PROXY STATEMENT

Table of Content
EXPLANATORY NOTE ABOUT HOLDING COMPANY REORGANIZATION	1
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING	1
What is the purpose of the meeting?	1
Who is entitled to vote at the meeting?	1
What are my voting rights?	1
How many shares must be present to hold the meeting?	1
How do I vote my shares?	1
How do I access the proxy materials?	2
Can I vote my shares in person at the meeting?	2
What vote is required for the election of directors or for a proposal to be approved?	2
How are votes counted?	2
What is the difference between a “shareholder of record” and a shareholder who holds stock in “street name”?	2
What is a broker non‑vote?	3
What is the effect of not casting my vote?	3
How does the Board of Directors recommend that I vote?	3
What if I do not specify how I want my shares voted?	4
Can I change my vote after submitting my proxy or voting instructions?	4
Who pays for the cost of proxy preparation and solicitation?	4
How can I communicate with the Board of Directors?	4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	5
DELINQUENT SECTION 16(a) REPORTS	6
PROPOSAL 1 ‑ ELECTION OF DIRECTORS	7
CORPORATE GOVERNANCE	9
Board Composition and Meetings	9
Board Leadership Structure	9
Risk Oversight	9
Board Committees	10
Audit Committee	10
Compensation Committee	10
Nominating and Corporate Governance Committee	11
Executive Sessions of the Board	11
Board Nomination Process	11
Policy Regarding Attendance at Annual Meetings	12
Non‑Employee Director Compensation	12
Director Compensation – 2021	12

 

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EXECUTIVE COMPENSATION	13
Compensation Discussion	13
Summary Compensation Table ‑ 2021 and 2020	17
Grants of Equity and Non-Equity Awards ‑ 2021	18
Outstanding Equity Awards at Fiscal Year‑End ‑ 2021	18
Option Exercises and Stock Vested – 2021	19
Stock Options	19
Employment Agreements	20
Potential Payments upon Termination of Employment	21
RELATED PERSON TRANSACTIONS AND POLICY	22
Related Person Transactions	22
Related Person Transaction Policy	22
AUDIT COMMITTEE REPORT	23
Audit Committee Report	23
PAYMENT OF FEES TO OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	24
Audit Fees	24
Audit‑Related Fees	24
Tax Fees	24
All Other Fees	25
Policy on Audit Committee Pre‑Approval of Audit and Permissible Non‑Audit Services Provided by Our Independent Registered Public Accounting Firm	25
PROPOSAL 2 ‑ RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	26
PROPOSAL 3 –VOTE ON THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS	26
PROPOSAL 4 - VOTE ON THE AMENDMENT TO OUR SECTION 382 SHAREHOLDER RIGHTS AGREEMENT	27
PROPOSAL 5 – APPROVAL OF THE AUTOSCOPE TECHNOLOGIES CORPORATION 2022 STOCK OPTION AND INCENTIVE PLAN	33
SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING	39
ANNUAL REPORT TO SHAREHOLDERS	39
OTHER MATTERS	40

 

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PROXY STATEMENT

2022 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 10, 2022 

The Board of Directors of Autoscope Technologies Corporation is soliciting proxies for use at the annual meeting of shareholders to be held on May 10, 2022 and at any adjournment of the meeting.  This proxy statement and the proxy are being made available to shareholders on the internet or mailed to shareholders on or about March 22, 2022.

EXPLANATORY NOTE ABOUT HOLDING COMPANY REORGANIZATION

On April 29, 2021, Image Sensing Systems, Inc. ("ISNS") announced plans to implement a holding company reorganization.  Following the implementation of the reorganization on July 21, 2021, ISNS became a wholly-owned subsidiary of the new holding company, Autoscope Technologies Corporation ("Autoscope"), which replaced ISNS as the public company trading on The Nasdaq Capital Market under a new ticker symbol, "AATC."  As used in this proxy statement, the terms "Company", "we", "us" and "our" or their management or business at any time before the effective date of the reorganization refer to those of ISNS as the predecessor company and its wholly-owned subsidiaries and thereafter to Autoscope and its wholly-owned subsidiaries, except as otherwise specified or to the extent the context otherwise indicates.

At the annual meeting, shareholders will act upon the matters described in the Notice of Annual Meeting of Shareholders.  These consist of the election of directors, the ratification of the appointment of our independent registered public accounting firm, the vote on the advisory resolution to approve the compensation of our named executive officers (the “say-on-pay” vote), the vote on the adoption of an amendment to Autoscope's Section 382 rights agreement to preserve our net operating loss carryforwards and other tax benefits, and to approve the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan.  Also, management will report on our performance during the last fiscal year and respond to questions from shareholders.

The Board of Directors has set March 14, 2022 as the record date for the annual meeting.  If you were a shareholder of record at the close of business on March 14, 2022, you are entitled to notice of and to vote at the annual meeting.

As of the record date, 5,378,857 shares of common stock, par value $.01 per share, were issued and outstanding and, therefore, eligible to vote at the annual meeting.

Holders of Autoscope's common stock are entitled to one vote per share.  Therefore, a total of 5,378,857 votes are entitled to be cast at the meeting.  There is no cumulative voting for directors.

In accordance with Autoscope's bylaws, shares equal to at least a majority of the voting power of the outstanding shares of Autoscope's common stock as of the record date must be present at the meeting in order to hold the meeting and conduct business.  This is called a quorum.  Therefore, the holders of at least 2,689,429 shares constitute a quorum for the 2022 annual meeting.  Shares are counted as present at the meeting if:

•          you are present and vote them at the meeting; or

•          you have properly submitted a proxy.

If you are a shareholder of record, you can give a proxy to be voted at the meeting by voting your proxy over the internet or by telephone or, if you elect by receive written proxy materials, by completing, signing and mailing the proxy card.  If you properly vote and do not revoke your proxy, it will be voted in the manner you specify.

We are making proxy materials for the annual meeting available over the internet.  Therefore, we are mailing to Autoscope's shareholders a Notice of Internet Availability of Proxy Materials instead of paper copies of the proxy materials.  All shareholders receiving the Notice of Internet Availability of Proxy Materials will have the ability to access the proxy materials over the internet and to request to receive paper copies of the proxy materials by mail.  Instructions on how to access the proxy materials over the internet or to request paper copies may be found on the Notice of Internet Availability of Proxy Materials.  Autoscope's proxy materials may also be accessed on Autoscope's website at https://www.autoscope.com/financial-information.html.

If you are a shareholder of record, you will have the opportunity to vote your shares at the virtual annual meeting of shareholders.  Even if you currently plan to attend the virtual meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.

In accordance with Minnesota law, if a quorum is present, the nominees for election as directors will be elected by a plurality of the votes cast at the annual meeting.  This means that because shareholders will be electing six directors, the six nominees receiving the highest number of votes will be elected.  The affirmative vote of a majority of the shares of Autoscope's common stock present in person or by proxy and entitled to vote at the annual meeting is required to approve Proposals 2, 3, 4 and 5 (provided that a quorum is present at the meeting).

You may either vote “FOR” or “WITHHOLD AUTHORITY” to vote for each nominee for the Board of Directors.  You may vote “FOR,” “AGAINST” or “ABSTAIN” on Proposals 2, 3, 4 and 5.

If you submit your proxy but abstain from voting or withhold authority to vote on one or more matters, your shares will be counted as present at the meeting for the purpose of determining a quorum.  Your shares also will be counted as present at the meeting for the purpose of calculating the vote on the particular matter with respect to which you abstained from voting or withheld authority to vote.

If you withhold authority to vote for one or more of the directors, this has no effect on the election of those directors.  If you abstain from voting on a proposal, your abstention has the same effect as a vote against that proposal.

If you hold your shares in “street name” and do not provide voting instructions to your broker, your shares will be considered to be “broker non‑votes” and will not be voted on any proposal on which your broker does not have discretionary authority to vote.  Shares that constitute broker non‑votes will be counted as present at the meeting for the purpose of determining a quorum but will not be represented at the meeting for purposes of calculating the vote with respect to such matter or matters.  This effectively reduces the number of shares needed to approve such matter or matters.

If you hold Autoscope's shares directly in your name with Autoscope's transfer agent, Continental Stock Transfer & Trust Company, you are a “shareholder of record” (also known as a “registered shareholder”). The Notice of Internet Availability of Proxy Materials and, if you elect to receive written proxy materials, the Notice of Annual Meeting, Proxy Statement, 2021 Annual Report to Shareholders, and proxy card have been sent directly to you by us or Autoscope's representative.

If you own your shares indirectly through a broker, bank, or other financial institution, your shares are said to be held in “street name.” Technically, the bank or broker is the shareholder of record with respect to those shares.  In this case, the Notice of Internet Availability of Proxy Materials and, if you elect to receive written proxy materials, the Notice of Annual Meeting of Shareholders, Proxy Statement, 2021 Annual Report to Shareholders, and a voting instruction form have been forwarded to you by your broker, bank or other financial institution or its designated representative.  Through this process, your bank or broker collects the voting instructions from all of its customers who hold Autoscope's shares and then submits those votes to us.

Because of a change in the rules of The Nasdaq Stock Market ("Nasdaq") effective in 2010, your broker will NOT be able to vote your shares with respect to the election of directors, the advisory resolution to approve executive compensation, the approval of the amendment to Autoscope's Section 382 rights agreement, or to approve the 2022 Stock Option and Incentive Plan.  We strongly encourage you to exercise your right to vote.

 

A broker non‑vote occurs when a broker’s or bank’s customer does not provide the broker or bank with voting instructions on “non‑routine” matters for shares owned by the customer (sometimes referred to as the “beneficial owner”) but held in the name of the broker or bank.  For such matters, the broker or bank cannot vote on behalf of the beneficial owner and reports the number of such shares as “non‑votes.” By contrast, if a proposal is considered “routine,” the broker or bank, in its discretion, may vote any shares as to which it has not received specific instructions from its customer.  Each bank or broker has its own policies that control whether or not it casts votes for routine matters.

 

Whether the proposal is non‑routine or routine is governed by Nasdaq rules.  The election of directors (Proposal 1), the vote on the advisory resolution to approve the compensation of our named executive officers (Proposal 3), the approval of the amendment to Autoscope's Section 382 rights agreement (Proposal 4), and the vote to approve the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan (Proposal 5) are considered non‑routine by Nasdaq; the ratification of our independent registered public accounting firm (Proposal 2) is considered routine.

Changes in Nasdaq regulations in 2010 eliminated the ability of your bank or broker to vote your uninstructed shares in the election of directors on a discretionary basis.  Therefore, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors (Proposal 1), the vote on the advisory resolution to approve the compensation of our named executive officers (Proposal 3), the approval of the amendment to Autoscope's Section 382 rights agreement (Proposal 4), or the vote to approve the 2022 Stock Option and Incentive Plan (Proposal 5), no votes will be cast on your behalf.

Your bank or broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 2). If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any proposals at the annual meeting.

The Board of Directors recommends a vote:

• FOR all of the nominees for director;
• FOR the ratification of the appointment of Boulay PLLP as our independent registered public accounting firm for the 2022 fiscal year;
• FOR the advisory resolution approving the compensation of our named executive officers;
• FOR approval of the amendment to Autoscope's Section 382 rights agreement; and
• FOR approval of the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan.

If you vote your proxy and do not specify how you want to vote your shares, we will vote your shares:

• FOR all of the nominees for director;
  
• FOR the ratification of the appointment of Boulay PLLP as our independent registered public accounting firm for the 2022 fiscal year;
  
• FOR the advisory resolution approving the compensation of our named executive officers;
• FOR approval of the amendment to Autoscope's Section 382 rights agreement;
• FOR approval of the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan; and
• in the discretion of the persons named in the proxy on any other proposals that properly come before the meeting and as to which we did not receive notice within a reasonable time before the annual meeting of shareholders.

Yes.  You may revoke your proxy at any time before the proxy vote is cast at the annual meeting in any of the following ways:

• by giving written notice of revocation to Autoscope's Corporate Secretary (whose address is set forth below);
• by submitting a later‑dated proxy; or
• by voting in person at the meeting.

We pay for the cost of proxy preparation and solicitation.

We are soliciting proxies by making Autoscope's proxy materials available over the internet and by providing paper copies of Autoscope's proxy materials to shareholders who request them.  In addition, some of our officers, directors and regular employees may solicit proxies by telephone, letter, facsimile or personally.  These individuals will receive no additional compensation for these services.

Shareholders may communicate with Autoscope's Board of Directors by sending a letter addressed to the Board of Directors or specified individual directors to:

The Office of the Corporate Secretary

Autoscope Technologies Corporation

1115 Hennepin Avenue

Minneapolis, MN 55403

Autoscope's Corporate Secretary will deliver such letters to a director that can address the matter or to a specified director if so addressed.

The following table sets forth certain information with respect to the beneficial ownership of Autoscope's common stock as of March 14, 2022 by (1) each person or entity known by us to own beneficially more than five percent of Autoscope's common stock; (2) each director and nominee for election as a director of Autoscope Technologies Corporation; (3) each of our executive officers named in the Summary Compensation Table below; and (4) all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and includes voting power and investment power with respect to Autoscope's securities.  Shares of Autoscope's common stock issuable pursuant to stock options and convertible securities that are exercisable or convertible as of or within 60 days after March 14, 2022 are deemed outstanding for computing the beneficial ownership percentage of the person or member of a group holding the options but are not deemed outstanding for computing the beneficial ownership percentage of any other person.  Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.  The address of each director and executive officer named below is the same as that of Autoscope Technologies Corporation.

Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership			Percent of Common Stock Outstanding(1)
Five Percent Shareholders
John Lewis 300 Drakes Landing Road, Suite 172 Greenbrae, CA 94904		481,927	(2)		9.0	%
Nicusa Capital Partners L.P. 19 West 34th Street New York, NY 10001		470,660	(3)		8.8	%
AB Value Management LLC 208 Lenox Avenue, #409 Westfield, NJ 07090		466,642	(4)		8.7	%
Norman Pessin 366 Madison Avenue, 14th Floor New York, NY 10017		432,205	(5)		8.0	%
Executive Officers and Directors
Andrew T. Berger		582,884	(4)		10.8	%
Ezekiel J. Kruglick		188,468			3.5	%
Joseph P. Daly		135,408			2.5	%
James W. Bracke		94,406			1.8	%
Frank G. Hallowell		70,516	(6)		1.3	%
Chad A. Stelzig(7)		52,995	(6)		1.0	%
Geoffrey C. Davis		32,079			*
Brian J. VanDerBosch		5,294			*
All directors and executive officers as a group (7 persons)		1,162,050	(6)		21.6	%

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*              Less than one percent.

 

(1)		Based on 5,378,857 shares outstanding as of March 14, 2022.
(2)		We have relied upon the information supplied by John H. Lewis in a Schedule 13G/A he filed with the SEC on February 12, 2014.  Since February 12, 2014, no additional information has been supplied by John H. Lewis, and he has not been identified as a registered shareholder during the search conducted by our proxy group.  As a result, we do not believe that John H. Lewis continues to hold a position in the Autoscope's common stock.
(3)		We have relied upon the information supplied by Nicusa Capital Partners L.P. in a Schedule 13G/A it filed with the SEC on February 23, 2012.  Since February 23, 2012, no additional information has been supplied by Nicusa Capital Partners L.P., and it has not been identified as a registered shareholder during the search conducted by our proxy group.  As a result, we do not believe that Nicusa Capital Partners L.P. continues to hold a position in the Autoscope's common stock.
(4)		Mr. Berger has 116,242 shares under his direct ownership.  By virtue of his relationships with AB Value Management LLC and AB Value Partners, LP, Mr. Berger may be deemed to beneficially own the 466,642 shares owned by AB Value Partners, LP.  Of the 582,884 shares beneficially owned by Mr. Berger, 400,000 shares are pledged as security.  The 582,884 shares shown as being beneficially owned by Mr. Berger include the 466,642 shares shown as being beneficially owned by AB Value Management LLC.
(5)		We have relied upon the information supplied by Norman H. Pessin in a Schedule 13D/A he filed with the SEC on October 11, 2016.
(6)		Includes the following shares issuable pursuant to options exercisable as of or within 60 days after March 14, 2022: for Mr. Hallowell, 60,000 shares; for Mr. Stelzig, 9,000 shares; and for all directors and executive officers as a group, 69,000 shares.
(7)		Mr. Stelzig resigned as President and Chief Executive Officer of ISNS effective December 31, 2021.

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own more than 10% of our common to file initial reports of ownership and reports of changes in ownership of our common stock with the SEC.  Executive officers, directors and beneficial owners of more than 10% of our common stock are required by regulations of the SEC to furnish us with copies of all Section 16(a) reports they file.  Based solely on a review of the copies of such forms furnished to us and written representations from the executive officers and directors, we believe that all of our executive officers, directors and beneficial owners of more than 10% of our common stock complied with all Section 16(a) filing requirements applicable to them for 2021, except as follows: one report on Form 4 reporting the transfer, with no consideration, of common stock on May 28, 2021 for shares beneficially owned by Andrew T. Berger, and one report on Form 4 reporting the purchase of common stock on November 23, 2021 by Brian J. VanDerBosch, were not filed on a timely basis.

The business and affairs of Autoscope Technologies Corporation are managed under the direction of Autoscope's Board of Directors, which presently is comprised of six members.  Each of Autoscope's directors is elected until the next annual meeting of shareholders and until the director’s successor has been elected and qualifies to serve as a director or until the director’s earlier removal, death or resignation.  All of the nominees are currently members of the Board of Directors.

The Board of Directors recommends that you vote FOR election of the six nominated directors.  Proxies will be voted FOR the election of the six nominees unless otherwise specified.

If for any reason any nominee shall be unavailable for election to the Board of Directors, the named proxies will vote for such other candidate or candidates as may be nominated by the Board of Directors.  The Board of Directors has no reason to believe that any of the nominees will be unable to serve.

The nominees for election to Autoscope's Board of Directors provided the following information about themselves as of March 14, 2022.

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Andrew T. Berger, age 49, has been a director of ISNS since October 2015, Executive Chair of ISNS since June 2016, a director and Chief Executive Officer of Autoscope since April 2021, and the Executive Chair of Autoscope since March 10, 2022.  Mr. Berger was Chair of the Nominating and Corporate Governance Committee and a member of the Audit Committee and Compensation Committee until his appointment as Chief Executive Officer of Autoscope.  Mr. Berger is the Managing Member of AB Value Management LLC, which serves as the General Partner of AB Value Partners, LP.  Mr. Berger has nearly two decades of experience in investment analysis, investment management, and business consulting. From 1998 through 2002, Mr. Berger served as Equity Analyst for Value Line, Inc.  Since 2002, Mr. Berger has served as President of Walker's Manual, Inc., an investment publisher that he transformed into a business consulting company whose clients have included public and private companies. Since May 2017, Mr. Berger has been Chief Executive Officer of Cosi, Inc, a fast-casual restaurant chain that operates and franchises more than 25 domestic and international restaurants.  In 2020, Cosi, Inc. filed for Chapter 11 protection under the federal bankruptcy laws, but it has since withdrawn its filing.  From January 2020 through October 2021, Mr. Berger served on the board of directors of Rock Mountain Chocolate Factory, Inc., and international franchisor, confectionary manufacturer and retail operator, which has securities registered under Section 12 of the Securities Exchange Act of 1934.

Geoffrey C. Davis, age 63, has been a director of ISNS since November 2016 and a director of Autoscope since April 2021.  Mr. Davis is Chair and a member of Autoscope's Compensation Committee, a member of the Audit Committee and a member of the Nominating and Corporate Governance Committee.  Mr. Davis is a principal at Republic Consulting, LLC.  From 2005 to 2012, Mr. Davis served as a U.S. Congressman from the Commonwealth of Kentucky, and he represented the Fourth District in the United States House of Representatives.  During his tenure in Congress, Mr. Davis earned a leadership role within the Republican Conference as a Deputy Whip, which is a close advisor to Congressional Leadership.  Mr. Davis also served on the House and Finance Services and Armed Services Committees from 2005 to 2008.  Late in 2008, he was appointed to the Ways and Means Committee.  Prior to serving in Congress, Mr. Davis owned and operated a consulting firm specializing in lean manufacturing and systems integrations.  Mr. Davis graduated from the U.S. Military Academy at West Point, New York.

Mr. Davis is qualified to serve on Autoscope's Board due to his extensive experience working in senior positions in government and the manufacturing industry sector.  

Joseph P. Daly, age 60, has been a director of ISNS since January 2019, a director of Autoscope since April 2021, and the Lead Independent Director since March 10, 2022.  Mr. Daly is Chair and a member of Autoscope's Nomination and Corporate Governance Committee, a member of the Audit Committee and a member of the Compensation Committee. Mr. Daly is the Chief Executive Officer of Essig Research, Inc., a global engineering services company specializing in the design and repair of large, infrastructure related equipment, which he founded in October 1993.  Since January 2012, Mr. Daly has been a business and finance instructor at Northeastern University in Boston, Massachusetts.  In October 2016, Mr. Daly acquired the product lifecycle management ("PLM") software assets of SofTech Inc. and formed EssigPLM, which offers PLM related solutions to a broad, global client base.  Mr. Daly was also a director from December 2013 through July 2016 and largest shareholder of Kreisler Manufacturing Inc., which was acquired by Arlington Capital Partners in July 2016.  Mr. Daly received his BSME from Rensselaer Polytechnic Institute and his MBA/MSF from Northeastern University.

Mr. Daly is qualified to serve on Autoscope's Board due to his extensive experience in senior positions in companies offering engineering services, software solutions, and manufacturing capabilities.

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Brian J. VanDerBosch, age 57, was an independent advisor to the Board of Directors from November 2017 until May 2021.  Mr. VanDerBosch was elected to ISNS's board of directors in May 2021 and has served on Autoscope's board since April 2021.  He also serves on Autoscope's Audit Committee and Compensation Committee.  Mr. VanDerBosch has been Executive Vice President of Proprietors Capital Holdings, LLC, an angel investing fund, since October 2019.  He was Chief Financial Officer and Chief Operating Officer of Global Traffic Technologies, LLC, a developer and manufacturer of traffic signal priority control and traffic detection systems.  He served in these capacities under private equity ownership from January 2008 through August 2016, when the business was sold to Fortive Corporation, and he remained with the business through April 2019.  Mr. VanDerBosch was Chief Financial Officer of Lubrication Technologies, Inc., a provider of advanced lubrication and energy solutions, from February 2001 through December 2007.  Prior to 2001, he held various financial positions in publicly-traded and privately-held companies in diverse industries.  Mr. VanDerBosch earned his Bachelor of Science degree in Accounting from the University of Minnesota and is a CPA (inactive).

Mr. VanDerBosch is qualified to serve on Autoscope's Board due to his extensive experience in senior positions in companies offering traffic detection technologies and manufacturing capabilities.

Frank G. Hallowell, age 64, was appointed as Chief Financial Officer of ISNS in April 2019 and as Chief Financial Officer of Autoscope in April 2021.  Mr. Hallowell most recently served as the Vice President and Chief Financial Officer for Wipaire Inc. from January 2016 to April 2019.  Prior to his appointment at Wipaire Inc., Mr. Hallowell served as Chief Financial Officer and other senior financial roles at WellClub, LLC from May 2015 to January 2016, Logic PD, Inc. from December 2008 to March 2015, Pearson PLC from December 2006 to December 2008, and ExpressPoint Technology Services, Inc. from December 1997 to December 2006.

Our Boards of Directors and management are dedicated to exemplary corporate governance.  In 2004, we adopted a Code of Ethics and Business Conduct.  This Code is a statement of our high standards for ethical behavior and legal compliance, and it governs the manner in which we conduct our business.  In addition, our directors, officers, employees, and their family members are subject to our Policy Against Insider Trading - Procedures and Guidelines Governing Insider Trading and Tipping.  Copies of our Code of Ethics and Business Conduct and our Policy Against Insider Trading can be found on our website at www.autoscope.com by clicking on "Governance."

Autoscope's Board of Directors has determined that James W. Bracke, Geoffrey C. Davis, Joseph P. Daly and Brian J. VanDerBosch are independent directors as defined under the applicable rules of the SEC and Nasdaq, who are our current independent directors of the Board.  Each of the Committees of Autoscope's Board is composed of independent directors.  In making the independence determinations, Autoscope's Board of Directors reviewed all of Autoscope's directors’ and the nominee's relationships with us based primarily on a review of the responses of the directors and the nominee to questions regarding employment, business, familial, compensation and other relationships with us and our management.

We believe Autoscope's Board of Directors, taken as a whole, possesses an appropriate combination of skills and experiences. The majority of Autoscope's Board members have experience in operating and advising high‑growth technology‑based businesses.  Individually, Autoscope's directors have varied experiences in small and large publicly‑held companies in the operational areas of engineering, sales, marketing and finance.

Before July 21, 2021, which was the closing date of the holding company reorganization, the Board of Directors of ISNS held one meeting during 2021 in addition to Board Committee meetings and acted by written action in lieu of a meeting three times.  After July 21, 2021, the Autoscope Board of Directors held three meetings during 2021 in addition to Board Committee meetings, and it acted by written action in lieu of a meeting five times.  Each director who was a director in 2021 of ISNS and Autoscope attended each of the meetings held in 2021 of the Board and the Board Committees on which the director served during 2021, except for two Board Meetings held in 2021 that were attended by six of the seven Board members, two Audit Committee meetings held in 2021 that were attended by three of the four Committee members, and one Compensation Committee meeting held in 2021 that was attended by two of the three Committee members.

Before the effective date of the holding company reorganization in July 2021, ISNS separated the roles of Chief Executive Officer and Executive Chair of the Board of Directors.  ISNS believed that such a separation benefited ISNS by enhancing the opportunities for checks and balances between the Company’s strategies and its objectives and ensuring that a wider selection of alternative measures are considered.  On March 10, 2022, the Autoscope Board appointed Andrew T. Berger as Executive Chair and Joseph P. Daly as the Lead Independent Director  Autoscope's Board of Directors has determined that this structure, with a combined Executive Chair and Chief Executive Officer and a Lead Independent Director, is in the best interests of the Company and its shareholders at this time.

As set forth in the Lead Independent Director Charter adopted by the Autoscope Board, the Lead Independent Director’s duties and responsibilities include presiding at all meetings of the Board of Directors at which the Executive Chair is not present, including executive sessions of the independent Directors; calling meetings of the independent Directors; serving as the principal liaison between the Executive Chair and the independent Directors; approving all information sent to the Board of Directors, including the quality, quantity, appropriateness and timeliness of such information; approving meeting agendas for the Board of Directors; approving the frequency of Board meetings and meeting schedules; and recommending to the Nominating and Corporate Governance Committee and to the Executive Chair individuals for the membership and chair position for each Board committee.  

Autoscope's Board of Directors, in conjunction with management, has identified and prioritized various enterprise risks, and each prioritized risk is assigned to a Board Committee or the full Board for oversight.  For example, financial risks are overseen by the Audit Committee; compensation risks are overseen by the Compensation Committee; Chief Executive Officer succession planning is overseen by the Governance and Nominating Committee; and strategic, legal and compliance risks are typically overseen by the full Board.  Management regularly reports on each such risk to the relevant Committee of the Board, and material risks identified by a relevant Committee are then presented to the full Board.  Additional review or reporting on enterprise risks is conducted as needed or as requested by the Board or Committee.  Coordination of management’s review of risks is performed by the Chief Financial Officer, who reports to the Board of Directors.

 

Autoscope's Board of Directors conducts its business through meetings of the Board and the following three standing Committees: Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.  Each of these Committees has adopted and operates under a written charter.  Copies of the charters are posted on Autoscope's website at https://www.autoscope.com/corporate-governance.html.  The current membership of these Committees is described below.

Audit Committee(1)		Compensation Committee(2)			Nominating and Corporate Governance Committee(3)
James W. Bracke (Chair)		Geoffrey C. Davis (Chair)			Joseph P. Daly (Chair)
Geoffrey C. Davis		James W. Bracke			James W. Bracke
Brian J. VanDerBosch		Brian J. VanDerBosch			Geoffrey C. Davis
Joseph P. Daly		Joseph P. Daly

                                         

(1)  Mr. Bracke was appointed Chair of the Audit Committee on November 1, 2016.  Before the effective date of the holding company reorganization in July 2021, the ISNS Audit Committee consisted of Mr. Bracke, Paul F. Lidsky, Andrew T. Berger, and Mr. Davis.  Since the effective date of the reorganization, the Autoscope  Audit Committee has consisted of Mr. Bracke, (Chair), Mr. Davis, Mr. Lidsky (until his resignation from the Autoscope and ISNS Boards effective on December 31, 2021), Mr. VanDerBosch, and Mr. Daly (who was appointed to the Audit Committee on March 10, 2022).

(2)  Mr. Davis was appointed as Chair of the Compensation Committee effective on July 21, 2021.  Before the effective date of the holding company reorganization in July 2021, the ISNS Compensation Committee consisted of Mr. Lidsky (Chair), Mr. Bracke, Mr. Berger and Mr. Davis.  Since the effective date of the reorganization, the Autoscope Compensation Committee has consisted of Mr. Davis (Chair), Mr. Lidsky (until his resignation from the Autoscope and ISNS Boards effective on December 31, 2021), Mr. Bracke, Mr. VanDerBosch (who was appointed to the Compensation Committee on February 1, 2022), and Mr. Daly (who was appointed to the Compensation Committee on March 10, 2022).

(3)  Daly was appointed as Chair of the Nominating and Corporate Governance Committee on February 1, 2022. Before the effective date of the holding company reorganization in July 2021, the ISNS Nominating and Corporate Governance Committee consisted of Mr. Berger (Chair), Mr. Lidsky, and Mr. Bracke.  Since the effective date of the reorganization, the Autoscope Nominating and Corporate Governance Committee has consisted of Mr. Lidsky (Chair) (until his resignation from the Autoscope and ISNS Boards effective on December 31, 2021), Mr. Bracke, Mr. Daly, and Mr. Davis (who was appointed to the Nominating and Corporate Governance Committee on March 10, 2022).

The Audit Committee is responsible for the selection and compensation of the Company's independent registered public accounting firm, and it reviews with the independent registered public accounting firm the scope of the annual audit, matters of internal control and procedure and the adequacy thereof, the audit results and reports and other general matters relating to our accounts, records, controls and financial reporting. Each current member of Autoscope's Audit Committee possesses the financial qualifications required of audit committee members under the rules and regulations of Nasdaq and the SEC.  For 2021, our Board of Directors identified James W. Bracke and Brian J. VanDerBosch as audit committee financial experts as defined in the applicable rules of the SEC.  During 2021, the Audit Committee held five meetings.

The Compensation Committee reviews and recommends to the Board of Directors the compensation guidelines and stock award grants for executive officers and other key personnel.  During 2021, the Compensation Committee held five meetings.  The Committee’s primary responsibilities include:

•       annually reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluating their performances in light of those goals and objectives, and subsequently determining their incentive compensation levels based on this evaluation and other factors deemed relevant and appropriate by the Committee;

•       annually reviewing and determining for our Chief Executive Officer and Chief Financial Officer their annual base salary levels, annual incentive opportunity levels, employment agreements, severance arrangements and change of control agreements/provisions, and special or supplemental benefits, if any; and 

•       reviewing and making recommendations to the Board of Directors with respect to compensation programs and policies, including incentive compensation plans and equity‑based plans and the compensation of members of the Company's Board of Directors.

At least twice annually, Autoscope's independent directors meet in executive session without any director being present who does not meet the independence requirements of the listing standards of Nasdaq.  During 2021, our independent directors met four times in executive session.

The Nominating and Corporate Governance Committee determines the required selection criteria and qualifications of director nominees based upon our needs at the time nominees are considered.  Directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long‑term interests of Autoscope's shareholders.  In evaluating a candidate for nomination as a director of Autoscope Technologies Corporation, the Nominating and Corporate Governance Committee considers criteria including business and financial expertise; where the director resides; experience as a director of a public company; diversity of background and experience on the Board; and general criteria such as ethical standards, independent thought, practical wisdom and mature judgment.  The Nominating and Corporate Governance Committee will consider these criteria for nominees identified by the Nominating and Corporate Governance Committee, by shareholders, or through some other source.  The Nominating and Corporate Governance Committee does not have a policy that specifically addresses diversity in its nominating process.

The Nominating and Corporate Governance Committee will consider qualified candidates for possible nomination that are submitted by Autoscope's shareholders.  Shareholders wishing to make such a submission may do so by sending the following information to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, at the address indicated on the Notice of Annual Meeting of Shareholders: (1) name of the candidate and a brief biographical sketch and resume; (2) contact information for the candidate and a document evidencing the candidate’s willingness to serve as a director if elected; and (3) a signed statement as to the submitting shareholder’s current status as a shareholder and the number of shares currently held.

The Nominating and Corporate Governance Committee conducts a process of making a preliminary assessment of each proposed nominee based upon the nominee’s resume and biographical information, an indication of the nominee’s willingness to serve and other background information.  This information is evaluated against the criteria set forth above and our specific needs at that time.  Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet our needs may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates.  On the basis of information learned during this process, the Nominating and Corporate Governance Committee determines which nominee(s) to recommend to the Board to submit for election at the next annual meeting.  The Nominating and Corporate Governance Committee uses the same process for evaluating all nominees, regardless of the original source of the nomination.

No candidates for director nominations were submitted by any shareholder for consideration at the 2022 annual meeting.

 

We encourage, but do not require, Autoscope's Board members to attend the annual meeting of shareholders. At the Company's last annual meeting of shareholders held in 2021, all of our then elected directors attended the annual shareholders meeting.

During 2021, each of Autoscope's non‑employee directors received an annual $50,000 retainer, of which $25,000 was paid in cash and $25,000 was paid in the form of a common stock award grant, with the per share value of the common stock based on the closing price of the common stock on the trading day before the grant date of the award.  The Executive Chair of the Board of ISNS received an additional $22,500 annual cash retainer.  The Committee Chairs of the following standing Committees of the Company received the following additional annual cash retainers: Audit Committee ‑ $10,000; Compensation Committee ‑ $7,000; and Nominating and Corporate Governance Committee ‑ $5,000.  Members of the Committees received the following additional annual cash retainers: Audit Committee - $6,000; Compensation Committee - $5,000; and Nominating and Corporation Governance Committee - $4,000.  Members of any special Committees formed by the Board received a $1,500 quarterly retainer for each special Committee on which they served, with the Chair of each special Committee receiving an additional $4,000 quarterly retainer.  The Company had no special Committees during 2021.

The following table provides information regarding the compensation earned by the members of the Company's Board of Directors in 2021. 

Name			Fees Earned or Paid in Cash(1) ($)			Stock  Awards(2) ($)			Total ($)
James W. Bracke		$	50,000		$	25,004		$	75,004
Andrew T. Berger(3)		$	58,587		$	25,004		$	83,591
Paul F. Lidsky		$	46,109		$	25,004		$	71,113
Geoffrey C. Davis		$	39,120		$	25,004		$	64,124
Joseph P. Daly		$	26,783		$	25,004		$	51,787
Brian J. VanDerBosch		$	19,089		$	16,407		$	35,496
Ezekiel J. Kruglick		$	8,288		$	8,310		$	16,598

                                         

(1)    Consists of fees earned and paid in 2021.

(2)   Represents the grant date fair value of stock awards during the year determined pursuant to Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation – Stock Compensation (ASC Topic 718).  Refer to “Note 11 ‑ Stock-Based Compensation” in our Annual Report on Form 10‑K for the year ended December 31, 2021 for a discussion of the assumptions used in calculating the grant date fair value.

(3)   Consists of compensation paid to Mr. Berger as an independent member of the Company's Board of Directors in 2021 until the effective date of the holding company reorganization on July 21, 2021.

Each director is reimbursed by the Company for the director's actual out‑of‑pocket expenses, including telephone, travel and miscellaneous items incurred on behalf of the Company.

Under an Independent Consulting Agreement between Brian J. VanDerBosch and the Company dated November 20, 2017, the Company paid to Mr. VanDerBosch a total of $15,904 in consulting fees in fiscal 2021, none of which was related to his nomination to the Company's Board.

EXECUTIVE COMPENSATION

Compensation Discussion

Overview

This compensation discussion describes the material elements of compensation awarded to, earned by or paid to each of our named executive officers (the “Named Executive Officers”), as that term is defined in Item 402(a)(3) of the SEC’s Regulation S-K.  During 2021, our Named Executive Officers consisted of Chad A. Stelzig, who served in the capacity of President and Chief Executive Officer of ISNS from June 2016 until he resigned effective on December 31, 2021; Andrew T. Berger, the Chief Executive Officer of Autoscope, who began serving in that capacity in April 2021; and Frank G. Hallowell, who served as the Chief Financial Officer of ISNS throughout 2021 and as Chief Financial Officer of Autoscope beginning in April 2021.  During 2020, our Named Executive Officers consisted of Chad A. Stelzig, ISNS's President and Chief Executive Officer; and Frank G. Hallowell, ISNS's Chief Financial Officer.

Objectives of the Compensation Program

The Compensation Committee recommends the compensation programs for the Named Executive Officers, and the independent members of our Board approve the compensation of the Named Executive Officers

The primary objective of our various compensation programs is to attract, motivate and retain key executives and align their compensation with our overall performance. Autoscope's Compensation Committee believes that incentive, performance‑based compensation can be a key factor in motivating executive performance to maximize shareholder value and align executive performance with our corporate objectives and shareholder interests.  To this end, the Committee has established a compensation philosophy that includes the following considerations:

•	an emphasis on performance‑based compensation that differentiates compensation results based upon varying elements of Company and individual performance;
•	a recognition of both quantitative and qualitative performance objectives based upon an executive officer’s responsibilities; and
•	a mix of short‑term cash and long‑term equity‑based compensation.

The Committee and the Board believe it is important, when making their compensation‑related decisions, to be informed as to current practices of similarly situated companies.  Members of Autoscope's Board of Directors and members of the Committee are experienced in compensation matters and leverage such experience in addressing compensation matters and practices.

Design of the Compensation Program for the Named Executive Officers

The Committee and the Board have designed the compensation program for the Named Executive Officers to achieve the objectives described above, to ensure market competitiveness and to assure satisfaction of our objective of providing total executive pay that achieves an appropriate balance of variable pay‑for‑performance and at‑risk compensation. The compensation program will reward the Named Executive Officers based upon corporate performance as well as the performance of the Named Executive Officers.

The compensation program for the Named Executive Officers includes the following elements: base salary, annual cash incentives, restricted stock grants and other benefits. We characterize the annual cash incentives and the restricted stock grants as performance‑based compensation. Our executive compensation policy for the Named Executive Officers provides that a significant portion of the total compensation payable to them will be in the form of performance‑based compensation. We do not have a target for each element of performance‑based compensation relative to total compensation. The elements of our compensation program are described below.

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Base Salaries. Base salary is an important element of executive compensation because it provides executives with a fixed level of regular periodic income.  In determining base salaries for our Named Executive Officers, the Committee and the Board consider historic individual and corporate performance, level of responsibility and market and competitive data.  The Committee establishes base salaries for the Named Executive Officers at a level such that a significant portion of the total compensation that they can earn is performance‑based cash incentives and equity awards.

Annual Cash Incentive. As part of our executive compensation program, the Named Executive Officers may receive annual cash incentive awards pursuant to our annual cash bonus program.  Targeted bonus amounts are designed to provide competitive incentive pay and reflect our pay‑for‑performance philosophy.  The Committee historically has reviewed and determined target bonus amounts annually.

Performance objectives intended to focus attention on achieving key goals are established at the beginning of each fiscal year.  The primary quantitative objective is achievement of revenue and net income targets set forth in our annual operating plan established by the Board of Directors.  Specifically, these include metrics such as revenue and net profit (after tax), international operations revenue and operating profit.  Additionally, the performance of the Named Executive Officers is judged on success in achieving certain strategic and operational initiatives.  In evaluating their performance, the Committee may consider other factors in awarding bonuses and may, in its discretion, award as a discretionary bonus a portion of any bonus amount that is not earned based upon achievement of the financial and other metrics described above.  The Committee reviews the individual incentive components of the Named Executive Officers’ employment agreements, described below, and evaluates the objective portions relative to the Company’s performance.  The Committee also evaluates subjective, individual performance goals in determining the total amount of bonus to be awarded and has the ability to exercise discretion with respect to this portion. For the Named Executive Officers, up to one‑third of the bonus calculation may be associated with strategic and operational initiatives and is considered to be discretionary.

Grants of Stock Options and Stock Awards. Our executive officers also may receive equity‑based incentive compensation under stock plans approved by our shareholders and administered under the supervision of our Board of Directors. Grants under these plans are designed to align a significant portion of the executive compensation package with the long‑term interests of our shareholders. Stock options are generally granted with an exercise price equal to the closing sale price of the stock on the trading day before the date of grant, and they provide no cash benefit if the price of the stock does not exceed the grant price during the option’s term. Therefore, for any value to be derived from an option grant, our performance needs to result in increased stock price performance and shareholder value over a multi‑year period. Individual equity awards historically have been recommended by the Committee based on an officer’s current performance, potential for future contribution and responsibility and market competitiveness. 

For 2021, there was no grant of a stock award to the Named Executive Officers under the terms of the Image Sensing Systems, Inc. 2014 Stock Option and Incentive Plan (the "2014 Plan"), which was assumed by Autoscope effective on July 21, 2021.

For 2020, there was no grant of a stock award to the Named Executive Officers under the terms of the 2014 Plan.

Retirement Plans. We generally expect executives to plan for and fund their own retirement.  We maintain a 401(k) plan that permits eligible employees, including our Named Executive Officers, to defer a limited portion of salary and bonus into any of several investment alternatives. We make matching contributions equal to 50% of the first 6% of compensation deferred by employees subject to a maximum annual match of $8,250 and maximums established under the Internal Revenue Code (the “Code”). We may also make discretionary contributions to the 401(k) plan.  Payments made to the Named Executive Officers for matching contributions are included in the Summary Compensation Table below. We do not maintain defined benefit retirement or senior executive retirement plans, or provide post‑retirement medical benefits, for our Named Executive Officers.

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Other Benefits and Perquisites. Our executive compensation program also includes other benefits and perquisites. The Named Executive Officers participate in Company‑sponsored group benefit plans such as health, life and disability insurance plans available to all employees.  In addition, Named Executive Officers may upon joining the Company receive assistance in relocating in the discretion of our Board of Directors. For more detailed information regarding benefits and perquisites provided to our Named Executive Officers, see the Summary Compensation Table included elsewhere in this proxy statement.

2021 Compensation Program.  In November 2021, the Compensation Committee recommended and the Board of Directors approved a 2021 compensation plan for Chad A. Stelzig, ISNS's President and Chief Executive Officer, and Frank G. Hallowell, ISNS's Chief Financial Officer.  Under the compensation plan, Mr. Stelzig received an annual base salary of $275,000, the same as his annual compensation for 2020, and Mr. Hallowell received an annual base salary of $245,000, an increase from his 2020 base salary of $235,000.  The increase in base salary for Mr. Hallowell was effective September 1, 2021.  In addition, the compensation plan included a target cash bonus for Mr. Stelzig and Mr. Hallowell if the Company achieved performance criteria for 2021 set by the Board.  Andrew T. Berger received no compensation in 2021 as Chief Executive Officer of Autoscope.

2020 Compensation Program.  In March 2020, the Compensation Committee recommended and the Board of Directors approved a 2020 compensation plan for Chad A. Stelzig, ISNS's President and Chief Executive Officer, and Frank G. Hallowell, ISNS's Chief Financial Officer.  Under the compensation plan, Mr. Stelzig received an annual base salary of $260,000, and Mr. Hallowell received an annual base salary of $220,000, both of which were the same as their annual compensation for 2019 (which was annualized in the case of Mr. Hallowell, who became Chief Financial Officer on April 29, 2019).  In addition, the compensation plan included a target cash bonus for Mr. Stelzig and Mr. Hallowell if ISNS achieved performance criteria for 2020 set by the Board.  In December 2020, the Compensation Committee recommended and the Board of Directors approved an increase in base salary for Mr. Stelzig from $260,000 to $275,000, and for Frank G. Hallowell from $220,000 to $235,000.  The increase in base salaries for Mr. Stelzig and Mr. Hallowell were effective November 1, 2020.

Named Executive Officers’ Role in Compensation Decisions

The Committee recommends to the Board of Directors the actual and targeted compensation of the Company’s Named Executive Officers. The Board, with any non‑independent members abstaining, approves the compensation of the Named Executive Officers.  (During 2020, all members of the Board were independent, and, during 2021, all members of the Board, except for Andrew T. Berger (since July 21, 2021) and Ezekiel J. Kruglick were independent.) The Committee determines its recommendations regarding the compensation plan for the Named Executive Officers based on major goals and objectives established by the Board of Directors. When applicable, the Committee also receives input from the Company's Chief Executive Officer regarding another Named Executive Officer’s leadership capabilities, past performance and potential for future contributions when making its recommendations on actual and targeted compensation amounts for Named Executive Officers.

Compensation Committee's Independent Consultant

The Compensation Committee has the authority to retain and terminate any compensation and benefits consultant and the authority to approve the related fees and other retention terms of the consultant.  In October 2021, the Compensation Committee directly retained the services of Semler Brossy Consulting Group, LLC ("Semler Brossy"), an independent compensation firm to advise the committee on certain executive compensation and benefit matters.  The Compensation Committee directed Semler Brossy to provide a competitive assessment of the compensation of our Chief Executive Officer and Chief Financial Officer (who are named executive officers for 2021), the Senior Vice President of Sales and Vice President of Engineering of ISNS (who are not named executive officers), and our Board of Directors; conduct a competitive assessment of the compensation of these officers and total Board and Board Committee 

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compensation; draft a report summarizing Semler Brossy's findings and recommendations; and present the final results to the Compensation Committee that could be considered by the Compensation Committee and then recommended to the full Board of Directors for approval.  Semler Brossy provided compensation consulting services to the Compensation Committee only on matters for which the Compensation Committee is responsible. Semler Brossy did not provide the Compensation Committee or the Company's management with any additional services, and Semler Brossy does not have any additional relationship with Autoscope, ISNS, or their management in addition to the services that it provided to the Compensation Committee.  The Compensation Committee assessed Semler Brossy's independence in light of applicable rules of the SEC and Nasdaq and determined that no conflict of interest or independence concerns exist.

Other Considerations and Factors

Although the Committee and the Board consider tax and accounting issues in connection with their compensation decisions, those have not become material factors in their compensation decisions to date. 

As disclosed elsewhere in this proxy statement, our directors, officers, employees, and their family members are subject to our Policy Against Insider Trading – Procedures and Guidelines Governing Insider Trading and Tipping.  Among other requirements, the Policy provides that these individuals are prohibited from engaging in hedging or monetization transactions with respect to the Company’s securities.  For purposes of the Policy, “hedge” and “hedging” include financial instruments that are designed to hedge or offset decreases in the value of equity securities (including prepaid variable forward contracts, equity swaps, collars and exchange funds); short sales that hedge the economic risk of ownership; entering into borrowing or other arrangements involving a nonrecourse pledge of securities; selling security futures that establish a position that increase in value as the value of the underlying equity security decreases; and transactions that involve pledges of the underlying Company equity securities as collateral.  These types of transactions and all similar transactions denominated in the Company’s securities are prohibited by the Policy.  Individuals covered by the Policy also are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.  In certain limited circumstances, the Board may consider and grant waivers of the Policy's prohibitions on these individuals from holding Company securities in a margin account or pledging such securities.

 

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Summary Compensation Table ‑ 2021 and 2020

The following table sets forth information about compensation awarded to, earned by or paid to our Named Executive Officers for 2021 and 2020.

Name and Principal Position		Year			Salary ($)			Stock- Based Compensation (1) ($)			Non-Equity Incentive Plan Compensation ($)			All Other Compensation ($)			Total ($)
Chad A. Stelzig		2021		$	275,000		$	18,174		$	--		$	11,973(2)		$	305,148
Former President and Chief Executive Officer		2020		$	262,500		$	46,571		$	--		$	11,601(3)		$	320,672
Frank G. Hallowell		2021		$	238,333		$	18,316		$	--		$	11,096(4)		$	267,745
Chief Financial Officer		2020		$	222,500		$	18,366		$	--		$	8,907(5)		$	249,773
Andrew T. Berger		2021		$	--		$	--		$	--		$	--		$	--
Chief Executive Officer(6)

_________________

(1)   Consists of the grant date fair value of stock option awards during each year determined pursuant to Accounting Standards Codification (“ASC”) Topic 718. Refer to “Note 11 – Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2021 and “Note 11 – Stock-Based Compensation” in our Annual Report on Form 10‑K for the year ended December 31, 2020 for a discussion of the assumptions used in calculating the grant date fair value. There can be no assurance that the amounts reflected in the table will ever be realized.

(2)    For Mr. Stelzig, the $11,973 in All Other Compensation for 2021 consists of $8,265 in Company match paid into his 401(k) plan account in 2021, $1,200 of Company contributions paid into his health savings account in 2021 and $2,508 for executive life premiums paid for Mr. Stelzig in 2021.  Mr. Stelzig served as ISNS's President and Chief Executive Officer throughout all of 2020 and 2021, and he resigned effective December 31, 2021.

(3)    For Mr. Stelzig, the $11,601 in All Other Compensation for 2020 consists of $7,896 in Company match paid into his 401(k) plan account in 2020, $1,200 of Company contributions paid into his health savings account in 2020 and $2,505 for executive life premiums paid for Mr. Stelzig in 2020.

(4)    For Mr. Hallowell, the $11,096 in All Other Compensation for 2021 consists of $7,150 in Company match paid into his 401(k) plan account in 2021, $1,200 of Company contributions paid into his health savings account in 2021 and $2,746 for executive life insurance premiums paid for Mr. Hallowell in 2021.

(5)    For Mr. Hallowell, the $8,907 in All Other Compensation for 2020 consists of $5,000 in Company match paid into his 401(k) plan account in 2020, $1,200 of Company contributions paid into his health savings account in 2020 and $2,707 for executive life insurance premiums paid for Mr. Hallowell in 2020.

(6)    Mr. Berger has served as Chief Executive Officer of Autoscope beginning in April 2021 and received no compensation in 2021 for serving in such position.

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Grants of Equity and Non-Equity Awards ‑ 2021

In the following table, we have provided information regarding equity awards under the 2014 Plan and non-equity incentive plan awards made to Mr. Stelzig and Mr. Hallowell for 2021. 

Name		Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)									All Other Stock Awards: Number of Securities Underlying Stock Awards (#)			Exercise or Base Price of Option Awards ($/Sh)			Grant Date Fair Value of Stock and Option Awards(2)
					Threshold($)			Target($)			Maximum($)
Chad A. Stelzig		1/1/21		$	110,000		$	137,500		$	220,000		--			--			--
Frank G. Hallowell		1/1/21		$	98,000		$	122,500		$	196,000		--			--			--

_________________

 

(1)  Represents the range of awards under the incentive component for 2021 under the incentive cash bonus plans for Mr. Stelzig and Mr. Hallowell.  The amounts in these columns reflect the minimum payment level if an award is achieved, the target payment level and the maximum payment level under each plan if superior performance is attained.  Amounts actually paid for 2021 are set forth in the “Non‑Equity Incentive Plan Compensation” column of the “Summary Compensation Table ‑ 2021 and 2020” above.

(2)  Represents the grant date fair value determined pursuant to ASC Topic 718.  Generally, the grant date fair value is the amount expensed in our financial statements over the vesting schedule of the stock options or restricted stock awards.

Outstanding Equity Awards at Fiscal Year‑End ‑ 2021

In April 2005, we adopted the Image Sensing Systems, Inc. 2005 Stock Incentive Plan (the "2005 Plan"), and in April 2014, we adopted the 2014 Plan (collectively, the “Plans”), which provide for the granting of incentive stock options, non‑qualified stock options, stock appreciation rights, restricted stock awards and performance awards to our officers, directors, employees, consultants and independent contractors.  Options granted to employees under the Plans generally vest over three to five years based on service and have a contractual term of nine to 10 years. As of December 31, 2021, there were options outstanding under the Plans to purchase a total of 12,000 shares with a weighted average exercise price per share of $4.90.

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In the following table, we have provided information regarding outstanding equity awards held at December 31, 2021 by the Named Executive Officers:

		Option Awards									Stock Awards
		Number of Securities Underlying Unexercised Options
Name		Exercisable (#)		Un-Exercisable (#)		Option Exercise Price ($)			Option Expiration Date		Number of Shares That Have Not Vested (#)			Market Value of Shares That Have Not Vested(1) ($)
Chad A. Stelzig		3,000		—		$	5.00		09/17/2022
		2,000		—		$	7.10		08/20/2023
		4,000		—		$	4.22		05/13/2024
											4,225		$	26,575
Frank G. Hallowell											3,506		$	22,053

(1) The market value of unvested restricted stock awards ("RSAs") equal the closing price of our common stock on The Nasdaq Capital Market at the end of fiscal year 2021 ($6.29) multiplied by the number of shares.  The RSAs vest in three equal installments beginning on the first anniversary of the grant date.

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Option Exercises and Stock Vested – 2021

 

		Option Awards				Stock Awards
		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)			Value Realized on Vesting(2) ($)
Chad A. Stelzig		—		—		11,220(1)		$	50,070
Frank G. Hallowell		—		—		3,505		$	16,158

(1) Mr. Stelzig authorized the Company to withhold 4,028 shares of stock to cover tax obligations.  The number of shares subject to RSAs acquired by Mr. Stelzig after fulfilling all tax obligations was 7,192 shares, and the value realized on vesting following the withholding of shares was $32,095.

(2) The value realized on the vesting of the RSAs is the fair market value of our common stock at the time of vesting.

Stock Options

Under the terms of the 2005 Plan and 2014 Plan, if a participant’s employment with the Company terminates by reason of the participant’s death or disability, then, to the extent a stock option held by the participant is vested as of the date of death or disability, the stock option may be exercised by the participant, the legal representative of the participant’s estate, the legatee of the participant under the will of the participant, or the distributee of the participant’s estate, whichever is applicable, for a period of one year from the date of death or disability or until the expiration of the stated term of the stock option, whichever period is shorter.  Any options that are not vested as of the date of death or termination due to disability will immediately lapse and be of no further force or effect.

If a participant’s employment with us terminates for any reason other than death or disability or other than for cause, then, to the extent any stock option held by the participant is vested as of the date of termination, the stock option may be exercised for a period of 90 days from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter.  Any options that are not vested as of the date of termination will immediately lapse and be of no further force or effect.  Upon the termination of the participant’s employment by us for cause, any and all unexercised stock options granted to the participant will immediately lapse and be of no further force or effect.

In the event of a “change in control” of Autoscope, as that term is defined in the respective Plans, all stock options held by executive officers then outstanding and not fully vested will become fully vested and exercisable in accordance with their terms. 

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Employment Agreements

Chad A. Stelzig

On June 27, 2016, the Company entered into an Employment Agreement with Chad A. Stelzig (the “Stelzig Agreement”) providing that Mr. Stelzig would serve as ISNS's Interim President and Interim Chief Executive Officer.  The Stelzig Agreement provided for a base salary for the year ended December 31, 2016 of $225,000 and that his performance would be evaluated by the Company's Board no less often than annually.  The Stelzig Agreement provided that Mr. Stelzig was eligible to receive a bonus to be determined by the Company’s Board of Directors and that he would be entitled to insurance and other benefits in accordance with the Company’s standard executive employee programs.

The Stelzig Agreement provided that if Mr. Stelzig’s termination of employment was voluntary on his part and not for “Good Reason” as defined in the Stelzig Agreement, the Company must pay to Mr. Stelzig all earned and unpaid amounts due to him for salary through the termination date, and Mr. Stelzig would have 90 days after the date of the termination of his employment to exercise all options owned by Mr. Stelzig that were exercisable as of such termination date.  Any other options, restricted stock awards and restricted stock units owned by Mr. Stelzig would automatically terminate.  The Stelzig Agreement also provided that if the termination of employment was “With Cause” as defined in the Stelzig Agreement, Mr. Stelzig would not be entitled to any severance, and all of the options, restricted stock awards and restricted stock units then owned by Mr. Stelzig would automatically terminate.  It also provided that if the termination was “Without Cause” as defined in the Stelzig Agreement, Mr. Stelzig would be entitled to six months of salary continuation, without eligibility for bonus, and he would have 90 days to exercise all options that he owned that were exercisable as of such termination date. Any other options and any unvested restricted stock awards or restricted stock units for the Company’s common stock owned by him would terminate. 

On March 25, 2020, the Company approved a compensation plan for the year ending December 31, 2020 for Mr. Stelzig.  Under the compensation plan, Mr. Stelzig received an annual base salary of $260,000.  Furthermore, Mr. Stelzig was eligible to receive a cash bonus for 2020 to be determined by the Company's Board of Directors.

On December 28, 2020, the Company approved an increase in annual base salary for Mr. Stelzig from $260,000 to $275,000.  The increase in base salary for Mr. Stelzig was retroactive to November 1, 2020.

Frank G. Hallowell

On April 29, 2019, the Company entered into an Employment Agreement with Frank G. Hallowell (the "2019 Hallowell Agreement") providing that Mr. Hallowell will serve as ISNS's Chief Financial Officer.  The 2019 Hallowell Agreement provided for an annualized base salary for the year ended December 31, 2019 of $220,000 and that his performance would be evaluated by the Company's Board no less often than annually.  In addition, the 2019 Hallowell Agreement provided for a one-time restricted stock award granted under the 2014 Plan with a grant date fair value equal to $55,000 determined pursuant to Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation - Stock Compensation, which vests as to one-third of the shares of the Company's common stock subject to such awards on each of the first, second and third anniversary dates of the date of grant if Mr. Hallowell is then an employee of the Company.  The 2019 Hallowell Agreement provided that Mr. Hallowell was eligible to receive a bonus to be determined by the Company's Board of Directors and that he was entitled to insurance and other benefits in accordance with the Company's standard executive employee programs.

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The 2019 Hallowell Agreement provided that if Mr. Hallowell's termination of employment was voluntary on his part and not for "Good Reason" as defined in the 2019 Hallowell Agreement, the Company must pay to Mr. Hallowell all earned and unpaid amounts due to him for salary through the termination date, and Mr. Hallowell would have 90 days after the date of the termination of his employment to exercise all options owned by Mr. Hallowell that were exercisable as of such termination date.  Any other options, restricted stock awards and restricted stock units owned by Mr. Hallowell would automatically terminate.  The 2019 Hallowell Agreement also provided that if the termination of employment was “With Cause” as defined in the 2019 Hallowell Agreement, Mr. Hallowell would not be entitled to any severance, and all of the options, restricted stock awards and restricted stock units then owned by Mr. Hallowell would automatically terminate.  It also provided that if the termination was “Without Cause” as defined in the 2019 Hallowell Agreement, Mr. Hallowell would be entitled to three months of salary continuation, without eligibility for bonus, and he would have 90 days to exercise all options that he owned that were exercisable as of such termination date. Any other options and any unvested restricted stock awards or restricted stock units for the Company’s common stock owned by him would terminate.

On March 25, 2020, the Company approved a compensation plan for the year ending December 31, 2020 for Mr. Hallowell.  Under the compensation plan, Mr. Hallowell received an annual base salary of $220,000.  Furthermore, Mr. Hallowell was eligible to receive a cash bonus for 2020 to be determined by the Company's Board of Directors.

On December 28, 2020, the Company approved an increase in annual base salary for Mr. Hallowell from $220,000 to $235,000.  The increase in base salary for Mr. Hallowell was retroactive to November 1, 2020.

On November 15, 2021, the Company approved a compensation plan for the year ending December 31, 2021 for Mr. Hallowell.  Under the compensation plan, Mr. Hallowell received an increase in annual base salary from $235,000 to $245,000.  The increase in base salary for Mr. Hallowell was retroactive to September 1, 2021.  Furthermore, Mr. Hallowell was eligible to receive a cash bonus to be determined by the Company's Board of Directors.

Effective on February 1, 2022, Mr. Hallowell was appointed as ISNS's President and Chief Operating Officer.  Also on February 1, 2022, the Company entered into an Employment Agreement (the "2022 Hallowell Employment Agreement") with Mr. Hallowell as the Chief Financial Officer of Autoscope and the President, Chief Financial Officer and Chief Operating Officer of ISNS.  The 2022 Hallowell Employment Agreement supersedes the 2019 Hallowell Agreement.

The 2022 Hallowell Employment Agreement provides for an annual salary of $300,000.00 for the remainder of the 2022 calendar year and a target bonus of up to 25% of Mr. Hallowell's salary for the previous calendar year based on the attainment of performance goals set by Autoscope's Board of Directors.

Potential Payments upon Termination of Employment

The table below reflects the amount of compensation to which Chad A. Stelzig, Frank G. Hallowell and Andrew T. Berger would have been entitled as our Named Executive Officers as of December 31, 2021 upon termination of employment under the specified circumstances.  The amounts shown assume that the termination was effective as of December 31, 2021, include amounts earned through that time, and are estimates of the amounts which would be paid out to each of our Named Executive Officers upon the termination of their employment.  The actual amounts to be paid out can be determined only at the time of actual separation from our Company. 

Name			Cash Severance Payment($)			Total($)
Chad A. Stelzig
Retirement or resignation		$	—		$	—
Termination without cause			137,500			137,500
Termination for cause			—			—
Death			—			—
Frank G. Hallowell
Retirement or resignation		$	—		$	—
Termination without cause			61,250			61,250
Termination for cause			—			—
Death			—			—
Andrew T. Berger
Retirement or resignation		$	—			—
Termination without cause			—			—
Termination for cause			—			—
Death			—			—

 

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Other Post‑Employment Payments

We generally do not provide pension arrangements or post‑retirement health coverage for executive officers or other employees. We do not provide any nonqualified defined contribution or other deferred compensation plans.

RELATED PERSON TRANSACTIONS AND POLICY

Related Person Transactions

During the year ended December 31, 2021, the Company had no transactions with related persons as described in Item 404 of the SEC’s Regulation S-K.

Related Person Transaction Policy

The Company’s Code of Ethics and Business Conduct (the “Ethics Code”) requires that the Company’s Board or Audit Committee approve activities that could involve a conflict of interest if undertaken by an “associate,” which consists of the Company’s directors, officers, employees and consultants.  These transactions include owning a substantial interest in any competing business or in any outside distributor or customer that does or seeks to do business with the Company; providing services to any outside concern that does business with the Company or competes with the Company; representing the Company in any business transaction with a person or organization in which associates or their immediate family have a personal interest or may derive a benefit; or taking advantage of any business opportunity which may belong to the Company.  In considering these transactions under the Ethics Code, the Board or the Audit Committee would consider and evaluate information regarding the transaction, including the dollar amounts involved in the transaction. 

 

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AUDIT COMMITTEE REPORT

Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings by reference, including this proxy statement, in whole or in part, the following report of the Audit Committee shall not be deemed to be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.

Audit Committee Report

The Audit Committee of the Board of Directors is currently composed of the following non‑employee directors: James W. Bracke (Chair), Geoffrey C. Davis and Brian J. VanDerBosch.  Mr. Bracke was appointed Audit Committee Chair on November 1, 2016.  The members of the Audit Committee in 2021 were and now are independent for purposes of the listing standards of The Nasdaq Capital Market and the rules of the Securities and Exchange Commission.  For 2021, our Board of Directors identified members Mr. Bracke, and Mr. VanDerBosch as audit committee financial experts under the rules of the Securities and Exchange Commission. The Audit Committee operates under a written charter adopted by the Board of Directors.

The Audit Committee oversees our financial reporting process on behalf of the Board of Directors and selects our independent registered public accounting firm.  Management has the primary responsibility for the financial reporting process, including our system of internal controls. Our independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally accepted in the United States and issuing a report on our financial statements.  The Audit Committee discusses with our independent registered public accounting firm the overall scope and plans for its audits and meets with our independent registered public accounting firm, with and without management present, to discuss the results of its examinations, its evaluations of our internal controls, and the overall quality of our financial reporting.

In fulfilling our oversight responsibilities, the Audit Committee has met and held discussions with management and our independent registered public accounting firm. The Audit Committee reviewed and discussed the financial statements with management and our independent registered public accounting firm, including a discussion of the application of accounting principles generally accepted in the United States, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee also has discussed with our independent registered public accounting firm the firm’s independence from management, including whether the provision of non‑audit services is compatible with maintaining the firm’s independence, and matters required to be discussed by the Auditing Standards No. 1301, Communications with Audit Committee, as adopted by the Public Company Accounting Oversight Board. The Audit Committee received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in Autoscope Technologies Corporation’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission.  The Committee has selected Boulay PLLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2022.

 

By the Audit Committee –

James W. Bracke, Chair

Geoffrey C. Davis

Brian J. VanDerBosch

 

  

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PAYMENT OF FEES TO OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Fees

Audit fees, including aggregate fees for the audit of our annual financial statements, reviews of our quarterly financial statements and reviews of filings with the Securities and Exchange Commission, were $76,900 and $72,885 for fiscal 2021 and 2020, respectively.

Audit‑Related Fees

There were no audit‑related fees paid to Boulay for fiscal 2021 and 2020.

Tax Fees

There were no tax‑related fees paid to Boulay for fiscal 2021 and 2020.

 

All Other Fees

We paid no other fees to our independent registered public accounting firm in 2021 or 2020.

Policy on Audit Committee Pre‑Approval of Audit and Permissible Non‑Audit Services Provided by Our Independent Registered Public Accounting Firm

The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of our independent registered public accounting firm.  The Audit Committee has established a policy for pre‑approving the services provided by our independent registered public accounting firm in accordance with the auditor independence rules of the Securities and Exchange Commission.  This policy requires the review and pre‑approval by the Audit Committee of all audit and permissible non‑audit services provided by our independent registered public accounting firm and an annual review of the financial plan for audit fees.

To ensure that auditor independence is maintained, the Audit Committee annually pre‑approves the audit services to be provided by our independent registered public accounting firm and the related estimated fees for such services, as well as the nature and extent of specific types of audit‑related, tax and other non‑audit services to be provided by our independent registered public accounting firm during the year.

As the need arises, other specific permitted services are pre‑approved on a case‑by‑case basis during the year.  A request for pre‑approval of services on a case‑by‑case basis must be submitted by our Chief Financial Officer, providing information as to the nature of the particular service to be provided, estimated related fees and management’s assessment of the impact of the service on the auditor’s independence.  The Audit Committee has delegated to its Chair pre‑approval authority between meetings of the Audit Committee.  Any pre‑approvals made by the Chair must be reported to the Audit Committee.  The Audit Committee will not delegate to management the pre‑approval of services to be performed by our independent registered public accounting firm.

All of the services provided by our independent registered public accounting firm in fiscal 2021 and 2020 were approved by the Audit Committee under its pre‑approval policies.

 

PROPOSAL 2 ‑ RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Boulay PLLP audited our consolidated financial statements for the fiscal year ended December 31, 2021.  The Audit Committee has appointed Boulay PLLP as our independent registered public accounting firm for the year ending December 31, 2022.

Although we are not required to do so, we are submitting the appointment of Boulay PLLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2022 for ratification by Autoscope's shareholders in order to ascertain the views of Autoscope's shareholders on this appointment.  If the appointment is not ratified, the Audit Committee will reconsider its selection. A representative of Boulay PLLP is expected to be present at the 2022 annual meeting. The representative will have an opportunity to make a statement at the meeting and will be available to respond to appropriate questions from shareholders.

The Board of Directors recommends that you vote FOR ratification of the appointment of Boulay PLLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.  Proxies will be voted FOR ratifying this appointment unless otherwise specified.

PROPOSAL 3 –VOTE ON THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION PAID
TO OUR NAMED EXECUTIVE OFFICERS

 

Our executive compensation program emphasizes performance-based compensation, recognizes both quantitative and qualitative performance objectives based upon our executives officers’ responsibilities, and includes a mix of short-term cash and long-term equity-based compensation.  The annual cash incentives and the stock options and awards we grant to our Named Executive Officers, which constitute a significant portion of their total compensation, are performance-based compensation.  We believe that performance-based compensation can be a key factor in motivating executive performance to maximize shareholder value and align executive performance with our corporate objectives and shareholder interests.

 

We generally do not have separate retirement plans or benefits for our Named Executive Officers. They may participate in our 401(k) plan in which all eligible employees may participate.  In addition, our Named Executive Officers participate in Company-sponsored group benefit plans available to all employees. 

 

We urge you to read the Compensation Discussion section of this proxy statement for additional details on our executive compensation, including our compensation philosophy and objectives and the fiscal 2021 compensation of our Named Executive Officers.  We believe that, viewed as a whole, our compensation practices and policies are appropriate and fair to both the Company and its executives.

 

As provided by the say-on-pay rules, we are asking you to vote on the adoption of the following resolution:

 

BE IT RESOLVED by the shareholders of Autoscope Technologies Corporation that the shareholders approve the compensation of the Company's Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K in the Company's proxy statement for the 2022 Annual Meeting.

 

Proxies will be voted in favor of the resolution unless shareholders specify otherwise in their proxies and except for broker non-votes. The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required for advisory approval of our executive compensation. As an advisory vote, this proposal is non-binding. However, the Board and our Compensation Committee, which is responsible for designing and overseeing the administration of our executive compensation program, value the opinions of Autoscope's shareholders and will consider the outcome of the vote when making future compensation decisions for our Named Executive Officers.

The Board of Directors recommends that you vote FOR the approval of the compensation of our Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules.

 

 

Background of and Reasons for the Amendment

Effective on July 21, 2021, Autoscope, Continental Stock Transfer & Trust Company and, with respect to only Section 37 thereof, ISNS, entered into the Amended and Restated Rights Agreement (the "Rights Agreement").  The Board of Directors of Autoscope declared a dividend distribution of one right (a “Right”) for each outstanding share of Autoscope’s common stock, par value $0.01 per share, to shareholders of record at the close of business on July 21, 2021 pursuant to the Rights Agreement. Each Right entitles the registered holder to purchase from Autoscope one one-thousandth of a share of the Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of Autoscope at an exercise price of $25.00 per one one-thousandth of a Preferred Share, subject to adjustment (the “Purchase Price”).

The Rights Agreement provides that the "Final Expiration Date" of the Rights Agreement is 6:00 p.m., Eastern time, on June 4, 2022.  On March 1, 2022, the Board of Directors adopted an amendment to the Rights Agreement (the "2022 Amendment") to extend the expiration date of the Rights Agreement from June 4, 2022 to June 4, 2024.  Autoscope is now submitting the 2022 Amendment to the shareholders for their consideration and approval.

By adopting the 2022 Amendment, the Board of Directors is helping to preserve the value of certain deferred tax benefits of the Company, including those generated by net operating losses (collectively, the “Tax Benefits”). As of December 31, 2021, we estimate that we had U.S. federal net operating loss carryforwards of approximately $17 million. Unless otherwise restricted, we believe that we will be able to carry forward a significant amount of these net operating loss carryforwards and any other Tax Benefits, and so these Tax Benefits could be a substantial asset to us. If we experience an ownership change for purposes of Section 382 of the Code, however, our ability to use our Tax Benefits will be substantially limited. These limitations could require us to pay U.S. federal income taxes earlier than would otherwise be required if such limitations were not in effect and could cause the Tax Benefits to expire unused, in each case reducing or eliminating the benefit of the Tax Benefits. Similar rules and limitations may apply for state income tax purposes.

In general terms, the Rights Agreement works by imposing a significant penalty upon any person or group that acquires 4.99% or more of the outstanding shares of Autoscope’s common stock without the approval of the Board. The Company’s ability to use the Tax Benefits would be substantially limited if it were to experience an “ownership change” as defined under Section 382 of the Code. In general, such an ownership change would occur if there is a greater than 50-percentage point change in ownership of securities by shareholders owning (or deemed to own under Section 382 of the Code) five percent or more of a corporation’s securities over a rolling three-year period. The Rights Agreement reduces the likelihood that changes in Autoscope’s investor base have the unintended effect of limiting the Company’s use of its Tax Benefits. The Board believes it is in the best interest of the Company and its shareholders that the Company provide for the protection of the Tax Benefits by adopting the 2022 Amendment extending the expiration date of the Rights Agreement.

The Rights Agreement is intended to act as a deterrent to any Acquiring Person (as defined below). This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of Autoscope's common stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code. The Board has established procedures to consider requests to exempt certain acquisitions of Autoscope’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.

 

Description of the Rights Agreement

The following summary of the material terms of the 2022 Amendment and the Rights Agreement is qualified in its entirety by reference to the copy of the 2022 Amendment attached as Appendix A and the Rights Agreement attached as Appendix B to this proxy statement.

 

Distribution and Transfer of Rights; Rights Certificates

 

Before the Distribution Date referred to below:

 

• the Rights are and will be evidenced by and trade with the stock certificates for the shares of Autoscope’s common stock (or, with respect to any uncertificated shares of common stock registered in book entry form, by notation in book entry), and no separate Rights certificates will be distributed;

 

• stock certificates for shares of Autoscope’s common stock issued after the Record Date (as that term is defined in the Rights Agreement) contain a legend incorporating the Rights Agreement by reference (and, for any uncertificated shares of common stock registered in book entry form, this legend is contained in a notation in book entry);

 

• new Rights will accompany any new shares of Autoscope’s common stock issued after the Record Date; and

 

• the surrender for transfer of any certificates for shares of Autoscope’s common stock (or the surrender for transfer of any uncertificated shares of common stock registered in book entry form) will also constitute the transfer of the Rights associated with such shares.

 

Distribution Date

 

Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from Autoscope’s common stock and become exercisable following (i) the 10th business day (or such later date as may be determined by the Board) after the public announcement that an Acquiring Person has acquired beneficial ownership of 4.99% or more of the Common Shares or (ii) the 10th business day (or such later date as may be determined by the Board) after a person or group announces a tender or exchange offer that would result in ownership by a person or group of 4.99% or more of Autoscope’s common stock. The date on which the Rights separate from the shares of Autoscope’s common stock and become exercisable is referred to as the “Distribution Date.”

 

After the Distribution Date, the Rights will separate from the shares of common stock and be evidenced by book-entry credits or by Rights certificates that Autoscope will cause to be mailed to all eligible holders of common stock, and any Rights held by an Acquiring Person will be void and may not be exercised.

 

Preferred Shares Purchasable Upon Exercise of Rights

 

After the Distribution Date, each Right will entitle the holder to purchase, for the Purchase Price (as that term is defined in the Rights Agreement), one one-thousandth of a Preferred Share having economic and other terms similar to that of one share of Autoscope’s common stock. This portion of a Preferred Share is intended to give the shareholder approximately the same dividend, voting and liquidation rights as would one share of common stock and should approximate the value of one share of common stock.

More specifically, each one one-thousandth of a Preferred Share, if issued, will:

 

• not be redeemable;

 

• entitle its holder to quarterly dividend payments of $0.001 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater;

 

• entitle its holder upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of common stock, whichever is greater;

 

• have the same voting power as one share of common stock; and

 

• entitle its holder to a per share payment equal to the payment made on one share of common stock, if the shares of common stock are exchanged via merger, consolidation or a similar transaction.

 

Consequences of a Person or Group Becoming an Acquiring Person

 

Definition of Acquiring Person.  An “Acquiring Person” is a person or group that, together with affiliates and associates of such person or group, acquires beneficial ownership of 4.99% or more of Autoscope’s common stock, other than (i) an “Exempt Person”; (ii) any shareholder that, as of the time of the first public announcement of adoption of the Rights Agreement, beneficially owns 4.99% or more of Autoscope’s common stock (unless and until such person thereafter acquires any additional shares of common stock, subject to certain exceptions); (iii) a person who becomes an Acquiring Person solely as a result of Autoscope repurchasing shares of its common stock; and (iv) certain shareholders who inadvertently buy shares in excess of 4.99% of the shares of common stock and who thereafter reduce the percentage of the shares they own below 4.99%. An Exempt Person is defined as Autoscope, its subsidiaries and their respective employee benefit plans; and any person that the Board has affirmatively determined, in its sole discretion, prior to the Distribution Date, in light of the intent and purposes of the Rights Agreement or other circumstances facing the Company, will not be deemed an Acquiring Person.

 

Flip-In Trigger.  If an Acquiring Person acquires beneficial ownership of 4.99% or more of the outstanding shares of Autoscope’s common stock, all holders of Rights may purchase, for the Purchase Price, a number of shares of common stock (or, in certain circumstances, cash, property or other securities of Autoscope) having a then-current market value equal to twice the Purchase Price, based on the market price of the common stock before such acquisition. However, the Rights are not exercisable following the occurrence of such an event until the Rights are no longer redeemable by Autoscope, as described below.

 

Following the occurrence of an event described in the preceding paragraph, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.

 

Flip-Over Trigger.  If, after an Acquiring Person obtains 4.99% or more of the outstanding shares of Autoscope’s common stock, Autoscope merges into another entity, an acquiring entity merges into Autoscope, or Autoscope sells or transfers more than 50% of its assets, cash flow or earning power, then each Right (except for Rights that have previously been voided as set forth above) will entitle its holder to purchase, for the Purchase Price, a number of shares of stock of the acquiring person engaging in the transaction having a then-current market value equal to twice the Purchase Price, based on the market price of the Acquiring Person’s stock before such transaction.

Redemption of the Rights

 

The Board may redeem the Rights for $0.001 per Right (payable in cash, shares of Autoscope’s common stock or other consideration deemed appropriate by the Board) at any time before a person becomes an Acquiring Person. When the Board redeems the Rights, the Rights will terminate, and the only right of the holders of the Rights will be to receive the $0.001 redemption price. The redemption price will be adjusted if Autoscope undertakes a stock dividend or a stock split of its common stock.

 

Exchange

 

After a person or group becomes an Acquiring Person, but before an Acquiring Person beneficially owns 50% of the outstanding shares of Autoscope’s common stock, the Board may extinguish the Rights (except for Rights that have previously been voided as set forth above), in whole or in part, by exchanging two shares of common stock or an equivalent security for each Right. In certain circumstances, Autoscope may elect to exchange the Rights for cash or other securities of Autoscope having a value approximately equal to two shares of common stock.

 

Expiration of the Rights

 

The Rights expire on the earliest of (i) 6:00 p.m., Eastern time, on June 4, 2022 (unless such date is extended because the 2022 Amendment is approved by Autoscope’s shareholders at the annual meeting of shareholders scheduled for May 10, 2022); (ii) the time at which the Rights are redeemed or exchanged under the Rights Agreement; (iii) the repeal of Section 382 of the Code or any successor statute or any other change if the Board determines that the Rights Agreement is no longer necessary or desirable for the preservation of the Tax Benefits; or (iv) the time at which the Board determines that the Tax Benefits are fully utilized or no longer available.  If Autoscope’s shareholders approve the 2022 Amendment, the Rights will expire at the earliest of 6:00 p.m., Eastern time, on June 4, 2024 (unless such date is again extended) and the occurrence of the other events set forth in clauses (ii) through (iv) of the foregoing sentence.

 

Amendment of Terms of Rights Agreement and Rights

 

The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the holders of the Rights on or before the Distribution Date. After the Distribution Date, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights in order to cure any ambiguities, to shorten or lengthen any time period set forth in the Rights Agreement, or to make changes that do not adversely affect the interests of holders of the Rights.

 

Voting Rights; Other Shareholder Rights

 

The Rights do not have any voting rights. Until a Right is exercised, the holder of the Right will have no separate rights as a shareholder of Autoscope.

 

Anti-Dilution Provisions

 

The Board may adjust the Purchase Price, the number of Preferred Shares issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of Autoscope’s Preferred Shares or shares of common stock.

 

With certain exceptions, no adjustments to the Purchase Price will be made until the cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Preferred Shares will be issued and, in lieu thereof, an adjustment in cash will be made based on the current market price of the Preferred Shares.

Taxes

 

The distribution of Rights should not be taxable for federal income tax purposes. However, following any occurrence of an event that renders the Rights exercisable or upon any redemption of the Rights, shareholders may recognize taxable income.

 

Certain Considerations Relating to the Rights Agreement

 

The Board believes that attempting to protect the Tax Benefits as described above is in our and the shareholders’ best interests. Nonetheless, we cannot eliminate the possibility that an ownership change will occur even if the 2022 Amendment is approved. You should consider the factors below when making your decision.

 

• Future Use and Amount of the Tax Benefits Are Uncertain. Our use of the Tax Benefits depends on our ability to generate taxable income in the future. We cannot assure you whether we will have taxable income in any applicable period or, if we do, whether such income or the Tax Benefits at such time will exceed any potential limitation under Section 382 of the Code. 

 

• Potential Challenge to the Tax Benefits. The amount of the Tax Benefits has not been audited or otherwise validated by the Internal Revenue Service (the “IRS”). The IRS could challenge the amount of the Tax Benefits, which could result in an increase in our liability in the future for income taxes. In addition, determining whether an ownership change has occurred is subject to uncertainty because of the complexity and ambiguity of the Section 382 provisions of the Code and because of limitations on the knowledge that any publicly-traded company can have about the ownership of, and transactions in, its securities on a timely basis. Therefore, we cannot assure you that the IRS or another taxing authority will not claim that we experienced an ownership change and attempt to reduce the benefit of the Tax Benefits available to us at such time even if the Rights Agreement is in place. 

 

• Continued Possibility of Ownership Change. Although the Rights Agreement is intended to diminish the likelihood of an ownership change by deterring (rather than prohibiting) persons or groups of persons from acquiring beneficial ownership of Autoscope's common stock in excess of the specified limitations, we cannot assure you that it will be effective. The amount by which an ownership interest may change in the future could, for example, be affected by sales of Autoscope's common stock by shareholders who are 5% shareholders (as defined under Section 382 of the Code) or by sales or purchases of stock or other interests in corporations, partnerships or other legal entities that own 5% or more of Autoscope's common stock, over which we have no control. Additionally, it may be in Autoscope's best interests, taking into account all relevant facts and circumstances at the time, to permit the acquisition of common stock in excess of the specified limitations or to issue a reasonable amount of equity in the future, all of which may increase the likelihood of an ownership change. 

 

• Potential Effects on Liquidity. The Rights Agreement is intended to deter persons or groups of persons from acquiring beneficial ownership of Autoscope's common stock in excess of the specified limitations. A shareholder’s ability to dispose of Autoscope's common stock may be limited if the Rights Agreement reduces the number of persons willing to acquire Autoscope's common stock or the amount they are willing to acquire. A shareholder may become an Acquiring Person upon actions taken by persons related to, or affiliated with, them. Shareholders are advised to carefully monitor their ownership of Autoscope's common stock and consult their own legal advisors and/or us to determine whether their ownership of the shares approaches the proscribed level. 

• Potential Impact on Value. The Rights Agreement could negatively impact the value of Autoscope's common stock by deterring persons or groups of persons from acquiring Autoscope's common stock, including in acquisitions for which some shareholders might receive a premium above market value. 

 

• Anti-Takeover Effect. The Board adopted the Rights Agreement and the 2022 Amendment to diminish the risk that our ability to use the Tax Benefits to reduce potential federal and state income tax obligations becomes limited. Nonetheless, the Rights Agreement may have an “anti-takeover effect” because it may deter a person or group of persons from acquiring beneficial ownership of 4.99% or more of Autoscope's common stock or, in the case of a person or group of persons that already own 4.99% or more of Autoscope's common stock, from increasing its percentage ownership by more than 1.00% of Autoscope's outstanding shares. The Rights Agreement could discourage or prevent a merger, tender offer, proxy contest or accumulations of substantial blocks of shares. 

 

Proxies will be voted in favor of the 2022 Amendment unless shareholders specify otherwise in their proxies and except for broker non-votes.  The affirmative vote of at least a majority of the voting power of the shares present, in person or by proxy, and entitled to vote (excluding broker non-votes) is required for the approval of the 2022 Amendment. If the 2022 Amendment is not approved, the Rights Agreement will expire at 6:00 p.m., Eastern time, on June 4, 2022.

 

The Board of Directors recommends that you vote FOR the approval of the 2022 Amendment.

On February 17, 2022, Autoscope's Board of Directors adopted, subject to shareholder approval, the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan (the "2022 Stock Plan").  The purpose of the 2022 Stock Plan is to promote the growth and general prosperity of Autoscope by permitting it to grant awards to employees, officers, members of the Board of Directors, consultants, independent contractors, and other service providers of the Company, thereby assisting it in its efforts to attract and retain the best available persons for positions of substantial responsibility and to provide employees, officers, members of the Board of Directors, consultants, independent contracts, and other service providers an additional incentive to contribute, by the performance of services, to the future success of the Company.

The 2014 Plan will expire on April 9, 2024, and we plan to continue to grant options and other awards under the 2014 Plan until shares are no longer available for the grant of awards.  As of February 28, 2022, 125,504 shares remained available for awards under the 2014 Plan.

The Board believes that the continuation of incentive compensation is essential to attracting, retaining and motivating individuals to enhance the likelihood of our future success.  Shareholder approval of the 2022 Stock Plan will permit us to award incentives to achieve these goals.

The following summary of the material terms of the 2022 Stock Plan is qualified in its entirety by reference to the 2022 Stock Plan, a copy of which is attached as Appendix C to this proxy statement.

 

Summary of the 2022 Stock Plan

Administration

The Compensation Committee will administer the 2022 Stock Plan and will have full power and authority to determine when and to whom awards will be granted and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the 2022 Stock Plan.  In addition, the Compensation Committee can determine any restrictions to be placed on common stock purchased upon exercising an option and whether any specific grants of awards should include provisions regarding non-solicitation, non-competition, confidentiality or "for cause" restrictions.  Subject to the provisions of the 2022 Stock Plan, the Compensation Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award.  The Compensation Committee has authority to interpret the 2022 Stock Plan and establish rules and regulations for it administration.  The Board may exercise the powers of the Compensation Committee at any time, subject to certain conditions.  The Compensation Committee may delegate to one or more of our officers the authority to grant options, subject to certain conditions and the terms, conditions and limitations the Compensation Committee may establish.  The Board may exercise the powers and duties of the Compensation Committee under the 2022 Stock Plan unless the exercise of such powers and duties by the Board would cause the 2022 Stock Plan not to comply with the requirements of Section 162(m) of the Code.

Eligible Participants

Any employee, officer, member of the Company's Board of Directors, consultant, independent contractors or others providing services to us or any of our affiliates who is selected by the Compensation Committee is eligible to receive an award under the 2022 Stock Plan.  As of February 28, 2022, approximately 41 employees, officers and directors were eligible to be selected by the Compensation Committee to receive awards under the 2022 Stock Plan.

Shares Available for Awards

The maximum number of shares of Autoscope's common stock that may be issued under all stock-based awards made under the 2022 Stock Plan will be 1,000,000 shares.  The closing price of a share of Autoscope's common stock as reported on The Nasdaq Capital Market on February 28, 2022 was $6.67.  Certain awards under the 2022 Stock Plan are subject to limitations on the number of shares that may be awarded, as follows:

•	No person may be granted options, stock appreciation rights or any other award under the 2022 Stock Plan in any calendar year, the value of which award is based solely on an increase in the value of Autoscope's common stock after the date of grant of the award, for more than 150,000 shares in the aggregate.
•	No person may receive performance awards in any calendar year for more than $500,000 in value in the aggregate, whether payable in cash, shares or other property.

The maximum number of shares subject to the 2022 Stock Plan may be increased by the Board of Directors or the Compensation Committee, subject to the approval of Autoscope's shareholders.  In addition, the Compensation Committee may adjust the number of shares subject to the 2022 Stock Plan and, if appropriate, the per share exercise price of outstanding awards in the case of a stock dividend, split, reverse split, reclassification, combination, exchange of common stock or other similar recapitalization of Autoscope in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the 2022 Stock Plan.

Shares of Autoscope's common stock subject to any awards which terminate or expire prior to exercise by or vesting in a recipient of the award will be available for future awards under the 2022 Stock Plan.  In addition, shares used by award recipients as payment of the exercise price or in satisfaction of the tax obligations relating to an award will be available again for award grants.

Change in Control

Unless otherwise provided by the Compensation Committee, in the event of a "Change in Control" (as that term is defined in the 2022 Stock Plan), the following shall occur immediately as of the effective date of such Change in Control:

•	any and all awards granted will be, as nearly as may reasonably be, automatically converted into the same type of award to acquire the kind and amount of shares of stock or other securities or property (including cash) which the recipient of the award would have owned or been entitled to receive had the awards been exercised or realized in full immediately before the effective date of the Change in Control;
•	all options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the recipients to whom such options have been granted remain in the employ or service of Autoscope or any "Affiliate" (as the term "Affiliate" is defined in the 2022 Stock Plan);
•	all outstanding awards of restricted stock and restricted stock units will become immediately fully vested regardless of whether the recipients to whom such options have been granted remain in the employ or service of Autoscope or any Affiliate; and
•	all other outstanding awards will vest and/or continue to vest in the manner determined by the Compensation Committee.

In addition, the Compensation Committee has the discretion, exercisable without the consent of any recipient of an award under the 2022 Stock Plan, if not prohibited by the applicable agreement, at any time before the effective date of a Change in Control, to take such further action as it determines to be necessary or advisable with respect to outstanding awards.  Such authorized action may include establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, awards so as to provide for earlier, later, extended or additional time for exercise; paying cash or other consideration in exchange for all or part of such awards; and lifting restrictions and other modifications.  The Compensation Committee may take such actions with respect to all recipients, to certain categories of recipients or to only individual recipients of awards granted under the 2022 Stock Plan.

Types of Awards and Terms and Conditions

The 2022 Stock Plan permits the granting of:

•	stock options (including both incentive stock options ("ISOs") intended to qualify as such as defined in Section 422 of the Code and non-qualified stock options);
•	stock appreciation rights ("SARS");
•	restricted stock and restricted stock units;
•	performance awards of cash, stock or property; and
•	other stock grants.

Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the 2022 Stock Plan or any other compensation plan. 

Stock Options. The holder of an option granted under the 2022 Stock Plan will be entitled to purchase a number of shares of Autoscope's common stock at a specified exercise price during a specified time period, all as determined by the Committee. However, the exercise price of shares of common stock that are subject to an ISO cannot be less than 100% of the Fair Market Value of such shares at the time the option is granted (as the term “Fair Market Value” is defined in the 2022 Stock Plan), and the exercise price of an ISO granted to an employee of Autoscope or any Affiliate who owns at least 10% of the total combined voting power of all classes of Autoscope’s stock or any Affiliate cannot be less than 110% of the Fair Market Value of the shares subject to the ISO. In addition, the term of an ISO cannot be more than 10 years after the date of grant, although the term of an ISO granted to an employee or an Affiliate who owns at least 10% of the total combined voting power of all classes of Autoscope’s stock or any Affiliate cannot be more than five years. The aggregate Fair Market Value of the shares of common stock with respect to which an ISO is exercisable by the recipient for the first time during any calendar year cannot exceed $100,000. To the extent an ISO exceeds this $100,000 limit, the portion of the ISO in excess of such limit shall be deemed a non-statutory option. An ISO is not transferable except by will or the laws of descent and distribution, and ISOs are exercisable during a recipient’s lifetime only by the recipient.

The option exercise price of any option granted under the 2022 Stock Plan may be payable either in cash or, at the discretion of the Compensation Committee, payment or a portion thereof may be made by surrendering previously acquired shares of common stock or shares of common stock issuable upon the exercise of that option, or by a combination of such shares and cash. Except for an ISO as described above, and subject to the discretion of the Compensation Committee to provide otherwise when an option is granted, options granted under the 2022 Stock Plan are not transferable except by will or the laws of descent and distribution and are exercisable during a recipient’s lifetime only by the recipient.

Subject to the discretion of the Compensation Committee to determine otherwise at the time of grant of an option under the 2022 Stock Plan, upon the termination of the recipient’s employment or other relationship with Autoscope or with an Affiliate for any reason other than the recipient’s death, all options held by the recipient may be exercised to the same extent that the recipient would have been entitled to exercise such options at the date of termination and may be exercised within a period of 90 days after the date of termination, but in no case later than the expiration date of each such option. Any portion of an option that is not exercisable at the time of the termination of a recipient’s employment or other relationship with the Company as described in the foregoing sentence shall automatically terminate.

Subject to the discretion of the Compensation Committee to determine otherwise at the time of grant of an option under the 2022 Stock Plan, upon the termination of a recipient’s employment as a result of the death of a recipient, all options held by the recipient may be exercised to the same extent that the recipient would have been entitled to exercise such options at the date of death and may be exercised within a period of 180 days after the date of death, but in no case later than the expiration date of each such option. In such event, such options shall be exercisable only by the executors or administrators of the recipient or by the person or persons to whom the recipient’s rights under the options have passed by will or the laws of descent and distribution. Any portion of an option that is not exercisable at the time of a recipient’s death will automatically terminate.

Stock Appreciation Rights. The holder of a SAR granted under the 2022 Stock Plan is entitled to receive upon its exercise the excess of the Fair Market Value (calculated as of the exercise date or, in the Compensation Committee’s discretion, as of any time during a specified period before or after the exercise date) of a specified number of shares of Autoscope's common stock over the grant price of the SAR, which price will not be less than 100% of the Fair Market Value of one share of common stock on the date of grant. SARs vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee. Subject to the terms of the 2022 Stock Plan, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions (including conditions or restrictions on the exercise thereof) of any SAR are as determined by the Compensation Committee.

Subject to the provisions of the 2022 Stock Plan and the agreement for any award of SARs, SARs are not transferable during any applicable restriction period.

Restricted Stock and Restricted Stock Units. The holder of awards of restricted stock granted under the 2022 Stock Plan will own shares of Autoscope's common stock subject to restrictions imposed by the Compensation Committee (including, for example, a restriction on the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Compensation Committee. The 2022 Stock Plan provides that certificates for shares evidencing restricted stock will be held in custody by or on behalf of Autoscope until the restrictions on the restricted stock have lapsed. The certificates will be delivered to the recipient after the period of forfeiture has expired and any other conditions to the vesting of the restricted stock have been met. Except as provided in the 2022 Stock Plan or by the Compensation Committee in an applicable award agreement, recipients of restricted stock awards have all of the rights of a holder of Autoscope’s common stock.

The holder of restricted stock units granted under the 2022 Stock Plan will have the right, subject to the restrictions and conditions imposed by the Compensation Committee, to receive one share of Autoscope's common stock for each restricted stock unit at some future date determined by the Compensation Committee.

Subject to the provisions of the 2022 Stock Plan and the agreement for any award of restricted stock or a restricted stock unit, they are not transferable during any applicable restriction period.

If the recipient’s employment or service as a director otherwise terminates during the vesting period for any reason, the restricted stock and restricted stock units will be forfeited, unless the Compensation Committee determines it appropriate to waive the remaining restrictions.

Performance Awards. Performance awards granted under the 2022 Stock Plan are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. Performance awards will give participants the right to receive payments in cash, shares of common stock or other awards based solely upon the achievement of one or more performance goals during a specified performance period. Subject to the terms of the 2022 Stock Plan and the applicable agreement, the performance goals to be achieved during any performance period, the length of any performance period, and amount of the performance award granted, the amount of any payment or transfer to be made under any performance award, and any other terms and conditions of any performance award will be determined by the Compensation Committee and must comply with Section 162(m) of the Code.

Performance goals are defined in the 2022 Stock Plan as any one or more of the following, either individually, alternatively or in any combination, applied on a corporate, subsidiary or group basis: revenue, cash flow, earnings (including one or more of gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings), earnings per share (basic or diluted), margins (including one or more of gross, operating and net income margins), returns (including one or more of return on assets, equity, investment, capital and revenue and total shareholder return), stock price, economic value added, working capital, market share, cost reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction, completion of key projects and strategic plan development and implementation.

Such goals may reflect absolute entity or group performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria.

Subject to the provisions of the 2022 Stock Plan and the agreement for any performance award, performance awards are not transferable during any applicable restriction period.

Other Stock Grants. Under the 2022 Stock Plan, the Compensation Committee may grant shares of Autoscope's common stock with or without restrictions as are determined by the Compensation Committee to be consistent with the purposes of the 2022 Stock Plan. Subject to the provisions of the 2022 Stock Plan and the agreement for any other stock grant, stock grants are not transferable during any applicable restriction period.

Duration, Termination and Amendment

Unless terminated by the Board of Directors or the Compensation Committee, the 2022 Stock Plan will expire on February 17, 2032. No awards may be made after the date that the 2022 Stock Plan terminates. However, any award granted under the 2022 Stock Plan prior to its termination may extend beyond the end of such period through the award’s normal expiration date.

The Board of Directors or the Compensation Committee may amend the 2022 Stock Plan at any time in such respects as it deems advisable, including to affect awards already granted., However, no amendment may be made to the extent that such amendment would (i) violate the applicable rules or regulations of The Nasdaq Stock Market or any other securities exchange applicable to Autoscope, (ii) prevent the grant of options or SARs that would qualify under Section 162(m) of the Code, or (iii) cause any ISO already granted under the 2022 Stock Plan to cease to satisfy the requirements for ISOs under Section 422 of the Code. In addition, certain amendments, such as an amendment increasing the number of shares of Autoscopes' common stock available under the 2022 Stock Plan for the grant of awards, are subject to the approval of Autoscope's shareholders.

New Plan Benefits

No benefits or amounts have been granted, awarded or received under the 2022 Stock Plan. In addition, the Committee in its sole discretion will determine the number and types of awards that will be granted. Thus, it is not possible to determine the benefits that will be received by eligible participants if the 2022 Stock Plan were to be approved by the shareholders.

Equity Compensation Plan Information

The following table provides information as of December 31, 2021 about Autoscope's shares of common stock subject to outstanding awards or available for future awards under our equity compensation plans and arrangements.

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by shareholders		12,000		$	4.90		125,504
Equity compensation plans not approved by security holders (none)		--			--		--
Total		12,000		$	4.90		125,504

Federal Income Tax Treatment

Because the Code and other federal income tax law is subject to change, and because local and state tax laws vary, Autoscope strongly recommends that potential recipients of awards under the 2022 Stock Plan consult with a professional tax advisor prior to exercising an option or any other award granted under the 2022 Stock Plan.

Grant of Options and SARs

The grant of a stock option or SAR under the 2022 Stock Plan is not expected to result in any taxable income for the recipient.

Exercise of Options and SARs

Upon exercising a non-qualified stock option granted under the 2022 Stock Plan, the recipient of the option must recognize ordinary income equal to the excess of the fair market value of the shares of Autoscope's common stock acquired on the date of exercise over the exercise price, and we will generally be entitled at that time to an income tax deduction for the same amount. The holder of an ISO generally will have no taxable income upon exercising the ISO (except that an alternative minimum tax liability may arise), and we will not be entitled to an income tax deduction. Upon exercising an SAR, the amount of any cash received and the fair market value on the exercise date of any shares of Autoscope's common stock received are taxable to the recipient as ordinary income and generally deductible by us.

Disposition of Shares Acquired Upon Exercise of Options and SARs

The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR granted under the 2022 Stock Plan will depend on how long the shares have been held and whether the shares were acquired by exercising an ISO or by exercising a non-qualified stock option or SAR. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under an option or SAR, except that we may be entitled to an income tax deduction in the case of the disposition of shares acquired under an ISO before the applicable ISO holding periods set forth in the Code have been satisfied.

Awards Other than Options and SARs

As to other awards granted under the 2022 Stock Plan that are payable either in cash or shares of Autoscope's common stock that are either transferable or not subject to substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date of receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.

As to an award that is payable in shares of Autoscope's common stock that are restricted from transfer and subject to substantial risk of forfeiture, unless a special election is made by the holder of the award under the Code, the holder must recognize ordinary income equal to the excess of (a) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (b) the amount (if any) paid for the shares by the holder. We will generally be entitled at that time to an income tax deduction for the same amount.

Income Tax Deduction

Subject to the usual rules concerning reasonable compensation, and assuming that, as expected, performance awards paid under the 2022 Stock Plan are “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, we will generally be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2022 Stock Plan.

Application of Section 16 of the Securities Exchange Act of 1934

Special rules may apply to individuals subject to Section 16 of the Securities Exchange Act of 1934. In particular, unless a special election is made pursuant to the Code, shares received through the exercise of a stock option or SAR may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that report.

The Board of Directors recommends that the shareholders vote FOR the proposal to approve the Autoscope Technologies Corporation 2022 Stock Option and Incentive Plan.

SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING

Any proposal by a shareholder to be included in our proxy statement for the 2023 annual meeting of shareholders must comply with the applicable rules and regulations of the Securities and Exchange Commission and must be received at our principal executive offices, 1115 Hennepin Ave, Minneapolis, Minnesota 55403, no later than November 22, 2022. Pursuant to the rules of the Securities and Exchange Commission, proxies solicited by management for the next annual meeting may grant management the authority to vote in its discretion on any proposal submitted by a shareholder otherwise than through inclusion in the proxy statement for the meeting unless we have received notice of the shareholder proposal at our principal executive offices on or before February 6, 2023.

ANNUAL REPORT TO SHAREHOLDERS

We are including with this proxy statement our Annual Report to Shareholders for the year ended December 31, 2021, which includes our Annual Report on Form 10‑K for the year ended December 31, 2021, without certain exhibits.  Shareholders may request a complete copy of our Annual Report on Form 10‑K for fiscal 2021 with all exhibits, as filed with the Securities and Exchange Commission, by writing to Autoscope Technologies Corporation, 1115 Hennepin Ave, Minneapolis, Minnesota 55403, Attention: Chief Financial Officer.

 

OTHER MATTERS

We know of no matters other than those that are described in this proxy statement to come before the 2022 annual meeting of shareholders.  However, if any other matters are properly brought before the meeting, one or more persons named in the proxy or their substitutes will vote in accordance with their best judgment on such matters.

 

 

 

	Andrew T. Berger
	Executive Chair and Chief Executive Officer

 

 

Dated: March 22, 2022