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))
IMAGE SENSING 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>
IMAGE SENSING SYSTEMS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
MAY 10, 2000
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 Wednesday, May 10, 2000, at
the Hyatt Regency Hotel, 1300 Nicollet Mall, Minneapolis, Minnesota, for the
following purposes:
1. To elect six directors to serve on the Board of Directors.
2. To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 24,
2000 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: March 31, 2000
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 10, 2000
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 10, 2000 at the Hyatt Regency Hotel,1300 Nicollet Mall.,
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, 2000 along with the Company's 1999 Annual Report to
Shareholders.
Only shareholders of record at the close of business on March 24, 2000
are entitled to notice of and to vote at the meeting or at any adjournment
thereof. On March 24, 2000, there were 2,480,950 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 2000 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
---- --- --------
William L. Russell 51 Chairman of the Board, President and
Chief Executive Officer
Panos G. Michalopoulos* 51 Director and Chief Scientific Advisor
Richard C. Magnuson* 58 Director
Richard P. Braun# 74 Director
James Murdakes# 67 Director and Secretary
C. (Dino) Xykis# 41 Director
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* Denotes a member of the audit committee.
# Denotes a member of the compensation and stock option committee.
WILLIAM L. RUSSELL has been the President and Chief Executive Officer
and a Director since June 1998. He became Chairman of the Board on January 1,
2000. 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.
PANOS G. MICHALOPOULOS has been a long standing Director and is the
immediate past Chairman. He has been the 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.
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.
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<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:
Jeffrey F. Martin, age 44, has been the Company's Chief Financial
Officer and the Treasurer since December 1999. Prior to joining Image Sensing
Systems Mr. Martin was the CFO, Secretary and Director of Tech Squared Inc. from
1998 through 1999. Prior to 1998 he was the CFO of an Anderson Consulting
Enterprise subsidiary. Mr. Martin has an MBA in Finance.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the fiscal year ended December 31, 1999, 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
1999, 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 1999, 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 1999, non-employee directors received a total retainer of $10,000, with
$4,000 payable in May and $500 payable each month.
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<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, except that Jeff Martin filed his
Initial Statement of Beneficial Ownership of Securities on Form 3 and Annual
Statement of Beneficial Ownership of Securities on Form 5 after the date on
which they were required to be filed. Mr. Martin's Form 3 filing related to the
commencement of his employment by the Company. His Form 5 filing related to one
transaction.
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, 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal All Other
Position Year Salary Bonus Compensation(1)
-------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Panos G. Michalopoulos 1999 $100,000 - $3,000
Chairman of the Board 1998 $100,000 - $2,971
and Chief Scientific 1997 $100,000 - $4,500
Advisor
William L. Russell 1999 $144,585 $26,250 $2,165
President and Chief Executive 1998 $ 77,989 $32,275
Officer
</TABLE>
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(1) Represents employer contribution to the Company's 401(k) plan.
STOCK OPTIONS
The following table provides information concerning the value of unexercised
options at December 31, 1999 for the Named Executive Officers:
<TABLE>
<CAPTION>
YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT END OF IN-THE-MONEY OPTIONS
1999 AT END OF 1999 (1)
--------------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dr. Michalopoulos ..................... 73,400 21,600 0 0
Mr. Russell............................. 50,000 50,000 $ 37,500 $ 37,500
</TABLE>
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(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,
1999 and the option exercise price per share multiplied by the number of
shares subject to the option.
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<PAGE>
EMPLOYMENT AGREEMENTS
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 and to participate in the Company's
benefits. Effective for fiscal year 1999, Mr. Russell is eligible for an
incentive compensation payment of up to fifty percent of his annual base salary,
with incentive compensation subject to Mr. Russell's 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.
Mr. Martin entered into an employment agreement with the Company in
December of 1999 that shall continue until terminated by either party for any
reason or no reason upon a notice of ninety days. Notwithstanding the above, the
Company may terminate the agreement at any time without notice for Good Cause.
Under the terms of his employment agreement, Mr. Martin assumed the position of
Chief Financial Officer and is entitled to receive a base salary and to
participate in Company's benefits and is eligible for incentive compensation. If
terminated by the Company for other than Good Cause after Mr. Martin's first
year of employment, the Company shall pay Mr. Martin severance equal to three
months' salary and benefits. If Mr. Martin is terminated as a result of the
sale, acquisition or merger of the Company, he will be entitled to severance
equal to his salary for the term of one year from the termination date or until
Mr. Martin obtains new employment, whichever is earlier. In his employment
agreement, Mr. Martin has agreed that during his employment and for one year
following termination 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.
OTHER AGREEMENTS
Dr. Michalopoulos had an employment agreement with the Company which
ended December 31, 1999. He has entered into a consulting agreement with the
Company that runs from January 1, 2000 through December 31, 2000, with the
stipulation that either party may terminate the agreement at any time by giving
45 days' notice. Under the terms of the consulting agreement, he will act as
Technical/Scientific Advisor at the request and under the direction of the
President/CEO of the Company. His compensation for any activities requested of
him will be paid at the rate of $125.00 per hour. In his consulting agreement,
Dr. Michalopoulos has agreed that from the date of his agreement and for the
period of one year after the termination of the agreement, he will not, in any
manner, directly or indirectly, compete with the Company in the field of image
processing anywhere in the United States, Canada, countries in the European
Common Market Community, or the Orient.
5
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 10, 2000 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.......................... 1,230,648(2) 47.8%
William L. Russell.............................. 54,500(3) 2.2%
Richard C. Magnuson............................. 114,338(4) 4.6%
Richard P. Braun................................ 106,778(5) 4.3%
James Murdakes.................................. 52,938(6) 2.1%
C. (Dino) Xykis................................. 20,000(5) .8%
All Directors and Executive Officers............ 1,329,202 53.6%
</TABLE>
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(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 10, 2000 ("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 95,000 shares issuable pursuant to Currently Exercisable
Options.
(3) Includes 25,000 shares issuable pursuant to Currently Exercisable Options.
(4) Includes 39,852 shares held by Operating Management, Inc., a corporation
controlled by Mr. Magnuson, and 20,000 shares issuable pursuant to
Currently Exercisable Options.
(5) Includes 20,000 shares issuable pursuant to Currently Exercisable Options.
(6) Includes 45,000 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, 2000. Ernst &
Young LLP audited the financial statements for the Company for the year ended
December 31, 1999. A representative of Ernst & Young LLP is expected to be
present at the 2000 Annual Meeting and will have an opportunity to make a
statement and will be available to respond to appropriate questions from
shareholders.
OTHER MATTERS
The Company is including with this Proxy Statement its Annual Report to
Shareholders for the year ended December 31, 1999, 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
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<PAGE>
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, 2000.
By Order of the Board of Directors,
James Murdakes
Secretary
Dated: March 31, 2000
