-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H89SQKQo8UcbuLIciuEmp8irKCOhGFZ/VMHAI0ShP48SPre3TSRRWhr1atCig7rS quL/iEx0VZVpUIswhnqxKQ== 0000897101-06-001883.txt : 20060905 0000897101-06-001883.hdr.sgml : 20060904 20060905112457 ACCESSION NUMBER: 0000897101-06-001883 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20060905 DATE AS OF CHANGE: 20060905 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: IMAGE SENSING SYSTEMS INC CENTRAL INDEX KEY: 0000943034 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 411519168 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56343 FILM NUMBER: 061073010 BUSINESS ADDRESS: STREET 1: 500 SPRUCE TREE CENTRE STREET 2: 1600 UNIVERSITY AVE CITY: ST PAUL STATE: MN ZIP: 55104-3825 BUSINESS PHONE: 6516037700 MAIL ADDRESS: STREET 1: 500 SPRUCE TREE CENTRE STREET 2: 1600 UNIVERSITY AVE W. CITY: ST PAUL STATE: MN ZIP: 55104 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MICHALOPOULOS PANOS G CENTRAL INDEX KEY: 0001008477 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: BUSINESS PHONE: 6126037700 MAIL ADDRESS: STREET 1: 500 SPRUCE TREE CENTRE STREET 2: 1600 UNIVERSITY AVE WEST CITY: ST PAUL STATE: MN ZIP: 55104-3825 SC 13D/A 1 image063487_sc13da.txt AMENDMENT NO. 1 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) IMAGE SENSING SYSTEMS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - -------------------------------------------------------------------------------- (Title of Class of Securities) 45244C 10 4 - -------------------------------------------------------------------------------- (CUSIP Number) WITH A COPY TO: Panos G. Michalopoulos Amy Schneider 500 Spruce Tree Centre Dorsey & Whitney LLP 1600 University Ave. N. 50 S. Sixth St., Suite 1500 St. Paul, MN 55104 Minneapolis, MN 55402 (651) 603-7700 (612) 340-2971 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 8, 2006 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Secs. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] CUSIP NO. 45244C 10 4 1. Names of reporting persons: DR. PANOS G. MICHALOPOULOS 2. Check the appropriate box if a member of a group: (a) [ ] (b) [ ] 3. SEC use only: 4. Source of funds: PF 5. Check if disclosure of legal proceedings is required pursuant to [ ] Items 2(d) or 2(e): 6. Citizenship or place of organization: UNITED STATES Number of shares beneficially owned by each reporting person with: 7. Sole voting power: 336,298(1) 8. Shared voting power: 182,336(2) 9. Sole dispositive power: 336,298(1) 10. Shared dispositive power: 182,336(2) 11. Aggregate amount beneficially owned by each reporting person: 518,634 12. Check if the aggregate amount in Row (11) excludes certain shares: [ ] 13. Percent of class represented by amount in Row (11): 13.93% 14. Type of reporting person: IN - ------------------------------ (1) Includes a stock option to acquire 36,000 shares of common stock which Dr. Michalopoulos may purchase within 60 days at a price of $3.10 per share pursuant to the Non-Incentive Stock Option Agreement, dated September 20, 2002, between Dr. Michalopoulos and Image Sensing Systems, Inc., a stock option to acquire 6,000 shares of common stock which Dr. Michalopoulos may purchase within 60 days at a price of $7.50 per share pursuant to the Non-Incentive Stock Option Agreement, dated May 10, 2000, between Mr. Michalopoulos and Image Sensing Systems, Inc., and 294,298 shares held by Transatlantic Emporium & Technology Exchange L.L.C., a corporation wholly owned by Dr. Michalopoulos. (2) Includes 182,366 shares of common stock held by Ms. Betty Papapanou (the former spouse of Dr. Michalopoulos). Pursuant to an agreement between Ms. Papapanou and Dr. Michalopoulos, Ms. Papapanou will vote all such shares consistent with the recommendations of the majority of the Board of Directors of the Issuer, unless Dr. Michalopoulos agrees in writing that she need not so vote in respect to a particular proposal. Dr. Michalopoulos disclaims beneficial interest in respect to Ms. Papapanou's shares. CUSIP NO. 45244C 10 4 1. Names of reporting persons: TRANSATLANTIC EMPORIUM & TECHNOLOGY EXCHANGE L.L.C. I.R.S. Identification No. of Above Entity 20-0478877 2. Check the appropriate box if a member of a group: (a) [ ] (b) [ ] 3. SEC use only: 4. Source of funds: OO 5. Check if disclosure of legal proceedings is required pursuant to [ ] Items 2(d) or 2(e): 6. Citizenship or place of organization: DELAWARE LIMITED LIABILITY COMPANY Number of shares beneficially owned by each reporting person with: 7. Sole voting power: 0 8. Shared voting power: 294,298 9. Sole dispositive power: 0 10. Shared dispositive power: 294,298 11. Aggregate amount beneficially owned by each reporting person: 294,298 12. Check if the aggregate amount in Row (11) excludes certain shares: [ ] 13. Percent of class represented by amount in Row (11): 7.9% 14. Type of reporting person: OO - LIMITED LIABILITY COMPANY ITEM 1. SECURITY AND ISSUER This Amendment No. 1 Schedule 13D (the "SCHEDULE 13D") relates to the Common Stock, CUSIP 45244C 10 4, of Image Sensing Systems, Inc., a Minnesota corporation (the "ISSUER"). The address of the principal executive offices of the Issuer is 500 Spruce Tree Centre, 1600 University Avenue North, Saint Paul, Minnesota 55104. ITEM 2. IDENTITY AND BACKGROUND (a)-(c) This joint filing statement is being filed by Dr. Panos G. Michalopoulos, a citizen of the United States of America, and Transatlantic Emporium & Technology Exchange L.L.C., a Delaware limited liability company ("TRANSATLANTIC"). Dr. Michalopoulos and Transatlantic are each sometimes referred to as a Reporting Person and, collectively, referred to as Reporting Persons. The principal employment of Dr. Michalopoulos is Professor, Department of Civil Engineering, University of Minnesota, and Director, Image Sensing Systems, Inc. The principal business address of Dr. Michalopoulos is 500 Spruce Tree Centre, 1600 University Avenue North, Saint Paul, Minnesota 55104. Dr. Michalopoulos also controls Transatlantic, and owns 100% of the outstanding interest in Transatlantic. The principal business address of Transatlantic is 715 Fairfield Circle, Minnetonka, Minnesota 55305. (d)-(e) During the last five years, no Reporting Person, and to the best knowledge of the Reporting Persons, no director or executive officer of any Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or other similar misdemeanors) or has been a party to a civil proceeding of a judicial administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree, or other final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Dr. Michalopoulos is a citizen of the United States of America. Transatlantic is a Delaware limited liability company. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Dr. Michalopoulos used personal funds to purchase the shares of Common Stock of the Issuer that he holds directly, and will use personal funds to purchase shares of Common Stock of the Issuer if he exercises his right to do so pursuant to the Non-Incentive Stock Option Agreement, dated September 20, 2002 between Dr. Michalopoulos and Image Sensing Systems, Inc. to purchase up to an additional 36,000 shares of Common Stock of the Issuer at an exercise price of $3.10 per share and/or the Non-Incentive Stock Option Agreement, dated May 10, 2000 between Dr. Michalopoulos and Image Sensing Systems, Inc. to purchase up to an additional 6,000 shares of Common Stock of the Issuer at an exercise price of $7.50 per share. Transatlantic acquired the shares of Common Stock of the Issuer held by it pursuant to Dr. Michalopoulos's transfer of his direct ownership interest in the Issuer to Transatlantic. ITEM 4. PURPOSE OF TRANSACTION All of the shares of Common Stock acquired by the Reporting Persons were acquired and are held for investment purposes. Dr. Michalopoulos is also a director of the Issuer and has served as a director since 1984. Directors of the Issuer are elected annually by the stockholders of the Issuer. Other than as described above, none of the Reporting Persons currently have any plans or proposals which relate to, or may result in, any of the matters listed in Items 4(a)-(j) of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a),(b) As of the close of business on August 31, 2006, Dr. Michalopoulos beneficially owned 518,634 shares of Common Stock of the Issuer, constituting 13.93% of the shares outstanding. Dr. Michalopoulos has sole voting and dispositive power with respect to 336,298 shares, and shared voting and dispositive power with respect to 182,336 shares. As of the close of business on August 31, 2006, Transatlantic beneficially owned 294,298 shares of Common Stock of the Issuer, constituting 7.9% of the shares outstanding. Transatlantic shares voting and dispositive power with respect to all 294,298 shares beneficially owned by it. The aggregate percentage of shares of Common Stock of the Issuer reported owned by each of the Reporting Persons herein is based upon 3,723,704 shares of Common Stock outstanding, which is the total number of shares of the Issuer's Common Stock outstanding as of July 25, 2006 as reported in the Issuer's Form 10-Q for the quarter ended June 30, 2006, filed on August 9, 2006. (c) Except as described herein, in the past 60 days, none of the Reporting Persons have effected any transactions in respect to these shares of Common Stock. (d), (e) Not applicable ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Dr. Michalopoulos holds an option to purchase 36,000 shares of Common Stock of the Issuer at an exercise price of $3.10 per share, pursuant to the terms of the Non-Incentive Stock Option Agreement, dated September 20, 2002. A copy of the option agreement is attached hereto as Exhibit 2. Dr. Michalopoulos holds an option to purchase 6,000 shares of Common Stock of the Issuer at an exercise price of $7.50 per share, pursuant to the terms of the Non-Incentive Stock Option Agreement, dated May 10, 2000. A copy of the option agreement is attached hereto as Exhibit 3. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Joint Filing Agreement, dated August 31, 2006, between Panos Michalopoulos and Transatlantic Emporium & Technology Exchange L.L.C. Exhibit 2 Non-Incentive Stock Option Agreement, dated September 20, 2002, between Panos Michalopoulos and Image Sensing Systems, Inc. Exhibit 3 Non-Incentive Stock Option Agreement, dated May 10, 2000, between Panos Michalopoulos and Image Sensing Systems, Inc. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete, and correct. Date: August 31, 2006 /s/ Panos Michalopoulos ------------------------------------- Panos Michalopoulos TRANSATLANTIC EMPORIUM & TECHNOLOGIES EXCHANGE L.L.C. /s/ Panos Michalopoulos ------------------------------------- Panos Michalopoulos Owner INDEX TO EXHIBITS Exhibit 1 Joint Filing Agreement, dated August 31, 2006, between Panos Michalopoulos and Transatlantic Emporium & Technology Exchange L.L.C. Exhibit2 Non-Incentive Stock Option Agreement, dated September 20, 2002, between Panos Michalopoulos and Image Sensing Systems, Inc. Exhibit 3 Non-Incentive Stock Option Agreement, dated May 10, 2000, between Panos Michalopoulos and Image Sensing Systems, Inc. EX-1 2 image063487_ex1.txt JOINT FILING AGREEMENT EXHIBIT 1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, Dr. Panos G. Michalopoulos and Transatlantic Emporium & Technology Exchange L.L.C. each agree to the joint filing on behalf of each of them of a Schedule 13D (including amendments thereto) with respect to the Common Stock of Image Sensing Systems, Inc., a Minnesota corporation, and further agree that this Joint Filing Agreement be included as an exhibit to such joint filing. Date: August 31, 2006 /s/ Panos Michalopoulos ------------------------------------- Panos Michalopoulos TRANSATLANTIC EMPORIUM & TECHNOLOGIES EXCHANGE L.L.C. /s/ Panos Michalopoulos ------------------------------------- Panos Michalopoulos Owner EX-2 3 image063487_ex2.txt NON-INCENTIVE STOCK OPTION AGREEMENT (DIRECTOR) EXHIBIT 2 IMAGE SENSING SYSTEMS, INC. NON-INCENTIVE STOCK OPTION AGREEMENT (DIRECTOR) This Option Agreement, made and entered into this 20th day of September 2002 between Image Sensing Systems, Inc., a Minnesota corporation (the "Company") and Panos Michalopoulos ("Director"). WHEREAS, the Company has adopted the Image Sensing Systems, Inc. 1995 Long-Term Incentive and Stock Option Plan (the "Plan") which permits issuance of stock options for the purchase of shares of common stock of the Company, and the Company has taken all necessary actions to grant the following option pursuant and subject to the terms of the Plan. NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Director hereby agree as follows: 1. Grant of Option. The Company hereby grants Director the right and option (hereinafter called the "Option") to purchase all or any part of the aggregate of thirty-six thousand (36,000) shares of the Company's common stock at the option price equal to $3.10 per share on the terms and conditions set forth in this agreement and in the Plan. It is understood and agreed that the option price is the per share fair market value of such shares on September 20, 2002. The Option is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The option is issued pursuant to the Plan and is subject to its terms. A copy of the Plan will be furnished upon request of Director. 2. Vesting of Option Rights. Except as otherwise provided in section 3 of this agreement, Director may exercise the Option in accordance with the following schedule: On or after each of Number of shares with respect to the following dates which the Option is exercisable ------------------- ------------------------------- December 31, 2002 24,000 December 31, 2003 12,000 Notwithstanding the foregoing, the Option may be exercised as to 100% of the shares of common stock of the Company for which the Option was granted on the date of a "change of control", as hereinafter defined. A "change of control" shall mean any of the following: (i) a public announcement that any person has acquired or has the right to acquire beneficial ownership of 51 % or more of the then outstanding shares of common stock of the Company and, for this purpose, the terms "person" and "beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission; (ii) the commencement of or public announcement of an intention to make a tender or exchange offer for 51% or more of the then outstanding shares of the common stock of the Company; (iii) a sale of all or substantially all of the assets of the Company, or (iv) the Board of Directors of the Company, in its sole and absolute discretion, determines that there has been a sufficient change in the stock ownership of the Company to constitute a change in control of the Company. The Option shall terminate at the close of business on September 20, 2012 or such shorter period as is prescribed herein. Director shall not have any of the rights of a shareholder with respect to the shares subject to the Option until such shares shall be issued to Director upon the proper exercise of the Option. 3. Exercise of Option after Death or Termination of Employment. The Option shall terminate and may no longer be exercised if director ceases to be employed (which term, for the purposes of this section 3, shall include status as a member of the board of directors of the Company) by the Company or its subsidiaries, except that: (a) If Director's employment shall be terminated for any reason, voluntary or involuntary, other than death or disability (as set forth in section 3(c)) or as a result of Director's gross and willful misconduct, Director may at any time prior to the close of business on September 20, 2012 exercise the Option to the extent the Option was exercisable by Director on the date of the termination of Director's employment: and (b) If Director's employment is terminated as a result of Director's gross and willful misconduct, including but not limited to wrongful appropriation of funds or the commission of a gross misdemeanor or felony, the Option shall be terminated as of the date of the misconduct; and (c) If Director dies in the employ of the Company or a subsidiary or Director's employment is terminated because Director has become disabled (within the meaning of Code section 22(e)(3)) while in the employ of the Company or a subsidiary, the Option may be exercised at any time prior to the close of business on September 20, 2012 to the extent that Director was entitled to exercise the Option on the date of Director's death or termination of employment, if earlier, by director or Director's personal representatives, if applicable, or by the person or persons to whom Director's rights under the Option pass be will or by the applicable laws of descent and distribution: provided, however, that the Option may not be exercised to any extent by anyone after the termination date of the Option. 4. Method of Exercise of Option. Subject to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Company at its principal office at 500 Spruce Tree Centre, 1600 University Avenue, St. Paul, Minnesota 55104. The notice shall set forth the number of shares as to which the Option is being exercised and shall be accompanied by payment of the purchase price. Payment of the purchase price shall be made in cash (including bank check, personal check or money order payable to the Company), or, at the discretion of the Company, by delivering to the Company for cancellation shares of the Company's common stock already owned by Director having a fair market value equal to the full purchase price of the shares being acquired or a combination of cash and such shares. The fair market value of any shares delivered by Director upon the exercise of the Option shall be determined as provided in section 5 of the Plan. 5. Miscellaneous. (a) This agreement shall not confer on Director any right with respect to continuance of employment with the Company or any subsidiary of the Company, nor will it interfere in any way with the right of the Company to terminate such employment at any time. (b) The exercise of all or any parts of the Option shall only be effective at such time that the sale of shares of common stock pursuant to such exercise will not violate any state or federal securities or other laws. (c) The Option may not be transferred, except by will or the laws of descent and distribution to the extent provided in subsection 3(c), and during Director's lifetime the Option is exercisable only by Director. (d) If there shall be any change in the common stock subject to the Option through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or other change in the corporate structure of the Company, appropriate adjustments shall be made by the Company in the number of shares and the price per share of the shares subject to the Option in order to prevent dilution or enlargement of the option rights granted hereunder. (e) The Company shall at all times during the term of the Option reserve and keep available such number of shares of the Company's common stock as will be sufficient to satisfy the requirements of this agreement. (f) In order to comply with all applicable federal or state income tax laws or regulation, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Director. (g) Director shall not disclose either the contents or any of the terms and conditions of the Option to any other person, except with the consent of an authorized officer of the Company that is not the Director or on a confidential basis for personal financial planning, legal or administrative purposes, and agrees that disclosure in violation of this Section 5(g) may result in both immediate termination of the Option without the right to exercise any part thereof and termination of employment with the Company. IN WITNESS WHEREOF, the Company and Director have executed this agreement on the date set forth in the first paragraph. IMAGE SENSING SYSTEMS, INC. By /s/ James Murdakes ------------------------------- James Murdakes President and Chief Executive Officer By /s/ Panos Michalopoulos ------------------------------- Director EX-3 4 image063487_ex3.txt NON-INCENTIVE STOCK OPTION AGREEMENT EXHIBIT 3 IMAGE SENSING SYSTEMS, INC. NON-INCENTIVE STOCK OPTION AGREEMENT This Option Agreement, made and entered into this 10th day of May 2000 between Image Sensing Systems, Inc., a Minnesota corporation (the "Company") and Panos Michalopoulos, an individual resident of Minnesota ("Director"). WHEREAS, the Company has taken all necessary actions to grant the following option, which option is not granted pursuant to the terms of the Company's 1995 Long-Term Incentive and Stock Option Plan. NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Director agree as follows: 1. Grant of Option. The Company hereby grants Director the right and option (hereinafter called the "Option") to purchase all or any part of the aggregate of Six thousand (6,000) shares of the Company's common stock at the option price of $7.50 per share on the terms and conditions set forth in this agreement and in the Plan. It is understood and agreed that the option price is the per share fair market value of such shares on the date of the grant. The Option is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Vesting of Option Rights. Except as otherwise provided in section 3 of this agreement, the Director may exercise the Option in accordance with the following schedule: On or after each of Number of shares with respect to the following dates which the Option is exercisable ------------------- ------------------------------- 05/10/00 6,000 Notwithstanding the foregoing, the Option may be exercised as to 100% of the shares of common stock of the Company for which the Option was granted on the date of a "change of control", as hereinafter defined. A "change of control" shall mean any of the following: (i) a public announcement that any person has acquired or has the right to acquire beneficial ownership of 51% or more of the then outstanding shares of common stock of the Company and, for this purpose, the terms "person" and `beneficial ownership" shall have the meanings provided in Section 13(d) of the Securities Exchange Act of 1934 or related rules promulgated by the Securities and Exchange Commission; (ii) the commencement of or public announcement of an intention to make a tender or exchange offer for 51% or more of the then outstanding shares of the common stock of the Company; (iii) a sale of all or substantially all of the assets of the Company, or (iv) the Board of Directors of the Company, in its sole and absolute discretion, determines that there has been a sufficient change in the stock ownership of the Company to constitute a change in control of the Company. The Option shall terminate at the close of business on May 10, 2010 or such shorter period as is prescribed herein. The Director shall not have any of the rights of a shareholder with respect to the shares subject to the Option until such shares shall be issued to Director upon the proper exercise of the Option. 3. Termination of Option. In the event the Director ceases to be employed by the Company or its subsidiaries as an employee or director, any Option Rights which have not become vested on, or before, the date on which such employment terminates, shall become null and void. In the event such termination is due to the death or legal incapacity of the Director, then the heirs or other legal representative of the Director or his estate may enjoy the same rights and options contained herein for the benefit of the Director. In the event of a "change in control", as that term may be defined by the Board of Directors from time to time, then all unvested share option shall become vested at the time of such event 4. Method of Exercise of Option. Subject to the foregoing, the Option may be exercised in whole or in part from time to time by serving written notice of exercise on the Company at its principal office at 500 Spruce Tree Centre, 1600 University Avenue, St. Paul, Minnesota 55104. The notice shall set forth the number of shares as to which the Option is being exercised and shall be accompanied by payment of the purchase price. Payment of the purchase price shall be made in cash (including bank check, personal check or money order payable to the Company), or, at the discretion of the Company, by delivering to the Company for cancellation shares of the Company's common stock already owned by Director having a fair market value equal to the full purchase price of the shares being acquired or a combination of cash and such shares. The fair market value of any shares delivered by Director upon the exercise of the Option shall be determined as provided in section 5 of the Company's 1995 Long-Term Incentive and Stock Option Plan. 5. Miscellaneous. (a) This agreement shall not confer on Director any right with respect to continuance of employment with the Company or any subsidiary of the Company, nor will it interfere in any way with the right of the Company to terminate such employment at any time. (b) The exercise of all or any parts of the Option shall only be effective at such time that the sale of shares of common stock pursuant to such exercise will not violate any state or federal securities or other laws. (c) The Option may not be transferred, except by will or the laws of descent and distribution to the extent provided in subsection 3, and during Director's lifetime the Option is exercisable only by Director. (d) If there shall be any change in the common stock subject to the Option through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or other change in the corporate structure of the Company, appropriate adjustments shall be made by the Company in the number of shares and the price per share of the shares subject to the Option in order to prevent dilution or enlargement of the option rights granted hereunder. (e) The Company shall at all times during the term of the Option reserve and keep available such number of shares of the Company's common stock as will be sufficient to satisfy the requirements of this agreement. (f) In order to comply with all applicable federal or state income tax laws or regulation, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or collected from Employee. (g) Director shall not disclose either the contents or any of the terms and conditions of the Option to any other person, except with the consent of an authorized officer of the Company that is not the Employee or on a confidential basis for personal financial planning, legal or administrative purposes, and agrees that disclosure in violation of this Section 5(g) may result in both immediate termination of the Option without the right to exercise any part thereof and termination of employment with the Company. IN WITNESS WHEREOF, the Company and Director have executed this agreement on the date set forth in the first paragraph. IMAGE SENSING SYSTEMS, INC. By /s/ William L. Russell ----------------------------------- William L. Russell Its President and Chairman By /s/ Panos Michalopoulos ----------------------------------- Panos Michalopoulos Director -----END PRIVACY-ENHANCED MESSAGE-----