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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
[ ] Soliciting material pursuant to Rule 14a-1(c) or Rule 14a-2
I. D. Systems, Inc.
-------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / 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:
(4) Proposed maximum aggregate value of transaction:
/ / 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.
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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:
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I.D. SYSTEMS, INC.
--------------------------
NOTICE OF 2001 ANNUAL MEETING
AND
PROXY STATEMENT
FRIDAY, JUNE 1, 2001
AT 10:00 A.M.
AT THE OFFICES OF THE COMPANY
ONE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY 07601
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I.D. SYSTEMS, INC.
ONE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY 07601
April 20, 2001
Dear Shareholder:
On behalf of the Board of Directors and management, I
cordially invite you to attend the 2001 Annual Meeting of Shareholders to be
held on Friday, 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,
Jeffrey M. Jagid
Chief Executive Officer
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I.D. SYSTEMS, INC.
ONE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY 07601
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of I.D. Systems, Inc.:
Notice is hereby given that the 2001 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
Friday, June 1, 2001 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 2002
Annual Meeting of Shareholders.
2. To increase, by 1,000,000 shares, the number of shares of
Common Stock available for issuance upon the exercise of
options granted under the Company's 1999 Stock Option Plan.
3. To ratify the appointment of Richard A. Eisner & Company, LLP
as independent auditors of the Company for 2001.
4. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on April 2,
2001 are the only shareholders entitled to notice of and to vote at the 2001
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 20, 2001
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I.D. SYSTEMS, INC.
ONE UNIVERSITY PLAZA
HACKENSACK, NEW JERSEY 07601
April 20, 2001
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 2001 Annual Meeting of
Shareholders (the "2001 Annual Meeting") to be held at the Company's offices,
located at One University Plaza, Hackensack, New Jersey 07601, on Friday, 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 2000 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 2, 2001. These
documents shall be mailed on or about April 20, 2001.
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, NO. 2 AND NO. 3.
OUTSTANDING VOTING SECURITIES
Only shareholders of record at the close of business on April
2, 2001 are entitled to vote at the 2001 Annual Meeting. On that day, there were
5,835,625 shares of Common Stock outstanding.
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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 2001 Annual Meeting.
SHAREHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders' proposals intended to be presented at the 2002
Annual Meeting of Shareholders must be received by the Company no later than
February 28, 2002 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 2001 Annual Meeting
to serve for a term of one year, until the 2002 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 2001 Annual Meeting are listed below.
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JEFFREY M. JAGID, 32, has been Chief Executive Officer since
June 1, 2000. Prior to that, he had served as the Company's Chief Operating
Officer. Since he joined the Company in 1995, Mr. Jagid has served as a Director
of the Company, as well as its General Counsel. 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.
KENNETH S. EHRMAN, 31, is a founder of the Company and has
been its Chief Operating Officer since June 1, 2000. Prior to that, and since
inception, he served as the Company's President. Mr. Ehrman has been a Director
of the Company since inception. 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.
N. BERT LOOSMORE, 31, is a founder of the Company and served
as its Executive Vice President of Technology from August 1999 until December
15, 2000. 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, 61, 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 served as a director
until June of 2000. Prior to Mr. Jagid's involvement with Ultralife, he
co-founded Power Conversion Inc. and was its President until January 1989. Mr.
Jagid is a Director of THQ, Inc. 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, 61, 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
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and Treasurer from 1970 to January 1989. Mr. Rosansky earned a Bachelor of
Science in Mechanical Engineering from Polytechnic Institute of Brooklyn in
1960.
LAWRENCE BURSTEIN, 57, 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 five meetings during 2000. 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 one meeting during 2000 which was
attended by all the members thereof.
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 eight meetings during 2000
which were attended by all the members thereof.
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OWNERSHIP OF SHARES
The following table contains information relating to the
beneficial ownership of Common Stock as of March 28, 2001 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 OWNER (1) NUMBER OF SHARES PERCENTAGE (2)
- ----------------------------------------------------------------------------------------------------------
Jeffrey M. Jagid 321,000(3) 5.33%
Kenneth S. Ehrman 598,963(4) 10.07%
Michael L. Ehrman 265,275(5) 4.41%
Ned Mavrommatis 14,500(6) 0.25%
Bruce Jagid 553,679(7) 9.36%
Martin Rosansky 589,517(8) 9.97%
Lawrence Burstein 8,000(9) 0.14%
N. Bert Loosmore 575,447 9.86%
Jack Silver 308,200(10) 5.40%
President and Fellow of Harvard College 375,000(11) 6.60%
All Directors and Executive Officers as a group
(7 persons) 2,926,381(12) 45.05%
- ---------------------
(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.
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(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 March 27, 2001 upon the exercise of options, warrants or
convertible securities (in any case, the "Currently Exercisable Options").
Each beneficial owner's percentage ownership is determined by assuming that
the Currently Exercisable Options that are held by such person (but not
those held by any other person) have been exercised and converted.
(3) Includes 183,750 shares of common stock underlying Currently Exercisable
Options granted to Mr. Jagid, pursuant to the Company's 1995 Employee Stock
Option Plan.
(4) Includes 115,000 shares of common stock underlying Currently Exercisable
Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
Option Plan.
(5) Includes 183,750 shares of common stock underlying Currently Exercisable
Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
Option Plan.
(6) Includes 12,000 shares of common stock underlying Currently Exercisable
Options to Mr. Mavrommatis pursuant to the Company's 1999 Stock Option
Plan.
(7) Includes 78,979 shares of common stock underlying Currently Exercisable
Options granted to Mr. Jagid pursuant to the Company's 1995 Employee Stock
Option Plan and its 1999 Director Option Plan.
(8) Includes 78,979 shares of common stock underlying Currently Exercisable
Options granted to Mr. Rosansky pursuant to the Company's 1995 Employee
Stock Option Plan and its 1999 Director Option Plan.
(9) Includes 8,000 shares of common stock underlying currently exercisable
options granted to Mr. Burstein pursuant to the Company's 1999 Director
Option Plan.
(10) Principal office is 660 Madison Avenue, 15th Floor, New York, New York
10021.
(11) Principal office is c/o Harvard Management Company, Inc., 600 Atlantic
Avenue, Boston, Massachusetts 02210.
(12) Includes 660,458 shares of common stock underlying Currently Exercisable
Options granted to such individuals pursuant to the Company's 1995 Employee
Stock Option Plan,1999 Stock Option Plan and 1999 Directors Option Plan.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or
accrued, for the fiscal years ended December 31, 2000 and 1999 and 1998, for the
Company's Chief Executive Officer and four most highly compensated executive
officers other than its Chief Executive Officer, whose salary and bonus were in
excess of $100,000 (the "Named Officers") who were employed by the Company on
December 31, 2000.
SUMMARY COMPENSATION TABLE
Name and Annual Compensation
Principal Position Year Salary Bonus
- --------------------------------------------------------------------------------------------------------------
Jeffrey M. Jagid 2000 $119,500 --
Chief Executive Officer 1999 $114,500 $12,000
and General Counsel 1998 $ 80,000 $40,000
Kenneth S. Ehrman 2000 $119,500 --
Chief Operating Officer 1999 $114,500 $12,000
1998 $ 80,000 $40,000
Michael L. Ehrman 2000 $107,500 --
Executive Vice President 1999 $109,000 $24,000
1998 $ 80,000 $40,000
Ned Mavrommatis (1) 2000 $100,000 --
Chief Financial Officer 1999 $ 34,000 --
1998 -- --
N. Bert Loosmore (2) 2000 $103,000 --
1999 $109,000 $24,000
1998 $ 80,000 $40,000
- ----------
(1) Mr. Mavrommatis joined the Company in August 1999. His annualized salary in
1999 would have been $100,000.
(2) Mr. Loosmore served as the Company's Executive Vice President of Technology
until December 15, 2000. His annualized salary for 2000 would have been
$107,500.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
Presented below is information with respect to unexercised
stock options to purchase the Company's Common Stock held by each Named Officer
as of December 31, 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT DECEMBER 31, 2000 (#) AT DECEMBER 31, 2000 ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------
Jeffrey M. Jagid 353,125 $397,000 183,750/169,375 $274,000/123,000
Kenneth S. Ehrman 206,250 $244,000 115,000/91,250 $174,000/70,000
Michael L. Ehrman 353,125 $397,000 183,750/169,375 $274,000/123,000
Ned Mavrommatis 110,000 $ 0 8,000/102,000 $ 0/0
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 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,
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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.
During fiscal year 2000, the following grants were made to directors
under this plan.
Jeffrey M. Jagid 1/19/2000 75,000 at $7.56
Kenneth S. Ehrman 1/19/2000 37,500 at $7.56
N. Bert Loosmore 1/19/2000 37,500 at $7.56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
In June 1999 the Company entered into three-year employment
agreements with Kenneth Ehrman, Jeffrey Jagid and Michael Ehrman. Pursuant to
the agreements, Messrs. Kenneth Ehrman and Jagid are each entitled to base
salaries of $108,000 and Mr. Michael Ehrman is entitled to a base salary of
$96,000. Each employment agreement also provides that the employee is entitled
to a bonus as determined by the board of directors, from time to time, and
options under the Company's 1999 Stock Option Plan. Each employment agreement
provides for a term of three years and is renewable upon mutual consent. A
similar agreement with N. Bert Loosmore expired on December 15, 2000.
The employment agreements may be terminated for cause and, 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 agreements
also contain confidentiality and non-competition provisions prohibiting the
employee from competing against the Company and disclosing trade secrets and
other proprietary information.
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
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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.
INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE 1999 STOCK
OPTION PLAN
At present, the Company has 812,500 shares of Common Stock
reserved for issuance upon the exercise of options granted under the Company's
1999 Stock Option Plan (the "Plan"). This number includes shares to be issued
upon the exercise of options already granted. Proposal No. 2 provides for an
increase of 1,000,000 shares reserved for issuance under the Plan, so that the
total number of options, including shares to be issued upon the exercise of
options already granted, will be 1,812,500 shares.
The purpose of the Plan is to provide an incentive to key
employees (including directors and officers who are key employees), and to
consultants who are not employees of the Company, and to offer an additional
inducement in obtaining the services of such persons.
The Plan provides for grants of incentive stock options
("ISO's") and non-qualified stock options ("NSO's") 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 cannot be less than the fair
market value of a share 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 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. On April 2, 2001, the closing price of a share of
the Company's common stock as
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reported on the NASDAQ SmallCap Market was $3.375 per share. All options granted
expire not later than ten years after the date of grant.
Neither the optionee nor the Company will incur any federal
income tax consequences as a result of the grant of an option. The optionee will
have no taxable income upon exercising an ISO (except that the alternative
minimum tax may apply), and the Company will receive no deduction when an ISO is
exercised. Upon exercising an NSO, the optionee generally must recognize
ordinary income equal to the "spread" between the exercise price and the fair
market vale of a share of the Company's common stock on the date of exercise and
the Company will be entitled to a business expense deduction for the same
amount. In the case of an employee, the option spread at the time the NSO is
exercised is subject to income tax withholding, but the optionee generally may
elect to satisfy the withholding tax obligation by having shares of common stock
withheld from those purchased under the NSO. The tax treatment of a disposition
of option shares acquired under the Plan depends upon how long the shares have
been held and on whether such shares were acquired by exercising an ISO or an
NSO. The Company will not be entitled to a deduction in connection with a
disposition of option shares, except in the case of a disposition of shares
acquired under an ISO before the applicable ISO holding period has been
satisfied.
As of April 2, 2001, options to purchase 791,500 shares have
been granted and are outstanding under the Plan, leaving 21,000 shares of the
812,500 shares now currently authorized available for further grants of options.
The Board of Directors is seeking shareholder to approve the increase in the
number of shares reserved for issuance upon the exercise of options granted
under the Plan to adequately compensate the Company's employees and directors as
the Company expands its business and adds additional employees. The Board of
Directors therefore requests that the shareholders authorize the reservation and
issuance of up to an additional 1,000,000 shares, which would bring the total
number of shares reserved for issuance under the Plan to 1,812,500 shares. When
combined with the shares reserved for issuance under the Company's 1995 Employee
Stock Option Plan and the 1999 Director Stock Option Plan, an aggregate of
3,362,500 shares of the Company's 15,000,000 authorized shares of common stock
will be available for issuance pursuant to option benefit plans. As of April 2,
2001, there were 5,835,625 shares of the Company's common stock outstanding.
The Compensation Committee has not yet determined that it will
allocate the additional options authorized by this proposal to any particular
individuals or groups of individuals among those otherwise eligible to receive
grants. The chart below sets forth certain information regarding grants which
have heretofore been made under the Plan to the persons listed therein. In
addition, during 2001 employees who are not officers or directors have received
grants to purchase an additional 185,000 shares of common stock at a per share
exercise price of $2.31.
11
17
# OF OPTIONS GRANTED IN # OF OPTIONS GRANTED IN YEAR
YEAR ENDED ENDED PER
DECEMBER 31, 1999 PER SHARE DECEMBER 31, 2000 SHARE
AND OPTION AND OPTION
PERCENTAGE OF ALL EXERCISE PERCENTAGE OF ALL EXERCISE
NAME AND POSITION OPTIONS THEN GRANTED PRICE OPTIONS THEN GRANTED PRICE
----------------- ------------------------ --------- ----------------------------- --------
Jeffrey M. Jagid
Chief Executive Officer,
Director 0 -- 75,000 / 14% $7.56
Kenneth S. Ehrman
Chief Operating Officer, Director
0 -- 37,500 / 7% $7.56
Michael L. Ehrman
Executive Vice President 0 -- 75,000 / 14% $7.56
Ned Mavrommatis
Chief Financial Officer 40,000 / 17% $4.13 20,000 / 4% $7.56
50,000 / 9% $3.56
N. Bert Loosmore
Director (1) 0 -- 37,500 / 7% $7.56
Martin Rosansky
Secretary and Director 0 -- 0 --
Bruce Jagid
Treasurer and Director 0 -- 0 --
All Executive Officers and Directors
as a group (6 persons) (1)
40,000 / 17% $4.13 245,000 / 46% $7.56
50,000 / 9% $3.56
All Other Employees as a group
(31 persons) (2) 65,000 / 28% $7.67 20,000 $7.56
127,500 / 55% $4.13 25,000 $8.00
5,000 $6.75
107,500 $3.56
5,000 $4.50
10,000 $4.75
5,000 $4.13
66,000 $2.00
-------
243,500 / 45%
(1) Mr. Loosmore served as a Vice President until December 2000. Upon the
termination of his employment, all of his unexercised options were
forfeited.
(2) 127,000 options forfeited upon termination of employment.
12
18
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE FOLLOWING RESOLUTION. THE AFFIRMATIVE VOTE
OF THE MAJORITY OF THE VOTES CAST AT THE 2001 ANNUAL MEETING IS REQUIRED FOR
APPROVAL.
RESOLVED, that the Company reserve an additional 1,000,000
shares of the Corporation's Common Stock, $.01 value per share, for
issuance pursuant to the terms of the Company's 1999 Stock Option Plan
and that the shares to be issued under the Plan shall be so increased.
PROPOSAL NO. 3.
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 2001 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 2001 ANNUAL MEETING IS REQUIRED FOR THE
RATIFICATION OF THIS SELECTION.
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.
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19
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 20, 2001
20
I.D. SYSTEMS, INC.
One University Plaza, Hackensack, New Jersey 07601
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 1, 2001
The undersigned hereby appoints MICHAEL L. EHRMAN and NED MAVROMMATIS
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of I.D. Systems, Inc., held of record by the undersigned on April 2, 2001
at the Annual Meeting of Stockholders to be held on June 1, 2001, or any
adjournment thereof.
1. The election of all nominees for directors listed below.
/ / FOR ALL NOMINEES (except as marked to the contrary)
/ / WITHHOLD AUTHORITY TO VOTE
Instruction: To withhold authority to vote for any
particular nominee, strike a line through that
nominee's name in the list below.
Kenneth S. Ehrman, Jeffrey M. Jagid, N. Bert Loosmore,
Bruce Jagid, Martin G. Rosansky, Lawrence Burstein
2. To reserve an additional 1,000,000 shares of common stock for issuance
pursuant to the Company's 1999 Stock Option Plan
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the selection of Richard A. Eisner & Company, LLP as
the Company's independent auditors.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion upon any other matters which may properly come
before such meeting.
This Proxy will be voted as specified above.
This Proxy confers authority to vote "FOR" each proposition listed
above unless otherwise indicated.
(continued on reverse side)
21
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
DATE ______________, 2001
Signature_________________________
__________________________________
Signature of joint holder, if any
Please sign exactly as your name
appears to the left. If joint
owners, both should sign.
Executors, administrators,
trustees, etc. should sign and
give full titles as such. If the
signer is a corporation or
partnership, please sign full
corporate or partnership name by a
duly authorized officer or
partner.