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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6 (e) (2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
IMAGE SENSING SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
IMAGE SENSING SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 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:
----------------------------------------------
<TABLE>
<S> <C> <C> <C>
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] 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: __________________________________________________________
</TABLE>
<PAGE>
IMAGE SENSING SYSTEMS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
MAY 11, 1999
TO THE SHAREHOLDERS OF IMAGE SENSING SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Image
Sensing Systems, Inc. will be held at 3:30 p.m. on Tuesday, May 11, 1999, at the
Crowne Plaza Northstar Hotel, 618 Second Avenue South, Minneapolis, Minnesota,
for the following purposes:
1. To elect six directors to serve on the Board of Directors.
2. To ratify and approve an amendment to the Company's 1995
Long-Term Incentive and Stock Option Plan to increase the
number of shares authorized for issuance under the Plan by
180,000 shares to 400,000 shares.
3. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 30,
1999 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
We encourage you to take part in the affairs of your Company either in
person or by executing and returning the enclosed proxy.
By Order of the Board of Directors,
James Murdakes
Secretary
Dated: April 5, 1999
SHAREHOLDERS UNABLE TO ATTEND THIS MEETING ARE URGED TO
DATE AND SIGN THE ENCLOSED PROXY AND TO RETURN
IT IN THE ENCLOSED ENVELOPE.
<PAGE>
IMAGE SENSING SYSTEMS, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 1999
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Image Sensing Systems, Inc.
(the "Company") for use at the Annual Meeting of Shareholders of the Company to
be held on May 11, 1999, at 3:30 p.m. at the Crowne Plaza Northstar Hotel, 618
Second Avenue South, Minneapolis, Minnesota, and at any adjournment thereof. A
shareholder giving the enclosed proxy may revoke it at any time before the vote
is cast at the annual meeting. Shares represented by a proxy will be voted in
the manner directed by a shareholder. If no direction is made, the proxy will be
voted for the election of the nominees for director named in this Proxy
Statement and for any other proposals set forth in this Proxy Statement. This
Proxy Statement and the accompanying form of proxy are being sent or given to
shareholders beginning on or about April 5, 1999 along with the Company's 1998
Annual Report to Shareholders.
Only shareholders of record at the close of business on March 30, 1999
are entitled to notice of and to vote at the meeting or at any adjournment
thereof. On March 30, 1999, there were 2,479,200 shares of Common Stock of the
Company outstanding. Each share is entitled to one vote. Cumulative voting is
not permitted. Shares voted as abstentions on any matter (or a "withhold vote
for" as to a director) will be counted as shares that are present and entitled
to vote for purposes of determining the presence of a quorum at the meeting and
as unvoted, although present and entitled to vote, for purposes of determining
the approval of each matter as to which the shareholder has abstained. If a
broker submits a proxy that indicates the broker does not have discretionary
authority as to certain shares to vote on one or more matters, those shares will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the meeting, but will not be considered
as present and entitled to vote with respect to such matters.
The Board of Directors knows of no matters other than those that are
described in this Proxy Statement that may be brought before the meeting.
However, if any other matters are properly brought before the meeting, persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
The Company will pay all expenses in connection with the solicitation
of proxies. In addition to solicitation by mail, officers, directors and regular
employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by telephone, facsimile or personal calls.
The Company's principal executive offices are located at 500 Spruce
Tree Centre, 1600 University Avenue West, St. Paul, Minnesota 55104.
<PAGE>
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The business and affairs of the Company are managed under the direction
of its Board of Directors, which is presently comprised of six members. The
Bylaws of the Company provide that at any regular meeting of the shareholders of
the Company there shall be an election of directors whose terms have expired.
The Board of Directors recommends that shareholders elect the nominees named
below as Directors of the Company for the ensuing year and until their
successors are elected and shall have qualified. Unless otherwise indicated
thereon, the persons named in the enclosed form of proxy intend to vote FOR the
election of the six nominees listed below. The affirmative vote of a majority of
the shares of the Company's Common Stock present (or represented by proxy) at
the 1999 Annual Meeting is required to elect each of the nominees as Directors
for the ensuing year or until their successors are elected and have qualified.
All of the nominees are members of the present Board of Directors. If for any
reason any nominee shall be unavailable for election to the Board of Directors,
votes will be cast pursuant to authority granted by the enclosed proxy for such
other candidate or candidates as may be nominated by the Board of Directors. The
Board of Directors has no reason to believe that any of the nominees will be
unable to serve.
Information regarding the nominees for election to the Board of
Directors of the Company is set forth below:
Name Age Position
---- --- --------
Panos G. Michalopoulos 50 Chairman of the Board and Chief
Scientific Advisor
William L. Russell 50 President and Chief Executive Officer
Richard C. Magnuson* 57 Director
Richard P. Braun# 73 Director
James Murdakes# 66 Director and Secretary
C. (Dino) Xykis*# 40 Director
- ---------------------
* Denotes a member of the audit committee.
# Denotes a member of the compensation and stock option committee.
PANOS G. MICHALOPOULOS has been the Chairman of the Board of Directors
since 1990 and Chief Scientific Advisor since 1995. Dr. Michalopoulos has been a
professor in the Department of Civil Engineering at the University of Minnesota
since 1977. Dr. Michalopoulos has over 26 years of research, teaching, and
consulting experience in traffic engineering operations and control. He has
taught at several universities, consulted with many firms in the U.S. and abroad
in the area of traffic control and has worked as a traffic engineer.
WILLIAM L. RUSSELL has been the President and Chief Executive Officer
and a Director since June 1998. Mr. Russell had been president of Peek Traffic
U.S.A. since 1993 and was previously general manager of Peek Traffic Sarasota
since 1992, Vice-President for Marketing and Product Development of Econolite
Control Products Inc. since 1991 and General Manager of Detector Systems, Inc.
since 1987. Mr. Russell has over 30 years of traffic and transportation industry
experience and has held various senior management positions since 1987.
RICHARD C. MAGNUSON has been a Director of the Company since September
1990. Mr. Magnuson has been President and Chief Executive Officer of BioMedix,
Inc. since July 1997 and previously operated his own management consulting firm
since October 1995. Prior to that he served as the President and Chief Executive
Officer of the Company from June 1991 to January 1995 and as Vice President and
Secretary from January 1995 until September 1995. Prior to 1990, Mr. Magnuson
had worked with the Company as a private consultant since 1988.
2
<PAGE>
RICHARD P. BRAUN HAS been a Director of the Company since March 1994.
Mr. Braun was the Director of the Center for Transportation Studies at the
University of Minnesota from 1987 to 1994. From September 1993 to February 1995,
Mr. Braun was chairman of the Metropolitan Airports Commission. Prior to 1987,
Mr. Braun was Commissioner of Transportation for the State of Minnesota for
eight years.
JAMES MURDAKES has been a Director of the Company since March 1994. Mr.
Murdakes was Chairman of the Board of Directors and management consultant to
LSC, Inc., a Minneapolis-based systems integrator for computer network storage
servers, in 1997 and was President and Chief Executive Officer of LSC, Inc. from
1993 through 1996.
C. (DINO) XYKIS has been a Director of the Company since May 1996. Dr.
Xykis has been Manager of Automatic Transfer Switches for Cummins Power
Generation, a division of Cummings Engine Company, since 1998 and had previously
held various engineering and product development positions with Cummings Engine
Company since 1989. Dr. Xykis was nominated to the Board of Directors by Equity
Securities Trading Co., Inc., the underwriter for the Company's 1995 public
offering, in accordance with the Underwriting Agreement for such offering.
In addition to the executive officers listed above who are nominees for
election to the Board of Directors, the other executive officer of the Company
and his biographical information is as follows:
ARTHUR J. BOURGEOIS, AGE 58, has been the Company's Chief Financial
Officer since December 1994 and was Secretary of the Company from October 1995
until February 1997. Effective March 1, 1997, Mr. Bourgeois became an
independent management consultant to the Company and continues as the Chief
Financial Officer. Mr. Bourgeois was an independent management consultant in
1994 and was an audit partner with the accounting firm of Ernst & Young LLP
prior to 1994. Mr. Bourgeois is also a Certified Public Accountant.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors
met six times. All of the Directors attended more than 75% of the aggregate of
all meetings of the Board of Directors and meetings of the committees on which
they served. The Board of Directors and its committees also act from time to
time by written consent in lieu of meetings.
The Board of Directors of the Company has standing audit and
compensation and stock option committees, which have a current membership as,
indicated in the foregoing section. The Board of Directors has no standing
nominating committee.
The audit committee makes recommendations as to the selection of
auditors and their compensation, and reviews with the auditors the scope of the
annual audit, matters of internal control and procedure and the adequacy
thereof, the audit results and reports and other general matters relating to the
Company's accounts, records, controls and financial reporting. During fiscal
1998, the audit committee held two meetings.
The compensation and stock option committee reviews and recommends to
the Board of Directors the compensation guidelines and stock options for
executive officers and other key personnel. During fiscal 1998, the compensation
and stock option committee held three meetings.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any
compensation from the Company for attending meetings of the Board of Directors.
In 1998, non-employee directors received a total retainer of $10,000 with $4,000
payable in May and $500 payable each month. In addition, on December 8, 1998,
the Board of Directors granted options to purchase 30,000 shares of the
Company's common stock to each of the three non-employee directors at $2.875 per
share, the closing market price on the date of grant. These options were not
granted under the 1995 Long-Term Incentive and Stock Option Plan or any other
shareholder approved plan.
3
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater than 10% beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers, directors and
holders of 10% or more of the Company's Common Stock, the Company believes that
its executive officers, directors and 10% shareholders complied with all Section
16(a) filing requirements applicable to them.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to or earned in
certain fiscal years by the Company's Chief Executive Officers and each other
executive officer who earned salary and bonus in excess of $100,000 during the
fiscal year ended December 31, 1998(the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Name and Principal All Other
Position Year Salary Bonus Compensation(3)
------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Panos G. Michalopoulos 1998 $100,000 - $2,971
Chairman of the Board 1997 $100,000 - $4,500
and Chief Scientific 1996 $100,000 - $2,903
Advisor
William L. Russell (1) 1998 $ 77,989 $32,275 -
President and Chief Executive
Officer
Spiro G. Voglis (2) 1998 $130,000 - $3,616
President, 1997 $120,000 - $3,960
Chief Executive Officer 1996 $120,000 - $3,758
and Secretary
</TABLE>
- --------------------
(1) Mr. Russell became an executive officer of the Company in June 1998.
Prior thereto, Mr. Russell had not served as an officer of the Company.
(2) Dr. Voglis resigned as a Director and President, Chief Executive
Officer and Secretary of the Company in June 1998 but remained as a
consultant to the Company through December 1998.
(3) Represents employer contribution to the Company's 401(k) plan.
4
<PAGE>
STOCK OPTIONS
The following table summarizes the options granted to the Named
Executive Officers in 1998:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARs
UNDERLYING GRANTED TO EXERCISE OR
OPTION/SARs EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/Sh) DATE
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Dr. Michalopoulos............. 0 ---- ---- ----
Mr. Russell................... 100,000 84% $3.25 June 2008
Dr. Voglis.................... 0 ---- ---- ----
</TABLE>
The following table provides information concerning the value of
unexercised options at December 31, 1998 for the Named Executive Officers:
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT END OF IN-THE-MONEY OPTIONS
1998 AT END OF 1998 (1)
-------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dr. Michalopoulos ...... 56,800 38,200 $ 0 $ 0
Mr. Russell ............ 25,000 75,000 $ 750 $2,250
Dr. Voglis ............. 48,600 16,200 $ 0 $ 0
</TABLE>
- --------------------
(1) Value based on the difference between the closing price of the Company's
Common Stock as reported by the Nasdaq Small Cap Market on December 31,
1998 and the option exercise price per share multiplied by the number of
shares subject to the option.
EMPLOYMENT AGREEMENTS
Dr. Michalopoulos has an employment agreement that provides for a term
of employment ending December 31, 1999. Under the terms of his employment
agreement, Dr. Michalopoulos assumed the position of Chairman of the Board of
Directors and Chief Scientific Advisor for the Company and is entitled to
receive an annual salary of $50,000 for serving as Chairman of the Board of
Directors and $50,000 for serving as Chief Scientific Advisor. In addition, Dr.
Michalopoulos is eligible to participate in the Company's 401(k) plan. Dr.
Michalopoulos also was granted an option under his employment agreement to
purchase up to 108,000 shares of the Company's Common Stock exercisable in five
equal increments of 21,600 shares in each of the calendar years beginning
January 1, 1996 and ending January 1, 2000. The exercise price for the option is
$4.75 per share. On June 5, 1996 and February 23, 1998, Dr. Michalopoulos
relinquished his option to purchase 8,000 shares and 5,000 shares, respectively,
of the Company's Common Stock under his employment agreement. In the event that
Dr. Michalopoulos does not exercise any of the options during such years, he has
the right to accumulate such options to be exercised no later than December 31,
2005. In his employment agreement, Dr. Michalopoulos has agreed not to compete
directly or indirectly with the Company in the field of image processing
anywhere in the United States, Canada or the European Common Market Community
for a period of two years after termination of the employment agreement. Dr.
Michalopoulos has also agreed not to divulge to any third party any confidential
information of the Company. If Dr. Michalopoulos is terminated as a result of
the sale, acquisition or merger of the Company, Dr. Michalopoulos will be
entitled to severance in an amount equal to twelve months' salary. If Dr.
Michalopoulos is terminated for cause, severance is limited to an amount equal
to six months' salary. The Company must give
5
<PAGE>
written notice to Dr. Michalopoulos by April 30, 1999 if it does not seek to
renew the employment agreement after December 31, 1999.
Mr. Russell entered into an employment agreement with the Company in
June 1998 that provides for a term of employment for not less than three years,
after which time it shall be terminable by either Mr. Russell or the Company
upon ninety days notice. Under the terms of his employment agreement, Mr.
Russell assumed the position of President and Chief Executive Officer of the
Company and is entitled to receive a salary of $140,000 and to participate in
the Company's 401(k) plan. In addition, Mr. Russell was guaranteed a bonus of
$40,000 for 1998 payable in the first quarter of 1999 and reimbursement of
relocation expenses not to exceed $70,000. In January 1999, the Company and Mr.
Russell agreed that the Company would pay $77,725 in relocation expenses and
offset the $7,725 excess against Mr. Russell's guaranteed bonus. Effective for
fiscal year 1999, Mr. Russell will be eligible for an incentive compensation
payment of up to fifty percent of his annual base salary, with incentive
compensation subject to Mr. Russell achieving certain objectives set annually by
Mr. Russell and the Board of Directors. If the Company for other than good cause
terminates Mr. Russell after three years of employment, the Company will pay Mr.
Russell severance equal to six months' salary and benefits. If Mr. Russell is
terminated as a result of the sale, acquisition or merger of the Company, he
will be entitled to severance equal to twelve months' salary. In his employment
agreement, Mr. Russell has agreed that during his employment and for one year
following termination of his employment with the Company he will not directly or
indirectly engage in any business activity that is competitive with any business
of the Company or any business that is engaged in the development or production
of products intended to compete with the Company, and for one year following
termination will not solicit or assist anyone else in the solicitation of any of
the Company's then-current employees or solicit any of the Company's
then-current customers.
Dr. Voglis had an employment agreement with the Company that provided
for a term of employment ending December 31, 1998. Under the terms of his
employment agreement, Dr. Voglis served as President and Chief Executive Officer
of the Company and was entitled to receive an annual salary of $130,000. In
addition, Dr. Voglis was eligible to participate in the Company's 401(k) plan
and to receive an incentive bonus upon satisfaction of certain performance
objectives established by the Company's compensation and stock option committee.
In his employment agreement, Dr. Voglis agreed not to compete directly or
indirectly with the Company in the field of image processing anywhere in the
United States, Canada or the European Common Market Community for a period
beginning as of January 1, 1995 through the date two years after termination of
the employment agreement. Dr. Voglis also agreed not to divulge to any third
party any confidential information of the Company. On June 9, 1998, Dr. Voglis
resigned from the Board of Directors and effective June 30, 1998 resigned as
President, Chief Executive Officer and Secretary of the Company.
6
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 12, 1999 by: (i)
each Director of the Company, (ii) each Named Executive Officer (iii) all
Directors and executive officers of the Company as a group and (iv) each person
or entity known by the Company to own beneficially more than five percent of the
Company's Common Stock. The address of each of the following shareholders is the
same as the Company.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF OUTSTANDING
OWNED (1) SHARES (1)
------------------- -----------------------
<S> <C> <C>
Panos G. Michalopoulos................... 1,209,048(2) 47.4%
William L. Russell....................... 28,000(3) 1.1%
Spiro G. Voglis.......................... 89,098(4) 3.5%
Richard C. Magnuson...................... 109,338(5) 4.4%
Richard P. Braun......................... 101,778(6) 4.1%
James Murdakes........................... 47,938(7) 1.9%
C. (Dino) Xykis.......................... 15,000(6) .6%
All Directors and Executive Officers..... 1,352,000 54.5%
</TABLE>
- --------------------
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes generally voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days of March 12, 1999 ("Currently Exercisable Options") are deemed
outstanding for computing the beneficial ownership percentage of the person
holding such options but are not deemed outstanding for computing the
beneficial ownership percentage of any other person. Except as indicated by
footnote, the persons named in the table above have the sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 21,598 shares held by Dr. Michalopoulos' wife and 300 shares held
by his son, as to which Dr. Michalopoulos disclaims beneficial ownership.
Also includes 73,400 shares issuable pursuant to Currently Exercisable
Options.
(3) Includes 25,000 shares issuable pursuant to Currently Exercisable Options.
(4) Shares are held jointly with Dr. Voglis' wife. Also includes 64,800 shares
issuable pursuant to Currently Exercisable Options.
(5) Includes 39,852 shares held by Operating Management, Inc., a corporation
controlled by Mr. Magnuson, and 15,000 shares issuable pursuant to
Currently Exercisable Options.
(6) Includes 15,000 shares issuable pursuant to Currently Exercisable Options.
(7) Includes 40,000 shares issuable pursuant to Currently Exercisable Options.
AUDITORS
The Board of Directors intends to appoint Ernst & Young LLP as the
Company's independent auditors for the year ending December 31, 1999. Ernst &
Young LLP audited the financial statements for the Company for the year ended
December 31, 1998. A representative of Ernst & Young LLP is expected to be
present at the 1999 Annual Meeting and will have an opportunity to make a
statement and will be available to respond to appropriate questions from
shareholders.
7
<PAGE>
INCREASE OF SHARES AUTHORIZED UNDER THE 1995 LONG-TERM INCENTIVE
AND STOCK OPTION PLAN
(ITEM 2 ON THE PROXY CARD)
On July 21, 1998, the Board of Directors approved an amendment to the
1995 Long-Term Incentive and Stock Option Plan (the "1995 Plan"), subject to
shareholder approval, to increase the number of shares of common Stock
authorized for issuance thereunder from 220,000 shares to 400,000 shares.
As of December 31, 1997, the Company had issued and outstanding options
to purchase 179,150 shares of Common Stock under the 1995 Plan. On June 18,
1998, the Company granted to Mr. Russell, CEO, an option to purchase 100,000
shares of Common Stock at an exercise price of $3.25 per share pursuant to his
employment agreement with the Company, dated June 10, 1998. This option will be
issued under the 1995 Plan if this proposal to amend the 1995 Plan to increase
the number of shares available thereunder is approved by the shareholders at the
Annual Meeting. This option was granted to Mr. Russell in order to provide him
with an additional incentive to add shareholder value to the Company. One fourth
(1/4) of this option will vest immediately upon the date of grant and the
remainder of the option will vest in equal annual installments over the next
three years following the date of grant.
The Board of Directors believes that stock option grants under the 1995
Plan are an important element in attracting and retaining highly skilled and
qualified employees and officers, and, furthermore, that stock option grants are
highly effective in aligning the interests of management with those of the
shareholders. Therefore, the Board of Directors believes that it is desirable to
amend the 1995 Plan to authorize an additional 180,000 shares of Common Stock to
be available in order to permit the option grant to Mr. Russell described above
to be issued under the 1995 Plan and to provide for future option grants to
employees, officers and directors.
NEW PLAN BENEFITS
The following table sets forth the allocation, if currently
determinable, of the 180,000 additional shares that will be authorized for
issuance under the 1995 Plan if this amendment is approved:
NAME AND POSITION DOLLAR VALUE NUMBER OF SHARES
----------------- ------------ ----------------
William L. Russell, CEO N/A 100,000
The benefits issuable under the Plan, as proposed to be amended, to
other executives officers, Directors and employees is not determinable as of the
date of this Proxy Statement, nor are such benefits determinable had the
amendment been effective as of the last completed fiscal year.
1995 PLAN
On May 3, 1995, the Board of Directors adopted and the shareholders
approved the 1995 Plan. The purpose of the 1995 Plan is to promote the interests
of the company and its shareholders by aiding the Company in attracting and
retaining employees and directors capable of contributing to the growth and
success of, and providing strategic direction to, the Company, and by offering
such employees and directors an opportunity to acquire a proprietary interest in
the Company, thereby providing them with incentives to put forth maximum efforts
for the success of the company's business and aligning the interests of such
employees and directors with those of the Company's shareholders. The following
is a description of the material terms and conditions of the 1995 Plan.
The 1995 Plan is administered by the Board of Directors. A total of
220,000 shares of Common Stock currently are available and reserved for issuance
upon the exercise of options granted under the 1995 Plan. Full and part-time
employees, members of the Board of Directors, consultants and independent
contractors providing valuable services to the Company or any eligible affiliate
of the Company are eligible to receive awards under the 1995 Plan.
8
<PAGE>
Awards may be either incentive stock option ("Incentive Stock Options"), which
comply with Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonqualified stock options ("Nonqualified Stock Options") provided,
however, that Incentive Stock Options may only be granted to employees and may
not have a term greater than 10 years.
The Board of Directors has the power to determine the number of shares
to be covered by awards under the 1995 Plan, determine the terms and conditions
of an award, amend the terms of an award, interpret and administer the 1995 Plan
and establish rules under the 1995 Plan. The exercise price of each Incentive
Stock Option granted under the 1995 Plan shall not be less than the fair market
value of the Common Stock on the date the option is granted. Under the 1995
Plan, the Board of Directors may permit participants receiving or exercising
options, subject to the discretion of the Board of Directors and upon such terms
and conditions as it may impose, to surrender shares of Common Stock (either
shares received upon the receipt or exercise of the option or shares previously
owned by the optionee) to the Company in payment of the exercise price
thereunder or to satisfy federal and state tax obligations in the event any
dividend, distribution, recapitalization, stock split, merger, consolidation, or
other event occurs that affects the Shares such that an adjustment is determined
by the Board of Directors to be appropriate to prevent dilution or enlargement
of benefits under the 1995 Plan. The Board may make such adjustments to awards
under the 1995 Plan as it deems necessary to preserve the benefits intended
under the 1995 Plan and such awards. Awards granted under the 1995 Plan are not
transferable.
The 1995 Plan will expire on February 27, 2005, unless terminated
earlier by the Board of Directors. No option may be granted after such
termination, but termination of the 1995 Plan shall not, without the consent of
the optionee, alter or impair any rights or obligations under any option
previously granted.
The affirmative vote of a majority of the outstanding shares of the
Company's common Stock, represented in person or by proxy at the Annual Meeting,
is necessary for approval of the amendment to the 1995 Plan, The Board of
Directors recommends a vote FOR the proposal to increase the number of shares
available under the 1995 Plan.
OTHER MATTERS
The Company is including with this Proxy Statement its Annual Report to
Shareholders for the year ended December 31, 1998, which includes an audited
balance sheet as of that date and the related statements of operations, cash
flows and shareholders' equity for the year then ended, as well as other
financial information relating to the Company including Management's Discussion
and Analysis of Financial Condition and Results of Operations. Shareholders may
receive, without charge, a copy of the Company's 1998 Form 10-KSB Report as
filed with the Securities and Exchange Commission by writing to Image Sensing
Systems, Inc., 500 Spruce Tree Centre, 1600 University Avenue West, St. Paul,
Minnesota 55104, Attention: Chief Financial Officer.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Any proposal by a shareholder to be presented at the next annual
meeting must be received at the Company's principal executive offices, 500
Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota 55104, not
later than December 6, 1999.
By Order of the Board of Directors,
James Murdakes
Secretary
Dated: April 5, 1999
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IMAGE SENSING SYSTEMS, INC.
1600 UNIVERSITY AVENUE WEST, #500
ST. PAUL, MINNESOTA 55104
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and
Proxy Statement dated April 5, 1999, appoints William L. Russell and James
Murdakes as proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote, as
designated below, all shares of Common Stock of Image Sensing Systems, Inc.
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on Tuesday, May 11, 1999 at the Crowne Plaza Northstar Hotel, 618
Second Avenue South, Minneapolis, Minnesota at 3:30 p.m., and any adjournment
thereof. Each of the matters set forth below has been proposed by the Company.
Receipt of Notice of Annual Meeting of Shareholders and Proxy Statement is
acknowledged by your execution of this proxy. Complete, sign, date, and return
this proxy in the addressed envelope--no postage required. Please mail promptly
to save further solicitation expenses.
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<S> <C> <C>
1. ELECTION OF DIRECTORS. FOR all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) [ ] TO VOTE FOR ALL NOMINEES LISTED BELOW [ ]
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(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Panos G. Michalopoulos William L. Russell Richard C. Magnuson
Richard P. Braun James Murdakes C. (Dino) Xykis
(CONTINUED ON REVERSE SIDE)
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2. To approve a 180,000 share increase in the number of shares reserved for
issuance under the Company's 1995 Long-Term Incentive and Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER MATTERS. In their discretion, the appointed Proxies are:
[ ] AUTHORIZED [ ] NOT AUTHORIZED
to vote upon such other business as may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL AND, IN THE
CASE OF PROPOSAL #3 WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL #3.
Dated: ------------------------, 1999
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(PLEASE DATE AND SIGN name(s) exactly
as shown on your stock certificate.
Executors, administrators, trustees,
guardians, etc., should indicate
capacity when signing. FOR STOCK HELD
IN JOINT TENANCY, EACH JOINT OWNER
SHOULD SIGN.)
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IMAGE SENSING SYSTEMS, INC.
1995 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN
(As proposed to be Amended at Annual Meeting of Shareholders-May 11, 1999)
SECTION 1. PURPOSE OF PLAN.
This Plan shall be known as the "IMAGE SENSING SYSTEMS, INC.
1995 LONG-TERM INCENTIVE AND STOCK OPTION PLAN" and is hereinafter referred to
as the "Plan." The purpose of the Plan is to aid in maintaining and developing
personnel capable of assuring the future ' success of Image Sensing Systems,
Inc., a Minnesota corporation (the "Company"), to offer such personnel
additional incentives to put forth maximum efforts for the success of the
business, and to afford them an opportunity to acquire a proprietary interest in
the Company through stock options and other long-term incentive awards as
provided herein. Options granted under this Plan may be either incentive stock
options ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code"), or options that do not qualify as
Incentive Stock Options. Awards granted under this Plan shall be SARS,
restricted stock or performance awards as hereinafter described.
SECTION 2. STOCK SUBJECT TO PLAN.
Subject to the provisions of Section 16 hereof, the stock to
be subject to options or other awards under the Plan shall be the Company's
authorized common shares, par value $0.01 per share (the "Common Shares"). Such
Common Shares may be either authorized but unissued shares, or issued shares
which have been reacquired by the Company. Subject to adjustment as provided in
Section 16 hereof, the maximum number of shares on which options may be
exercised or other awards issued under this Plan shall be 400,000 shares. If an
option or award under the Plan expires, or for any reason is terminated or
unexercised with respect to any shares, such shares shall again be available for
options or awards thereafter granted during the term of the Plan.
SECTION 3. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by the Board of Directors
of the Company or a committee thereof. The members of any such committee shall
be appointed by and serve at the pleasure of the Board of Directors. (The group
administering the Plan shall hereinafter be referred to as the "Committee.")
(b) The Committee shall have plenary authority in its
discretion, but subject to the express provisions of the Plan: (i) to determine
the purchase price of the Common Stock covered by each option or award, (11) to
determine the employees to whom and the time or times at which such options and
awards shall be granted and the number of shares to be subject to each, (iii) to
determine the form of payment to be made upon the exercise of an SAR or in
connection with performance awards, either cash, Common Shares of the Company or
a combination thereof, (iv) to determine the terms of exercise of each option
and award, (v) to accelerate the time at which all or any part of an option or
award may be exercised, (vi) to amend or modify the terms of any
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option or award with the consent of the optionee, (vii) to interpret the Plan,
(viii) to prescribe, amend and rescind rules and regulations relating to the
Plan, (ix) to determine the terms and provisions of each option and award
agreement under the Plan (which agreements need not be identical), including the
designation of those options intended to be Incentive Stock Options, and (x) to
make all other determinations necessary or advisable for the administration of
the Plan, subject to the exclusive authority of the Board of Directors under
Section 17 herein to amend or terminate the Plan. The Committee's determinations
on the foregoing matters, unless otherwise disapproved by the Board of Directors
of the Company, shall be final and conclusive.
(c) The Committee shall select one of its members as its Chair
and shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority vote at
a meeting duly called and held. The grant of an option or award shall be
effective only if a written agreement shall have been duly executed and
delivered by and on behalf of the Company following such grant. The Committee
may appoint a Secretary and may make such rules and regulations for the conduct
of its business as it shall deem advisable.
SECTION 4. ELIGIBILITY AND GRANT.
(a) Eligibility. Incentive Stock Options may only be granted
under this Plan to any full or part-time employee (which term as used herein
includes, but is not limited to, officers and directors who are also employees)
of the Company and of its present and future subsidiary corporations within the
meaning of Section 424(f) of the Code (herein called "subsidiaries"). Full or
part-time employees, directors who are not employees, consultants or independent
contractors to the Company or one of its subsidiaries or affiliates shall be
eligible to receive options which do not qualify as Incentive Stock Options and
awards. In determining the persons to whom options and awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant.
(b) Grant of Additional 0ptions. A person who has been granted
an option or award under this Plan may be granted additional options or awards
under the Plan if the Committee shall so determine; provided, however, that to
the extent the aggregate fair market value (determined at the time the Incentive
Stock Option is granted) of the Common Shares with respect to which all
Incentive Stock Options are exercisable for the first time by an employee during
any calendar year (under all plans described in subsection (d) of Section 422 of
the Code of his or her employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as options that do
not qualify as Incentive Stock Options. Nothing in the Plan or in any agreement
thereunder shall confer on any employee any right to continue in the employ of
the Company or any of its subsidiaries or affect, in any
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way, the right of the Company or any of its subsidiaries to terminate his or her
employment at any time.
SECTION 5. PRICE.
The option price for all Incentive Stock Options granted under
the Plan shall be determined by the Committee but shall not be less than 100% of
the fair market value of the Common Shares at the date of grant of such option.
The option price for options granted under the Plan that do not qualify as
Incentive Stock Options and, if applicable, the price for all awards shall be
determined by the Committee but shall not be less than 85% of the fair market
value of the Common Shares at the date of grant of such option. For purposes of
the preceding sentence and for all other valuation purposes under the Plan, the
fair market value of the Common Shares shall be as reasonably determined by the
Committee. If on the date of grant of any option or award hereunder the Common
Shares are not traded on an established securities market, the Committee shall
make a good faith attempt to satisfy the requirements of this Section 5 and in
connection therewith shall take such action as it deems necessary or advisable.
SECTION 6. TERM.
Each option and award and all rights and obligations
thereunder shall expire on the date determined by the Committee and specified in
the option or award agreement. The Committee shall be under no duty to provide
terms of like duration for options or awards granted under the Plan, but the
term of an Incentive Stock Option may not extend more than ten (10) years from
the date of grant of such option and the term of options granted under the Plan
which do not qualify as Incentive Stock Options may not extend more than fifteen
(15) years from the date of granting of such option.
SECTION 7. EXERCISE OF OPTION OR AWARD.
(a) Exercisability. The Committee shall have full and
complete authority to determine whether an option or award will be exercisable
in full at any time or from time to time during the term thereof, or to provide
for the exercise thereof in such installments, upon the occurrence of such
events (such as termination of employment for any reason) and at such times
during the term of the option as the Committee may determine and specify in the
option or award agreement.
(b) No Violation of State or Federal Laws. The exercise of any
option or award granted hereunder shall only be effective at such time that the
sale of Common Shares pursuant to such exercise will not violate any state or
federal securities or other laws.
(c) Method of Exercise. An optionee or grantee electing to
exercise an option or award shall give written notice to the Company of such
election and of the number of shares subject to such exercise. The full purchase
price of such shares shall be tendered with such notice of exercise. Payment
shall be made to the Company in cash (including bank check, certified check,
personal check, or money order), or, at the discretion of the Committee and as
specified by the Committee, (i) by delivering certificates for the Company's
Common Shares already owned by the optionee or
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grantee having a fair market value as of the date of grant equal to the full
purchase price of the shares, or (ii) by delivering the optionee's or grantee I
s promissory note, which shall provide for interest at a rate not less than the
minimum rate required to avoid the imputation of income, original issue discount
or a below-market-rate loan pursuant to Sections 483, 1274 or 7872 of the Code
or any successor provisions thereto, or (iii) a combination of cash, the
optionee's or grantee promissory note and such shares. The fair market value of
such tendered shares shall be determined as provided in Section 5 herein. The
optionee's or grantee's promissory note shall be a full recourse liability of
the optionee and may, at the discretion of the Committee, be secured by a pledge
of the shares being purchased. Until such person has been issued the shares
subject to such exercise, he or she shall possess no rights as a shareholder
with respect to such shares.
SECTION 8. RESTORATION OPTIONS.
The Committee may grant "restoration" options, separately or
together with another option, pursuant to which, subject to the terms and
conditions established by the Committee and any applicable requirements of Rule
16b-3 promulgated under the Exchange Act or any other applicable law, the
optionee would be granted a new option when the payment of the exercise price of
the option to which such "restoration" option relates is made by the delivery of
shares of the Company's Common Shares owned by the optionee, as described in
this Section 8, which new option would be an option to purchase the number of
shares not exceeding the sum of (a) the number of shares of the Company's Common
Shares tendered as payment upon the exercise of the option to which such
"restoration" option relates and (b) the number of shares of the Company's
Common Shares, if any, tendered as payment of the amount to be withheld under
applicable income tax laws in connection with the exercise of the option to
which such "restoration" option relates, as described in Section 12 hereof.
"Restoration" options may be granted with respect to options previously granted
under this Plan or any prior stock option plan of the Company, and may be
granted in connection with any option granted under this Plan at the time of
such grant. The purchase price of the Common Shares under each such new option,
and the other terms and conditions of such option, shall be determined by the
Committee, consistent with the provisions of the Plan.
SECTION 9. STOCK APPRECIATION RIGHTS.
(a) Grant. At the time of grant of an option or award under
the Plan (or at any other time), the Committee, in its discretion, may grant a
Stock Appreciation Right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the
Company of a written notice which shall state that the holder thereof elects to
exercise
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his or her SAR as to the number of shares specified in the notice and which
shall further state what portion, if any, of the SAR exercise amount
(hereinafter defined) the holder thereof requests is to be paid in cash and what
portion, if any, is to be paid in Common Shares of the Company. The Committee
promptly shall cause to be paid to such holder the SAR exercise amount either in
cash, in Common Shares of the Company, or any combination of cash and shares as
the Committee may determine. Such determination may be either in accordance with
the request made by the holder of the SAR or in the sole and absolute discretion
of the Committee. The SAR exercise amount is the excess of the fair market value
of one share of the Company's Common Shares on the date of exercise over the per
share exercise price in respect of which the SAR was granted, multiplied by the
number of shares as to which the SAR is exercised. For the purposes hereof, the
fair market value of the Company's shares shall be determined as provided in
Section 5 herein.
SECTION 10. RESTRICTED STOCK AWARDS.
Awards of Common Shares subject to forfeiture and transfer
restrictions may be granted by the Committee. Any restricted stock award shall
be evidenced by an agreement in such form as the Committee shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions and any additional terms and conditions (including any
buy-back provisions) established by the Committee that are consistent with the
terms of the Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock
award made under the Plan shall be for such number of Common Shares as shall be
determined by the Committee and set forth in the agreement containing the terms
of such restricted stock award. Such agreement shall set forth a period of time
during which the grantee must remain in the continuous employment of the Company
in order for the forfeiture and transfer restrictions to lapse. If the Committee
so determines, the restrictions may lapse during such restricted period in
installments with respect to specified portions of the shares covered by the
restricted stock award. The agreement may also, in the discretion of the
Committee, set forth performance or other conditions that will subject the
Common Shares to forfeiture and transfer restrictions. The Committee may, at its
discretion, waive all or any part of the restrictions applicable to any or all
outstanding restricted stock awards.
(b) Delivery of Common Shares and Restrictions. At the time of
a restricted stock award, a certificate representing the number of Common Shares
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of
the Plan, and shall bear such a legend setting forth the restrictions imposed
thereon as the Committee, in its discretion, may determine. The grantee shall
have all rights of a shareholder with respect to the Common Shares, including
the right to receive dividends and the right to vote such shares, subject to the
following restrictions: (i) the grantee shall not be entitled to delivery of the
stock certificate until the expiration of the restricted period and the
fulfillment of any other restrictive conditions set forth in the restricted
stock agreement with respect to such Common Shares; (ii) none of the Common
Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of
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during such restricted period or until after the fulfillment of any such other
restrictive conditions; and (iii) except as otherwise determined by the
Committee, all of the Common Shares shall be forfeited and all rights of the
grantee to such Common Shares shall terminate, without further obligation on the
part of the Company, unless the grantee remains in the continuous employment of
the Company for the entire restricted period in relation to which such Common
Shares were granted and unless any other restrictive conditions relating to the
restricted stock award are met. Any Common Shares, any other securities of the
Company and any other property (except for cash dividends) distributed with
respect to the Common Shares subject to restricted stock awards shall be subject
to the same restrictions, terms and conditions as such restricted Common Shares.
(c) Termination of Restrictions. At the end of the restricted
period and provided that any other restrictive conditions of the restricted
stock award are met, or at such earlier time as otherwise determined by the
Committee, all restrictions set forth in the agreement relating to the
restricted stock award or in the Plan shall lapse as to the restricted Common
Shares subject thereto, and a stock certificate for the appropriate number of
Common Shares, free of the restrictions and the restricted stock legend, shall
be delivered to the grantee or his or her beneficiary or estate, as the case may
be.
SECTION 11. PERFORMANCE AWARDS.
The Committee is further authorized to grant performance
awards. Subject to the terms of this Plan and any applicable award agreement, a
performance award granted under the Plan (i) may be denominated or payable in
cash, Common Shares (including, without limitation, restricted stock), other
securities, other awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee, in its discretion, and
payable to, or exercisable by, the holder of the Performance awards in whole or
in part, upon the achievement of such performance goals during such performance
periods as the Committee, in its discretion, shall establish. Subject to the
terms of this Plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance award granted, and the amount of any payment or
transfer to be made by the grantee and by the Company under any Performance
award shall be determined by the Committee.
SECTION 12. INCOME TAX WITHHOLDING AND TAX BONUSES.
(a) Withholding of Taxes. In order to comply with all
applicable federal or state income tax laws or regulations, the Company may take
such action as it deems appropriate to ensure that all applicable federal or
state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of an optionee or grantee under the Plan, are withheld
or collected from such optionee or grantee. In order to assist an optionee or
grantee in paying all federal and state taxes to be withheld or collected upon
exercise of an option or award which does not qualify as an Incentive Stock
Option hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, shall permit the optionee or
grantee to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the
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shares otherwise to be delivered upon exercise of such option or award with a
fair market value, determined in accordance with Section 5 herein, equal to such
taxes or (ii) delivering to the Company Common Shares other than the shares
issuable upon exercise of such option or award with a fair market value,
determined in accordance with Section 5, equal to such taxes.
(b) Tax Bonus. The Committee shall have the authority, at the
time of grant of an option under the Plan or at any time thereafter, to approve
tax bonuses to designated optionees or grantees to be paid upon their exercise
of options or awards granted hereunder. The amount of any such payments shall be
determined by the Committee. The Committee shall have full authority in its
absolute discretion to determine the amount of any such tax bonus and the terms
and conditions affecting the vesting and payment thereafter.
SECTION 13. ADDITIONAL RESTRICTIONS.
The Committee shall have full and complete authority to
determine whether all or any part of the Common Shares of the Company acquired
upon exercise of any of the options or awards granted under the Plan shall be
subject to restrictions on the transferability thereof or any other restrictions
affecting in any manner the optionee's or grantee's rights with respect thereto,
but any such restriction shall be contained in the agreement relating to such
options or awards.
SECTION 14. TEN PERCENT SHAREHOLDER RULE.
Notwithstanding any other provision in the Plan, if at the
time an option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Common
Shares of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or its parent or
subsidiary corporations, if any (within the meaning of Section 422(b)(6) of the
Code), then any Incentive Stock Option to be granted to such optionee pursuant
to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value of the
Common Shares of the Company determined as described herein, and such option by
its terms shall not be exercisable after the expiration of five (5) years from
the date such option is granted.
SECTION 15. NON-TRANSFERABILITY.
No option or award granted under the Plan shall be
transferable by an optionee or grantee, otherwise than by will or the laws of
descent or distribution. Except as otherwise provided in an option or award
agreement, during the lifetime of an optionee or grantee, the option shall be
exercisable only by such optionee or grantee.
SECTION 16. DILUTION OR OTHER ADJUSTMENTS.
If there shall be any change in the Common Shares through
merger, consolidation, reorganization, recapitalization, dividend i - n the form
of stock (of whatever amount), stock split or other change in the corporate
structure,
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appropriate adjustments in the Plan and outstanding options and awards shall be
made by the Committee. In the event of any such changes, adjustments shall
include, where appropriate, changes in the aggregate number of shares subject to
the Plan, the number of shares and the price per share subject to outstanding
options and awards and the amount payable upon exercise of outstanding awards,
in order to prevent dilution or enlargement of option or award rights.
SECTION 17. AMENDMENT OR DISCONTINUANCE OF PLAN.
The Board of Directors may amend or discontinue the Plan at
any time. Subject to the provisions of Section 16 no amendment of the Plan,
however, shall without shareholder approval: (i) increase the maximum number of
shares under the Plan as provided in Section 2 herein, (ii) decrease the minimum
price provided in Section 5 herein, (iii) extend the maximum term under Section
6, or (iv) modify the eligibility requirements for participation in the Plan.
The Board of Directors shall not alter or impair any option or award theretofore
granted under the Plan without the consent of the holder of the option.
SECTION 18. TIME OF GRANTING.
Nothing contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or by the shareholders of the Company,
and no action taken by the Committee or the Board of Directors (other than the
execution and delivery of an option or award agreement), shall constitute the
granting of an option or award hereunder.
SECTION 19. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The Plan was approved by the Board of Directors on
February 27, 1995 and shall be approved by the shareholders of the Company
within twelve (12) months thereof.
(b) Unless the Plan shall have been discontinued as provided
in Section 16 hereof, the Plan shall terminate February 27, 2005. No option or
award may be granted after such termination, but termination of the Plan shall
not, without the consent of the optionee or grantee, alter or impair any rights
or obligations under any option or award theretofore granted.
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