I.D. SYSTEMS, INC.
--------------------------
Notice of 2000 Annual Meeting
and
Proxy Statement
Thursday, June 1, 2000
at 10:00 a.m.
At the offices of the Company
One University Plaza
Hackensack, New Jersey 07601
I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601
April 30, 2000
Dear Shareholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the 2000 Annual Meeting of Shareholders to be held on Thursday, June
1, 2000 at 10 a.m. Eastern Daylight Time, at the offices of I.D. Systems, Inc.
(the "Company") at One University Plaza, Hackensack, New Jersey 07601.
The notice of meeting and proxy statement accompanying this letter describe
the specific business to be acted upon.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity for questions of
general interest to the shareholders.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend in person, you are requested to vote, sign, date and
promptly return the enclosed proxy in the self-addressed envelope provided.
Sincerely,
Kenneth S. Ehrman
President
I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of I.D. Systems, Inc.:
Notice is hereby given that the 2000 Annual Meeting of Shareholders of I.D.
Systems, Inc. (the "Company") will be held at the offices of the Company,
located at One University Plaza, Hackensack, New Jersey 07601 on Thursday, June
1, 2000 at 10:00 a.m. Eastern Daylight Time for the following purposes:
1. To elect six (6) Directors, the names of whom are set forth on the
accompanying proxy statement, to serve until the 2001 Annual Meeting
of Shareholders.
2. To ratify the appointment of Richard A. Eisner & Company, LLP as
independent auditors of the Company for 2000.
3. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on April 14, 2000 are the
only shareholders entitled to notice of and to vote at the 2000 Annual Meeting
of Shareholders and any adjournments thereof.
Whether you expect to attend the meeting or not, please vote, sign, date
and return the enclosed proxy in the self-addressed envelope provided as
promptly as possible. If you attend the meeting, you may vote your shares in
person, even though you have previously signed and returned your proxy.
By order of the Board of Directors
Martin G. Rosansky
Secretary
April 30, 2000
I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601
April 30, 2000
Proxy Statement
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of I.D. Systems, Inc., a Delaware corporation
(the "Company"), to be used at the 2000 Annual Meeting of Shareholders (the
"2000 Annual Meeting") to be held at the Company's offices, located at One
University Plaza, Hackensack, New Jersey 07601, on Thursday, June 1, 2000 at
10:00 a.m. Eastern Daylight Time, and all adjournments thereof.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy material to the beneficial
owners of shares held of record by such persons will be borne by the Company.
The Company does not intend to solicit proxies otherwise than by mail, but
certain officers and regular employees of the Company, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. The Company's 1999 Annual Report, including financial
statements, the Proxy Statement and form of proxy/voting instruction card (the
"proxy card" or "proxy") are being mailed to the Company's shareholders of
record at the close of business on April 14, 2000. These documents shall be
mailed on or about April 30, 2000.
A shareholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to such proxy are voted
by notifying the Secretary of the Company in writing. If a shareholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
instructions. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted FOR Proposals No. 1. and No. 2.
Outstanding Voting Securities
Only shareholders of record at the close of business on April 14, 2000 are
entitled to vote at the 2000 Annual Meeting. On that day, there were 5,720,625
shares of Common Stock outstanding.
1
If a quorum is present, in person or by proxy, all elections for Directors
shall be decided by plurality of the votes cast in respect thereof. If no voting
direction is indicated on the proxy cards, the shares will be considered votes
for the nominees. In accordance with Delaware law, shareholders entitled to vote
for the election of Directors can withhold authority to vote for all nominees
for Directors or can withhold authority to vote for certain nominees for
Directors.
Abstentions may be specified on all proposals submitted to a shareholder
vote other than the election of Directors. Abstentions will be counted as
present for purposes of determining the existence of a quorum regarding the
proposal on which the abstention is noted. Abstentions on the Company's proposal
to ratify the appointment of the independent auditors will not have any effect
for or against such proposal.
Brokers holding shares of the Company's Common Stock in street name who do
not receive instructions are entitled to vote on the election of Directors and
the ratification of the appointment of the independent auditors. Under
applicable Delaware law, "broker non-votes" on any other non-routine proposal
(where a broker submits a proxy but does not have authority to vote a customer's
shares on such proposal) would not be considered entitled to vote on that
proposal and would not be counted in determining whether such proposal receives
a majority of the shares entitled to vote at the 2000 Annual Meeting.
Shareholders' Proposals for Next Annual Meeting
Shareholders' proposals intended to be presented at the 2001 Annual Meeting
of Shareholders (the "2001 Annual Meeting") must be received by the Company no
later than February 28, 2001 for inclusion in the Company's proxy statement and
form of proxy for that meeting.
Execution of the accompanying proxy card will not affect a shareholder's
right to attend the meeting and vote in person. Any shareholder giving a proxy
has the right to revoke it by giving written notice of revocation to the
Secretary of the Company at any time before the proxy is voted.
Proposal No. 1.
Election of Directors
Six (6) directors will be elected at the 2000 Annual Meeting to serve for a
term of one year, until the 2001 Annual Meeting and until their successors have
been duly elected and have qualified. If any nominee is unable to serve, which
the Board of Directors has no reason to expect, the persons named in the
accompanying proxy intend to vote for the balance of those named and, if they
deem it advisable, for a substitute nominee. The names of the nominees for
directors of the Company whose terms of office will continue after the 2000
Annual Meeting are listed below.
2
Kenneth S. Ehrman, 30, is a founder of the Company and has been its
President and a Director since inception in 1993. He graduated from Stanford
University in 1991 with a Bachelor of Science in Industrial Engineering after
studying Management, Production and Finance. Upon his graduation, and until the
inception of the Company in 1993, Mr. Ehrman worked as a production manager with
a Silicon Valley networking company. Mr. Ehrman is the brother of Michael L.
Ehrman, the Company's Executive Vice President of Engineering.
Jeffrey M. Jagid, 31, has been Chief Operating Officer, General Counsel and
a Director since joining the Company in 1995. Mr. Jagid received a Bachelor of
Business Administration from Emory University in 1991 and a Juris Doctor degree
from the Benjamin N. Cardozo School of Law in 1994. Prior to joining the
Company, Mr. Jagid was a corporate litigation associate at the law firm of
Tannenbaum Helpern Syracuse & Hirschtritt LLP, in New York City. He is a member
of the Bar of the States of New York and New Jersey. Mr. Jagid is Bruce Jagid's
son.
N. Bert Loosmore, 30, is a founder of the Company and has served as its
Executive Vice President of Technology since August 1999. Prior to that, since
inception, he served as the Company's Executive Vice President of Engineering.
Mr. Loosmore has been a Director of the Company since inception. He graduated
from Stanford University in 1991 with a Bachelor of Science in Electrical
Engineering after concentrating on computer hardware and software, including
microprocessor design. From 1991 to 1992, he worked at International Business
Machines, Inc. as a Design and Test Engineer and later as a Production Engineer.
From 1992 until the Company's inception, Mr. Loosmore was a Production Engineer
at a Silicon Valley networking company.
Bruce Jagid, 60, is a founder of the Company and has served as its
Treasurer and as a Director since its inception. Mr. Jagid served as Chairman of
the Board of Directors of Ultralife Batteries, Inc., a public company devoted to
the development and manufacture of primary and secondary lithium battery
systems, from March 1991 to January 1999; served as its Chief Executive Officer
from January 1992 to January 1999 and currently serves as a director. Prior to
Mr. Jagid's involvement with Ultralife, he co-founded Power Conversion Inc. and
was its President until January 1989. Mr. Jagid received his Bachelor of Science
in Mechanical Engineering from the City College of New York and obtained his
masters degree in Mechanical Engineering from Rensselaer Polytechnic Institute.
Mr. Jagid is Jeffrey M. Jagid's father.
Martin G. Rosansky, 60, is a founder of the Company and has served as its
Secretary and as a Director since inception. In March 1991, Mr. Rosansky
co-founded and served as the Vice Chairman of Ultralife Batteries, Inc. Prior to
Mr. Rosansky's involvement in Ultralife, he co-founded Power Conversion, Inc.
and was its Chairman of the Board, Secretary and Treasurer from 1970 to January
1989. Mr. Rosansky earned a Bachelor of Science in Mechanical Engineering from
Polytechnic Institute of Brooklyn in 1960.
3
Lawrence Burstein, 56, has served as a Director of the Company since June
1999. Since March 1996, Mr. Burstein has served as President and a director of
Unity Venture Capital Associates, Ltd., a private investment company. From
January 1982 to March 1996, Mr. Burstein was Chairman of the Board and a
principal stockholder of Trinity Capital Corporation, a private investment
company. Mr. Burstein is also a director of THQ, Inc., Brazil Fast Food Corp.,
CAS Medical Systems, Inc., Quintel Communications, Inc. and Medical Nutrition
Inc. Mr. Burstein received a Bachelor of Arts in Economics from the University
of Wisconsin and a Bachelor of Law from Columbia Law School.
The Board of Directors of the Corporation recommends a vote FOR the slate
of director nominees. The vote of a plurality of shares, present in person or
represented by proxy at the Annual Meeting and entitled to vote, is required to
elect each of the Directors.
The Board of Directors
The Board of Directors is responsible for the management and direction of
the Company and for establishing broad corporate policies. Members of the Board
of Directors are kept informed of the Company's business through various
documents and reports provided by the Chairman and other corporate officers, and
by participating in Board of Directors and committee meetings. Each Director has
access to all books, records and reports of the Company, and members of
management are available at all times to answer their questions. The Board of
Directors held three meetings between June 30, 1999, the date on which the
Company completed the initial public offering of its shares, and December 31,
1999. Each Director attended all of these meetings.
The Audit Committee recommends engagement of independent auditors,
considers the fee arrangement and scope of the audit, reviews the financial
statements and the independent auditors' report, considers comments made by the
independent auditors with respect to the Company's internal control structure,
and reviews internal accounting procedures and controls with the Company's
financial and accounting staff. The Audit Committee, composed of Messrs.
Burstein, Rosansky and B. Jagid, held three meetings during the period from June
30, 1999 until December 31, 1999.
The Compensation Committee sets policies that govern executives' annual
compensation and long-term incentives, reviews management performance,
development and compensation, determines option grants and administers the
Company's incentive plans. The Compensation Committee, composed of Messrs.
Burstein, Rosansky and B. Jagid, held two meetings during the period from June
30, 1999 until December 31, 1999.
4
OWNERSHIP OF SHARES
The following table contains information relating to the beneficial
ownership of Common Stock as of April 14, 2000 by each person or entity who is
known by the Company to beneficially own five percent or more of the Common
Stock; each director and executive officer of the Company; and all directors and
executive officers of the Company as a group. Information as to the number of
shares of Common Stock owned and the nature of ownership has been provided by
these individuals and is not within the direct knowledge of the Company. Unless
otherwise indicated, the named individuals possess sole voting and investment
power with respect to the shares listed. The following information has been
furnished to the Company or is based on Schedules 13D, or any amendments
thereto, received by the Company as filed with the Commission.
Name of Beneficial Owners (1) Number of Shares Percent(2)
-------------------------- ---------------- ----------
Kenneth Ehrman .................................. 565,213(3) 9.74%
N. Bert Loosmore ................................ 581,875(4) 10.03%
Bruce Jagid ..................................... 532,825(5) 9.22%
Martin Rosansky ................................. 568,663(6) 9.84%
Michael Ehrman .................................. 209,650(7) 3.58%
Jeffrey M. Jagid ................................ 255,375(8) 4.37%
President and Fellows of Harvard College ........ 375,000(9) 6.60%
All directors and executive officers
as a group (6 persons) .......................... 2,713,601(10) 43.38%
- -------------------
(1) Unless otherwise indicated, the address for each named individual or group
is in care of the Company, Inc., One University Plaza, 6th Floor
Hackensack, NJ 07601.
(2) Unless otherwise indicated, the Company believe that all persons named in
the table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days after April 14, 2000 upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities
that are held by such
5
person (but not those held by any other person) and which are exercisable
within 60 days after April 14, 2000 have been exercised and converted.
(3) Includes 81,250 shares of common stock underlying options granted to Mr.
Ehrman pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
(4) Includes 81,250 shares of common stock underlying options granted to Mr.
Loosmore pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
(5) Includes 58,125 shares of common stock underlying options granted to Mr.
Jagid pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
(6) Includes 58,125 shares of common stock underlying options granted to Mr.
Rosansky pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
(7) Includes 128,125 shares of common stock underlying options granted to Mr.
Ehrman pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
(8) Includes 128,125 shares of common stock underlying options granted to Mr.
Jagid exercisable within sixty days after April 14, 2000.
(9) Its principal office is c/o Harvard Management company, Inc., 600 Atlantic
Avenue, Boston, Massachusetts 02210.
(10) Includes 535,000 shares of common stock underlying options granted to such
individuals pursuant to the Company's 1995 Employee Stock Option Plan and
exercisable within sixty days after April 14, 2000.
6
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
or accrued, for the fiscal years ended December 31, 1999, 1998 and 1997, for the
Company's President and other officers whose total cash compensation exceeded
$100,000 for services rendered to the Company for the fiscal year ended December
31, 1999 (the "Named Officers").
Long-Term
Annual Compensation Compensation Awards ($)
- -------------------------------------------------------------------------- --------------------------
Name and Restricted Securities
Principal Stock Underlying
Position Year Salary($) Bonus($) Award Options/SARs(#)
- -----------------------------------------------------------------------------------------------------
1999 $114,500 $12,000 -- --
Kenneth S. Ehrman, 1998 $ 80,000 $40,000 -- --
President 1997 $ 65,000 -- -- --
- -----------------------------------------------------------------------------------------------------
Jeffrey M. Jagid,
Chief Operating 1999 $114,500 $12,000 -- --
Officer and 1998 $ 80,000 $40,000 -- --
General Counsel 1997 $ 65,000 -- -- --
- -----------------------------------------------------------------------------------------------------
N. Bert Loosmore, 1999 $109,000 $24,000 -- --
Executive Vice President of 1998 $ 80,000 $40,000 -- --
Technology 1997 $ 65,000 -- -- --
- -----------------------------------------------------------------------------------------------------
Michael L. Ehrman, 1999 $109,000 $24,000 -- --
Executive Vice President of 1998 $ 80,000 $40,000 -- --
Engineering 1997 $ 65,000 -- -- --
- -----------------------------------------------------------------------------------------------------
Ned Mavrommatis -- --
Chief Financial Officer 1999(1) $ 34,000 -- -- --
- -----------------------------------------------------------------------------------------------------
(1) Mr. Mavrommatis joined the Company in August 1999; his annualized salary
would have been $100,000.
7
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Presented below is information with respect to unexercised stock options to
purchase the Company's Common Stock held by each Named Officer as of December
31, 1999.
Unexercised Value of
Number of Securities In-the-Money
Underlying Unexercised Options at
Options December 31,
at December 31, 1999 (#) 1999($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------
Kenneth S. Ehrman 168,750 $ 761,000 81,250/87,500 $374,000/387,000
Jeffrey M. Jagid 278,125 $1,213,000 128,125/150,000 $559,000/654,000
N. Bert Loosmore 168,750 $ 761,000 81,250/87,500 $374,000/387,000
Michael L. Ehrman 278,125 $1,248,000 128,125/150,000 $587,000/661,000
Ned Mavrommatis 40,000 $ 58,000 0/40,000 $0/58,000
Directors' Compensation
The Company reimburses its directors for reasonable travel expenses
incurred in connection with their activities on behalf of the Company but does
not pay its directors any fees for board participation.
Non-employee directors are entitled to participate in the Company's 1999
Director Option Plan. A total of 300,000 shares of Common Stock have been
reserved for issuance under the plan. The plan provides for the automatic grant
of 15,000 shares to each non-employee director at the time he or she is first
elected to the board of directors and an automatic grant of an option to
purchase 5,000 shares on the first day of each fiscal quarter, if on such date
he or she has served on the board for at least six months. Each option grant
under the plan has a term of 10 years and vests on a cumulative monthly basis
over a four-year period. The exercise price of all options equals the fair
market value of the Common Stock on the date of grant.
Employee directors are entitled to participate in the Company's 1999 Stock
Option Plan. A total of 812,500 shares have been reserved for issuance under the
plan. The plan provides for grants of incentive stock options and non-qualified
stock options. Options can be granted under the plan on terms and at prices as
determined by the Board of Directors, or a committee of the Board of Directors,
except that the exercise price of incentive options will not be less than the
fair market value of common stock on the date of grant. In the case of an
incentive stock option granted to a stockholder who owns more than 10% of the
total combined
8
voting power of all classes of the Company's stock, the per share exercise
proceeds will not be less than 110% of the fair market value on the date of
grant. The aggregate fair market value, determined on the date of grant, of the
shares covered by incentive stock options granted under the plan that become
exercisable by a grantee for the first time in any calendar year is subject to a
$100,000 limit. As of December 31, 1999, no grants were made to directors under
this plan.
Certain Relationships and Related Transactions
During the years ended December 31, 1998 and 1999, the Company purchased
approximately $33,000 and $262,000, respectively, of components from a company
where two of the Company's directors were directors in 1998 and one of the
Company's directors continued to be a director. Additionally, at December 31,
1999, $95,000 remained open under a purchase order issued in 1998.
The Company believes that these transactions were fair and reasonable to it
and were on terms no less favorable than could have been obtained from
unaffiliated third parties. The Company cannot offer assurance, however, that
future transactions or arrangements between it and affiliates will continue to
be advantageous to the Company, that conflicts of interest will not arise with
respect thereto, or that if conflicts do arise, they will be resolved in a
manner favorable to the Company. Any such future transactions will be on terms
no less favorable to the Company than could be obtained from unaffiliated
parties and will be approved by the Company's compensation committee.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
In June 1999, the Company entered into three-year employment agreements,
renewable upon mutual agreement, with Kenneth Ehrman, Jeffrey Jagid, N. Bert
Loosmore and Michael Ehrman. Pursuant to the agreements, Messrs. Ehrman and
Jagid are each entitled to base salaries of $108,000 and Messrs. Loosmore and
Ehrman are each entitled to base salaries of $96,000. Each employment agreement
also provides for a bonus as determined by the Board of Directors and for
options under the Company's 1999 Stock Option Plan.
In the event of change in control of the Company, each employee is entitled
to a lump sum payment equal to the greater of one year's salary or the base
salary and benefits that would have been received by the employee if he had
remained employed by the Company the remainder of the three year term.
The employment agreements may be terminated for cause and contain
confidentiality and non-competition provisions prohibiting the employee from
competing against the Company and disclosing trade secrets and other proprietary
information.
9
Indemnification for Certain Liabilities
The By-Laws of the Company provide that the Company may indemnify its
directors and officers to the fullest extent permitted by the laws of the
Delaware General Corporation Law against all expenses, liability and loss
(including attorneys' fees, judgment, fines and amounts paid in settlement)
incurred by them in any action, suit or proceeding arising out of certain of
their actions or omissions in their capacities as directors or officers. Article
Seven of the Company's Restated Certificate of Incorporation provides that, with
certain exceptions, no director of the Company may be liable to the Company for
monetary damages as a result of a breach of his fiduciary duties as a director.
The Company has acquired directors' and officers' liability insurance for its
directors and officers.
The Delaware Supreme Court has held the directors' duty of care to a
corporation and its shareholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its certificate of incorporation to exonerate its directors from personal
liability to the corporation or its shareholders for monetary damages for a
breach of their fiduciary duty of care as a director, with certain exceptions.
The exceptions include a breach of the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, improper declaration of dividends and transactions from which
the director derived an improper personal benefit. As noted above, the Company's
Restated Certificate of Incorporation exonerates its directors, acting in such
capacity, from monetary liability to the extent permitted by this statutory
provision. This limitation of liability provision does not eliminate a
shareholder's right to seek non-monetary, equitable remedies such as an
injunction or rescission in order to redress an action taken by directors.
However, as a practical matter, equitable remedies may not be available in all
situations, and there may be instances in which no effective remedy is
available.
Proposal No. 2.
Ratification of Appointment of Independent Auditors
Subject to ratification by the shareholders, the Board of Directors has
reappointed Richard A. Eisner & Company, LLP as independent accountants to audit
the financial statements of the Company for the current fiscal year.
Representatives of the firm of Richard A. Eisner & Company, LLP are
expected to be present at the 2000 Annual Meeting and will have an opportunity
to make a statement, if they so desire, and will be available to respond to
appropriate questions.
The Board of Directors unanimously recommends that the shareholders vote
FOR approval of this proposal. The affirmative vote of the majority of the votes
cast at the 2000 Annual Meeting is required for the ratification of this
selection.
10
Other Matters
As of the date of this proxy statement, the Board of Directors is not
informed of any matters, other than those stated above, that may be brought
before the meeting. The persons named in the enclosed form of proxy or their
substitutes will vote with respect to any such matters in accordance with their
best judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN
AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED, NO
MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
By order of the Board of Directors,
Martin G. Rosansky
Secretary
Dated: April 30, 2000