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: [ ] Confidential, for use of
[ ] Preliminary Proxy Statement the Commission only (as
permitted by Rule
14-a-6(c)(2))
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTEGRATED SURGICAL SYSTEMS, INC.
---------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $______________
(2) Form, Schedule or Registration Statement No.: ________________
(3) Filing Party: _________________
(4) Date Filed: __________________
INTEGRATED SURGICAL SYSTEMS, INC.
1850 Research Park Drive
Davis, California 95616-4884
Notice of Annual Meeting
To our Stockholders:
Our Annual Meeting of Stockholders will be held at 9:30 a.m. on Tuesday,
January 14, 2003, at our executive offices, 1850 Research Park Drive, Davis,
California 95616-4884. At the meeting, we will ask stockholders:
1. To elect three (3) Directors to serve for the ensuing year;
2. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the year ending December 31, 2002; and
3. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
You must be a stockholder of record as of the close of business on November
15, 2002, to be entitled to notice of, and to vote at, the Annual Meeting. A
list of stockholders entitled to vote at the Annual Meeting will be available
for examination by any stockholder for any purpose germane to the meeting at our
executive offices, 1850 Research Park Drive, Davis, California 95616-4884 for a
period of ten days prior to, and during, the Annual Meeting.
By Order of the Board of Directors,
Davis California Charles J. Novak
December 3, 2002 Chief Financial Officer
Your Vote is Important
Whether or not you plan to attend the Annual Meeting, please promptly
complete, sign and date your enclosed proxy card, which is solicited by the
Board of Directors, and return it to us in the enclosed envelope. You may revoke
your proxy at any time before it is voted. If you do execute a proxy, you may
still attend the Annual Meeting and vote in person if you prefer.
INTEGRATED SURGICAL SYSTEMS, INC.
1850 Research Park Drive
Davis, California 95616-4884
PROXY STATEMENT
Information About the Annual Meeting
Information About Attending the Annual Meeting
Our Annual Meeting of Stockholders will be held at our executive offices
located at 1850 Research Park Drive, Davis, California 95616-4884 on Tuesday,
January 14, 2003 at 9:30 a.m. All stockholders of record at the close of
business on November 15, 2002 may attend and vote at the Annual Meeting.
Information About This Proxy Statement
We sent you this Proxy Statement and the enclosed Proxy Card because our
Board of Directors is soliciting your proxy to vote your shares at the Annual
Meeting. This Proxy Statement summarizes information that we are required to
provide to you under the rules of the Securities and Exchange Commission and
that is designed to assist you in voting your shares. We began mailing these
proxy materials on December 3, 2002 to all stockholders of record as of the
close of business on November 15, 2002. We will bear the entire expense of
soliciting these proxies by use of the mails.
Information About Voting
You can vote on matters coming before the Annual Meeting by proxy or in
person:
|X| For all, some or none of the nominees for Director;
|X| For or against ratification of the appointment of Ernst & Young LLP as
our independent auditors for the year ending December 31, 2002.
If you vote by proxy, you can vote by signing, dating and returning the
proxy card. If you do this, the individuals named on the card will be your
proxies and they will vote your shares in the manner you indicate.
If you do not indicate instructions on the card, your proxies will vote
your shares FOR the election of all nominees for Director and FOR ratification
of the appointment of Ernst & Young LLP as our independent auditors for the year
ending December 31, 2002.
The Board of Directors anticipates that all of the nominees will be
available for election and does not know of any other matters that may be
brought before the Annual Meeting. If any other matters should come before the
Annual Meeting or any of the nominees for Director is not available for
election, your proxies will have discretionary authority to vote in accordance
with their best judgment on such matters unless the proxy card is marked to the
contrary.
If you vote in person, you may attend the Annual Meeting and cast your vote
there. You may do this even if you have signed and returned the enclosed proxy
card.
You may revoke the proxy at any time before it is voted by:
|X| Sending a written notice of revocation to our Chief Financial Officer,
Charles Novak,
|X| Delivering a later dated proxy, or
|X| Voting in person at the Annual Meeting.
If you want to vote at the Annual Meeting, but your shares are held in the
name of a broker or other nominee, you should obtain a proxy from your nominee
naming you as its proxy to vote the shares.
Information About Votes Necessary for Action to be Taken
As of November 15, 2002, we had outstanding 38,900,469 shares of common
stock, our only securities entitled to vote. Each share has one vote. Only
stockholders of record as of the close of business on November 15, 2002 will be
entitled to vote at the Annual Meeting. The presence at the Annual Meeting,
either in person or by proxy, of holders of at least a majority of the shares
outstanding on November 15, 2002, is necessary to have a quorum allowing us to
conduct business at the Annual Meeting.
The following votes are required to approve each Proposal at the Annual
Meeting:
|X| A plurality of all the votes cast for Directors will elect three
Directors. This means that the three nominees for Director with the
most votes will be elected.
|X| A majority of the votes cast will ratify the appointment of Ernst &
Young LLP as our independent auditors for the year ending December 31,
2002.
Proxies marked "abstain" with respect to proposals other than the election
of directors and proxies marked to deny discretionary authority on all other
matters will only be counted for the purpose of determining the presence of a
quorum. 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.
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Proposal 1.
Election of Three (3) Nominees as Directors
At the Annual Meeting, three (3) Directors will be nominated for election
to our Board of Directors. Directors serve until the next annual meeting of
stockholders and until their successors are duly elected and qualify. If, at the
time of election, any of the nominees should be unavailable for election, a
circumstance which we do not expect, the proxies will be voted for the
substitute nominee as we may select. The proxies cannot be voted for more than
three Directors at the Annual Meeting.
Proxies not marked to the contrary will be voted "FOR" the election of the
following three (3) persons:
Name Age Position Director Since
- ---- --- -------- --------------
Ramesh C. Trivedi 63 President, Chief Executive
Officer, Director
1995
Falah Al-Kadi 51 Chairman of the Board of Directors 1999
Jack W. Moorman 55 Director October 2002
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.
Falah Al-Kadi has been chairman of our board of directors since January 2000 and
a director since December 1999. Since 1994, Mr. Al-Kadi has been vice chairman
of the Dogmoch Group of Companies, which provides consulting and support
services to German companies doing business in the Middle East.
Jack W. Moorman has been president and chief executive officer of Microbar,
Inc., a capital equipment manufacturer of advanced chemical management systems,
since August 2002.
All directors hold office until the annual meeting of stockholders following
their election or until their successors are duly elected and qualified.
In September 2001 we granted our non-employee directors ten-year options to
purchase 100,000 shares of common stock at an exercise price of $0.06 per share.
Our Board of Directors held 4 meetings during 2001.
Our Board of Directors has two standing committees -- an Audit Committee
and a Compensation Committee.
The Audit Committee reviews and evaluates the scope of the audits to be
performed, the adequacy of services performed by, and the fees and compensation
of the independent auditors. The Committee also reviews the Company's audited
financial statements with management and with the Company's independent auditors
and recommends approval of the audited financial statements to the Board of
Directors before publication in the Annual Report on Form 10-KSB; reviews and
considers matters which may have a bearing upon continuing auditor independence;
considers and recommends to the Board of Directors the selection of the
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independent auditors to examine the consolidated financial statements of the
Company for the next year; reviews and evaluates the scope and appropriateness
of the Company's system of internal controls; reviews and evaluates the
appropriateness of the Company's accounting principles and practices and
financial reporting matters. One meeting was held during 2001. Current members
of the Audit Committee are: Mr. Moorman (Chairman) and Mr. Al-Kadi, both of whom
are independent outside directors. The Report of the Audit Committee for fiscal
year 2001 appears on page 6.
The Board of Directors has adopted a charter for the Audit Committee. A
copy of the Audit Committee's Charter is appended to the Proxy Statement. All
members of the Audit Committee are "independent" within the meaning of Nasdaq
Marketplace Rule 4200(a)(15).
The information contained in this Proxy Statement with respect to the Audit
Committee charter and the independence of the members of the Audit Committee
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission, nor shall such information be incorporated
by reference into any future filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that we specifically incorporate it by reference to such filing.
The Compensation Committee is composed of Mr. Moorman and Mr. Al-Kadi
(Chairman). The duties of the Compensation Committee are to recommend to the
Board remuneration for our officers, to determine the number and issuance of
options pursuant to our stock option plans and to recommend the establishment of
and to monitor a compensation and incentive program for all our executives. The
Compensation Committee did not hold any meetings in 2001.
During the year ended December 31, 2001, each incumbent Director attended
100% of the total number of Board of Directors meetings and meetings of
committees on which he served, except that Mr. Al-Kadi attended 75% of the
meetings.
The Board of Directors Recommends that You Vote "For" the Election of
the Nominees Named Above (Proposal 1).
Executive Compensation
The following table sets forth the aggregate compensation earned by, paid
to, or accrued for our chief executive officer and each other executive officer
whose aggregate compensation, was in excess of $100,000, based on their salary
and bonus for the fiscal year ended December 31, 2001.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Cash Underlying
Name Year Salary Bonus Other Options
- ---- ---- ------ ----- ----- -------
Ramesh C. Trivedi 2001 $301,434 $0 $17,214(1) 0
President and Chief 2000 302,215 0 29,003(1) 240,000
Executive Officer 1999 279,840 27,984 48,281(1) 6,210
Leland Witherspoon 2001 141,335 0 0 0
Vice President 2000 141,400 0 0 30,000
1999 147,413 0 0 0
(1) Represents expense allowances paid under the terms of Dr. Trivedi's
employment agreement.
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Employment Agreement
Dr. Trivedi serves as our Chief Executive Officer and President pursuant to
an employment agreement terminable at will by either party. Upon termination by
us, other than for cause, Dr. Trivedi is entitled to receive his monthly salary
for a period of eighteen months following the date of termination. Dr. Trivedi's
salary for 2002 is $302,215 ($25,185 per month).
Option Grants in Last Fiscal Year
There were no grants of stock options under any of our stock option plans
to Messrs. Trivedi and Witherspoon during the fiscal year ended December 31,
2001.
Aggregated Option Exercises in the Last Fiscal year and Fiscal Year End Option
Values
The following table summarizes, for each of Dr. Trivedi and Mr.
Witherspoon, the total number of unexercised options held at December 31, 2001,
and the aggregate dollar value of in-the-money, unexercised options, held at
December 31, 2001. The value of the unexercised, in-the-money options at
December 31, 2001, is the difference between their exercise or base price and
the value of the underlying common stock on December 31, 2001. The closing sale
price of the common stock on December 31, 2001 was $0.115 per share.
Shares Acquired
Upon Exercise Number of Securities Value of Unexercised
of Options Underlying In-The-Money
During Fiscal Unexercised Options Options at
2001 At December 31, 2001 December 31, 2001
---- -------------------- -----------------
Value
Name Number Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------ -------- ----------- ------------- ----------- -------------
Ramesh C. Trivedi None None 571,861 175,556 $14,354(1) $0
Leland Witherspoon None None 52,569 22,431 0 0
(1) Represents value of options to purchase 6,210 shares at an exercise price
of $0.10 per share and 316,907 shares at an exercise price of $0.07 per
share.
Executive Officers
Ramesh C. Trivedi has been president, chief executive officer and a director of
Integrated Surgical Systems since 1995. Prior to that time, Dr. Trivedi was a
principal of California Biomedical Consultants, an international consulting
firm, and he served as the president and chief executive officer of DigiRad
Corporation, a medical imaging company. Dr. Trivedi received his Ph.D. in
chemical engineering from Lehigh University, and holds an MBA from Pepperdine
University.
Leland Witherspoon has been vice president of engineering since joining
Integrated Surgical Systems in 1997. From 1992 to 1997, Mr. Witherspoon was
director of product research and development for Biomedicals, Inc., a developer
and manufacturer of cardiopulmonary and cardiovascular products. Prior to that
time, he served in various technical and management positions for Pfizer/Shiley,
Xerox Medical Systems and IBM. Mr. Witherspoon received his Bachelor of Science
from Rensselaer Polytechnic Institute.
Charles J. Novak has been our chief financial officer since joining Integrated
Surgical Systems in July 2002. From September 2001 to December 2001, Mr. Novak
was the vice president of finance and administration, CFO for Realty Plus
Online, a real estate software transaction system company. From January 2001 to
September 2001, he was the vice president of finance and administration, CFO for
WebRaiser Technologies, Inc., an integration and professional services firm.
From February 1999 to January 2001, Mr. Novak was the director of operations for
MRI Sierra International Group, Inc., an executive search firm. From September
1995 to February 1999 he
5
was the assistant corporate controller for USCS International, Inc., a supplier
of customer management software and open billing solutions. Prior to that, Mr.
Novak served in executive management positions for Describe, Inc. and HealthTek,
Inc. and he served in various management positions with the Hewlett-Packard
Company. Mr. Novak earned his BS in Accounting from Lewis University in
Lockport, Illinois.
Certain Transactions
During the year ended December 31, 2001 certain of our officers, on five
occasions, advanced to us, in the aggregate, $477,000 in order to permit us to
meet our payroll obligations. Each of these advances was non-interest bearing
and was repaid within one to five days.
At December 31, 2001, we had amounts due to Mr. Trivedi our Chief Executive
Officer of approximately $193,000: $50,000 of this amount related to salary
deferred in the fourth quarter of 2001, included in accrued payroll and related
expense, and $143,000 related to unreimbursed travel expenses, included in
accounts payable.
Equity Compensation Plans
The following table provides information as of the fiscal year ended
December 31, 2001 with respect to our compensation plans (including individual
compensation arrangements):
EQUITY COMPENSATION PLAN INFORMATION TABLE
- -----------------------------------------------------------------------------------------------------------------
(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 (1) 1,703,017 $1.52 1,401,461
- -----------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security ---- ---- ----
holders
- -----------------------------------------------------------------------------------------------------------------
Total 1,703,017 $1.52 1,401,461
- -----------------------------------------------------------------------------------------------------------------
(1) Includes the Company's 1991, 1995 and 1998 Stock Option Plans and the 2000
Long-Term Performance Plan.
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on
behalf of the board of directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
6
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards. In addition, the
Committee has discussed with the independent auditors matters required to be
discussed by SAS 61 and the auditors' independence from management and the
Company, including the written disclosures and letter received from the
independent auditors as required by the Independence Standards Board Standard
No. 1.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their respective audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Committee held one meeting during 2001. In reliance on this review process and
the reviews and discussions referred to above, the Committee recommended to the
Board of Directors (and the Board has approved) that the audited financial
statements be included in the Annual Report on Form 10-KSB for the year ended
December 31, 2001 for filing with the Securities and Exchange Commission. The
Committee and the Board have also recommended, subject to stockholder
ratification, the selection of Ernst & Young LLP as the Company's independent
auditors for the year ending December 31, 2002.
Elliot Smith, Audit Committee Chair (1)
Falah Al-Kadi, Committee Member
March 20, 2002
(1) Resigned from the Board of Directors and Audit Committee effective October
8, 2002
The information contained in the foregoing report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
such future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate it by reference to such filing.
Proposal 2
Ratification of Appointment of Independent Auditors
During 2001, Ernst & Young LLP provided various audit and non-audit
services to the Company as follows:
a) Audit Fees: Aggregate fees billed for professional services rendered for
the audit of the Company's 2001 annual consolidated financial statements,
review of consolidated financial statements in the Company's Form 10-QSB,
and a statutory audit of the Company's foreign subsidiary, primarily
benefiting the sign-off in the consolidated financial statements, $216,900,
b) Audit Related Fees: $0,
c) Financial Information Systems Design and Implementation Fees: $0,
d) All Other Fees: Principally income tax consulting and income tax compliance
services, $35,000.
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The Audit Committee of the Board has considered whether provision of the
services described in section (d) above is compatible with maintaining the
independent accountant's independence and has determined that such services have
not adversely affected Ernst & Young LLP's independence. Upon recommendation of
the Audit Committee, and subject to ratification by the stockholders at the
January 14, 2003 Annual Meeting, the Board of Directors has appointed Ernst &
Young LLP as independent auditors to examine the consolidated financial
statements of the Company for the year ending December 31, 2002.
If the Board's appointment is not ratified, or if Ernst & Young LLP declines to
act or becomes incapable of action, or if their appointment is discontinued, the
Board will appoint other independent auditors whose continued appointment after
the next Annual Meeting of Stockholders shall be subject to ratification by the
stockholders.
Ernst & Young LLP has been responsible for the audit of our financial statements
since the fiscal year ended December 31, 1991. A representative of Ernst & Young
LLP will be present at the Annual Meeting of Stockholders, will have an
opportunity to make a statement and will be available to respond to appropriate
questions from stockholders.
The Board of Directors Recommends That You Vote "For" the Ratification of
Ernst & Young LLP as our independent auditors for the year ending December 31,
2002.
Securities Ownership
The following table indicates how many shares of common stock were
beneficially owned, as of November 15, 2002 by (1) each person known by us to be
the owner of more than five percent of the outstanding shares of our common
stock, (2) each director, (3) each executive officer named in the Summary
Compensation Table and (4) all directors and executive officers as a group. In
general, "beneficial ownership" includes those shares a person has the power to
vote or the power to transfer, and stock options and other rights to acquire
common stock that are exercisable currently or become exercisable within 60
days. For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on November 15, 2002, any security
which such person or group of persons has the right to acquire within 60 days
after such date is deemed to be outstanding for the purpose of computing the
percentage ownership of such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person. Except as indicated, the persons named in the table below have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, subject to community property laws, where applicable. We based
our calculation of the percentage owned on 38,900,469 shares outstanding on
November 15, 2002.
8
Amount and Nature Percentage of
of Beneficial Common Stock
Name Ownership Beneficially Owned
---- ---------- ------------------
International Business Machines Corporation;
Old Orchard Road, Armonk, N.Y. 10504 2,248,900 (1) 5.78%
ILTAG International Licensing Holding S.A.L.; Adnan Al
Hakim Street; Assaf Bldg.;
P.O. Box 135660; Beirut, Lebanon 3,461,198 (2) 8.90%
Ramesh C. Trivedi (3) 659,984 (4) 1.70%
Leland Witherspoon (3) 76,484 (5) *
Falah Al-Kadi (6) 3,504,948 (7) 9.01%
Jack W. Moorman (9) -- *
All directors and officers as a group (4 persons) 4,241,416 10.90%
- -------------------------------------------------------------------------------------------------------------------------
* Less than one percent.
(1) Includes warrants to purchase 2,206,479 shares of common stock at an exercise price of $0.01 per share, exercisable until
December 31, 2006.
(2) Includes warrants to purchase 2,000,000 shares of common stock at an exercise price of $1.027 per share, exercisable until
December 13, 2003.
(3) Address is c/o Integrated Surgical Systems, Inc., 1850 Research Park, Davis, California 95616.
(4) Includes 645,984 shares that Dr. Trivedi may acquire upon exercise of stock options exercisable within 60 days - 316,907
shares at an exercise price of $0.07 per share, 120,000 shares at an exercise price of $3.00 per share, 202,867 shares at
an exercise price of $1.81 per share, and 6,210 shares at an exercise price of $0.10 per share. Dr. Trivedi may acquire an
additional 101,433 shares upon exercise of stock options that become exercisable over the remaining term of the options
at an exercise price of $1.81 per share.
(5) Includes 65,000 shares that Mr. Witherspoon may acquire upon exercise of stock options exercisable within 60 days - 45,000
shares at an exercise price of $3.00 per share and 20,000 shares at an exercise price of $1.81 per share. Mr. Witherspoon
may acquire an additional 10,000 shares upon exercise of stock options that become exercisable over the remaining term of
the options at an exercise price of $1.81 per share.
(6) Address is c/o Dogmoch Group of Companies, Adnan Al Hakim St., Assaf Bldg., P.O. Box 135660, Beirut, Lebanon.
(7) Includes the 3,461,198 shares and warrants owned by ILTAG, an affiliate of Dogmoch, of which Mr. Al-Kadi is Vice-Chairman,
and 43,750 shares that Mr. Al-Kadi may acquire upon exercise of stock options exercisable within 60 days at an exercise
price of $0.06 per share.
(8) Address is c/o Microbar Inc., 1252 Orleans Drive, Sunnyvale, California 94089-1137.
9
Compliance With 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors and persons who own more than ten percent of a registered class of our
equity securities within specified time periods to file certain reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and ten percent stockholders are required by regulation to
furnish us with copies of all Section 16(a) forms they file. Based solely on a
review of copies of the reports we received and written representations from
persons concerning the necessity to file these reports, we are not aware of any
failure to file reports or report transactions in a timely manner during the
fiscal year ended December 31, 2001, except that Mr. Witherspoon did not file,
in a timely manner, an initial report of beneficial ownership on Form 3 upon
joining Integrated Surgical Systems, Inc. in April 1997, nor file, in a timely
manner, Forms 4 and 5 reporting the grant of additional stock options since that
time; and Mr. Al-Kadi did not file, in a timely manner, an initial report of
beneficial ownership on Form 3 upon becoming a director in December 1999 or a
Form 4 upon the granting of stock options in September 2001.
Stockholder Proposals For the 2003 Annual Meeting
Stockholder Proposals for Inclusion in Next Year's Proxy Statement
Stockholders may submit proposals on matters appropriate for stockholder
action at our annual meetings consistent with regulations adopted by the SEC and
our By-laws. We must receive any such proposals not later than August 5, 2003
for such proposals to be considered for inclusion in our Proxy Statement and
form of proxy relating to the 2003 Annual Meeting. Proposals should be addressed
to our Chief Financial Officer, at 1850 Research Park Drive, Davis, California
95616-4884.
Other Stockholder Proposals for Presentation at Next Year's Annual Meeting
For any proposal that is not submitted for inclusion in our next year's
Proxy Statement, but is instead sought to be presented directly at the next
Annual Meeting, SEC rules permit management to vote proxies in its discretion
if:
|X| We receive notice of the proposal before the close of business on
October 19, 2003 and advise stockholders in the 2003 Proxy Statement
about the nature of the matter and how our management intends to vote
on such matter, or
|X| We do not receive notice of the proposal prior to the close of
business on October 19, 2003.
Notices of intention to present proposals at the next Annual Meeting should
be addressed to our Chief Financial Officer, at 1850 Research Park Drive, Davis,
California 95616-4884.
10
Available Information
This Proxy Statement is being mailed to our stockholders together with a
copy of our Annual Report on Form 10-KSB as filed with the SEC. Additional
copies of the Form 10-KSB, as well as copies of our other periodic reports filed
under the Securities Exchange Act, may be obtained without charge from our Chief
Financial Officer, Integrated Surgical Systems, Inc., 1850 Research Park Drive,
Davis, California 95616-4884 (telephone 530-792-2600, fax 530-792-2619).
By Order of the Board of Directors,
Davis, California Charles J. Novak
December 3, 2002 Chief Financial Officer
11
APPENDIX A
Charter for the Audit Committee of the Board of Directors
Organization
This charter governs the operations of the audit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least two directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, or shall become financially literate within a
reasonable period of time after appointment to the committee, and at least one
member shall have accounting or related financial management expertise.
Purpose
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs as
established by management and the board. In so doing, it is the responsibility
of the committee to maintain free and open communication between the committee,
the internal auditors, and management of the Company. In discharging its
oversight role, the committee is empowered to investigate any matter brought to
its attention with full access to all books, records, facilities, and personnel
of the Company and the power to retain outside counsel, or other experts for
this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements.
The committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The committee should take appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices, and ethical behavior.
The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.
The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable to
the board and the audit committee, as representatives of the Company's
stockholders. The committee shall have the ultimate authority and responsibility
to evaluate and, where appropriate, recommend the replacement of the independent
auditors. The committee shall discuss with the auditors their independence from
management and the Company, including matters in the written disclosures
required by the Independence Standards Board, and shall consider the
compatibility of nonaudit services with the auditors' independence. Annually,
the committee shall review and recommend to the board the selection of the
Company's independent auditors, subject to stockholders' approval.
12
The committee shall discuss with the independent auditors the overall scope and
plans for their respective audits, including the adequacy of staffing and
compensation. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs, including the
Company's Code of Conduct. Further, the committee shall meet separately with the
independent auditors, with and without management present, to discuss the
results of their examinations and will provide sufficient opportunity for the
independent auditors to meet privately with the members of the committee.
The committee shall review the interim financial statements with management and
the independent auditors prior to the filing of the Company's Quarterly Report
on Form 10-QSB. Also, the committee shall discuss the results of the quarterly
review and any other matters required to be communicated to the committee by the
independent auditors under generally accepted auditing standards. The chair of
the committee may represent the entire committee for the purposes of this
review.
The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-KSB (or the annual report to stockholders if distributed prior to the filing
of Form 10-KSB), including their judgment about the quality, not just the
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements. Also,
the committee shall discuss the results of the annual audit and any other
matters required to be communicated to the committee by the independent auditors
under generally accepted auditing standards.
13
INTEGRATED SURGICAL SYSTEMS, INC.
1850 Research Park Drive
Davis, California 95616-4884
PROXY
The undersigned, a holder of the common stock of INTEGRATED SURGICAL SYSTEMS,
INC., a Delaware corporation, hereby appoints Ramesh Trivedi and Charles Novak,
and each of them, the proxies of the undersigned, each with full power of
substitution, to attend, represent and vote for the undersigned, all of the
shares which the undersigned would be entitled to vote, at the Annual Meeting of
Stockholders to be held on January 14, 2003 and any adjournments thereof, as
follows:
1. ELECTION OF DIRECTORS:
[ ] FOR the nominees listed below.
[ ] WITHHOLD AUTHORITY to vote for the nominee(s) listed below.
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS NAME BELOW)
Ramesh C. Trivedi
Falah Al-Kadi
Jack W. Moorman
2. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS HEREON. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE DIRECTORS NAMED IN PROPOSAL 1, FOR THE ADOPTION OF PROPOSAL 2
AND AS SAID PROXIES SHALL DEEM ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME
BEFORE THE ANNUAL MEETING.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and the accompanying Proxy Statement dated December 3, 2002 relating to
the Annual Meeting, and the 2001 Annual Report to Stockholders.
Date: , 2002
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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.