UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 Or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)  July 3, 2008

 

Image Sensing Systems, Inc.

(Exact name of registrant as specified in its charter)

 

Minnesota

0-26056

41-1519168

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(IRS Employer
Identification No.)

 

 

 

500 Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota

55104

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code   (651) 603-7700

 

____________________________________________________________________________

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 
 


Section 1 – Registrant’s Business and Operations

 

Item 1.01. Entry into a Material Definitive Agreement.

 

(a)  On July 3, 2008, Image Sensing Systems, Inc. (the “Company”) entered into an Extension and Third Modification to Manufacturing, Distributing and Technology License Agreement (the “2008 Amendment”). The 2008 Amendment amends the Manufacturing, Distributing and Technology License Agreement dated June 11, 1991 by and between the Company and Econolite Control Products, Inc., as amended and modified by a Letter Agreement dated June 19, 1997, a Modification to Manufacturing, Distributing and Technology License Agreement dated September 1, 2000, an Extension and Second Modification to Manufacturing, Distributing and Technology License Agreement dated July 13, 2001, and a Settlement Agreement, Contract Modification and Mutual Release executed August 3, 2006 (as so amended and modified, the “Econolite Agreement”).

 

Among other modifications, the 2008 Amendment extended the term of the Econolite Agreement to June 12, 2031, subject to the right of either party to terminate it upon three years’ prior written notice to the other party.

 

The foregoing description of the 2008 Amendment is qualified by reference to the copy of the 2008 Amendment attached as Exhibit 10.1, and the 2008 Amendment is described in the press release attached as Exhibit 99.1.

 

Section 9 – Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits

 

(d)   Exhibits. The following exhibits are hereby filed as part of this Current Report on Form 8-K:

 

10.1  Extension and Third Modification to Manufacturing, Distributing and Technology License Agreement dated as of July 3, 2008 by and between Image Sensing Systems, Inc. and Econolite Control Products, Inc.

 

99.1  Press release of Image Sensing Systems, Inc. dated July 10, 2008.

 

 






2



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Image Sensing Systems, Inc.

 

 

Dated: July 10, 2008

 

 

By

/s/ Gregory R. L. Smith

 

 

Gregory R. L. Smith
Chief Financial Officer
(Principal Financial Officer)

 

 

 









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EXHIBIT INDEX

 

Exhibit No.

Description

 

 

 

10.1

Extension and Third Modification to Manufacturing, Distributing and Technology License Agreement dated as of July 3, 2008 by and between Image Sensing Systems, Inc. and Econolite Control Products, Inc.

 

 

 

 

99.1

Press Release of Image Sensing Systems, Inc. dated July 10, 2008.

 

 















Exhibit 10.1

 

E XTENSION AND T HIRD M ODIFICATION TO M ANUFACTURING, D ISTRIBUTING AND T ECHNOLOGY L ICENSE A GREEMENT

 

THIS EXTENSION AND THIRD MODIFICATION TO MANUFACTURING, DISTRIBUTING AND TECHNOLOGY LICENSE AGREEMENT (this “Third Modification”) is made and entered into as of July 3, 2008 by and between Image Sensing Systems, Inc., a Delaware corporation located at 500 Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota 55104 (hereinafter, “ISS”), and Econolite Control Products, Inc., a California corporation located at 3360 E. La Palma Avenue, Anaheim, California 92806 (hereinafter “Econolite”). ISS and Econolite were the parties to the original Manufacturing, Distributing and Technology License Agreement dated June 11, 1991 (the “Agreement”) which was subsequently modified, in part, in a Modification to Manufacturing, Distributing and Technology License Agreement dated September 1, 2000 (the “First Modification”), a Letter Agreement dated June 19, 1997 (the “Letter Agreement”), Extension and Second Modification to Manufacturing, Distributing and Technology License Agreement dated July 13, 2001 (the “Second Modification”) and Settlement Agreement, Contract Modification and Mutual Release executed August 3, 2006 (the “Settlement”).

 

Recitals:

 

A.

The parties have operated successfully under the Agreement, as modified, for more than 15 years.

 

B.

The Agreement, as previously modified, will, under its terms, terminate on June 11, 2011.

 

C.

The parties hereto decide to extend the term of the Agreement and to add or modify certain provisions.

 

NOW, THEREFORE , for and in consideration of the foregoing premises, and the mutual covenants and agreements contained herein, the parties hereto agree as follows:

 

1.             The first paragraph of ARTICLE I. APPOINTMENT AS EXCLUSIVE DISTRIBUTOR AND MANUFACTURER OF THE PRODUCTS shall be deleted in is entirety and replaced with the following:

 

In accordance with and subject to the terms and conditions of Article V below, ISS appoints Econolite as its exclusive licensee to make, have made, use, license, distribute and sell the products defined in Article V and specified in Exhibit A attached hereto (the “Products”) to customers located in the Territory (as defined in Article V) for use solely in connection with applications primarily related to the regulation of surface transportation. Notwithstanding the foregoing and for purposes of clarification, applications related to security, environmental and other applications not related to the regulation of surface transportation shall be specifically excluded from the license rights granted to Econolite in this Agreement. Other territories and other products used primarily for the regulation of surface transportation (the “Additional Products”) will be first offered to Econolite for negotiation within a reasonable time period before distribution rights are granted to any other party in any part of the world pursuant to the terms of Article V.B.4. and V.B.5. Exhibit A may be modified by the parties hereto, from time to time, in a writing agreed to and signed by the parties.

 



2.             A new paragraph of ARTICLE I. APPOINTMENT AS EXCLUSIVE DISTRIBUTOR AND MANUFACTURER OF THE PRODUCTS shall added immediately after the first paragraph of ARTICLE I as follows:

 

Notwithstanding the foregoing and for purposes of clarification, ISS may request the right to manufacture (or cause to be manufactured) the Products in the Territory; provided, that such Products are being manufactured to fulfill sales to customers located outside of the Territory. If ISS believes that Econolite is not competitive on cost and/or delivery schedule, it shall send written notice to Econolite explaining in detail its basis for this claim (any claim by ISS must be supported by including a copy of a written bid from a qualified and reputable third party). Econolite may agree to match the third party price and/or delivery schedule, as the case may be, and, if Econolite does not agree to match the third party price and/or delivery schedule, Econolite shall provide a reasonable business basis on which it has not agreed.

 

3.             The words “and its affiliates and subsidiaries” shall be inserted after the word “Econolite” in line 1 of Section B of ARTICLE II. RESPONSIBILITIES OF ECONOLITE.

 

4.             A new Section M is hereby added to ARTICLE II. RESPONSIBILITIES OF ECONOLITE which shall read as follows:

 

M.         ISS and Econolite shall use their commercially reasonable efforts to minimize costs incurred in connection with the manufacture of the Products without any impact on the Product’s form, fit or function (the “Cost Savings Projects”). All Cost Savings Projects must be agreed to by ISS and Econolite in writing and in advance of any implementation.

 

5.             The words “additional products” in lines 2, 4, 9 and 10 of Section B(4) of Article V. TECHNOLOGY LICENSE are hereby deleted and replaced with the words “Additional Products”.

 

6.             ARTICLE VII. OWNERSHIP OF INVENTIONS shall be deleted in its entirety and replaced with:

 

 

[Intentionally Omitted]

 

7.             ARTICLE VIII. DURATION AND TERMINATION shall be deleted in its entirety and replaced with the following:






ARTICLE VIII. DURATION AND TERMINATION

 

This Agreement shall become effective upon the Effective Date and shall be non-cancellable except under the terms of Article IX for a term of forty (40) years.

 

8.             A new Section D shall be added to ARTICLE IX. EARLY TERMINATION which shall read as follows:

 

D.         Either party may terminate this Agreement upon three (3) years prior    written notice to the other party.

 

9.             Except as modified herein, each and every other provision of the Agreement, as modified by the First Modification, Letter Agreement, Second Modification and Settlement are confirmed and reaffirmed.

 

IN WITNESS WHEREOF , the parties hereto have executed this Modification effective as of the date first set out above.

 

IMAGE SENSING SYSTEMS, INC.

ECONOLITE CONTROL PRODUCTS, INC.

 

 

By: /s/ Kenneth R. Aubrey

By: /s/ David St. Amant

Title:  President and CEO

Title:   President and COO

Date:   July 2, 2008

Date:   July 3, 2008

 













Exhibit 99.1

 


500 Spruce Tree Centre

1600 University Avenue West

St. Paul, Minnesota 55104-3825 USA

651.603.7700 Fax: 651.603.7795

www.imagesensing.com

NEWS RELEASE

 

Contacts:

Greg Smith, Chief Financial Officer

Image Sensing Systems, Inc. Phone: 651.603.7700

 

 

FOR IMMEDIATE RELEASE

 

Image Sensing Systems Announces Extension to Econolite Distribution Agreement

 

Saint Paul, Minn., July 10, 2008-- Image Sensing Systems, Inc. (NASDAQ: ISNS), announced today that it had reached an agreement with its exclusive North American distributor for Autoscope®, Econolite Control Products, Inc., to extend the current agreement.

 

Under an amendment to the Manufacturing, Distributing and Technology License Agreement, the term of the agreement, which was set to expire in 2011 has been extended to 2031 with either party being allowed to cancel the agreement with three years’ notice. The amendment includes additional non-financial modifications.

 

Ken Aubrey, CEO, said, “Since 1991, Econolite has been our valued partner and has shared our belief in the advantages of computer enabled detection for ITS. They have helped us become the leaders in machine-vision based detection for intersection control in North America with our Autoscope family of products. We are fortunate to be a part of the premier distribution channel in our market.”

 

Added Mike Doyle, CEO of Econolite, “We value Image Sensing for consistently delivering new and exciting technology that keeps us ahead of the competition. Recently, it was Autoscope Terra™, with its Ethernet over power design, MPEG-4 streaming and Internet connectivity. And we are anxiously awaiting the hybrid machine-vision/radar offering, which we believe will set a significantly higher standard for performance and functionality and open previously untapped segments of the market.”

 

About Image Sensing

 

Image Sensing Systems, Inc. is a technology company specializing in software-based detection solutions for the Intelligent Transportation Systems (ITS) sector and adjacent overlapping markets. Our industry leading computer enabled detection (CED) products, including the Autoscope® machine-vision family and the RTMS® radar family, combine embedded software signal processing with sophisticated sensing technologies for use in transportation and safety/surveillance management. CED is a group of technologies in which software, rather than humans, examines the outputs of complex sensors to determine what is happening in the field of view in real-time. With more than 80,000 instances sold in over 60 countries worldwide, our depth of experience coupled with breadth of product portfolio uniquely positions us to provide powerful hybrid technology solutions and to exploit the convergence of the traffic, security and environmental management markets. We are headquartered in St. Paul, Minnesota. Visit us on the web at imagesensing.com.

 

Safe Harbor Statement: Statements made in this release concerning the Company's or management's intentions, expectations, or predictions about future results or events are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management's current expectations or beliefs, and are subject to risks and uncertainties that could cause actual results or events to vary from stated expectations, which variations could be material and adverse. Factors that could produce such a variation include, but are not limited to, the following: the inherent unreliability of earnings, revenue and cash flow predictions due to numerous factors, many of which are beyond the Company's control; developments in the demand for the Company's products and services; relationships with the Company's major customers and suppliers; unanticipated delays, costs and expenses inherent in the development and marketing of new products and services; the impact of governmental laws and regulations; and competitive factors. Our forward-looking statements speak only as of the time made, and we assume no obligation to publicly update any such statements. Additional information concerning these and other factors that could cause actual results and events to differ materially from the Company's current expectations are contained in the Company's reports and other documents filed with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2007.