<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ____]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
VIISAGE TECHNOLOGY, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Viisage Technology, Inc.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act 0-
11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed __________________________________________________________
<PAGE>
[Viisage Technology Logo]
April 28, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting (the "Meeting")
of the Shareholders of Viisage Technology, Inc. ("Viisage"). Your Board of
Directors and management look forward to greeting those of you who are able to
attend.
Our 1996 Annual Report is enclosed. I hope you will read it carefully. I
have also enclosed our Notice of the 1997 Annual Meeting of Shareholders,
Proxy Statement, and proxy card.
At the Meeting, your Board of Directors will be asking you to vote for one
Class I director, to approve certain amendments to the 1996 Director Stock
Option Plan including an increase in the number of shares available for
issuance thereunder from 81,650 shares to 156,650 shares, and to ratify the
selection of Viisage's independent public accountants. The enclosed Proxy
Statement describes these proposals more fully. For the reasons set forth in
the Proxy Statement, your Board of Directors recommends votes "FOR" each
proposal.
Whether or not you plan to attend the Meeting, it is important that your
shares be represented and voted. Accordingly, please read the enclosed
material and mark, date, sign, and return the enclosed proxy card at your
earliest convenience. If you attend the Meeting, you may revoke your proxy by
requesting the right to vote in person.
Very Truly Yours,
/s/ Denis K. Berube
Denis K. Berube
Chairman of the Board of Directors
YOUR VOTE IS IMPORTANT.
PLEASE MARK, DATE, SIGN, AND RETURN YOUR PROXY CARD.
<PAGE>
[Viisage Technology Logo]
30 PORTER ROAD
LITTLETON, MASSACHUSETTS 01460
NOTICE OF THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The 1997 Annual Meeting of the Shareholders of Viisage Technology, Inc.
("Viisage") will be held at 1:30 p.m. on Wednesday, May 21, 1997 in the
Captain's Room on the 33rd floor of the State Street Bank and Trust Company
Building, 225 Franklin Street, Boston, Massachusetts. The Meeting is being
held for the following purposes:
1. To elect one Class I director for a three year term;
2. To approve amendments to Viisage's 1996 Director Stock Option Plan to
increase the number of shares available for issuance thereunder from
81,650 shares to 156,650 shares and to address certain administrative
matters relating to the Plan which are described in the Proxy Statement;
3. To ratify the selection of Arthur Andersen LLP as independent public
accountants for Viisage for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the Meeting.
Shareholders of record at the close of business on March 24, 1997, the
record date for the Meeting, are entitled to receive notice of and to vote at
the Meeting.
The enclosed proxy card, Proxy Statement, and Viisage's 1996 Annual Report
are being sent to you along with this Notice.
By Order of the Board of Directors
/s/ Charles J. Johnson
Charles J. Johnson, Secretary
April 28, 1997
<PAGE>
VIISAGE TECHNOLOGY, INC.
PROXY STATEMENT
FOR THE
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1997
This Proxy Statement is provided in connection with the solicitation of
proxies by the Board of Directors of Viisage Technology, Inc., a Delaware
corporation (the "Company" or "Viisage"), for the 1997 Annual Meeting of
Shareholders to be held at 1:30 p.m. on Wednesday, May 21, 1997 in the
Captain's Room on the 33rd floor of the State Street Bank and Trust Company
Building, 225 Franklin Street, Boston, Massachusetts, and at any adjournment
thereof (the "Meeting"). The Company's principal executive offices are located
at 30 Porter Road, Littleton, Massachusetts 01460. This Proxy Statement and
the accompanying proxy card were first provided to shareholders on or about
April 30, 1997.
VOTING PROCEDURES
Viisage's Board of Directors (the "Board of Directors" or the "Board") is
soliciting proxies for the election of one director, comprising the class of
directors to be elected for the term expiring in 2000; to approve amendments
to Viisage's 1996 Director Stock Option Plan to increase the number of shares
available for issuance thereunder from 81,650 shares to 156,650 shares and to
address certain administrative matters relating to the Plan which are
described below; and the ratification of the selection of the Company's
independent public accountants.
At the close of business on March 24, 1997, the record date for the Meeting,
there were outstanding and entitled to vote 8,055,000 shares of the Company's
common stock, $0.001 par value per share (the "Common Stock"). Only
shareholders of record at the close of business on March 24, 1997 are entitled
to vote at the Meeting. Each outstanding share of Common Stock is entitled to
one vote.
The representation, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is necessary to
establish a quorum for the transaction of business at the Meeting. YOUR VOTE
IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE MARK, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. All
signed and returned proxies count toward establishing a quorum, regardless of
how the shares are voted. An abstention or withholding authority to vote will
be counted as present for determining a quorum.
Shares represented by proxy will be voted in accordance with your
instructions. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the nominee for director, for the two
proposals, and as the individuals named as proxy holders on the proxy card
deem advisable on all other matters as may properly come before the Meeting.
A plurality of the votes cast by shareholders entitled to vote is required
to approve the election of the director. For the other proposals, the
affirmative vote of a majority of the Common Stock present or represented and
voting on the matters is necessary for approval. With respect to the election
of the director, abstentions and broker "non-votes" will not have an effect.
Regarding the other proposals, abstentions will have the effect of negative
votes, but broker non-votes will have no effect. A broker "non-vote" occurs
when a nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting instructions from the
beneficial owner.
A shareholder who returns a proxy card may revoke it at any time before the
shareholder's shares are voted at the Meeting by written notice to the
Secretary of the Company received prior to the Meeting, by executing and
returning a later-dated proxy, or by voting by ballot at the Meeting.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTOR
One director, Denis K. Berube, is to be elected at the Meeting for a three
year term expiring at the 2000 Annual Meeting of Shareholders and until his
successor has been elected and qualified.
Pursuant to the Company's Restated Certificate of Incorporation, the Board
has set the number of directors at five. In addition, the Restated Certificate
of Incorporation provides that directors shall be divided into three classes
and that each director shall serve for a term of three years and until his or
her successor is elected and qualified or until his or her earlier
resignation, death, or removal. One class of directors is elected at each
annual meeting for a three year term.
Denis K. Berube is the sole Class I director (whose term expires in 1997);
the Class II directors (whose terms expire in 1998) are Charles J. Johnson and
Harriet Mouchly-Weiss; and the Class III directors (whose terms expire in
1999) are Peter Nessen and Thomas J. Reilly. There are no family relationships
between any of the directors or executive officers of the Company.
NOMINEE AND INCUMBENT DIRECTORS
As the sole Class I director, Mr. Berube's term expires at the Meeting. If
elected at the Meeting, Mr. Berube will serve for a term of three years
expiring on the date of the Annual Meeting of Shareholders in 2000 and until
his successor has been elected and qualified. Mr. Berube has consented to
serve as a director of the Company, and the Board of Directors has no reason
to believe that he will be unavailable for service. The terms of the other
four directors will continue as indicated above.
The Board recommends a vote "FOR" the proposed nominee to the Board.
Set forth below are the names, ages, principal occupation or employment for
the past five years, and length of tenure as Company directors of the person
nominated as a director and the directors whose terms do not expire at the
Meeting. Information regarding their beneficial ownership of shares of the
Company's Common Stock is reported in the section entitled "Security
Ownership."
NOMINEE FOR CLASS I DIRECTOR
Denis K. Berube, 54, has been the Chairman of the Board of Directors of
Viisage since the Company's incorporation in 1996. He chaired the Advisory
Board of the Viisage Technology Division of Lau Technologies since its
formation in October 1995. Mr. Berube also serves as Executive Vice President
and Chief Operating Officer of Lau Technologies, a position he has held since
1990.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING (CLASS II DIRECTORS)
Charles J. Johnson, 41, has served as a director of Viisage since its
incorporation in May 1996 and earlier served on the Advisory Board of the
Viisage Technology Division of Lau Technologies. Mr. Johnson is a principal of
the law firm Finnegan, Hickey, Dinsmoor & Johnson, P.C. in Boston,
Massachusetts, which serves as counsel to the Company and Lau Technologies.
Harriet Mouchly-Weiss, 54, has served as a director of Viisage since its
incorporation in May 1996 and earlier served on the Advisory Board of the
Viisage Technology Division of Lau Technologies. Ms. Mouchly-Weiss founded
Strategy XXI Group, an international communications and consulting firm in
January 1993 and has served as its managing partner since that time. From 1986
to December 1992, Ms. Mouchly-Weiss was President of GCI International, an
international public relations and marketing agency.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING (CLASS III DIRECTORS)
Peter Nessen, 61, has served as a director of Viisage since its
incorporation in May 1996 and earlier served on the Advisory Board of the
Viisage Technology Division of Lau Technologies. Mr. Nessen has been Chairman
of the Board of NCN Financial Corporation, a private banking firm, since
January 1995. From June 1993 through
2
<PAGE>
December 1994, Mr. Nessen was a Dean at Harvard Medical School, responsible
for special projects. Mr. Nessen was Secretary of Administration and Finance
for the Commonwealth of Massachusetts from January 1991 through May 1993 and
managing partner of the consulting practice in the Boston office of BDO
Seidman LLP, a public accounting firm, from February 1990 through December
1990.
Thomas J. Reilly, 58, has served as a director of Viisage since its
incorporation in May 1996 and earlier served on the Advisory Board of the
Viisage Technology Division of Lau Technologies. Mr. Reilly has been a self-
employed financial consultant since December 1994. From June 1966 through
November 1994, Mr. Reilly was with Arthur Andersen LLP, a public accounting
firm, and became a partner in 1975.
EXECUTIVE OFFICERS
Executive officers of the Company are elected by the Board of Directors
annually and, subject to employment agreements with Messrs. Hughes, Marshall
and Wieder, serve until their successors have been duly elected and qualified.
Robert C. Hughes, 56, is the President and Chief Executive Officer of the
Company. Mr. Hughes previously served as President and Chief Executive Officer
of the Viisage Technology Division of Lau Technologies, which he joined in
August 1995. Mr. Hughes was Vice President, Worldwide Sales and Service, at
Data General Corporation, a computer systems vendor, from April 1993 through
March 1995. Mr. Hughes was Chief Operating Officer at Bachman Information
Systems, a provider of software engineering products and services, from April
1992 to April 1993. He was a senior manager at Digital Equipment Corporation,
a computer systems and services vendor, from December 1976 to May 1992,
serving as a Corporate Officer and Vice President from 1984 to 1992.
William A. Marshall, 44, is Vice President, Chief Financial Officer and
Treasurer of the Company. Mr. Marshall previously served as Chief Financial
Officer of the Viisage Technology Division of Lau Technologies, which he
joined in December 1995. From September 1994 through November 1995, Mr.
Marshall was an independent consultant, providing general management and
financial consulting services. Mr. Marshall was a partner with KPMG Peat
Marwick LLP, a public accounting firm, from July 1987 through August 1994. Mr.
Marshall is a certified public accountant.
Thomas J. Colatosti, 49, is Vice President, Operations of the Company, which
he joined on December 30, 1996. From February 1995 through December 1996, Mr.
Colatosti was President and Chief Executive Officer of CIS, a software and
systems integration company. Mr. Colatosti held various finance, sales, and
operations positions with Digital Equipment Corporation from 1974 to 1995,
serving as Vice President of the Eastern Region from 1993 through 1994 and
Vice President of the Federal Systems Division from 1991 to 1993.
Yona Wieder, 48, is Vice President, Marketing and Sales Worldwide Public
Sector of the Company. Mr. Wieder served as a consultant to the Viisage
Technology Division of Lau Technologies from its inception through June 1996.
He joined the division in July 1996 in his present position. Mr. Wieder was
President and a principal of YW Technologies, a management consulting and
marketing organization, from September 1994 through June 1996. He was
President of Novatech, Inc., a management consulting organization, from May
1991 to September 1994.
Robert J. Schmitt, Jr., 53, is Vice President, Marketing and Sales Worldwide
Commercial Sector of the Company. Mr. Schmitt held the same position with the
Viisage Technology Division of Lau Technologies since June 1996. Mr. Schmitt
held various positions with Digital Equipment Corporation from 1977 through
May 1996, serving as Vice President of Marketing from February 1993 through
May 1996 and Manager of Technical Support from June 1991 to February 1993.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors (including the Advisory Board of the
Viisage Technology Division of Lau Technologies) held nine meetings during
1996, and each director attended 100% of all Board and committee meetings on
which he or she served.
3
<PAGE>
The Board has established a Compensation Committee, Audit Committee and
Marketing Committee, all of which are comprised of outside directors. The
Compensation Committee, comprised of Mr. Reilly (chair), Ms. Mouchly-Weiss and
Mr. Nessen, reviews senior management performance, recommends executive
compensation, and administers the Executive Incentive Compensation Plan and
1996 Management Stock Option Plan. The Audit Committee, comprised of Messrs.
Nessen (chair) and Reilly, reviews the scope of the Company's internal
controls, recommends the selection of the Company's independent public
accountants, reviews the scope of the audit with the independent public
accountants and reviews the results of the audit. The Marketing Committee,
comprised of Ms. Mouchly-Weiss (chair) and Mr. Johnson, reviews and makes
recommendations regarding the Company's marketing strategy and plans. The
Company does not have a nominating committee of the Board, and the Board of
Directors undertakes all nominating functions. During 1996, and including
meetings while functioning as the Advisory Board of the Viisage Technology
Division of Lau Technologies, the Compensation Committee met once, the Audit
Committee met three times, and the Marketing Committee met once.
COMPENSATION OF DIRECTORS
Cash Compensation. For their service as directors, each director received a
retainer of $1,000 per month during 1996 but no additional fees for attending
Board or committee meetings. In addition, the Company reimburses directors for
their out-of-pocket expenses incurred in connection with any Board or
committee meeting.
Directors' Options. Directors receive option grants under the Company's 1996
Director Stock Option Plan (the "Director Plan"). Under the Director Plan,
options to purchase an aggregate of 81,650 shares have been issued which
enable each director to purchase 16,330 shares of Common Stock (subject to
adjustment as provided in the Director Plan) at an exercise price equal to
$2.96 per share. Of those options, options to purchase 1,420 shares vested at
the time the Company adopted the Director Plan, and the balance currently vest
in equal increments of 4,970 shares on June 17, 1997, 1998, and 1999. On April
22, 1997, the Board voted to amend the Director Plan to permit the Board to
amend the vesting schedule for the outstanding nonvested options and to
determine a vesting schedule for those options which are to be issued in the
future. Subject to shareholder approval of the proposed amendments to the
Director Plan described below, the Board intends to change the respective
vesting dates of the outstanding options from June 17 in 1997, 1998, and 1999
to the day in those years immediately prior to the date of the shareholders'
meeting at which directors are elected. This is intended to make the vesting
schedule coincide with a full year of service on the Board.
On February 1, 1996, Lau Technologies granted the nonqualified options
discussed above. The Director Plan was adopted by the Board on June 17, 1996
to effectuate the option grants agreed to by Lau Technologies. The Director
Plan was approved by Lau Technologies in its capacity as the Company's sole
shareholder following the issuance of the Common Stock to Lau Technologies and
prior to the issuance of the Common Stock offered pursuant to the Company's
initial public offering.
The options issued pursuant to the Director Plan are nonqualified options
and are thus not intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended. The Director Plan is administered
by the Board of Directors. Subject to shareholder approval at this Meeting,
the aggregate number of shares issuable under the Director Plan will be
increased from 81,650 shares to 156,650 shares, which will be issued in the
discretion of the Board, and the expiration date of the Director Plan will be
extended from December 31, 1998 to December 31, 2002 unless terminated earlier
in accordance with the Plan. Vesting under the Director Plan ceases when an
option holder ceases to serve on the Board. Any future options issued under
the Director Plan will have an exercise price equal to the current fair market
value of shares of Common Stock on the option grant date. Shares reserved for
issuance under an option that is cancelled or terminated, and shares that are
used in payment of option exercise prices, will be restored and made available
for reissuance of additional options under the Director Plan. The Director
Plan does not permit reload options.
4
<PAGE>
Generally, no taxable income is recognized by the optionholder upon the
grant of a nonqualified option. The optionee must recognize as ordinary income
in the year in which the option is exercised the amount by which the fair
market value of the purchased shares on the date of exercise exceeds the
option price. There may also be other individual tax consequences relating to
such options.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee in the year of exercise.
Any additional gain or any loss recognized by the shareholder on the
subsequent disposition of the purchased shares will be capital gain or loss to
the shareholder, and will be a long-term gain or loss if the shares are held
for more than one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Reilly (chair), Ms. Mouchly-
Weiss, and Mr. Nessen, none of whom are officers or employees of the Company.
SECURITY OWNERSHIP
The following table sets forth, as of March 24, 1997, the beneficial
ownership of Common Stock by all directors, executive officers, all directors
and executive officers of the Company as a group, and each person who is known
to the Company to own 5% or more of the Company's Common Stock. With respect
to persons owning more than 5% of the Company's Common Stock, the Company has
relied on documents that Lau Technologies filed with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS(1) OWNED(2) PERCENTAGE
------------------- ------------ ----------
<S> <C> <C>
Joanna T. Lau (3)................................. 5,193,420 64.5%
Denis K. Berube (4)............................... 5,193,420 64.5%
Lau Technologies (5).............................. 5,180,000 64.3%
Robert C. Hughes (6)(7)........................... 193,370 2.4%
William A. Marshall (6)(8)........................ 104,751 1.3%
Yona Wieder (6)(9)................................ 120,126 1.5%
Robert J. Schmitt, Jr. (6)(10).................... 63,225 *
Charles J. Johnson (6)(11)........................ 3,720 *
Harriet Mouchly-Weiss (6)(12)..................... 6,620 *
Peter Nessen (6)(13).............................. 7,420 *
Thomas J. Reilly (6)(14).......................... 3,720 *
All directors and executive officers as a group (9
persons) (15).................................... 5,696,372 70.7%
</TABLE>
- --------
* Less than one percent
(1) The address of all persons who are directors or executive officers of the
Company is in care of the Company at 30 Porter Road, Littleton,
Massachusetts 01460. The address of Ms. Lau and Lau Technologies is in
care of Lau Technologies, 30 Porter Road, Littleton, Massachusetts 01460.
(2) Unless otherwise noted, each person identified possesses sole voting and
investment power over the shares owned.
(3) Consists of 5,180,000 shares held by Lau Technologies, of which Ms. Lau
owns approximately 56% of the outstanding capital stock, 6,000 shares
owned directly by Ms. Lau, 1,420 shares issuable to Denis K. Berube, the
spouse of Ms. Lau, pursuant to stock options, and 6,000 shares owned by
Mr. Berube. Ms. Lau disclaims beneficial ownership of the 1,420 issuable
shares and the 6,000 shares owned by Mr. Berube.
(4) Consists of 5,180,000 shares held by Lau Technologies, of which Mr.
Berube's spouse owns approximately 56% of the outstanding capital shares,
6,000 shares owned directly by Ms. Lau, 1,420 shares issuable to Mr.
Berube pursuant to stock options, and 6,000 shares owned by Mr. Berube.
Mr. Berube disclaims beneficial ownership of the shares of Common Stock
held by Lau Technologies and the 6,000 shares owned by Ms. Lau.
(Footnotes continued on next page.)
5
<PAGE>
(5) Includes shares of Common Stock held by Lau Technologies which are
subject to certain option rights granted to Lau Technologies' lenders
under a revolving credit facility. Lau has issued to affiliates of its
lender and a participating lender options to acquire an aggregate of
49,700 shares of the Company's Common Stock held by Lau, with an exercise
price equal to 95% of the offering price to the public (after deduction
of underwriting commissions and discounts) contained in the registration
statement for the Company's second underwritten public offering, if any.
These options are only exercisable if the principal outstanding under
Lau's facility has reached or exceeded $12.0 million at the time of any
such offering. In addition, Lau has granted the holders of such options
certain registration rights which apply under certain circumstances in
the event any of such options have become eligible for exercise and have
been exercised. First, if the Company has qualified to register
securities on Form S-3 under the Securities Act, holders of more than 50%
of the shares under each of the two lenders' sets of options may request,
on one occasion, that the Company file a registration statement on such
form for a public offering of all or any portion of such shares. Second,
the holders of such option shares have incidental ("piggyback")
registration rights with respect to registrations of the Company's
securities, pursuant to which holders may request that all or any portion
of their option shares be included in a registration statement (other
than a registration statement on Form S-4 or S-8 or certain other forms)
being filed by the Company for its own account or otherwise. Lau will pay
certain expenses incurred by the Company and the holders of option shares
in exercising the foregoing registration rights. The lenders' options and
attendant registration rights have terms of five years following the
expiration of the lock-up period after the public offering on which such
options' exercise price is based.
(6) Represents shares of Common Stock issuable pursuant to stock options. The
total number of shares issuable under options granted to Messrs. Hughes,
Marshall, Wieder, Schmitt, each director, and all directors and executive
officers as a group are 639,000, 213,000, 284,000, 177,500, 16,330, and
1,395,150, respectively. Thomas Colatosti, Vice President, Operations,
joined the Company in December 1996, currently has no options, and is not
listed in this table. Two hundred shares are held by Mr. Colatosti's
children. Mr. Colatosti disclaims beneficial ownership of those shares,
which are not listed in this table.
(7) Consists of 193,270 shares issuable to Mr. Hughes pursuant to stock
options and 100 shares owned by Mr. Hughes' son of majority age living in
the same household. Mr. Hughes disclaims beneficial ownership of his
son's 100 shares.
(8) Consists of 101,751 shares issuable pursuant to stock options and 3,000
shares owned directly by Mr. Marshall.
(9) Consists of 117,126 shares issuable pursuant to stock options and 3,000
shares owned directly by Mr. Wieder.
(10) Consists of 62,225 shares issuable pursuant to stock options and 1,000
shares owned directly by Mr. Schmitt.
(11) Consists of 1,420 shares issuable pursuant to stock options and 2,300
shares owned by Mr. Johnson's wife. Mr. Johnson disclaims beneficial
ownership of his wife's 2,300 shares.
(12) Consists of 1,420 shares issuable pursuant to stock options and 5,200
shares owned directly by Ms. Mouchly-Weiss.
(13) Consists of 1,420 shares issuable pursuant to stock options and 6,000
shares owned directly by Mr. Nessen.
(14) Consists of 1,420 shares issuable pursuant to stock options and 2,300
shares owned directly by Mr. Reilly.
(15) Represents shares described in Notes 5 and 7-15.
CERTAIN BUSINESS RELATIONSHIPS
For the year ended December 31, 1996, the Company paid approximately
$236,000 for professional services to the law firm Finnegan, Hickey, Dinsmoor
& Johnson, P.C., of which Charles J. Johnson, a Company director, is a
principal. Finnegan, Hickey, Dinsmoor & Johnson, P.C. will continue to provide
legal services to the Company during 1997.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who beneficially own
more than 10% of a class of the Company's equity securities ("10% holders") to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of common stock and other equity
securities of the Company, if any. Directors, executive officers, and 10%
holders are required by SEC regulation to provide the Company with copies of
all (S) 16(a) reports that they file.
Based solely on a review of reports provided to the Company during the year
ended December 31, 1996 and written representations that no reports were
required, all (S) 16(a) filings requirements applicable to directors,
executive officers, and 10% holders for such year were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation for the Chief Executive Officer
and other executive officers for 1996. Compensation amounts include amounts
for the period the Company was the Viisage Technology Division of Lau
Technologies.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL
COMPENSATION(1)
YEAR ------------------ SECURITIES
NAME AND PRINCIPAL ENDED UNDERLYING ALL OTHER
POSITION(1) 12/31 SALARY INCENTIVE OPTIONS (#) COMPENSATION(2)
------------------ ----- -------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert C. Hughes........ 1996 $220,000 $75,000 639,000 $ 15,000
President and Chief Ex-
ecutive Officer
William A. Marshall..... 1996 $140,000 $47,000 213,000 $ 79,000(3)
Vice President, Chief
Financial Officer
and Treasurer
Yona Wieder............. 1996 $ 79,000 $27,000 284,000 $163,000(4)
Vice President, Market-
ing and Sales
Worldwide Public Sector
Robert J. Schmitt, Jr. . 1996 $ 87,000 $15,000 177,500 $ 4,000
Vice President, Market-
ing and Sales
Worldwide Commercial
Sector
</TABLE>
- --------
(1) Mr. Wieder joined the Company on July 1, 1996, Mr. Schmitt joined the
Company on June 3, 1996, and Mr. Colatosti joined the Company on December
30, 1996 as Vice President, Operations. Because Mr. Colatosti's
compensation in 1996 did not exceed $100,000 and he was not granted any
stock options in 1996, he is not listed in the above table.
(2) Amounts include auto allowance, life insurance, and 401(k) plan match, if
any.
(3) Amount includes relocation expenses of $66,000.
(4) Amount includes $95,000 of consulting fees and $61,000 of commissions
earned by Mr. Wieder for the 1996 period prior to his employment.
STOCK OPTIONS GRANTED DURING 1996
The following table sets forth information concerning individual grants of
stock options made during 1996 to the Company's executive officers. It has not
been the Company's policy in the past to grant stock appreciation rights, and
no such rights were granted in 1996.
<TABLE>
<CAPTION>
% OF
TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED ANNUAL RATES OF STOCK
UNDERLYING TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES PRICE FOR OPTION TERM (2)
NAME GRANTED (1) IN YEAR ($/SHARE) EXPIRATION DATE 5% ($) 10% ($)
- ---- ---------- --------- -------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Hughes........ 639,000 47.5 $2.96 February 1, 2006 $1,189,800 $3,014,100
William A. Marshall..... 213,000 15.8 $2.96 February 1, 2006 $ 396,600 $1,004,700
Yona Wieder............. 284,000 21.1 $2.96 February 1, 2006 $ 528,800 $1,339,600
Robert J. Schmitt,
Jr. (3)................ 177,500 13.2 $4.86 February 1, 2006 $ 529,100 $1,334,300
</TABLE>
- --------
(1) Options were granted under the 1996 Management Stock Option Plan. For each
listed officer 71,000 options vested at the initial public offering,
except for Mr. Schmitt for whom 35,500 options vested at the initial
public offering. Additional options vested under the Plan as of December
31, 1996 are as follows: Mr. Hughes-122,270, Mr. Marshall-30,751, Mr.
Wieder-46,126, and Mr. Schmitt-26,725. The terms of the 1996 Management
Stock Option Plan are described in the text under "Incentive and Stock
Plans."
(2) The assumed rates are compounded annually for the full term of the
options.
(3) Mr. Schmitt's options were granted April 15, 1996.
7
<PAGE>
STOCK OPTIONS EXERCISED DURING 1996
The following table sets forth information concerning stock option exercises
during 1996 and outstanding stock options held at the end of 1996 by the
Company's executive officers. No stock appreciation rights were exercised or
outstanding during 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT 12/31/96 AT 12/31/96 ($)
ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Robert C. Hughes........ -- -- 193,270/445,730 $2,230,336/$5,143,724
William A. Marshall..... -- -- 101,751/111,249 $1,174,207/$1,283,813
Yona Wieder............. -- -- 117,126/166,874 $1,351,634/$1,925,726
Robert J. Schmitt, Jr... -- -- 62,225/115,275 $ 599,849/$ 1,111,251
</TABLE>
- --------
(1) Based on the $14.50 closing price of the Company's Common Stock on
December 31, 1996 on the NASDAQ National Market System minus the
respective option exercise price.
EMPLOYMENT AGREEMENTS
Viisage has employment agreements with Messrs. Hughes, Marshall, and Wieder.
The agreements are substantially similar, varying principally in each
executive officer's respective title and position and in his respective
compensation level, which in each case includes annual salary, discretionary
incentive compensation pursuant to the Company's Executive Incentive
Compensation Plan and certain health, pension and other benefits (including
stock option awards). The employment agreements expire on February 1, 2001,
subject to early termination in the event of death or disability of the
executive officer or as otherwise provided therein. The employment agreements
also have two year renewal options. The Company may terminate the executive
officer's employment with or without "cause" (as defined therein), but in the
event such termination is without "cause" the executive officer will be
entitled to receive severance pay at the current salary and incentive
compensation levels for two years, in the case of Mr. Hughes, and one year in
the cases of Messrs. Marshall and Wieder. In addition, the executive officer
may terminate his employment in the event of the Company's "non-performance"
(as defined in the agreements), and will be entitled to the severance
described above in the event of such a termination. The agreements also
contain non-competition provisions which generally survive two years beyond
the executive officer's termination.
INCENTIVE AND STOCK PLANS
Executive Incentive Compensation Plan
The Company currently maintains an Executive Incentive Compensation Plan for
its executive officers and other key employees of the Company to motivate
members of the Company's management team. Each participant in the Executive
Incentive Compensation Plan may receive a percentage of his or her base salary
based upon the Company's and each participant's individual performance, as
determined by success in meeting established goals approved by the Chief
Executive Officer, for individual goals, or the Board of Directors, for
Company goals. The Compensation Committee administers the Plan.
1996 Management Stock Option Plan
On February 1, 1996, Lau Technologies granted nonqualified options to
acquire up to an aggregate 1,167,950 shares of the Company's Common Stock, at
an exercise price of $2.96 per share, to eight key employees in its Viisage
Technology Division. On April 15, 1996, Lau Technologies granted nonqualified
options to acquire up to an additional 177,500 shares of the Company's Common
Stock, at an exercise price of $4.86 per share, to a ninth key employee of its
Viisage Technology Division. The 1996 Management Stock Option Plan described
below (the "Option Plan") was adopted by the Board of Directors in June 1996
to
8
<PAGE>
effectuate the option grants agreed to by Lau above and for the purpose of
providing executive officers and key personnel an opportunity to have an
ownership interest in the Company. The Option Plan was approved by Lau in its
capacity as the Company's sole shareholder following the issuance of the
Common Stock to Lau and prior to the issuance of the Common Stock offered
pursuant to the Company's initial public offering.
Depending on the recipient, options vested at the initial public offering
for as few as none or as much as one-third of the total number of option
shares. The balance of option shares vest in seven years, subject to
acceleration in benchmark increments based on each $1.0 million increase in
the current value of the Company's Common Stock over a base value of $21.0
million (or, with respect to the options granted April 15, 1996, $34.5
million), as measured (i) at each year end, (ii) upon a sale or change in
control of the Company, or (iii) in the event of a termination (or
constructive termination) of the option holder as an employee without cause,
as of the end of the Company's most recent fiscal quarter immediately before
such termination.
The Option Plan is administered by the Compensation Committee of the Board
of Directors, which currently consists of Mr. Reilly (chair), Ms. Mouchly-
Weiss, and Mr. Nessen. A total of 1,356,100 shares of Common Stock are
reserved for issuance under the Option Plan. Options under the Plan may be
either (a) "incentive options" under (S) 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or (b) options that do not qualify under (S)
422 of the Code ("nonqualified options"). The Option Plan will remain in
effect indefinitely (except in the case of incentive options, for which the
Plan will expire in ten years), unless earlier terminated by the Board of
Directors in accordance with the Option Plan's terms.
Officers and key employees of the Company, but not directors, are eligible
to receive options under the Option Plan. The exercise price of incentive
options under the Option Plan may not be less than the fair market value of
the underlying shares on the date of grant, except in the case of incentive
options granted to holders of 10% or more of the total combined voting power
of the Company, in which case the exercise price may not be less than 110% of
such fair market value. The exercise price of nonqualified options is to be
determined by the Compensation Committee at the time of option issuance.
Each option under the Option Plan will have a term not to exceed ten years,
except in the case of incentive options granted to holders of 10% or more of
the total combined voting power of the Company, with respect to which the term
may not exceed five years. The Compensation Committee will determine the
vesting schedule with respect to any grant of options. All options are subject
to adjustment in certain events.
The Option Plan may be amended from time to time by the Board of Directors,
subject to the rights of previously issued options, except that any such
amendment will require shareholder approval in certain circumstances.
Shares reserved for issuance under an option that is cancelled or
terminated, and shares that are used in payment of option exercise prices,
will be restored and made available for reissuance of additional options under
the Option Plan. The existing options contain reload option features.
401(k) Plan
The Company participates in the Lau Technologies 401(k) plan and pays its
proportionate share of plan expenses based on the number of participants. The
plan permits pre-tax contributions by participants of up to 15% of base
compensation or the statutory limit ($9,500 in 1996). The Company may make
discretionary matching contributions of up to 3% of base compensation.
Participants are fully vested in their contributions and vest 20% per year in
employer contributions.
9
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
"Committee") is responsible for establishing and managing compensation
policies for the Company's executive officers and for making decisions about
awards under certain of the Company's stock-based compensation plans in
satisfaction of the Securities Exchange Act Rule 16b-3. Each Committee member
is an outside director within the meaning of Rule 16(b) of the Securities
Exchange Act of 1934, as amended, and (S) 162(m) of the Internal Revenue Code.
This report outlines the Company's compensation policies for the Chief
Executive Officer and executive officers other than the Chief Executive
Officer (collectively, the "executive officers").
The Committee's compensation policies provide compensation opportunities
that are comparable to those for similarly situated executives in comparable
companies. These compensation policies are designed to reward executives based
on their contributions to the Company's success with respect to shareholder
value creation and to ensure the Company's ability to attract and retain
qualified executives. The principal elements of compensation employed by the
Committee to meet these objectives are base salaries, cash incentive
opportunities, and stock options.
In making its decisions, the Committee considers a range of factors it
believes to be relevant, including the Company's pay levels relative to
competitive norms, the Company's achievements over the past year, the
individual's contributions to the Company's success, and the roles and
responsibilities of each executive.
Compensation levels and incentive opportunities are designed to generally
reflect median levels of competitive compensation for executives with
corresponding responsibilities in comparably sized peer firms, and are
periodically adjusted to meet this objective. The actual level of compensation
earned by each executive will vary according to the success of the Company and
the performance of the individual.
The Committee assesses the competitiveness of the Company's total
compensation program and uses the services of an outside compensation
consultant as needed. External comparisons are made to data drawn from a
number of sources, including the publicly available disclosures of selected
peer firms and national compensation surveys of technology firms of similar
size and complexity. The Committee is currently evaluating long-term incentive
alternatives for management and employees.
In determining the appropriateness of executive base salary levels, the
Committee annually considers external competitiveness, the roles and
responsibilities of the individual, the internal equity of pay relationships,
and the contributions of the individual to the Company's success.
The Committee manages an Executive Incentive Compensation Plan, described in
the text above, under which awards are linked to the achievement of
predetermined financial goals such as earnings and revenue growth, as well as
individual objectives. The Committee assigns performance measures annually on
the basis of the Company's key objectives. All executive officers are eligible
to participate in this program.
All options granted to executive officers have an exercise price equal to
the fair market value of the stock on the date of the grant, implying that no
compensation can be earned under this element unless shareholder value is
created, and vesting requirements that are linked to the achievement of
predetermined levels of market capitalization or to an extended service
requirement. In determining the magnitude of the awards, the Committee
considers the challenge associated with achieving the performance vesting
requirements, competitive norms, and the roles, responsibilities, and prior
performance of the individual. All executive officers, including the Chief
Executive Officer, are eligible to participate in this program.
In establishing the initial stock option grants to certain of the executive
officers, including the Chief Executive Officer, prior to its spinoff from Lau
Technologies, it was determined that it was in the interest of shareholders to
make meaningful and significant grants, and to link their vesting to either
the achievement of
10
<PAGE>
predetermined levels of market capitalization or to extended, more than
competitive, service requirements. This approach is designed to ensure that
gains accruing to the executive officers will be consistent with significant
increases in shareholder value.
Compensation for 1996 generally reflects levels required to attract new
executives to the Company. Following its annual review of compensation after
the close of 1996, the Committee determined that the base salaries for certain
of the executive officers were less than the competitive norm and made
adjustments accordingly.
Short-term incentive compensation earned by all executive officers for 1996
was determined in conjunction with the Committee's assessment of the Company's
performance with respect to earnings expectations and to individual
achievements. The amounts are listed in the table above entitled "Executive
Compensation."
COMPENSATION COMMITTEE
Thomas J. Reilly, Chairman
Harriet Mouchly-Weiss
Peter Nessen
11
<PAGE>
PERFORMANCE GRAPH
Pursuant to Securities and Exchange Commission regulations, the Company has
included in this Proxy Statement the following performance graph comparing
cumulative returns for the Company's Common Stock with a broad-based market
index, the NASDAQ Composite index, and a nationally recognized industry
standard, the Russell 2000. This graph covers the period from the time the
Company went public on November 8, 1996 through December 31, 1996. Shares of
the Company's Common Stock were initially offered on November 8, 1997 at
$10.50 per share. The performance graph does not reflect any prediction of
future performance of the Company's stock.
[GRAPH APPEARS HERE]
COMPARISION OF NOVEMBER-DECEMBER 1996
CUMULATIVE TOTAL RETURN AMONG VIISAGE TECHNOLOGY,
THE NASDAQ COMPOSITE, AND THE RUSSELL 2000
<TABLE>
<CAPTION>
11/8/96 11/29/96 12/31/96
<S> <C> <C> <C>
VIISAGE $100 $105.00 $107.00
- --------------------------------------------------------------------------------
NASDAQ COMPOSITE $100 $103.00 $103.00
- --------------------------------------------------------------------------------
RUSSELL 2000 $100 $103.00 $105.00
- --------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to its incorporation in Delaware on May 23, 1996 and the November 1996
initial public offering, the Company operated as the Viisage Technology
Division of Lau Technologies. On November 6, 1996, Lau transferred
substantially all of the assets and liabilities of its Viisage Technology
Division to Viisage in exchange for shares of Viisage Common Stock.
Under the terms of the Asset Transfer Agreement between the Company and Lau,
on November 6, 1996, the Company issued to Lau 5,680,000 shares of Common
Stock (comprising all of the outstanding Common Stock other than the shares
sold in the initial public offering) in exchange for substantially all of the
assets and business formerly constituting the Viisage Technology Division of
Lau. In connection with this transaction, the Company agreed to assume
substantially all the obligations and liabilities of Lau relating to the
Viisage Technology Division. Each party has covenanted not to compete with the
other for ten years. The Company's obligation not to compete with Lau is
limited to the field of federal access control as defined in the Asset
Transfer Agreement.
Prior to the closing of the Asset Transfer Agreement, the Company was
included in Lau's tax returns, but, for accounting purposes, income taxes were
recorded as if the Company had filed its own separate tax returns. The Company
will now file its own tax returns.
The Company also entered into a License Agreement with Lau (the "License
Agreement"), which became effective on November 6, 1996, pursuant to which Lau
granted Viisage an exclusive, perpetual, irrevocable, paid-up, royalty-free,
worldwide license (with sublicensing rights) for all of the technology
relating to the Viisage Technology Division. Such license does not allow the
Company to use the technology in the federal access control field. Lau has
retained the right to use such technology solely in the federal access control
field. The licensed rights include all of Lau's technologies relating to the
SensorMast, the Visual Inspection System and facial recognition technology
developed by Lau. In addition, under the terms of the License Agreement, Lau
must disclose and provide to Viisage improvements to the licensed technology
and Viisage must disclose and provide to Lau modifications it makes to the
licensed technology for use in federal access control without any additional
charge.
In connection with the asset transfer described above, the Company and Lau
entered into an Administration and Services Agreement (the "Services
Agreement") for the purpose of defining their ongoing relationships. Under the
Services Agreement, Lau provides certain general accounting, data processing,
payroll, human resources, employee benefits administration, and certain
executive services to the Company. The Services Agreement requires the Company
to pay a monthly fee based on the estimated actual cost of such services and
permits the Company to terminate selected services upon 30 days' written
notice. The annual fee for such services is approximately $660,000 and will be
revised if the level of services is changed.
The Company and Lau also entered into a Use and Occupancy Agreement relating
to the Company's use of certain office space for its corporate headquarters.
The Use and Occupancy Agreement requires the Company to pay its proportionate
share of the cost of shared facilities and office services including rent,
insurance, property taxes, utilities, and other operating expenses, based on
square footage or equipment utilized. In February 1997, the Company and Lau
moved to larger facilities and extended the Use and Occupancy Agreement
through February 2002. The annual fee for facilities and services is
approximately $500,000 and will be revised for changes in operating expenses.
The amount for 1996 was approximately $220,000.
The Company from time to time has purchased or contracted for, and will
likely continue to purchase or contract for, certain system components and the
services of technical personnel from Lau.
13
<PAGE>
PROPOSAL 2 -- AMENDMENTS TO 1996 DIRECTOR STOCK OPTION PLAN
The 1996 Director Stock Option Plan (the "Director Plan") was adopted by the
Board of Directors on June 17, 1996 to provide directors with an opportunity
to have an ownership interest in the Company and further align the directors'
interests with the long-term interests of the shareholders. The Director Plan
was approved by Lau Technologies in its capacity as the Company's sole
shareholder just prior to the Company's initial public offering.
The Director Plan is administered by the Board of Directors, and on April
22, 1997 the Board voted, subject to shareholder approval at this Meeting, to
amend the Director Plan as follows: to increase the number of shares reserved
for issuance thereunder from 81,650 shares to 156,650 shares; to permit the
Board to determine and amend the vesting schedule for all options issued and
issuable under the Director Plan; and to extend the expiration date of the
Director Plan from December 31, 1998 to December 31, 2002. The proposed
changes make additional shares available for issuance under the Director Plan,
allow the Board to determine appropriate vesting provisions for future option
grants, and permit the vesting schedule for certain outstanding options to
coincide with a full year of service on the Board.
See "Compensation of Directors" for further information about the Director
Plan.
The Board recommends a vote "FOR" approval of Proposal 2.
PROPOSAL 3 -- RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the accounting firm of Arthur Andersen
LLP as the Company's independent public accountants for the year ending
December 31, 1997. Arthur Andersen LLP has served in this capacity since 1996.
Arthur Andersen representatives are expected to be present at the Annual
Meeting and available to respond to appropriate questions. They will have an
opportunity to make a statement if they desire to do so.
Shareholder ratification of the selection of Arthur Andersen LLP is not
required by the Company's By-laws or otherwise. The Board of Directors,
however, is submitting the selection of Arthur Andersen LLP to the
shareholders as matter of good corporate practice. If the shareholders fail to
ratify the selection, the Audit Committee and the Board of Directors will
reconsider whether or not to retain such firm. Even if the selection is
ratified, the Audit Committee and the Board, in their discretion, may direct
the appointment of a different independent public accounting firm at any time
during the year if they determine that such a change would be in the best
interest of the Company and its shareholders.
The Board recommends a vote "FOR" the ratification of Arthur Andersen LLP as
the Company's independent public accountants for the year ending December 31,
1997.
NO OTHER MATTERS
The Board of Directors does not know of any matters which will be brought
before the Meeting other than those matters specifically set forth in the
Notice of the 1997 Annual Meeting of Shareholders. However, if any other
matter properly comes before the Meeting, it is intended that the persons
named in the enclosed proxy card, or their substitutes acting thereunder, will
vote on such matter in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1998 Annual Meeting
must be received by the Company for inclusion in the Company's Proxy Statement
and proxy card relating to that meeting between January 22, 1998 and March 9,
1998.
14
<PAGE>
SOLICITATION EXPENSES
The Company will bear the cost of this solicitation. Solicitation will be
made primarily by mail, but directors, officers, and employees of the Company
may solicit proxies in person or by telephone or telecopy. The Company will
request brokers, nominees, custodians, and fiduciaries to forward solicitation
materials to obtain voting instructions from beneficial owners and will
reimburse such parties for their reasonable expenses in connection therewith.
In addition, the Company retains Boston EquiServe as its transfer agent who
assists in the distribution of proxies.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been specifically incorporated
by reference into any filing by the Company under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, the sections
of the Proxy Statement entitled "Board Compensation Committee Report on
Executive Compensation" and "Performance Graph" shall not be deemed to be so
incorporated, unless specifically otherwise provided in any such filing.
OTHER DOCUMENTS
UPON WRITTEN REQUEST BY ANYONE WHO IS A SHAREHOLDER AS OF THE RECORD DATE,
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K. Such written request should be sent to the attention of the Chief
Financial Officer, Viisage Technology, Inc., 30 Porter Road, Littleton, MA
01460.
15
<PAGE>
1576-PS-97
<PAGE>
APPENDIX A
----------
VIISAGE TECHNOLOGY, INC.
1996 DIRECTORS STOCK OPTION PLAN
--------------------------------
Section 1 -- Purpose
The purpose of this 1996 Directors Stock Option Plan (the "Plan") is to
increase the proprietary interest of non-employee members of the Board of
Directors (the "Board") of Viisage Technology, Inc., a Delaware corporation (the
"Company"), in the continued success of the Company, and to provide them with an
incentive to continue to serve as directors. All options issued pursuant to the
Plan shall be nonstatutory options which are not intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
Section 2 -- Effective Date
The Plan became effective as of June 17, 1996, the date as of which it was
adopted by the Board (the "Effective Date").
Section 3 -- Stock Subject to the Plan
Options issued under this Plan shall be exercisable for the Company's
common stock. The number of shares that may be issued under this Plan shall not
exceed in the aggregate one hundred fifty-six thousand six hundred fifty
(156,650) shares of the common stock, $.001 par value, of the Company (the
"Shares") authorized on the Effective Date, subject to adjustment as provided in
Sections 9 and 10 below. Any Shares subject to an option which for any reason
expires or is terminated as to such Shares may again be the subject of an option
under this Plan. In addition, any Shares purchased by an optionee upon exercise
of an option under this Plan that are subsequently repurchased by the Company
pursuant to the terms of such option, and Shares tendered as payment for Shares
upon exercise of an option under this Plan, may again be the subject of an
option under the Plan. The Shares delivered upon exercise of options under this
Plan may, in whole or in part, be either authorized but unissued Shares or
issued Shares reacquired by the Company.
Section 4 -- Administration
This Plan shall be administered by the Board. Subject to the provisions of
the Plan, the Board shall have full power to construe and interpret the Plan and
to establish, amend and rescind rules and regulations for its administration.
Any decisions made with respect thereto shall be final and binding on the
Company, the optionee and all other persons. No member of the Board shall be
liable for any action or determination made in good faith with respect to the
Plan.
Section 5 -- Eligible Participants
For so long as Shares are available for issuance pursuant to the provisions
of this Plan, individuals who become directors of the Company and who are not
employees of the Company
A-1
<PAGE>
("Non-Employee Directors") shall be eligible to participate in the Plan. Each
Director to whom options are issued hereunder shall be a participant
("Participant") under the Plan.
Section 6 -- Duration of Plan
This Plan shall remain in effect until December 31, 2002, unless terminated
earlier pursuant to Paragraph 13 hereof. Options that are issued on or before
the date of this Plan's termination shall remain exercisable in accordance with
their respective terms after the termination of the Plan.
Section 7 -- Issuance of Options
Options available for issuance under this Plan shall be issued in the
discretion of the Board.
Section 8 -- Terms and Conditions of Options
Options issued under this Plan shall be evidenced by written instruments in
such form not inconsistent with this Plan as the Board shall approve from time
to time, which instruments shall evidence the following terms and conditions:
(a) Price. The exercise price of an option issued on or before the date
when the Company first shall have effectively registered Shares for public
offering under the Securities Act of 1933, as amended, shall be $2.96 per Share,
and the exercise price of an option issued after such date shall be 100% of the
fair market value per Share on the date the option is issued. For purposes of
the foregoing, "fair market value" of a share of stock on any date shall mean
the closing price on NASDAQ (or, if the Company's common stock is not traded on
NASDAQ, on the principal exchange on which the Company's stock then is publicly
traded) as of the date of issuance, or if the date of issuance is not a business
day, as of the last business day for which prices are available prior to the
date of issuance.
(b) Number of Shares. Each option agreement shall specify the number of
Shares to which it pertains, pursuant to Section 7.
(c) Vesting. Each option issued under the Plan shall vest and be
exercisable in accordance with the schedule determined by the Board and set
forth in the written instrument evidencing the Options issued hereunder, subject
to adjustment as provided in Section 9 and 10 below. Such schedule may be
amended by mutual agreement of the Board and the optionee. In the event that
the Participant ceases to be a director of the Company for any reason prior to
the time a Participant's option becomes fully exercisable, the option will
terminate with respect to the Shares as to which the option is not then vested
and exercisable and all rights of the Participant to such Shares shall terminate
without further obligation on the part of the Company. In the event that the
Participant ceases to be a director of the Company after his or her option has
become exercisable in whole or in part, such option shall remain
A-2
<PAGE>
exercisable in whole or in part, as the case may be, in accordance with the
terms hereof.
(d) Notice of Exercise and Payment. An option shall be exercisable only
by delivery of a written notice to the Company's Treasurer or any other officer
of the Company designated by the Board to accept such notices on its behalf,
specifying the number of Shares for which it is exercised. If said Shares are
not at that time effectively registered under the Securities Act of 1933, as
amended, the optionee shall include with such notice a letter, in form and
substance satisfactory to the Company, confirming that the Shares are being
purchased for the optionee's own account for investment and not with a view to
distribution. Payment shall be made in full at the time the option is
exercised. Payment shall be made by (i) cash; (ii) by check; (iii) subject to
Section 12(c) hereof, by delivery and assignment to the Company of Shares
previously owned by the optionee for one year or more and having a value equal
to the Option price; (iv) if permitted by applicable law, through the delivery
of an assignment to the Company of a sufficient amount of the proceeds from the
sale of unrestricted Shares acquired upon exercise to pay for all of the Shares
so acquired and any tax withholding obligation resulting from such exercise, and
an authorization to the broker or selling agent to pay that amount to the
Corporation; or (v) by a combination of (i), (ii), (iii) and (iv). The value of
the Company stock for purposes of the foregoing clause (iii) shall be its fair
market value as of the date the Option is exercised, as determined in accordance
with procedures to be established by the Board.
(e) Expiration. Options issued under the Plan shall expire ten years from
the date on which the option is issued, unless terminated earlier in accordance
with the Plan; provided, however, that the vested portion of any unexpired
option in effect on the date of a Participant's death or disability shall expire
one year from the date of the Participant's death or disability (whether or not
this period ends after the stated expiration of the exercise period).
(f) Rights as Shareholder. No optionee shall have any rights as a
shareholder with respect to any Share covered by any option until the purchase
thereof.
(g) Non-Transferability. No option shall be transferable by the optionee
otherwise than by will or the laws of descent or distribution, and each option
shall be exercisable during the optionee's lifetime only by the optionee.
Notwithstanding the foregoing (but in the case of an optionee that is subject to
Section 16 of the Exchange Act, only to the extent consistent with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor provision, as applicable to the Company
at the time ("Rule 16b-3"), or other rules under Section 16 of the Exchange
Act), such option may be transferred pursuant to an order that would constitute
a qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act or the rules thereunder.
(h) The instruments evidencing options may be in the form of agreements to
be executed by both the optionee and the Company or certificates, letters or
similar instruments, which need not be executed by the optionee but acceptance
of which will evidence agreement to the terms of the issuance.
A-3
<PAGE>
Section 9 -- Stock Dividends; Stock Splits; Stock Combinations; Recapitalization
In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution with respect to holders of the Company's common stock other than
normal cash dividends, automatic adjustment shall be made in the number and kind
of shares as to which outstanding options or portions thereof then unexercised
shall be exercisable and in the available shares set forth in Section 3 hereof,
to the end that the proportionate interest of the option holder shall be
maintained as before the occurrence of such event. Such adjustment in
outstanding options shall be made without change in the total price applicable
to the unexercised portion of such options and with a corresponding adjustment
in the option price per share. Automatic adjustment shall also be made in the
number and kind of shares subject to options subsequently issued under the Plan.
Section 10 -- Merger; Sale of Assets; Dissolution
In the event of a change of the Company's common stock resulting from a
merger or similar reorganization as to which the Company is the surviving
corporation, or the formation of a holding company, the number and kind of
shares which thereafter may be optioned and sold under the Plan and the number
and kind of shares then subject to options issued hereunder or unexercised
portions thereof and the price per share thereof shall be appropriately adjusted
to the end that the proportionate interest of the option holder shall be
maintained as before the occurrence of such event. If the Company shall be a
party to a merger or a similar reorganization after which the Company will not
survive, or if there will be a sale of substantially all the common stock of the
Company or a sale of all or substantially all of the assets of the Company, then
to the extent permitted by Rule 16b-3, the options under this Plan automatically
shall be terminated, assumed by the successor corporation or repurchased by the
Company or its successor to the same extent, and on the same terms, as are
approved for options for the Company's Common Stock issued under the Company's
1996 Management Stock Option Plan or the then-existing successor plan thereto,
and otherwise will terminate upon such merger, reorganization or sale. Despite
the foregoing, no such adjustment shall be made which would, within the meaning
of any applicable provisions of the Internal Revenue Code of 1986, as amended,
constitute a modification, extension or renewal of any Option or a grant of
additional benefits to any optionee.
Section 11 -- No Right to Reelection
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board or standing Committee thereof to nominate any Director for reelection
by the Company's stockholders, nor confer upon any Director the right to remain
a member of the Board for any period of time, or at any particular rate of
compensation.
A-4
<PAGE>
Section 12 -- Regulatory Compliance and Listing
(a) The issuance or delivery of any shares of stock subject to exercisable
Options hereunder may be postponed by the Board for such period as may be
required to comply with any applicable requirements under the Federal securities
laws, any applicable listing requirements of NASDAQ or any national securities
exchange or any requirements under any law or regulation applicable to the
issuance or delivery of such shares. The Company shall not be obligated to issue
or deliver any such shares if the issuance or delivery thereof would constitute
a violation of any provision of any law or of any applicable regulation of any
governmental authority, NASDAQ or any national securities exchange.
(b) Should any provision of this Plan require modification or be unnecessary
to comply with the requirements of Section 16 of and Rule 16b-3 under the 1934
Act, the Board may waive such provision and/or amend this Plan to add to or
modify the provisions hereof accordingly.
(c) Any election made by an optionee then subject to Section 16 of the
Exchange Act to make payment of any portion of an option price with Shares shall
be subject to any then-applicable requirements of Rule 16b-3 and other
applicable rules under Section 16 of the Exchange Act.
Section 13 -- Amendment and Termination
The Board shall have the right to amend, modify or terminate the Plan at
any time and from time to time; provided, however, that unless required by law,
no such amendment or modification shall affect any right or obligation with
respect to any option theretofore issued. In addition, no such amendment or
modification shall be made without previous approval by the stockholders where
such approval is necessary to satisfy, nor shall any amendment or modification
be made at a time when the same would violate, any then-applicable requirements
of federal securities laws (including without limitation Rule 16b-3), the Code
or rules of NASDAQ or any stock exchange on which the Company's common stock is
listed.
A-5
<PAGE>
DETACH HERE VSG 1
VIISAGE TECHNOLOGY, INC.
30 PORTER ROAD
LITTLETON, MASSACHUSETTS 01460
P PROXY SOLICITED BY THE BOARD OF DIRECTORS
OF VIISAGE TECHNOLOGY, INC.
R FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
O The undersigned hereby appoints as proxies Robert C. Hughes, William A.
Marshall, and Jeffrey A. Levinson, and each of them or such other persons
X as the Board of Directors of Viisage Technology, Inc. (the "Company") may
designate, with full power of substitution. The undersigned hereby
Y authorizes the above-appointed proxies to represent and to vote, as
designated on the reverse side, all shares of common stock of the Company
held of record by the undersigned on March 24, 1997 at the 1997 Annual
Meeting of Shareholders to be held on May 21, 1997 and any adjournments
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THE PROXY WILL BE VOTED FOR THE PERSON NOMINATED AS
DIRECTOR, FOR PROPOSALS TWO AND THREE, AND IN ACCORDANCE WITH THE
PROXYHOLDERS' DISCRETION RESPECTING ANY OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY.
-------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON RESERVE SIDE SIDE
-------------
<PAGE>
DETACH HERE VSG 1
Please mark
[X] votes as in
this example.
1. Election of Director
NOMINEE: Denis K. Berube
FOR WITHHELD
[ ] [ ]
2. Approve amendments to the Company's
1996 Director Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratify the selection of Arthur
Andersen LLP as the Company's
independent public accountants.
[ ] [ ] [ ]
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians, or other fiduciaries should give
full title as such. If signing for a corporation, please sign the full
corporate name by a duly authorized officer.
Signature________________________________________ Date _______________
Signature________________________________________ Date _______________
