diligence. Further, Novatrix counsel, Soden &
Steinberger, LLP, began drafting the definitive agreements based upon a price equal
to 85%on the business
arrangements between the two parties.
21
During the three weeks beginning July 10, 2006, drafts of the closing priceagreements were
circulated to ISS and Snow Becker. Various discussions and negotiations ensued
among Drs. Hahn and Trivedi, as well as Snow Becker and Soden & Steinberger.
On August 4, 2006, Dr. Trivedi was invited to visit Novatrix's Irvine facility,
and Dr. Hahn and Dr. Trivedi executed the definitive agreements.
Regulatory Approvals
There are no federal or state regulatory approvals that must be obtained as
a condition of the Common Stock at the time the Common Stock is
acquired. As such,proposed asset sale.
Reports, Opinions and Appraisals
No report, opinion or appraisal was obtained by the Company will be deemed to be contributing 15% (85% of the
purchase price of the Common Stock is to be borne by the participants) of the
employee's contributions toward the purchase of such shares. Furthermore, the
Company shall bear all administrative and commission costsor Novatrix in
connection with the acquisition of the Common Stock and reasonable administrative costs, other
than commissions, from a sale of the Common Stock or transfer to a participant.
Federal Income Tax Consequences
Theproposed asset sale.
Shell Company has been advised by counsel that in general, under the Internal
Revenue Code as presently in effect, a Participant (as defined in the 2000 Plan)
will not be deemed to recognize any income for Federal Income Tax purposes at
the time an option or stock appreciation right ("SAR") is granted or a
restricted stock award is made, nor will the Company be entitled to a tax
deduction at that time. However, when any part of an option or SAR is exercised,
when restrictions on restricted stock lapse, or when an unrestricted stock award
is made, the federal income tax consequences may be summarized as follows:
1. In the case of an exercise of a stock option other than an ISO, the
Participant will generally recognize ordinary income in an amount equal to
the excess of the fair market value of the shares on the exercise date over
the option price.
2. In the case of an exercise of an SAR, the Participant will
generally recognize ordinary income on the exercise date in an amount equal
to any cash and the fair market value of any unrestricted shares received.
3. In the case of an exercise of an option or SAR payable in
restricted stock, or in the case of an award of restricted stock, the
immediate federal income tax effect for the Participant will depend on the
nature of the restrictions. Generally, the fair market value of the stock
will not be taxable as ordinary income until the year in which the
Participant's interest in the stock is freely transferable or is no longer
subject to a substantial risk of forfeiture. However, the Participant may
elect to recognize income when the stock is received, rather than when the
interest in the stock is received, the stock is freely transferable
12
15
or is no longer subject to a substantial risk of forfeiture. If the
Participant makes this election, the amount taxed to the Participant as
ordinary income is determined as of the date of receipt of the restricted
stock.
4. In the case of ISO's, there is generally no tax liability at time
of exercise. However, the excess of the fair market value of the stock on
the exercise date of over the option price is included in the Participant's
income for purposes of the alternative minimum tax. If no disposition of
the ISO stock is made before the later of one year from the date of
exercise and two years from the date of grant, the Participant will realize
a capital gain or loss upon a sale of the stock, equal to the difference
between the option price and the sale price, if the stock is not held for
the required period, ordinary income tax treatment will generally apply to
the excess of the fair market value of the stock on the date of exercise
(or, if less, the amount of gain realized on the disposition of the stock)
over the option price, and the balance of any gain or any loss will be
treated as capital gain or loss. In order for ISO's to be treated as
described above, the Participant must remain employed by the Company (or a
subsidiary in which the Company holds at least 50 percent of the voting
power) from the ISO grant date until three months before the ISO is
exercised. The three-month period is extended to one year if the
Participant's employment terminates on account of disability. If the
Participant does not meet the employment requirement, the option will be
treated for federal income tax purposes as an option as described in
paragraph 5 below. A Participant who exercises an ISO might also be subject
to an alternative minimum tax.
5. Upon the exercise of a stock option other than an ISO, the exercise
of a SAR, the award of stock, or the recognition of Income on restricted
stock, the Company will generally be allowed an income tax deduction equal
to the ordinary income recognized by a Participant. The Company will not
receive an income tax deduction asStatus
As a result of the exercise of an ISO,
provided that the ISO stocksale, once it is held for the required period as described
above. When a cash payment is made pursuant to the Award, the recipient
will recognize the amount of the cash payment as ordinary income,approved and the
Company will generally be entitled to a deduction in the same amount.
6. Pursuant to section 162(m) of the Code, the Company may not deduct
compensation of more than $1,000,000 that is paid in a taxable year to an
individual who, on the last day of the taxable year, is the Company's chief
executive officer or among one of its four other highest compensated
officers for that year. The deduction limit, however, does not apply to
certain types of compensation, including qualified performance-based
compensation. The Company believes that compensation attributable to stock
options and stock appreciation rights granted under the Plancompleted, we will be treated as qualified performance-based compensation and therefore will not
be subject to the deduction limit. The Plan also authorizes the granta "public
shell" company. In advance of long-term performance incentive awards utilizing the performance criteria
set forth in the Plan that may likewise be treated as qualified
performance-based awards.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE COMPANY'S
2000 LONG-TERM PERFORMANCE PLAN (PROPOSAL 5)
PROPOSAL 6. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
Theattaining this status, our Board of Directors has
appointed Ernst & Young LLP, independent
auditors,been evaluating the possibility of a transaction in which we would merge our
"public shell" company with an operating business. We have not had preliminary
negotiations with potential merger candidates nor have we had formal agreements
with any third parties to continueeffect a merger or acquisition and we cannot assure
that we will be able to effect such a merger or acquisition upon terms that we
consider favorable or at all. Once we are a "public shell" company, we will
thereafter comply all of our business and operations, including subsequent sales
of our stock and mergers, in accordance with the Shell Company Release No.
33-8587 and all other applicable regulations and guidance. You should be aware,
however, that depending upon the type of transaction we ultimately pursue, we
may not have to seek stockholder approval of such transaction. As a result, you
may not be able to vote on any new proposed transaction that our Board of
Directors approves.
Consequences of Owning Shares of a "Public Shell" Company
Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the
"Securities Act"), we will qualify as a "shell company," if the sale is approved
and completed because we will not have any assets (other than cash) or
operations. Many states have enacted statutes, rules and regulations limiting
the sale of securities of "blank check" companies in their respective
jurisdictions. We will comply with the periodic reporting requirements of the
Exchange Act for so long as we are subject to those requirements.
Recent amendments to Form 8-K by the Securities and Exchange Commission
regarding shell companies and transactions with shell companies require the
filing of all information about an acquired company that would have been
required to have been filed had any such company filed a Form 10 or 10-SB
Registration Statement with the Securities and Exchange Commission, along with
required audited, interim and proforma financial statements, within four
business days of the closing of any such transaction. These new regulations also
deny the use of Form S-8 for the registration of securities of a shell company,
and limit the use of this Form to a reorganized shell company until the
expiration of 60 days from when any such entity is no longer considered to be a
shell company. The additional time and costs that may be incurred by the
potential target company to prepare the necessary audited financial statements
and other information may significantly delay or essentially preclude
consummation of an otherwise desirable acquisition.
The Wulff Letter, as discussed below can restrict the free tradeability of
certain shares issued to our promoters or affiliates in any transaction with
respect to resales, other than pursuant to an effective registration statement
filed with the Securities and Exchange Commission. We would expect the
definition of these applicable persons to be liberally construed to promote the
findings set out in the Wulff Letter.
22
Restrictions on Sales of Certain "Restricted Securities"
Generally, "restricted securities" can be resold under Rule 144 once they have
been held for at least one year (subparagraph (d) thereof), provided that the
issuer of the securities satisfies the "current public information" requirements
(subparagraph (c)) of the Rule; no more than 1% of the outstanding securities of
the issuer are sold in any three month period (subparagraph (e)); the seller
does not arrange or solicit the solicitation of buyers for the securities in
anticipation of or in connection with the sale transactions or does not make any
payment to anyone in connection with the sales transactions except the broker
dealer who executes the trade or trades in these securities (subparagraph (f));
the shares are sold in "broker's transactions" only (subparagraph (g)); the
seller files a Notice on Form 144 with the Securities and Exchange Commission at
or prior to the sales transactions (subparagraph (h)); and the seller has a bona
fide intent to sell the securities within a reasonable time of the filing. Once
two years have lapsed, assuming the holder of the securities is not an
"affiliate" of the issuer, unlimited sales can be made without further
compliance with the terms and provisions of Rule 144. All "restricted
securities" of the Company have been held for in excess of one year.
In January, 2000, Richard K. Wulff, the Chief of the Securities and Exchange
Commission's Office of Small Business, wrote a letter to Ken Worm, the Assistant
Director of the OTC Compliance Unit of NASD Regulation, Inc. Many members of the
securities community have come to refer to that letter as the Company's auditors"Wulff letter."
The Wulff letter was written in response to a request for guidance from Mr.
Worm. In his request, Mr. Worm had referred to several situations in which
non-affiliate stockholders of "blank check" or "shell company" issuers had
sought to treat their shares as "free-trading" or unrestricted securities. As
defined in the Wulff letter, a blank check or public shell company is "a
development stage company that has no specific business plan or purpose or has
indicated its business plan is to engage in a merger or acquisition with an
unidentified company or companies, or other entity or person."
Citing the concerns of the United States Congress and the Securities and
Exchange Commission over potential fraud and market manipulations involving
blank check and public shell companies, the Wulff letter stated that affiliates
of such issuers, as well as transferees of their securities, are "underwriters"
with respect to auditsuch securities. Accordingly, transactions in these companies'
securities by promoters, affiliates or their transferees do not fall within the
consolidated
financial statementsscope of the Rule 144 "safe harbor" resales for securities that have been
beneficially owned for at least one year and that satisfy informational and
certain other requirements of the Rule, or the Section 4(1) exemption from
registration for resales under the Securities Act of 1933, as amended (the
"Securities Act"), that exempts sales by persons other than "an issuer,
underwriter or a dealer." As a result, it is the position of the Securities and
Exchange Commission that these securities may be resold by these persons only
pursuant to registration under the Securities Act. According to the Wulff
letter, this restriction would continue to apply even after the blank check or
public shell company completes a merger or acquisition transaction with an
operating entity.
Once the sale is completed, assuming it approved, and we become a "public shell"
company, any issuances of our shares thereafter, to any of our promoters or
affiliates, and their transferees, will likely be subject the restrictions
imposed by the Wulff letter.
We believe the Wulff Letter will be liberally construed to promote its purposes
as discussed herein and therein. The full text of the Wulff Letter can be
examined in the CCH Federal Securities Law Reporter, 1999-2000 Decisions,
Paragraph No. 77,681, issued under the name "NASD Regulation, Inc."
Appraisal Rights
Stockholders have no appraisal rights in connection with the proposed asset
sale.
23
Past Contacts, Transactions or Negotiations
Other than the description of the contacts and negotiations in "Background
of the Transaction" set forth above, there are no past contacts, transactions or
negotiations among the Company, its affiliates and Novatrix.
Recommendation of Our Board of Directors Regarding the Proposed Asset Sale
At a meeting on March 22, 2007, our board of directors unanimously
determined that the proposed asset sale is in the best interest of the Company
and our stockholders and unanimously approved the proposed asset sale. Our board
of directors recommends that you vote "FOR" the approval of the proposed asset
sale.
INFORMATION ABOUT INTEGRATED SURGICAL SYSTEMS, INC.
Reference is made to the Annual Report on Form 10-KSB of the Company for the
fiscal year ended December 31, 2006, which is incorporated by reference herein.
RECOMMENDATION:
The Board of Directors Unanimously Recommends That You Vote FOR
the Sale of Substantially All of Our Assets to Novatrix
Biomedical, Inc. described in Proposal 3.
24
PROPOSAL NO. 4
DISSOLVING AND LIQUIDATING THE COMPANY
General
Following consummation of the acquisition of substantially all of the assets of
the Company by Novatrix as detailed in Proposal Three of this Proxy, the Company
intends to pursue business relationships with companies in the medical device or
other suitable sector, either via targeted acquisitions, joint ventures or other
similar strategic transactions. The Company may elect to utilize the services of
one or more investment bankers to assist in this regard.
In the event that the Company is unable to complete a transaction with at least
one such company within 12 months of the date of the closing of the Novatrix
acquisition, the Board of Directors has determined that it is advisable and in
the best interests of the Company and our stockholders to dissolve and liquidate
in accordance with Delaware corporation law.
Under Delaware law, unless the board of directors approves the proposal to
dissolve, the dissolution must be unanimously approved by all the stockholders
entitled to vote on the matter. Only if the dissolution is initially approved by
the board of directors may the dissolution be approved by a simple majority of
the outstanding shares of the Delaware corporation's stock entitled to vote. Our
Board has unanimously approved the dissolution of the Company under the
circumstances as described herein. Accordingly, the affirmative vote of a
majority of the shares of common stock outstanding as of the Record Date is
required for approval of this Proposal Four.
Upon approval of this Proposal Four, and in the event that the Company does not
complete a transaction as described above within 12 months of the Novatrix
closing, the Board will be authorized, without further action by the
stockholders, to:
o dissolve the Company;
o liquidate our assets;
o pay, or provide for the payment of, any remaining, legally enforceable
obligations of the Company; and
o distribute any remaining assets to the stockholders.
Dissolution and liquidation of the Company may be revoked by the Board. By
approving this Proposal Four, stockholders will also be granting the Board the
authority, notwithstanding such approval, to abandon any decision to dissolve
and/or liquidate without further stockholder action, if the Board determines
that liquidation and dissolution are not in the best interests of the Company
and our stockholders.
Upon a liquidation of the Company, the Company's stockholders would be entitled
to receive, after the payment of all debts and liabilities of the Company, all
remaining assets, pro rata, in proportion to the number of shares of common
stock held by each stockholder.
Conduct of our Liquidation and Dissolution
In conducting our liquidation and dissolution, we will undertake the following
tasks:
o settle and close our business;
o convert to cash, by sales, as much of our remaining non-cash assets as
possible, upon terms and conditions as the Board may determine;
25
o withdraw from any jurisdiction where we are qualified to do business;
o pay or make provision for the payment of all of our expenses and
liabilities;
o prosecute and defend lawsuits, if any;
o distribute our remaining assets, which should be primarily cash, but which
may consist of other financial assets, to the stockholders; and
o do any other act necessary to wind up and liquidate our business and
affairs.
Reference is made to the disclosures contained in Proposal Three hereof to the
extent relevant to this Proposal Four.
RECOMMENDATION:
The Board of Directors Unanimously Recommends That You Vote
FOR the Dissolution of the Company under the circumstances
described in Proposal 4.
26
INDEPENDENT ACCOUNTANTS
On September 20, 2006, the Board of Directors of the Company retained Most &
Company, LLP ("Most") to act as our Independent Registered Public Accounting
Firm to audit and certify our financial statements for the year ending December
31, 2000. Ernst2004, 2005 and 2006. Prior to that, Macias Gini & YoungO'Connell LLP has auditedserved as
our independent certified public accountants.
All fees, whether audit, audit-related, tax or other, require 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.prior review
and approval of our Board of Directors. Representatives of Ernst & Young LLPMost are not expected
to be present at the Annual MeetingStockholders' Meeting.
Fees Paid to respond to appropriate questions
from stockholders and to make a statement if they desire to do so.
13
16
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS (PROPOSAL 6)
PROPOSAL 7. TO APPROVE THE ISSUANCE UPON CONVERSION OF SERIES H CONVERTIBLE
PREFERRED STOCK OF MORE THAN 3,494,298 SHARES OF COMMON STOCK, AS REQUIRED BY
NASDAQ RULES.
Nasdaq rules requireIndependent Registered Public Accounting Firm:
Category 2006 2005
- -------- ------- -------
Audit fees (1) $65,000 $65,000
Audit-related fees -0- -0-
Tax fees (2) 15,000 -0-
All other fees -0- -0-
------- -------
$80,000 $65,000
(1) Consists of the Company to obtain stockholder approvalestimates of the aggregate fees billed by its
Independent Registered Public Accounting Firm for professional services
rendered in connection with 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 August 17, 2000, the Company sold 1,200 sharesaudit of the Company's Series H
Convertible Preferred Stockannual financial
statements on Form 10-KSB and warrants to purchase 500,000 shares of its
Common Stock to four accredited investors for an aggregate purchase price of
$1,200,000. The Series H Convertible Preferred Stock is convertible into shares
of Common Stock, at the optionreview of the holder thereof, subjectCompany's quarterly
financial statements on Form 10-QSB and services normally provided by the
Independent Registered Public Accounting Firm in connection with the
statutory and regulatory filings or engagements.
(2) Consists of professional services rendered for tax compliance, tax advice,
and tax planning.
On May 7, 2007, we received a letter from Most & Company, LLP ("Mostco") stating
that Mostco has combined its practice into Raich Ende Malter & Co. LLP ("Raich
Ende"). Mostco has therefore effectively resigned as our independent certified
public accounting firm. Effective May 7, 2007, we engaged Raich Ende as our
independent certified public accounting firm to certain
limitations discussed below. The numberaudit our financial statements
for the year ended December 31, 2007.
ADDITIONAL MEETING INFORMATION
Our board of shares of Common Stock into which the
Series H Convertible Preferred Stock may be converted is determined by dividing
the product of $1,000 and the number of shares to be converted by a conversion
price equal to 80% of the lowest sale price of the Common Stock on the Nasdaq
SmallCap Market during the five trading days preceding the date of conversion
(the "Market Price"), but in no event more than $1.05625. No holder may convert
the Series H Convertible Preferred Stock to the extent such conversion would
result in the holders in the aggregate acquiring more than 3,494,298 shares of
Common Stock, representing 19.9% of the number of shares of Common Stock
outstanding on the date upon which the shares of Series H Convertible Preferred
Stock were issued, unless and until such issuance is approved by stockholders.
Until such stockholder approval is obtained, a holder requesting conversion may
only receive cash equal to the product of the number of shares of Common Stock
in excess of 3,494,298 shares and the closing price of the Common Stock on the
date of conversion.
The conversion price and the number of shares of Common Stock that may be
acquired upon conversion of the Series H Convertible Preferred Stock is subject
to adjustment in the event of a stock split, stock dividend, reorganization or
reclassification. In addition, if prior to August 17, 2001 the Company issues
shares of Common Stock (or securities 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 such shares or other securities the right to demand registration
of such shares, the conversion price of the Series H Convertible Preferred Stock
will be adjusted to the price (or conversion or exercise price, or exchange
rate) of such subsequent issuance.
The conversion, or the potential conversion, of the Series H Convertible
Preferred Stock at a discount of approximately 20% of the then prevailing market
price of the Common Stock and the immediate resale of the shares of 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 stockholders, the Company will be
required to pay holders of the Series H Convertible Preferred Stock upon any
conversion that, together with prior conversions, would result, in the absence
of the limitation discussed above, in the issuance of more than 3,494,298 shares
of Common Stock, an amount in cash equal to the product of the closing price of
the Common Stock on the date of conversion and the number of shares in excess of
3,494,298 shares that but for such limitation would have otherwise been issuable
upon such conversion. The Company's ability to make such cash payments will
depend on its available cash resources at the time of a request for conversion.
The payment of such amounts in lieu of the issuance of shares of Common Stock
upon conversion may adversely affect the liquidity and financial condition of
the Company.
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17
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE APPROVAL OF THE ISSUANCE OF MORE THAN
3,494,298 SHARES OF COMMON STOCK UPON CONVERSION OF THE
SERIES H CONVERTIBLE PREFERRED STOCK, AS REQUIRED
BY NASDAQ RULES (PROPOSAL 7)
OTHER MATTERS
The Board of Directorsdirectors is not aware of any business to be presented at the
Annual Meeting exceptannual meeting, other than the matters set forth in the Noticenotice of Annual Meetingannual meeting
and described in this Proxy Statement. Unless otherwise directed, all shares
represented by Board of Directors' proxies will be voted in favor of the
proposals of the Board of Directors described in this Proxy Statement.proxy statement. If any other mattersbusiness does lawfully come
before the Annual Meeting,annual meeting, it is the intention of the persons named in the
accompanying Proxy willenclosed proxy card to vote on those matters accordingsuch other business in accordance with their
judgment.
TRANSACTIONS WITH RELATED PERSONS
We maintain a written policy and procedures for the review, approval, or
ratification of all related party transactions. A related party, for purposes of
our policy, means (i) any person who is, or at any time since the beginning of
our last fiscal year was, a director or executive officer or a nominee for
director, (ii) any person known to their best judgment.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The names, agesbe the beneficial owner of more than 5% of
our common stock, and business backgrounds(iii) any immediate family member of the executive officersforegoing
persons.
Under the related party transaction policy, any transaction, arrangement or
relationship between us and other significant employeesa related party must be reviewed by Board of
Directors, except that the following transactions , arrangements or
relationships are pre-approved under the policy:
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o compensation arrangements required to be reported under the Director
Compensation section of the Company whoproxy statement;
o compensation arrangements required to be reported under the Executive
Compensation section of the proxy statement;
o business expense reimbursements;
o transactions with an entity in which the related party owns less than
10% of the other entity;
o transactions with an entity in which the related party is a director
only;
o transactions with an entity in which the related party is not an
executive officer; and
o indebtedness for transactions in the ordinary course of business.
We will only enter into transactions with related parties if they are in
the best interest of the Company. The Board of Directors will also consider
whether the transaction is entered into on an arms length basis, whether it
conforms to our Standards of Business Conduct and Ethics, and whether it
impacts a director's independence under applicable stock exchange rules. A
director is not nominees for Director are
as follows:
LOUIS J. KIRCHNER, 57, has been Chief Financial Officer and Secretary since
February 2000. Mr. Kirchner served as Vice President and Chief Financial Officer
of Robroy Industries, Inc. (manufacturer of electrical, oil field and computer
electronic products) from January 1981allowed to January 2000. Mr. Kirchner held
several positions with the Westinghouse Electric Corporation from February 1968
to December 1980.
LELAND WITHERSPOON, 48, 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 November 1990
to February 1992. 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.approve or vote on a related party transaction
involving him/herself or his or her family members.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers,our Directors and officers
and persons who own more than ten10 percent of a registeredany class of the Company'sour equity securities
within specified time periods to file
certain reports of ownership and changes in ownership with the SecuritiesSEC. Officers,
directors and Exchange Commission (the "Commission"). Officers, Directors and ten-percent
stockholderspersons who own more than 10 percent of our equity securities are
required by regulation to furnish the Companyus with copies of all Section 16(a) forms they
file.
Messrs. Al-Kadi, Herrmann and Wettstein
failed to timely file Form 3's reporting that they had become directors of the
Company and reporting their ownership of shares and warrants. Based solely on aour review of the copies of suchthose reports we have received, by the Company andor
written representations from suchthat no other reports were required for those persons,
concerning the necessity to file such reports,
the Company iswe are not aware of any other failures to file reports or report transactions in a
timely manner during the fiscal year ended December 31, 1999.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this2006.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
If you wish to submit proposals for possible inclusion in the Proxy Statement
the enclosed Proxy and other materials, and the cost of soliciting
Proxies with respect to theintended for our 2008 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 recordStockholders, we must receive them no
later than November 16, 2007 in names of nominees, and will
reimburse those banks and brokersorder for the reasonable out-of-pocket expenses of
such solicitations. Telephone and telegram by officers and other regular
employees of the Company may supplement the original solicitation of proxies by
mail, but no additional compensation will be paid to such individuals.
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18
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
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 proposalthem to be included in the Proxy
Statement and form of proxy statement or proxyrelating to that Annual Meeting. Proposals should be
mailed to Charles J. Novak, Secretary, Integrated Surgical Systems Inc., 1433 N.
Freeway Blvd., Suite 1, Sacramento, California 95834. In addition, nominations
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 August 13, 2001. If
the date of such meeting is changed by more than 30 calendar days from the date
such meeting is scheduledDirectors, and other business to be held underproperly brought before the Company's Bylaws, or if the
proposal is to be presented at any meeting other than the next annual meeting2008 Annual
Meeting of stockholders, the proposalStockholders, must be received at the Company's principal executive
office at a reasonable time before the solicitationby February 1, 2008.
AVAILABILITY OF INFORMATION
If you own our common stock, you can obtain copies 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.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999
Copies of the Company'sour Annual Report onand Form
10-KSB for the fiscal year ended December 31, 19992006, as filed with the Securities and Exchange Commission,SEC,
including the financial statements, can be obtained without charge, by stockholders (including beneficial owners of the Company's Common Stock) upon
written requestwriting to LouisMr. Charles J.
Kirchner, the Company'sNovak, Secretary, Integrated Surgical Systems, Inc. 1850 Research Park Drive, Davis,, 1433 N. Freeway Blvd.,
Suite 1, Sacramento, California 95616-4884 or95834. You can also access the 2006 Annual
Report and Form 10-KSB on our Web site at http://www.Robodoc.com. The 10-KSB can
also be found on the Commission's Web SiteSEC's website at www.sec.gov.
By Order of the Board of Directors
LOUIS/s/ Charles J. KIRCHNER,Novak
Charles J. Novak, Secretary
Davis,Sacramento, California
November 8, 2000
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19
PROXY INTEGRATED SURGICAL SYSTEMS, INC.
1850 RESEARCH PARK DRIVE, DAVIS, CALIFORNIA 95616-4884
The undersigned, a holder of Common Stock of INTEGRATED SURGICAL SYSTEMS,
INC., a Delaware corporation (the "Company"), hereby appoints DR. RAMESH C.
TRIVEDI and LOUIS J. KIRCHNER, 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 December 12, 2000 and any adjournments thereof, as follows:
1. The election of three (3) 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 NAME BELOW. YOU ARE ALLOWED TO
CUMULATE VOTING FOR THE NOMINEES. IN VOTING FOR DIRECTORS, A STOCKHOLDER IS
ENTITLED TO CAST THREE VOTES FOR EACH SHARE OF COMMON STOCK HELD, ONE FOR EACH
OF THE THREE NOMINEES. A STOCKHOLDER MAY CAST HIS OR HER VOTES EVENLY FOR ALL
NOMINEES OR MAY CUMULATE SUCH VOTES AND CAST ALL FOR ONE NOMINEE OR DISTRIBUTE
THEM AMONG THE THREE NOMINEES. TO CUMULATE VOTES FOR ANY NOMINEE, WRITE THE
NUMBER OF VOTES CAST IN FAVOR OF EACH NOMINEE IN THE SPACE PROVIDED TO THE RIGHT
OF EACH NOMINEE'S NAME)
Ramesh C. Trivedi ____________________, Falah Al-Kadi, ____________________
John Kapoor ____________________.
2. The approval of amendments to the Company's Restated Certificate of
Incorporation and Bylaws to eliminate cumulative voting rights with respect
to the election of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 50 million to 100 million.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. The approval of the issuance of more than 3,843,939 shares of Common Stock
under an equity line of credit agreement, as required by Nasdaq rules.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. The approval of the adoption of the 2000 Long-Term Performance Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on other side)
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(Continued from other side)
6. The ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7.The approval of the issuance of more than 3,494,298 shares of Common Stock
upon conversion of Series H Convertible Preferred Stock, as required by Nasdaq
rules.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
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 THREE DIRECTORS NAMED IN PROPOSAL 1 AND FOR THE
ADOPTION OF PROPOSALS 2 THROUGH 7 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 November 8, 2000 relating to the Annual Meeting.
Date: , 2000
-----------------------------------
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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.
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.May 15, 2007
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