UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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 [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
ID SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
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[_] Fee paid previously with preliminary materials.
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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I.D. SYSTEMS, INC.
--------------------
Notice of Annual Meeting
and
Proxy Statement
Wednesday, June 5, 2002
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
May 6, 2002
Dear Stockholder:
On behalf of the Board of Directors and management, I
cordially invite you to attend the Annual Meeting of Stockholders to be held on
Wednesday, June 5, 2002 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 Annual Meeting of Stockholders 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 stockholders.
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.
Thank you for your continued interest in I.D. Systems.
Sincerely,
/s/ Jeffrey M. Jagid
Jeffrey M. Jagid
Chief Executive Officer
I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2002
To the Stockholders of I.D. Systems, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders
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
Wednesday, June 5, 2002 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 for the ensuing
year or until their successors are elected.
2. To ratify the appointment of Richard A. Eisner & Company, LLP
as independent auditors of the Company for 2002.
3. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on April
22, 2002 are entitled to notice of and to vote at the Annual Meeting 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
/s/ Martin G. Rosansky
Martin G. Rosansky
Secretary
Dated: May 6, 2002
I.D. Systems, Inc.
One University Plaza
Hackensack, New Jersey 07601
May 6, 2002
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 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Company's offices, located
at One University Plaza, Hackensack, New Jersey 07601, on Wednesday, June 5,
2002 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 2001 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
stockholders of record at the close of business on April 22, 2002. These
documents shall be mailed on or about May 6, 2002.
A stockholder 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
stockholder 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 stockholder 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 stockholders of record at the close of business on April
22, 2002 are entitled to vote at the Annual Meeting. On that day, there were
6,754,598 shares of Common Stock outstanding.
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,
stockholders 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.
1
Abstentions may be specified on all proposals submitted to a
stockholder 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 will, therefore, have no legal effect on the vote of that
particular matter.
How You Can Vote
You may vote your shares by signing the enclosed proxy or
voting instruction card and returning it in a timely manner. Please mark the
appropriate boxes on the card and sign, date and return the card promptly. A
postage-paid return envelope is enclosed for your convenience.
Stockholders' Proposals for Next Annual Meeting
Stockholders' proposals intended to be presented at the 2002
Annual Meeting of Stockholders (to be held in 2003) must be received by the
Company no later than January 6, 2003 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
stockholder's right to attend the meeting and vote in person. Any stockholder
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 Annual Meeting to
serve for a term of one year, until the next 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. Mr. N. Bert Loosmore,
a current director of the Company, has not been slated for re-election at the
Annual Meeting. The names of the nominees for directors of the Company whose
terms of office will continue after the Annual Meeting are listed below.
2
Jeffrey M. Jagid, 33, has been Chairman of the Board since
June 2001 and Chief Executive Officer of the Company since June 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 is also a director of Coining Technologies,
Inc. 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.
Kenneth S. Ehrman, 32, is a founder of the Company and has
been its Chief Operating Officer since June 2000. Mr. Ehrman has been President
and 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
Echelon Corporation. Mr. Ehrman is the brother of Michael L. Ehrman, the
Company's Executive Vice President of Engineering.
Beatrice Yormark, 57, has served as a director of the Company
since June 2001. Ms. Yormark is the President and Chief Operating Officer of
Echelon Corporation, a leader in networking every day devices. Ms. Yormark has
been with Echelon since 1990. Prior to becoming the President and Chief
Operating Officer in September 2001, she held the position of Vice President of
Worldwide Marketing and Sales. Before joining Echelon, she was the Chief
Operating Officer of Connect, Inc., an on-line information services company.
Before joining Connect, Ms. Yormark held a variety of positions, including
executive director of systems engineering for Telaction Corporation, director in
the role of partner at Coopers & Lybrand, vice president of sales at INTERACTIVE
Systems Corporation, and various staff positions at the Rand Corporation. Ms.
Yormark spent one-year teaching computer science at Purdue University, following
the completion of her MS degree in computer science. In addition to her graduate
degree, Ms. Yormark has a BS degree in mathematics from City College of New
York.
Martin G. Rosansky, 63, is a founder of the Company and has
served as its Secretary and as a Director since inception. Mr. Rosansky is the
president of Coining Technologies, Inc., a manufacturer of electronic components
for the telecommunications industry, which he founded in 1991. 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.
Lawrence Burstein, 59, 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., Traffix, Inc. and Gender Sciences, Inc. Mr. Burstein
received a Bachelor of Arts in Economics from the University of Wisconsin and a
Bachelor of Law from Columbia Law School.
3
Michael Monaco, 54, is a Director nominee of the Company. He
has served as a Vice Chairman of Cendant Corporation from 1996 to 2000 and as
Chief Executive Officer of the Direct Marketing Division of Cendant from 1998 to
2000. Mr. Monaco served as the Executive Vice President and Chief Financial
Officer of the American Express Company from 1990 to 1996. Mr. Monaco is a
Director of Washington Group International, Inc. Mr. Monaco received a Bachelor
of Science degree in Accounting from Villanova University and a Master of
Business Administration degree from Fairleigh Dickinson University. Mr. Monaco
is also a Certified Public Accountant.
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 Chief Executive Officer 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 during 2001. Each Director
attended all of these meetings. The Board of Directors has a standing
Compensation Committee and standing Audit Committee but does not have a standing
Nominating Committee.
Compensation Committee
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 Ms. Yormark, held six meetings during 2001,
which were attended via teleconference by all the members thereof.
Audit Committee Report
The Audit Committee report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any of
the Company's other filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates the report by reference therein.
The Audit Committee consists of three members, all of whom are
"independent" under the Nasdaq listing standards as currently in effect. None of
the Audit Committee members is a current officer or employee of the Company or
any of its affiliates.
4
The Board of Directors has adopted a written charter for the
audit committee, which is included with this proxy statement as Appendix A. The
charter has been approved and adopted by the Board of Directors and is reviewed
and reassessed annually by the Audit Committee. The charter sets forth the
responsibilities, authority and specific duties of the Audit Committee. The
charter specifies, among other things, the structure and membership requirements
of the audit committee, as well as the relationship of the Audit Committee to
the Company's independent auditors and management.
In accordance with its written charter, the Audit Committee
assists the Board in monitoring (1) the integrity of the Company's financial
reporting process including its internal controls regarding financial reporting,
(2) the compliance by the Company with legal and regulatory requirements, (3)
the independence and performance of the Company's internal and external auditors
and (4) provide an avenue of communication among the independent auditors,
management and the Board of Directors. The Audit Committee, composed of Messrs.
Burstein, Rosansky and Ms. Yormark, all independent directors, held one meeting
during 2001, which was attended by all the members thereof.
The Audit Committee has reviewed the audited financial
statements of the Company for the year ended December 31, 2001, with management
and Richard A. Eisner & Company, LLP, the Company's independent auditors.
The Audit Committee has discussed and reviewed with Richard A.
Eisner & Company, LLP all the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). It has also
received the written disclosures and the letter from Richard A. Eisner &
Company, LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with Richard
A. Eisner & Company, LLP their independence.
Based on this review and discussions, the Audit Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in its Annual Report on Form 10-KSB for the year ended
December 31, 2001, for filing with the Securities and Exchange Commission.
Lawrence Burstein
Martin G. Rosansky
Beatrice Yormark
5
OWNERSHIP OF SHARES
The following table sets forth information with respect to the beneficial
ownership of shares of common stock as of March 31, 2002:
o each person or entity who is known by the Company to beneficially owns
five percent or more of the common stock;
o each director and executive officer of the Company; and
o all directors and executive officers of the Company as a group.
Name of Beneficial Owner (1) Number of Shares Percentage (2)
--------------------------------------------------------------------------------------------------------------------
Jeffrey M. Jagid 489,125(3) 6.94%
Kenneth S. Ehrman 635,213(4) 9.15%
Michael L. Ehrman 333,400(5) 4.73%
Ned Mavrommatis 36,500(6) *
N. Bert Loosmore 543,676(7) 8.00%
Martin Rosansky 606,538(8) 8.81%
Lawrence Burstein 25,063(9) *
Beatrice Yormark 3,958(10) *
CQ Capital, LLC and E. Turner Baur 538,200(11) 7.92%
Jack Silver 423,700(12) 6.24%
All Directors and Executive Officers as a group 2,673,473(13) 35.12%
(8 persons)
--------------------
* Less than one percent
(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 believes 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 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.
6
(3) Includes 251,875 shares of common stock underlying Currently Exercisable
Options granted to Mr. Jagid, pursuant to the Company's 1995 Employee Stock
Option Plan and 1999 Stock Option Plan.
(4) Includes 151,250 shares of common stock underlying Currently Exercisable
Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
Option Plan and 1999 Stock Option Plan.
(5) Includes 251,875 shares of common stock underlying Currently Exercisable
Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
Option Plan and 1999 Stock Option Plan.
(6) Includes 34,000 shares of common stock underlying Currently Exercisable
Options to Mr. Mavrommatis pursuant to the Company's 1999 Stock Option Plan.
(7) Includes 5,729 shares of common stock underlying Currently Exercisable
Options granted to Mr. Loosmore pursuant to the Company's 1999 Director Option
Plan.
(8) Includes 96,000 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 25,063 shares of common stock underlying currently exercisable
options granted to Mr. Burstein pursuant to the Company's 1999 Director Option
Plan.
(10) Includes 3,958 shares of common stock underlying currently exercisable
options granted to Ms. Yormark pursuant to the Company's 1999 Director Option
Plan.
(11) Includes (i) 467,300 shares held by CQ Capital, L.L.C. and beneficially
owned by E. Turner Baur and (ii) 70,900 shares beneficially owned by E. Turner
Baur. The address of the business office of each of the reporting persons is 65
Locust Avenue, Second Floor, New Canaan, Connecticut 06840. The foregoing
information is derived from a Schedule 13G/A filed on behalf of CQ Capital
L.L.C. and E. Turner Baur on January 25, 2002.
(12) His address is 660 Madison Avenue, 15th Floor, New York, New York 10021.
The foregoing information is derived from a Schedule 13G filed by Mr. Silver on
February 14, 2002.
(13) Includes 819,750 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.
7
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or
accrued, for the fiscal years ended December 31, 2001, 2000 and 1999, 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, 2001.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------- ---------------------
Securities
Name and Underlying
Principal Position Year Salary Bonus Options/SARs (#)
------------------ ---- ------ ----- ---------------------
Jeffrey M. Jagid 2001 $120,000 --- 65,000
Chief Executive Officer 2000 $119,500 --- 75,000
and General Counsel 1999 $114,500 $12,000 ---
Kenneth S. Ehrman 2001 $120,000 --- 45,000
President and Chief Operating Officer 2000 $119,500 --- 37,500
1999 $114,500 $12,000 ---
Michael L. Ehrman 2001 $108,000 --- 60,000
Executive Vice President 2000 $107,500 --- 75,000
1999 109,000 $24,000 ---
Ned Mavrommatis 2001 $100,000 --- 55,000
Chief Financial Officer and Treasurer 2000 $100,000 --- 70,000
1999(1) $34,000 --- 40,000
--------------------
(1) Mr. Mavrommatis joined the Company in August 1999. His annualized salary in
1999 would have been $100,000.
Option Grants in 2001
During the year ended December 31, 2001, options to purchase
shares of the Company's common stock were granted under the Company's 1999
Employee Stock Option Plan to the below named officers and directors in the
amounts and at the per share exercise price set forth opposite their names. All
options vest in equal installments over a five-year period commencing on the
first anniversary of the date of grant.
8
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal 2001 ($/Share) Date
------------------------------ ---------------- ------------------ --------------- ---------------
Jeffrey M. Jagid 65,000 11.2% $5.67 11/1/11
Michael L. Ehrman 60,000 10.4% $5.67 11/1/11
Ned Mavrommatis 55,000 9.5% $5.67 11/1/11
Kenneth S. Ehrman 45,000 7.8% $5.67 11/1/11
Option Values
The following table sets forth the number and value of
securities underlying unexercised options that are held by the Named Officers as
of December 31, 2001. The value of unexercised in-the-money options is based on
the fair market value of our common stock on December 31, 2001 of $10.59, as
quoted on the Nasdaq SmallCap Market, minus the actual exercise price. None of
the Named Officers exercised options during the fiscal year ended December 31,
2001.
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at December Money Options at December
31, 2001 31, 2001 ($)
------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Jeffrey M. Jagid 236,875 181,250 2,128,811 1,029,608
Michael L. Ehrman 236,875 176,250 2,163,856 1,005,188
Ned Mavrommatis 30,000 135,000 185,823 755,292
Kenneth S. Ehrman 143,750 107,500 1,327,091 617,385
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.
9
Employee directors are entitled to participate in the
Company's 1999 Stock Option Plan. A total of 1,812,500 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,
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.
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. The employment
agreements provide that Messrs. Kenneth Ehrman and Jeffrey Jagid are each
initially entitled to base salaries of $108,000 and Mr. Michael Ehrman is
entitled to a base salary of $96,000. The employment agreements provide that the
base salaries are subject to annual increases. 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.
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 fiduciary duties as a director.
The Company has acquired directors' and officers' liability insurance for its
directors and officers.
10
The Delaware Supreme Court has held the directors' duty of
care to a corporation and its stockholders 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 stockholders 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
stockholder'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.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and amendments
to these forms furnished to the Company all parties subject to the reporting
requirements of Section 16(a) of the Exchange Act filed all such required
reports during and with respect to the fiscal year ended December 31, 2001.
Proposal No. 2.
Ratification of Appointment of Independent Auditors
Subject to ratification by the stockholders, 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 Annual Meeting and will have an
opportunity to make a statement, if they so desire, and will be available to
respond to appropriate questions.
Audit Fees
Fees of Richard A. Eisner & Company, LLP for audit services
provided to the Company for 2001 were $28,000.
11
All Other Fees
Fees of Richard A. Eisner & Company, LLP for all other
services provided to the Company for 2001 were $8,500. These services were for
procedures in connection with Securities and Exchange Commission filings,
including quarterly reports on Form 10-QSB, and consents. The Audit Committee
has determined that the provision of such services is compatible with
maintaining the independence of Richard A. Eisner & Company, LLP.
Financial Information Systems Design and Implementation Fees
No fees were paid by the Company to Richard A. Eisner &
Company, LLP for any financial information systems design and implementation
services for 2001.
The Board of Directors unanimously recommends that the
stockholders vote FOR approval of this proposal. The affirmative vote of the
majority of the votes cast at the Annual Meeting is required for the
ratification of the appointment of the independent auditors.
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,
/s/ Martin G. Rosansky
Martin G. Rosansky
Secretary
Dated: May 6, 2002
12
Exhibit A
AUDIT COMMITTEE CHARTER
The members of the Audit Committee shall be appointed by the Board of Directors
to assist the Board in monitoring (1) the integrity of the Company's financial
reporting process including its internal controls regarding financial reporting,
(2) the compliance by the Company with legal and regulatory requirements, (3)
the independence and performance of the Company's internal and external auditors
and (4) provide an avenue of communication among the independent auditors,
management, the internal auditing department and the Board of Directors.
The number of members of the Audit Committee and their independence and
experience requirements shall meet NASD requirements.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually
and submit it to the Board for approval.
2. Review the annual audited financial statements with
management, including major issues regarding accounting and auditing principles
and practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the
independent auditor of significant financial reporting issues and judgments made
in connection with the preparation of the Company's financial statements.
4. In consultation with management, the independent auditors,
and the internal auditors, consider the integrity of the Company's financial
reporting processes and controls.
5. Review with management and the independent auditor the
Company's quarterly financial statements prior to the release of quarterly
earnings.
6. Meet with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
A-1
7. Review major changes to the Company's accounting principles
and practices taking into consideration the views of the independent auditor,
internal auditors or management.
8. Recommend to the Board the appointment of the independent
auditor.
9. Approve the fees to be paid to the independent auditor.
10. Receive periodic reports from the independent auditor
regarding the auditor's independence, discuss such reports with the auditor, and
if so determined by the Audit Committee, recommend that the Board take
appropriate action to assure the independence of the auditor.
11. Evaluate the performance of the independent auditor and,
if so determined by the Audit Committee, recommend that the Board replace the
independent auditor.
12. Review the appointment and replacement of the senior
internal auditing executive.
13. Review the significant reports to management prepared by
the internal auditing department and management's responses.
14. Meet with the independent auditor prior to the audit to
review the planning and staffing of the audit.
15. Obtain from the independent auditor an understanding of
whether there are any indications that Section 10A of the Private Securities
Litigation Reform Act of 1995 is applicable and consult counsel if necessary.
16. Obtain reports from management, the Company's senior
internal auditing executive and the independent auditor that the Company's
subsidiary/foreign affiliated entities are in conformity with applicable legal
requirements and the Company's Code of Conduct.
17. Discuss with the independent auditor the matters required
to be discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
18. Review with the independent auditor any problems or
difficulties the auditor may have encountered and any management letter provided
by the auditor and the Company's response to that letter. Such review should
include a discussion of any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities or access to
required information.
19. Prepare the report required by the rules of the Securities
and Exchange Commission to be included in the Company's annual proxy statement.
20. Advise the Board with respect to the Company's policies
and procedures regarding compliance with applicable laws and regulations and
with the Company's Code of Conduct.
A-2
21. Review with the Company's General Counsel legal matters
that may have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies.
22. Meet at least annually with the chief financial officer,
the senior internal auditing executive and the independent auditor in separate
executive sessions.
23. Establish, review, and update periodically a Code of
Ethical Conduct and ensure that management has established a system to enforce
the code.
24. Annually review policies and procedures as well as
internal audit results associated with directors' and officers expense accounts
and perquisites.
25. Annually review director and officer related party
transactions and potential conflicts of interest.
26. Perform any other activities consistent with this Charter,
as the Committee or Board deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles; this is the
responsibility of management and upon completion of the audit by the independent
auditor, subject to their findings, they render their report on the financial
statements. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent auditor
or to assure compliance with laws and regulations and the Company's Code of
Conduct; this is the responsibility of the Board.
A-3
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 ON JUNE 5, 2002
The undersigned hereby appoints Michael L. Ehrman and Ned Mavrommatis
as proxy to represent the undersigned at the Annual Meeting of Stockholders to
be held at the offices of I.D. Systems, Inc., at One University Plaza,
Hackensack, New Jersey 07601 on Wednesday, June 5, 2002 at 10:00 a.m., local
time, and at any adjournments thereof, and to vote the shares of Common Stock of
I.D. Systems, Inc. the undersigned would be entitled to vote if personally
present, as indicated below.
1. Election of Directors
FOR all nominees listed below |_| WITHHOLDING AUTHORITY |_|
(except as marked to the to vote for all nominees
contrary below) listed below
Jeffrey M. Jagid, Kenneth S. Ehrman, Beatrice Yormark, Martin G.
Rosansky, Lawrence Burstein and Michael Monaco
(INSTRUCTION: To withhold authority to vote for any individual nominee,
print that nominee's name on the line provided below.)
--------------------------------------------------------------------------------
2. Approval of the appointment of Richard A. Eisner & Company, LLP as
independent auditors.
FOR |_| AGAINST |_| ABSTAIN |_|
The shares of Common Stock represented by this proxy will be voted as
directed; however, if no direction is given, the shares of Common Stock will be
voted FOR the election of the nominees and FOR the approval of the appointment
of Richard A. Eisner & Company, LLP as the independent auditors of the Company.
If any other business is presented at the meeting, this proxy will be
voted by those named in this proxy in their best judgment. At the present time,
the Board of Directors knows of no other business to be presented at the
meeting.
DATED:______________________, 2002
----------------------------------
Signature
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Signature if held jointly
(Please date, sign as name
appears at the left, and
return promptly. If the
shares are registered in
the names of two or more
persons, each person should
sign. When signing as
Corporate Officer, Partner,
Executor, Administrator,
Trustee or Guardian, please
give full title. Please
note any changes in your
address alongside the
address as it appears in
the proxy.)