VIISAGE TECHNOLOGY INC, DEF 14A, 1998-04-21

VIISAGE TECHNOLOGY INC
DEF 14A, 1998-04-21
COMPUTER INTEGRATED SYSTEMS DESIGN

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<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) Proposed maximum aggregate value of transaction:

________________________________________________________________________

(5) Total fee paid:

________________________________________________________________________

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
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>

LOGO

April 17, 1998

Dear Shareholder:

You are cordially invited to attend the 1998 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 1997 Annual Report is enclosed. I hope you will read it carefully. I
have also enclosed our Notice of 1998 Annual Meeting, Proxy Statement, and
proxy card.

At the Meeting, your Board of Directors will be asking you to vote for three
directors and to ratify the selection of Viisage's independent public
accountants, as described more fully in the enclosed Proxy Statement. For the
reasons set forth in the Proxy Statement, your Board of Directors recommends
votes "FOR" the directors and the 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.

Sincerely,

/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>

LOGO

30 PORTER ROAD
LITTLETON, MASSACHUSETTS 01460

NOTICE OF THE 1998 ANNUAL MEETING OF SHAREHOLDERS

The 1998 Annual Meeting of the Shareholders of Viisage Technology, Inc.
("Viisage") will be held at 1:30 p.m. on Tuesday, May 12, 1998 in the Board
Room 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 to complete the remaining two years of the
three year Class I term;

2. To elect two Class II directors for three year terms;

3. To ratify the selection of Arthur Andersen LLP as independent public
accountants for Viisage for the year ending December 31, 1998; and

4. To transact such other business as may properly come before the Meeting.

Shareholders of record at the close of business on March 31, 1998, 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 1997 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 17, 1998
<PAGE>

VIISAGE TECHNOLOGY, INC.
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 12, 1998

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 1998 Annual Meeting of
Shareholders to be held at 1:30 p.m. on Tuesday, May 12, 1998, in the Board
Room 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 21, 1998.

VOTING PROCEDURES

Viisage's Board of Directors (the "Board of Directors" or the "Board") is
soliciting proxies for the election of one director to be elected to complete
the remainder of the Class I term expiring in 2000; the election of two Class
II directors, comprising the class of directors to be elected for the term
expiring in 2001; and the ratification of the selection of the Company's
independent public accountants.

At the close of business on March 31, 1998, the record date for the Meeting,
there were outstanding and entitled to vote 8,067,398 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 31, 1998 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 nominees for director, for the
proposal, and as the individuals named as proxy holders on the proxy card deem
advisable on all other matters that 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 directors. For the proposal, 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
directors, abstentions and broker "non-votes" will not have an effect.
Regarding the ratification proposal, 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.

PROPOSAL 1 -- ELECTION OF DIRECTORS

Three directors are to be elected at the Meeting. A new director, Charles E.
Levine, is to be elected to complete the final two years of the three year
Class I directors term expiring at the 2000 Annual Meeting of

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<PAGE>

Shareholders and until his successor has been elected and qualified. Mr.
Levine will join Denis K. Berube, currently the sole Class I director, who was
re-elected at the 1997 Annual Meeting of Shareholders.

Class II directors Charles J. Johnson and Harriet Mouchly-Weiss are to be
re-elected at the meeting for a three year term expiring at the 2001 Annual
Meeting of Shareholders and until their successors have been elected and duly
qualified.

Pursuant to the Company's Restated Certificate of Incorporation, the Board
has set the number of directors at six, which represents an addition of one
director to the current Board of Directors. 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. This year a new director will be
elected to be added to an existing class.

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.

NOMINEES AND INCUMBENT DIRECTORS

If elected at the Meeting, Mr. Levine will serve for a term of two years
expiring on the date of the Annual Meeting of Shareholders in 2000 and until
his successor has been elected and duly qualified. Mr. Levine 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.

If elected at the Meeting, Mr. Johnson and Ms. Mouchly-Weiss will serve for
three year terms expiring on the date of the Annual Meeting of Shareholders in
2001 and until their successors have been elected and duly qualified. Mr.
Johnson and Ms. Mouchly-Weiss have consented to serve as directors of the
Company, and the Board of Directors has no reason to believe that they will be
unavailable for service. The terms of the two Class III directors will
continue as indicated above.

The Board recommends a vote "FOR" the proposed nominees to the Board.

The following sets forth the names of the persons nominated as directors and
the directors whose terms do not expire at the Meeting, their ages, their
principal occupation or employment for the past five years, and their length
of tenure as Company directors. 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

Charles E. Levine, 45, nominated as a new director, has served as Chief
Marketing and Sales Officer of Sprint PCS since January 1997. Mr. Levine
served as Senior Vice President of Octel Services, a provider of voice systems
services, from October 1994 through September 1996. From October 1993 to
October 1994 Mr. Levine was Chief Executive Officer and Director of CFT
Systems, a company focusing on developing software for field-based utility
workers. Mr. Levine was a Vice President at AT&T from February 1987 to October
1993, with marketing, product management, and general management
responsibilities.

NOMINEES FOR CLASS II DIRECTORS

Charles J. Johnson, 42, 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.

2
<PAGE>

Harriet Mouchly-Weiss, 55, 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, 62, 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 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, 59, 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.

DIRECTOR WHOSE TERM EXPIRES AT THE 2000 ANNUAL MEETING (CLASS I DIRECTOR)

Denis K. Berube, 55, 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 is Executive Vice President and Chief
Operating Officer of Lau Technologies, where he has been employed since 1990.

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, 57, 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.

Thomas J. Colatosti, 50, is Vice President, Operations of the Company, which
he joined on December 30, 1996. From April 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 1973 to March
1995, serving as Vice President of the Northeast Region from 1993 through 1994
and Vice President of the Federal Systems Division from 1991 to 1993.

William A. Marshall, 45, 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,

3
<PAGE>

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.

Yona Wieder, 49, 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.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

The Company's Board of Directors held eight meetings during 1997, and each
director attended over 85% of all Board and committee meetings on which he or
she served.

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, 1996
Management Stock Option Plan, as amended, and the 1997 Employee Stock Purchase
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), Mr.
Johnson, and Mr. Nessen, reviews and makes recommendations regarding the
Company's marketing strategy and plans. The Company does not have a nominating
committee of the Board of Directors, and the Board of Directors undertakes all
nominating functions. During 1997, the Compensation Committee met four times,
the Audit Committee met two times, and the Marketing Committee met three
times.

COMPENSATION OF DIRECTORS

For their service as directors, each director received a retainer of $1,000
per month, which increased to $2,000 per month after April 30, 1997, but no
additional fees were paid 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 meetings.

Directors also receive option grants for nonqualified options under the
Company's 1996 Director Stock Option Plan, as amended (the "Director Plan").
Options to purchase an aggregate 156,650 shares have been issued which enable
each director (except for Mr. Levine) to purchase 31,330 shares of Common
Stock, subject to adjustment as provided in the Director Plan and subject to
various vesting requirements. Vesting occurs only if the option holder is
serving on the Board on the vesting date. The Board, which administers the
Director Plan, intends to increase the number of shares available under the
Director Plan and grant an option at fair market value on the date of the
grant to Mr. Levine following his election as a director. Such option would
vest in a manner consistent with that of the other directors' options,
prospectively, and in accordance with the terms of the Director Plan. Thus,
the options vesting in 1999 would be 4,970 shares, and the number would
increase to 5,000 shares for each of the years 2000 to 2002, assuming
continued service on the Board.

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.

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<PAGE>

SECURITY OWNERSHIP

The following table sets forth, as of March 31, 1998, 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 5% or more of the Company's Common Stock, the Company has
relied on documents that Lau Technologies and Fleet Financial Group, Inc.
filed with the Securities and Exchange Commission, indicating holdings which
are current through December 31, 1997.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME AND ADDRESS(1) OWNED(2) PERCENTAGE
------------------- ------------------- ----------
<S> <C> <C>
Joanna T. Lau(3)................... 5,191,390 64.4%
Denis K. Berube(4)................. 5,191,390 64.4%
Lau Technologies(5)................ 5,178,000 64.2%
Fleet Financial Group, Inc.(6)........ 537,280 6.7%
Robert C. Hughes(7)(8)............. 183,370 2.1%
Thomas J. Colatosti(7)(9)............. 121,200 1.5%
William A. Marshall(7)(10)......... 104,131 1.3%
Yona Wieder(7)(11)................. 119,126 1.5%
Robert J. Schmitt, Jr.(7)(12)...... 62,225 *
Charles J. Johnson(7)(13).......... 6,890 *
Harriet Mouchly-Weiss(7)(14)....... 6,590 *
Peter Nessen(7)(15)................ 12,390 *
Thomas J. Reilly(7)(16)............ 8,690 *
All directors and executive
officers as a group (9
persons)(17)...................... 5,816,002 72%
</TABLE>
- --------
* Less than one percent of the 8,067,398 shares issued and outstanding as of
March 31, 1998.
(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.
The address of Fleet Financial Group, Inc. is One Federal Street, Boston,
Massachusetts 02110.
(2) Unless otherwise noted, each person identified possesses sole voting and
investment power over the shares owned.
(3) Consists of 5,178,000 shares held by Lau Technologies, of which Ms. Lau
owns approximately 56% of the outstanding capital stock, 1,000 shares
owned directly by Ms. Lau, 6,390 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 6,390 issuable
shares and the 6,000 shares owned by Mr. Berube.
(4) Consists of 5,178,000 shares held by Lau Technologies, of which Mr.
Berube's spouse owns approximately 56% of the outstanding capital shares,
1,000 shares owned directly by Ms. Lau, 6,390 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 1,000 shares owned by Ms. Lau.
(5) Includes shares of Common Stock held by Lau Technologies which are subject
to certain option and other rights granted to Lau Technologies' lenders
under a revolving credit facility, including options to acquire an
aggregate of 49,700 shares of the Company's Common Stock held by Lau, at
approximately 95% of the offering price to the public contained in the
registration statement for the Company's second underwritten public
offering, if any, and only if certain lending benchmarks have been
reached.
(6) Consists of 537,280 shares beneficially owned, of which Fleet Financial
Group, Inc. had sole power to vote or direct the vote of 457,580 shares,
sole power to dispose or direct the disposition of 536,080 shares, and
shared power to dispose or direct the disposition of 1,200 shares.
(7) Represents shares of Common Stock issuable pursuant to stock options. The
total number of shares issuable under options granted to Messrs. Hughes,
Colatosti, Marshall, Wieder, Schmitt, each director, and all directors and
executive officers as a group are 629,000, 121,000, 213,000, 284,000,
62,225, 31,330, and 1,465,875, respectively.
(8) Consists of 183,270 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.
(9) Consists of 121,000 shares issuable to Mr. Colatosti pursuant to stock
options and 200 shares held by Mr. Colatosti's children. Mr. Colatosti
disclaims beneficial ownership of his children's shares.
(10) Consists of 101,751 shares issuable pursuant to stock options, 348 shares
owned by Mr. Marshall directly, 1782 shares issuable pursuant to options
under the 1997 Employee Stock Purchase Plan, and 250 shares owned by
members of Mr. Marshall's family, of which Mr. Marshall disclaims
beneficial ownership.
(footnotes continued on next page.)

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<PAGE>

(11) Consists of 117,126 shares issuable pursuant to stock options and 2,000
shares owned directly by Mr. Wieder.
(12) Consists of 62,225 shares issuable pursuant to stock options and 1,000
shares owned directly by Mr. Schmitt.
(13) Consists of 6,390 shares issuable pursuant to stock options and 500
shares owned by Mr. Johnson's wife. Mr. Johnson disclaims beneficial
ownership of his wife's 500 shares.
(14) Consists of 6,390 shares issuable pursuant to stock options and 200
shares owned directly by Ms. Mouchly-Weiss.
(15) Consists of 6,390 shares issuable pursuant to stock options and 6,000
shares owned directly by Mr. Nessen.
(16) Consists of 6,390 shares issuable pursuant to stock options and 2,300
shares owned directly by Mr. Reilly.
(17) Represents shares described in Notes 4 and 8-16.

COMPLIANCE WITH SECTION 16(A)

Based solely on a review of reports provided to the Company for 1997
pursuant to Section 16 of the Securities Exchange Act of 1934 and written
representations that no reports were required, the Company believes that all
of the reports required to be filed under Section 16 were timely filed.

EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------- ------------
YEAR SECURITIES
ENDED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) 12/31 SALARY INCENTIVE (2) OPTIONS (#) COMPENSATION(3)
- ------------------------------ ----- -------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert C. Hughes,....... 1997 $221,250 -- 629,000 $ 17,000
President and Chief 1996 $220,000 $75,000 639,000 $ 15,000
Executive Officer
Thomas J. Colatosti,.... 1997 $172,600 $22,000 121,000 $ 14,000
Vice President,
Operations
William A. Marshall, ... 1997 $180,000 -- 213,000 $ 17,000
Vice President, Chief 1996 $140,000 $47,000 213,000 $ 79,000
Financial Officer and
Treasurer
Yona Wieder,............ 1997 $180,000 $ 5,000 284,000 $ 14,000
Vice President, 1996 $ 79,000 $27,000 284,000 $163,000
Marketing and Sales
Worldwide Public Sector
Robert J. Schmitt, 1997 $157,500 $ 5,200 177,500 $ 14,000
Jr.,................... 1996 $ 87,000 $15,000 177,500 $ 4,000
Vice President,
Marketing and Sales
Worldwide Commercial
Sector
</TABLE>
- --------
(1) Compensation listed for 1996 includes amounts for the period the Company
was the Viisage Technology Division of Lau Technologies. 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. Mr.
Schmitt left the Company January 8, 1998 to form a company to distribute
certain Viisage facial recognition products to the gaming industry. Mr.
Schmitt forfeited 115,275 unvested options pursuant to the terms of the
1996 Management Stock Option Plan.
(2) 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 executive 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.
(3) Amounts include 1997 401(k) plan match of $4,750 per listed person, $8,400
auto allowance (except for Mr. Schmitt whose auto allowance was $7,200),
and various insurance benefit payments. Amounts also include relocation
expenses of $66,000 for Mr. Marshall in 1996; and, for Mr. Wieder, $95,000
of consulting fees and $61,000 of commissions earned by Mr. Wieder for the
1996 period prior to his employment. 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. 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.

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<PAGE>

STOCK OPTIONS GRANTED DURING 1997

The following table sets forth information concerning individual grants of
stock options made during 1997 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 1997.

<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS GRANTED EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS TO EMPLOYEES IN PRICE FOR OPTION TERM (2)
NAME GRANTED (1) YEAR ($/SHARE) EXPIRATION DATE 5% 10%
---- ----------- --------------- --------- ---------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Hughes........ -- -- -- -- -- --
Thomas J. Colatosti..... 100,000 42.2 $13.00 July 21, 2007 $817,600 $2,071,900
21,000 $ 6.25 December 8, 2007 $ 82,551 $ 209,181
William A. Marshall..... -- -- -- -- -- --
Yona Wieder............. -- -- -- -- -- --
Robert J. Schmitt,
Jr. ................... -- -- -- -- -- --
</TABLE>
- --------
(1) Options were granted under the 1996 Management Stock Option Plan, as
amended. Total of options granted does not include Employee Stock
Purchase Plan options. Options are exercisable on or after July 21, 2004,
subject to acceleration and earlier vesting on or after July 21, 1999
based on benchmark increments as defined in the option agreements. The
Option Plan is administered by the Compensation Committee of the Board of
Directors. Options under the Option Plan may be either (a) "incentive
options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or (b) options that do not qualify under Section
422 of the Code ("nonqualified options"). 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.
The Compensation Committee will determine the vesting schedule with
respect to any grant of options. All options are subject to adjustment in
certain events. Shares reserved for issuance under an option that is
cancelled or terminated, and shares that are used in payment of option
exercise prices, may be restored and made available for reissuance of
additional options under the Option Plan, considering certain anti-
dilution terms. The existing options contain reload option features.
(2) The assumed rates are compounded annually for the full term of the
options.

STOCK OPTIONS EXERCISED DURING 1997

The following table sets forth information concerning stock option exercises
during 1997 and outstanding stock options held at the end of 1997 by the
Company's executive officers. No stock appreciation rights were exercised or
outstanding during 1997.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT 12/31/97 AT 12/31/97 ($)
ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
---- ----------- -------------- --------------- -------------------
<S> <C> <C> <C> <C>
Robert C. Hughes........ 10,000 $119,000 183,270/435,730 $522,320/$1,241,831
Thomas J. Colatosti..... -- -- --/121,000 --
William A. Marshall..... 348 $ 2,023 101,751/111,249 $ 289,990/$317,060
Yona Wieder............. -- -- 117,126/166,874 $ 333,809/$475,591
Robert J. Schmitt,
Jr. ................... -- -- 62,225/115,275 $ 59,300/$109,857
</TABLE>
- --------
(1) Based on the $5 13/16 closing price of the Company's Common Stock on
December 31, 1997 on the NASDAQ National Market System minus the
respective option exercise price.

7
<PAGE>

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. The Company has also agreed with Mr.
Colatosti to pay six months of current salary if Viisage terminates his
employment.

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 Section 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.

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.

8
<PAGE>

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 in 1997 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 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. The Committee
continued this approach during 1997 with additional option grants to certain
executive officers, as listed in the section "Stock Options Granted During
1997."

Compensation for 1997 generally reflects levels required to attract new
executives to the Company. Following its annual review of compensation after
the close of 1997, the Committee made adjustments in executive officers'
salaries to reflect competitive norms.

COMPENSATION COMMITTEE

Thomas J. Reilly, Chairman

Harriet Mouchly-Weiss

Peter Nessen

9
<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, 1997. 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]

<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG VIISAGE, NASDAQ COMPOSITE AND RUSSELL 2000

<CAPTION>
Measurement period NASDAQ RUSSELL
(Fiscal Year Covered) VIISAGE COMPOSITE 2000
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
11/08/96 $100.00 $100.00 $100.00

FYE 12/31/96 $138.00 $103.00 $105.00
FYE 03/31/97 $ 89.00 $ 97.00 $ 99.00
FYE 06/30/97 $165.00 $115.00 $115.00
FYE 09/30/97 $107.00 $134.00 $132.00
FYE 12/31/97 $ 55.00 $125.00 $127.00

</TABLE>

10
<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.

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 at the time of transfer and
improvements thereto. Such license does not allow the Company to use the
technology in the federal access control field as defined in the Asset
Transfer Agreement.

In connection with the asset transfer described above, the Company and Lau
entered into an Administration and Services Agreement (the "Services
Agreement"). Under the Services Agreement, Lau provides certain general
accounting, data processing, payroll, human resources, employee benefits
administration, shipping and receiving, 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 amount for such
services in 1997 was $864,000.

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 1997 annual fee for facilities and services was
$512,000.

From time to time the Company purchases certain system components and the
services of technical personnel from Lau. The amounts for such components and
services for 1997 were approximately $1.9 million.

CERTAIN BUSINESS RELATIONSHIPS

For the year ended December 31, 1997, the Company paid approximately
$206,000 for professional services to the law firm Finnegan, Hickey, Dinsmoor
& Johnson, P.C., of which Mr. Johnson, a Company director, is a principal.
Finnegan, Hickey, Dinsmoor & Johnson, P.C. will continue to provide legal
services to the Company during 1998.

PROPOSAL 2 -- 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, 1998. 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.

11
<PAGE>

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 a 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,
1998.

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 1998 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 1999 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 12, 1999 and February
27, 1999.

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.