SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
INSIGNIA SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO]
INSIGNIA(R) SYSTEMS, INC.
5025 Cheshire Lane North * Plymouth, MN 55446
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS OF INSIGNIA SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Insignia Systems, Inc. (the "Company"), a Minnesota corporation, will be held on
Wednesday, May 17, 2000 at 9:00 a.m., Central Daylight Savings Time, at the
Ramada Plaza Hotel, 12201 Ridgedale Drive, Minnetonka, Minnesota, for the
following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected;
2. To ratify an amendment to the Company's Stock Plan to increase by
200,000 shares the number of shares available under the Plan;
3. To ratify an amendment to the Company's Employee Stock Purchase Plan
to increase by 200,000 shares the number of shares available under the
Plan and extend the term of the Plan for three additional years;
4. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the current year; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 22,
2000 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
By Order of the Board of Directors
G. L. Hoffman
Secretary
Plymouth, Minnesota
April 5, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID
ENVELOPE ENCLOSED FOR THAT PURPOSE.
<PAGE>
[LOGO]
INSIGNIA(R) SYSTEMS, INC.
---------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement is furnished to the stockholders of Insignia
Systems, Inc. in connection with the Board of Directors' solicitation of proxies
to be voted at the annual meeting of stockholders to be held on May 17, 2000 or
any adjournment thereof (the "Meeting"). The mailing of this Proxy Statement to
stockholders commenced on or about April 5, 2000.
All expenses in connection with solicitation of proxies will be borne
by the Company. The Company will pay brokers, nominees, fiduciaries, or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, officers, and
other employees of the Company may also solicit in person, by telephone, by
telegraph or by mail. The Company's principal offices are located at 5025
Cheshire Lane North, Plymouth, Minnesota 55446.
Any proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the Secretary of the Company, or by revocation in
person at the Meeting; but if not so revoked, the shares represented by such
proxy will be voted in the manner directed by the shareholder. If no direction
is made, proxies received from stockholders will be noted "for" the proposals
set forth in the Notice of Meeting.
The Company has 9,327,946 shares of common stock, par value $.01 per
share (the "Common Stock") outstanding and entitled to vote at the Meeting. Each
share of Common Stock is entitled to one vote. Only stockholders of record at
the close of business on March 22, 2000 are entitled to vote at the meeting and
at any continuation or adjournment thereof. The presence, in person or by proxy,
of the holders of a majority of the shares of Common Stock entitled to vote at
the meeting will constitute a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of stockholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in person
or by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number of
shares that would constitute such a quorum. Votes cast by proxy or in person at
the Meeting will be tabulated at the Meeting to determine whether or not a
quorum is present. Abstentions will be treated as unvoted for purposes of
determining the approval of the matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Page 1
<PAGE>
SECURITY OWNERSHIP OF
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table presents information provided to the Company as to
the beneficial ownership of Common Stock as of February 29, 2000 (i) by persons
known to the Company to hold 5% or more of such stock, (ii) each of the
directors of the Company, (iii) each of the executive officers named in the
Summary Compensation Table on page 3 and (iv) by all current officers and
directors as a group. Beneficial ownership includes shares available for
purchase under warrants or options which are either currently exercisable or
exercisable within 60 days after February 29, 2000.
Name and Address of Amount and Nature Percent of
Beneficial Owner of Beneficial Ownership Shares
- --------------------------------------- ----------------------- -----------
Perkins Capital Management, Inc. 1,799,800 17.4%
708 East Lake Street
Wayzata, MN 55391
W. Robert Ramsdell 1,090,567(1) 11.4%
474 Paseo Miramar
Pacific Palisades, CA 90272
G. L. Hoffman 907,500(2) 9.7%
5025 Cheshire Lane North
Plymouth, MN 55446
Lloyd I. Miller, III 554,410 5.4%
4550 Gordon Drive
Naples, FL 34102
Scott F. Drill 332,500(3) 3.5%
5025 Cheshire Lane North
Plymouth, MN 55446
Erwin A. Kelen 155,000(4) 1.6%
Kelen Ventures
5500 Wayzata Blvd., Suite 1045
Golden Valley, MN 55416
Frank D. Trestman 155,000(5) 1.6%
Trestman Enterprises
5500 Wayzata Blvd., Suite 1045
Golden Valley, MN 55416
Gary L. Vars 75,214(6) 0.8%
5025 Cheshire Lane North
Plymouth, MN 55446
John R. Whisnant 65,083(7) 0.7%
5025 Cheshire Lane North
Plymouth, MN 55446
Don E. Schultz 40,000(8) 0.4%
Agora, Inc.
1007 Church Street, Suite 105
Evanston, IL 60201
Page 2
<PAGE>
Gordon F. Stofer 19,014(9) 0.2%
Cherry Tree Ventures III
Centennial Lakes Office Park
7601 France Ave. So., Suite 225
Edina, MN 55435
All current Directors and Officers as a Group 2,839,635(10) 29.9%
(8 persons)
- -----------------------------------------------------
(1) Includes 280,000 shares subject to warrants which are currently
exercisable.
(2) Includes 50,000 shares subject to options and warrants which are
currently exercisable.
(3) Includes 310,000 shares subject to options and warrants which are
currently exercisable.
(4) Includes 105,000 shares subject to options and warrants which are
currently exercisable and 30,000 shares held in trust for Mr. Kelen's
children, as to which he disclaims beneficial ownership.
(5) Includes 55,000 shares subject to options and warrants which are
currently exercisable. Also includes 40,000 shares held in trust for Mr.
Trestman's wife and children and 50,000 shares subject to warrants
currently exercisable by the trust, as to which Mr. Trestman disclaims
beneficial ownership.
(6) Includes 51,464 shares subject to options and warrants which are
currently exercisable.
(7) Includes 23,750 shares subject to options and warrants which are
currently exercisable.
(8) Includes 40,000 shares subject to options and warrants which are
currently exercisable.
(9) Consists of 10,000 shares subject to options which are currently
exercisable.
(10) Includes 975,214 shares subject to options and warrants currently
exercisable by officers and directors of the Company, 30,000 shares held
in trust for the children of a director, 40,000 shares held in trust for
the wife and children of another director.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows, for the fiscal years ending December 31,
1997, 1998 and 1999, the cash compensation paid by the Company, as well as
certain compensation paid or accrued for such years, to Scott Drill, the
Company's President and Chief Executive Officer, and to each other executive
officer of the Company (together with Mr. Drill, the "Named Executives") whose
total cash compensation exceeded $100,000 during Fiscal 1997, 1998 and 1999 in
all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Fiscal Year ------------------------- ----------------
Ended Stock Options All Other
Name and Position December 31, Salary Bonus and Awards Compensation(1)
- -------------------------- ----------------- ------------ --------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
G. L. Hoffman 1999 $160,000 -- -- $6,290
Chairman and 1998 $160,000 -- -- $6,409
Secretary 1997 $158,800 -- -- $6,375
Scott Drill 1999 $200,000 -- -- $ 396
President and CEO 1998 $169,743 -- 400,000(2) $1,125
1997 N/A N/A N/A N/A
Gary Vars 1999 $144,000 -- 65,000(3) $ 666
Executive Vice President 1998 $ 36,000 -- 115,000(4) --
and General Manager 1997 N/A N/A N/A N/A
Page 3
<PAGE>
John R. Whisnant 1999 $112,500 -- 40,000(5) $6,234
Vice President of Finance 1998 $100,000 -- 35,000(6) $6,286
1997 $ 92,500 -- -- $6,285
</TABLE>
- --------------------------
(1) Includes amounts for car allowance and payment of life insurance
premiums.
(2) Includes a stock option to purchase 400,000 shares at $1.07 per share.
(3) Includes a stock option to purchase 50,000 shares at $1.00 per share and
a warrant to purchase 15,000 shares at $1.50 per share.
(4) Includes a stock option to purchase 75,000 shares at $1.72 per share and
a warrant to purchase 40,000 shares at $1.25 per share.
(5) Includes a stock option to purchase 40,000 shares at $1.00 per share.
(6) Includes a stock option to purchase 35,000 shares at $1.75 per share.
STOCK OPTIONS
The Company's Stock Plan (the "Plan") provides for the granting of
stock options or restricted stock awards to key employees, consultants and
directors. An aggregate of 1,770,000 shares of common stock have been issued or
reserved for issuance under the Plan, as amended by the Board of Directors on
May 20, 1999, when 250,000 shares were added to the Plan.
As of February 29, 2000, there are options outstanding under the Plan
for 1,278,000 shares. During the last three years (January 1, 1997 to December
31, 1999), the Company has granted under the Plan options for a total of 650,000
shares to executive officers at an average price of $1.24 per share, options for
a total of 75,000 shares to directors who are not executive officers at an
average price of $1.62 per share and options for a total of 696,500 shares to
other employees and to consultants at exercise prices ranging from $1.00 to
$3.375 per share. In 1997 options to purchase 13,768 shares were exercised by
current and former employees. In 1998 options to purchase 40,066 shares were
exercised by current and former employees. In 1999 options to purchase 181,666
shares were exercised by current and former employees. As of February 29, 2000,
options covering 828,093 shares have terminated with exercise prices ranging
from $.50 to $4.50 per share.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Options
Granted to
Number of Employees in Exercise
Shares Covered Fiscal Year Ended Price Expiration
Name by Option Grants Dec. 31, 1999 Per Share Date
- ------------------------ ------------------- ----------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Gary L. Vars 50,000(1) 11.0% $1.00(2) 8/16/2004
John R. Whisnant 40,000(3) 8.8% $1.75(2) 5/21/2003
</TABLE>
- ------------------------
(1) The option is exercisable for 25,000 shares after one year and 25,000
shares after two years.
(2) Reflects the market value of the Company's Common Stock on the date of
the grants.
(3) The option is exercisable for 13,333 shares after one year, 13,333
shares after two years and 13,334 shares after three years.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
Page 4
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares at December 31, 1999 as of December 31, 1999(1)
Acquired Value ---------------------------- ------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. L. Hoffman -- -- 50,000 -- $109,400 --
Scott F. Drill -- -- 274,000 126,000 $685,000 $315,000
Gary L. Vars -- -- 32,296 142,704 $ 51,538 $294,312
John R. Whisnant -- -- 23,750 66,250 $ 48,684 $150,111
</TABLE>
- -----------------------
(1) Based on the market price of $3.563 per share for the Company's Common
Stock on December 31, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(1) of the Securities Act of 1934 requires the Company's
executive officers and directors to file reports with the Securities and
Exchange Commission concerning their initial ownership and changes in ownership
of Company securities. To the Company's knowledge, all such reports were filed
in a timely manner, except that W. Robert Ramsdell filed one late report in
February 2000 concerning his ownership as of his initial election date as a
director.
ITEM I
ELECTION OF DIRECTORS
The Board of Directors has fixed at eight the size of the Board of
Directors to be elected at the Meeting and has nominated as the management slate
all of its current members. It is anticipated that proxies will be voted for the
management slate, and that each nominee will serve if elected. Should any
nominee be unable to serve, the persons named in the proxies may in their
discretion vote for a substitute.
The names and ages of the management slate of nominees, their principal
occupations and other information is set forth below, based upon information
furnished to the Company by the nominees.
<TABLE>
<CAPTION>
Name and Age Occupation Director Since
----------------------------- ----------------------------------------------------- ------------------
<S> <C> <C>
G. L. Hoffman (50) Chairman and Secretary of the Company 1990
Scott F. Drill (47) President and Chief Executive Officer 1998
Gary L. Vars (59) Executive Vice President and General Manager 1999
Erwin A. Kelen (64) Private Investor, Consultant 1990
W. Robert Ramsdell (59) Private Investor, Consultant 1999
Don E. Schultz (66) Professor, Consultant 1997
Gordon F. Stofer (53) Managing General Partner, Venture Capital Firm 1990
Frank D. Trestman (65) Private Investor, Consultant 1990
</TABLE>
Page 5
<PAGE>
BUSINESS EXPERIENCE
G. L. Hoffman, age 50, a co-founder of the Company, has been the
Chairman and Secretary of the Company since it was incorporated in January 1990
and was President and Chief Executive Officer from January 1990 until February
1998. Prior to that time he was a co-founder of Varitronic Systems, Inc., which
develops, manufactures and markets business graphic products. Mr. Hoffman was
employed as Chairman, Executive Vice President and Secretary of Varitronics from
1983 until January 1990. Mr. Hoffman had primary responsibility for developing
Varitronics' international marketing and private label distribution systems.
Scott F. Drill, age 47, has been President and Chief Executive Officer
of the Company since February 24, 1998. Since May 1996, Mr. Drill was a partner
in Minnesota Management Partners (MMP), a venture capital firm located in
Minneapolis, Minnesota. He remains a partner in MMP, which completed investment
of its capital in January 1998. From 1983 through March 1996 Mr. Drill was
President and Chief Executive Officer of Varitronic Systems and Chairman since
1990. Prior to starting Varitronics, Mr. Drill held senior management positions
in sales and marketing at Conklin Company and Kroy, Inc.
Gary L. Vars, age 59, has been Executive Vice President and General
Manager of the POPS Division since September 15, 1998. Prior to joining Insignia
Systems, Mr. Vars spent 22 years as a marketing and business development
consultant to Fortune 500 companies. From 1966 to 1976 Mr. Vars held various
management positions at the Pillsbury Co., including Director of Marketing and
New Product Development, Grocery Products Division.
Erwin A. Kelen, age 64, has been a Director of the Company since August
1990. Since October 1990 Mr. Kelen has served as President of Kelen Ventures, a
venture capital investment and consulting firm located in Minneapolis,
Minnesota. From January 1984 to October 1990 Mr. Kelen was President and Chief
Executive Officer of DataMyte Corporation, a manufacturer of computerized
factory data collection systems based in Minneapolis, Minnesota. He is a
director of Printronix, Inc., a manufacturer of printers for computer based
systems located in Irvine, California; Computer Network Technologies, Inc., a
Minneapolis-based designer and manufacturer of high-speed computer networking
equipment; and CyberOptics a Minneapolis-based manufacturer of laser sensors and
sensor systems.
W. Robert Ramsdell, age 59, has been a Director of the Company since
October 1999. Mr. Ramsdell has been engaged in private investments in micro cap
companies since 1990. From 1970 to 1990 Mr. Ramsdell was in the institutional
equity business where he became senior partner in 1973 as director of research
and Los Angeles Office manager of Cantor Fitzgerald & Co and retired in 1990. He
has been financial advisor to many companies including Occupational Urgent Care
Systems (OUCH).
Don E. Schultz, age 66, has been a Director of the Company since
September 1997. Since 1977 Mr. Schultz has been a professor at Northwestern
University. Mr. Schultz is also President of the consulting firm, Agora, Inc.
and is a Senior Partner in Targetbase Marketing International and The Targetbase
Institute. He is a director of Penten Media, Inc., a business publications and
trade show company.
Gordon F. Stofer, age 53, has been a Director of the Company since
February 1990. Since 1980 Mr. Stofer has been the managing general partner of
Cherry Tree Ventures, a venture capital investment firm located in Minneapolis,
Minnesota. Mr. Stofer is also a director of Verdant Brands, Inc. (formerly
Ringer Corporation), a lawn care products manufacturer and distributor in Eden
Prairie, Minnesota; and Coda Music Technology, Inc., a developer and marketer of
proprietary music technology products located in Eden Prairie, Minnesota.
Frank D. Trestman, age 65, has been a Director of the Company since
August 1990. Since November 1986 Mr. Trestman has served as President of
Trestman Enterprises, a Minneapolis-based investment and consulting firm. Mr.
Trestman also serves as a director of Best Buy Co., Inc., a national retailer of
consumer electronic products based in Minneapolis, Minnesota, and Metris
Companies, an information based direct marketer of consumer credit products,
extended service plans and other fee based products and services to moderate
income consumers. Metris Companies is located in Minneapolis, Minnesota.
Page 6
<PAGE>
The Board of Directors has two standing committees, the Audit Committee
and the Compensation Committee, each consisting of Mr. Kelen, Mr. Stofer and Mr.
Trestman. The Audit Committee met once and the Compensation Committee met once
during 1998.
The Board of Directors met four times during 1999. Each director
attended at least 75% of the meetings held. The Company's directors do not
receive any fees for their service on the Board of Directors, other than
reimbursement of reasonable out-of-pocket expenses incurred on behalf of the
Company. The Company's amended Stock Plan provides for the annual grant to each
non-employee director of a non-qualified option to purchase 5,000 shares of
common stock at an exercise price equal to the closing market price on the date
of grant.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ELECTION
OF THE MANAGEMENT SLATE OF NOMINEES.
ITEM II
AMENDMENT TO STOCK PLAN
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Company's Stock Plan (the "Plan"). The amendment provides for
an increase in the total number of shares available under the Plan by 200,000
shares to a total of 1,970,000 shares. As of February 29, 2000, a total of
475,807 shares had been issued upon the exercise of options under the Plan and
there were options outstanding to purchase 1,278,000 shares under the Plan.
Therefore, without shareholder approval of the amendment to the Plan, the
Company believes that the remaining shares will be insufficient to cover future
option grants and awards. The Board of Directors deemed it prudent to increase
the shares available for grant under the Plan by 200,000 shares to facilitate
future option grants and restricted stock awards.
SUMMARY OF THE PLAN
The Plan provides for the granting of stock options or restricted stock
awards to key employees, consultants and directors. An aggregate of 1,770,000
shares of Common Stock have been issued or reserved for issuance under the Plan,
as amended by the Board of Directors. Shares covered by expired or terminated
stock options and forfeited shares of restricted stock may be used for
subsequent awards under the Plan.
The Plan is administered by the Company's Board of Directors or, if the
Board so determines, by a committee of "disinterested persons" as defined in the
Plan who are appointed by the Board. The Board or the committee has the power to
select recipients, make awards of stock options or restricted shares, and adopt
regulations and procedures for the Plan.
The Plan permits the award of both stock options that qualify as
"incentive stock options" under the Internal Revenue Code and options that do
not so qualify ("non-qualified options"). Incentive stock options differ as to
their tax treatment and are subject to a number of limitations under the
Internal Revenue Code. The exercise price of non-qualified options may not be
less than 85% of the fair market value of the stock on the date the option is
granted. Incentive stock options may not be granted with an exercise price less
than 100% of the fair market value of the Common Stock on the date of the grant
(or, for an option granted to a person holding more than 10% of the Company's
voting stock, at less than 110% of fair market value).
Following an optionee's death, disability or retirement, the optionee's
options may be exercised by the optionee (or the optionee's legal representative
or legatee) for a period of three years or until the expiration of the stated
term of the option, whichever is less. If an optionee's employment with the
Company terminates for any other reason, such optionee's options will
immediately terminate, except if such optionee is involuntarily terminated
without "cause," in which even the optionee's vested options are exercisable for
the lesser of three months or the remaining term of the option. Options may not
be transferred other than by will
Page 7
<PAGE>
or the laws of descent and distribution, and during the lifetime of an optionee
may be exercised only by the optionee.
The term of each option, which is fixed by the committee or the Board
at the time of grant, may not exceed ten years from the date the option is
granted (except that an incentive option granted to a person holding more than
10% of the Company's voting stock may be exercisable only for five years).
Options may be made exercisable in whole or in installments, as determined by
the committee or the Board. The vesting of options may be accelerated upon a
change in control of the Company.
The committee or the Board may also grant restrictive stock awards
under the Plan that result in shares of Common Stock being issued to a
participant subject to restrictions against disposition during a restricted
period established by the committee or the Board. The committee or the Board may
condition the grant of restricted stock upon the attainment of specified
performance goals or service requirements. The provisions of restricted stock
awards need not be the same with respect to each recipient. The shares of
restricted stock awarded under the Plan are to be held in custody by the Company
until the restrictions thereon have lapsed. During the period of the
restrictions, a participant has the right to vote the shares of restricted stock
and to receive dividends and distributions unless the committee or the Board
requires such dividends and distributions to be held by the Company subject to
the same restrictions as the restricted stock. If a participant terminates
employment during the period of the restrictions, all shares still subject to
restrictions will be forfeited and returned to the Company, subject to the right
of the committee or the Board to waive such restrictions in the event of a
participant's death, total disability, retirement or under special circumstances
approved by the committee or the Board.
GRANTS OF OPTIONS
As of February 29, 2000, there are options outstanding under the Plan
for 1,278,000 shares. During the last three years (January 1, 1997 to December
31, 1999), the Company has granted under the Plan options for a total of 650,000
shares to executive officers at an average price of $1.24 per share, options for
a total of 75,000 shares to directors who are not executive officers at an
average price of $1.62 per share and options for a total of 696,500 shares to
other employees and to consultants at exercise prices ranging from $1.00 to
$3.375 per share. In 1997 options to purchase 13,768 shares were exercised by
current and former employees. In 1998 options to purchase 40,066 shares were
exercised by current and former employees. In 1999 options to purchase 181,666
shares were exercised by current and former employees. As of February 29, 2000,
options covering 828,093 shares have terminated with exercise prices ranging
from $.50 to $4.50 per share.
FEDERAL INCOME TAX TREATMENT
Generally the grant of either an incentive stock option or a
non-qualified option under the Plan will not cause recognition of income by the
optionee or entitle the Company to an income tax deduction. Upon exercise of an
option the tax treatment will generally vary depending on whether the option is
an incentive stock option or a non-qualified option. The exercise of an
incentive stock option will generally not cause recognition of income by the
optionee or entitle the Company to a tax deduction. However, the amount by which
the fair market value of the shares obtained exceeds the exercise price on the
date of exercise is an item of tax preference to the optionee for alternative
minimum tax purposes.
The exercise of a non-qualified option will generally cause the
optionee to recognize taxable income equal to the difference between the
exercise price and the fair market value of the stock obtained on the day of
exercise. The Company must then in most cases obtain from the optionee funds to
meet tax withholding requirements arising from that income recognition. The
exercise of a non-qualified option will also generally entitle the Company to an
income tax deduction equal to the amount of the income recognized by the
exercising option holder.
The foregoing discussion of the federal income tax treatment of options
is necessarily general and any option holder should consult his tax advisor as
to his own particular circumstances and applicable laws and regulations.
Page 8
<PAGE>
SHAREHOLDER APPROVAL
Approval of the amendment to the Plan requires the affirmative vote of
a majority of the shares present and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE PROPOSED AMENDMENT TO THE PLAN.
ITEM III
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Company's 1993 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors and was approved by the Company's
shareholders on April 27, 1993. The purpose of the Purchase Plan is to
facilitate purchase of Company Common Stock by employees through payroll
deductions to foster a greater community of interest between the Company's
employees and its shareholders. There are approximately 70 employees, including
four executive officers, who are currently eligible to participate under the
Purchase Plan.
In its original form the Purchase Plan covered 1993 through 1995 and
reserved a total of 200,000 shares of common stock for employee purchase in
those three years. At the Annual Meeting of Shareholders on May 11, 1995, the
shareholders approved the addition of 200,000 shares to the Purchase Plan and
extended the Purchase Plan through 1996. The Purchase Plan was not extended
through 1997. At the Annual Meeting of Shareholders on May 21, 1998, the
shareholders renewed the Purchase Plan for 1998 through 2000. As of the end of
1999 a total of 325,626 shares have been purchased by employees under the
Purchase Plan. The Company believes that the remaining 74,374 shares will be
insufficient to cover all the shares which employees would like to purchase
under the Plan in 2000. Thus the Company's Board of Directors has approved and
is hereby submitting to stockholders for approval amendments to the Plan which
would (i) increase by 200,000 the total number of shares available under the
Plan, and (ii) extend the term of the Plan for three additional years, so as to
allow greater participation by the Company's employees over a longer period of
tie. The other terms of the Plan would not change in any material aspect. The
terms of the Plan, with the proposed amendments, are summarized below.
TERM OF THE PURCHASE PLAN
The original Purchase Plan was for a total term of three years, carried
out in phases of one year each. Each phase commences immediately after the
termination of the preceding phase. The proposed Amendment would extend the
Purchase Plan for three one year phases, consisting of the years 2001 through
2003.
ELIGIBILITY
Any employee of the Company who customarily works more than 20 hours
per week and more than five months in a calendar year, and who is employed by
the Company when a phase begins, is eligible to participate in the phase of the
Purchase Plan. Employees of any future subsidiary of the Company may also
participate.
PARTICIPATION
Eligible employees may voluntarily elect to participate in the Purchase
Plan by completing a payroll deduction authorization which is effective on the
first day of the applicable phase. Payroll deductions are limited to 10% of the
participating employee's base pay for the phase.
Page 9
<PAGE>
PURCHASE PRICE
The payroll deductions authorized by participating employees are used
to purchase newly issued shares of Common Stock from the Company at the end of
each phase. The purchase price is the lower of 85% of the fair market value of
the shares on the first day or the last day of the applicable phase of the
Purchase Plan.
EXERCISE AND WITHDRAWAL
Shares are purchased for participating employees automatically on the
last day of a phase, unless the participant elects in writing prior to such date
not to complete the purchase. A participant may at any time during a phase give
notice that he or she does not wish to continue to participate, and all amounts
withheld are then refunded with interest.
ADMINISTRATION AND AMENDMENT
The Purchase Plan is administered by a Committee appointed by the Board
of Directors. Each member of such Committee is either a director, officer or
employee of the Company. The Board of Directors may at any time amend the
Purchase Plan, except that no amendment may make changes in stock purchase
rights already granted that would adversely affect the rights of any
participant.
INCOME TAX CONSEQUENCES AND REGISTRATION WITH SEC
The Company believes that the Purchase Plan is a "qualified" Purchase
Plan under Section 423 of the Internal Revenue Code of 1986. Under the Internal
Revenue Code, no income will result to a participant upon the purchase of
shares, and no deduction will be allowed by the Company. The gain, if any,
resulting from a disposition of the share received by a Participant, is reported
according to the provisions of Section 423 of the Internal Revenue Code, and
will be taxed in part as ordinary income and in part as capital gain.
The Company has filed with the Securities and Exchange Commission a
registration statement covering the offering of shares under the Purchase Plan,
and a prospectus will be delivered to each eligible employee prior to the time
when an election to participate must be made.
SHAREHOLDER APPROVAL OF AMENDMENT
Approval of the proposed amendment to the Purchase Plan requires the
affirmative vote of a majority of the shares present and entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE PURCHASE PLAN.
Page 10
<PAGE>
ITEM IV
APPROVAL OF AUDITORS
Ernst & Young LLP, independent auditors, have been the Company's
auditors since 1990. They have been reappointed by the Board of Directors as the
Company's auditors for the year ending December 31, 2000. Although shareholder
approval is not required, the Board of Directors requests it. In the event the
appointment should not be approved by the shareholders, the Board of Directors
will make another appointment to be effective at the earliest possible time.
A representative of Ernst & Young LLP is expected to be present at the
Meeting, will be given the opportunity to make a statement and will be available
to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP.
OTHER BUSINESS
The Management of the Company knows of no matters other than the
foregoing to be brought before the Meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be presented.
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's next meeting of Shareholders (for the year ending
December 31, 2000) is expected to be held on or about May 16, 2001 and proxy
materials in connection with that meeting are expected to be mailed on or about
April 6, 2001. Any shareholder proposals prepared in accordance with the proxy
rules for inclusion in the Company's proxy materials must be received by the
Company on or before December 1, 2000.
The Company's Annual Report on Form 10-K for the year ended December
31, 1999 is being mailed to shareholders with this Proxy Statement.
By Order of the Board of Directors
G. L. Hoffman
Secretary
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<PAGE>
[LOGO]
INSIGNIA(R) SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 17, 2000
9:00 A.M.
RAMADA PLAZA HOTEL
12201 RIDGEDALE DRIVE
MINNETONKA, MN 55305
[LOGO]
INSIGNIA(R) SYSTEMS, INC.
5025 CHESHIRE LANE NORTH, PLYMOUTH, MN 55446 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 17, 2000.
The shares of stock you hold in your account will be voted as you specify on the
reverse side.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, 2, 3 AND 4.
By signing the proxy, you revoke all prior proxies and appoint Scott F. Drill
and John R. Whisnant, and each of them, with full power of substitution, to vote
your shares on the matters shown on the reverse side and any other matters which
may come before the Annual Meeting and all adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Election of Directors: 01 G. L. Hoffman 05 W. Robert Ramsdell [ ] Vote FOR [ ] Vote WITHHELD
02 Scott F. Drill 06 Don E. Schultz all nominees from all nominees
03 Gary L. Vars 07 Gordon F. Stofer (except as marked)
04 Erwin A. Kelen 08 Frank D. Trestman
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) [ ]
PLEASE FOLD HERE
2. To ratify an amendment to the Company's Stock Plan to increase the number
of shares available under the plan. [ ]For [ ] Against [ ] Abstain
3. To ratify an amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares available under the Plan and extend the term
of the Plan. [ ]For [ ] Against [ ] Abstain
4. To ratify the appointment of Ernst & Young LLP as independent auditors for
the current year. [ ]For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ]
Indicate changes below:
Date
-----------------------------
----------------------------------------
----------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the proxy.
