VIISAGE TECHNOLOGY INC, DEF 14A, 2000-03-31

VIISAGE TECHNOLOGY INC
DEF 14A, 2000-03-31
COMPUTER INTEGRATED SYSTEMS DESIGN

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SCHEDULE 14A

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
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))

[_] 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, if other than the Registrant)

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:

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(2) Aggregate number of securities to which transaction applies:

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(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):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] 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:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

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[VIISAGE LOGO]

April 7, 2000

Dear Shareholder:

You are cordially invited to attend the 2000 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 1999 Annual Report is enclosed. I hope you will read it carefully. I
have also enclosed our Notice of the 2000 Annual Meeting, Proxy Statement, and
proxy card.

At the Meeting, your Board of Directors will be asking you to vote for two
directors, to approve amendments to Viisage's 1996 Management Stock Option
Plan and 1996 Director Stock Option Plan to increase the number of shares
available for issuance thereunder, 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, the amendments, 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>

[VIISAGE LOGO]

30 Porter Road
Littleton, Massachusetts 01460

NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS

The 2000 Annual Meeting of the Shareholders of Viisage Technology, Inc.
("Viisage") will be held at 1:30 p.m. on Tuesday, May 9, 2000 in the Board
Room on the 33rd floor of the State Street Corporation Building, 225 Franklin
Street, Boston, Massachusetts. The Meeting is being held for the following
purposes:

1. To elect two Class I directors for three year terms;

2. To approve an amendment to Viisage's 1996 Management Stock Option Plan
to increase the number of shares available for issuance thereunder from
2,057,100 to 2,807,100;

3. To approve an amendment to Viisage's 1996 Director Stock Option Plan to
increase the number of shares available for issuance thereunder from
201,616 to 326,616;

4. To ratify the selection of BDO Seidman, LLP as independent public
accountants for Viisage for the year ending December 31, 2000; and

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

Shareholders of record at the close of business on March 21, 2000, 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 1999 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 7, 2000
<PAGE>

VIISAGE TECHNOLOGY, INC.
PROXY STATEMENT
FOR THE
2000 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 9, 2000

INFORMATION ABOUT SOLICITATION AND VOTING

General

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 2000 Annual Meeting of
Shareholders to be held at 1:30 p.m. on Tuesday, May 9, 2000, in the Board
Room on the 33rd floor of the State Street Corporation 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 are expected to be mailed on or about April 7, 2000 to all
shareholders entitled to vote at the Meeting.

Viisage's Board of Directors (the "Board of Directors" or the "Board") is
soliciting proxies for the election of two Class I directors, comprising the
class of directors to be elected for the term expiring in 2003, for the
approval of amendments to Viisage's 1996 Management Stock Option Plan and 1996
Director Stock Option Plan to increase the number of shares available for
issuance thereunder, and for the ratification of the selection of the
Company's independent public accountants.

Stockholders Entitled to Vote

At the close of business on March 21, 2000, the record date for the
Meeting, there were outstanding and entitled to vote 9,936,033 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 21, 2000 are entitled
to vote at the Meeting. Each outstanding share of Common Stock is entitled to
one vote on each matter to be voted upon at the Meeting.

Quorum and Voting

The representation, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is
necessary to establish a quorum. All votes will be tabulated by the inspector
of elections appointed for the Meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes. Broker non-
votes occur when a nominee, such as a financial institution, returns a proxy,
but does not have the authorization from the beneficial owner to vote the
owner's shares on a particular proposal because the nominee did not receive
voting instructions from the beneficial owner. Abstentions and broker non-
votes will be counted for the purpose of determining if a quorum is present.
Abstentions will be counted towards the tabulations of votes cast on matters
presented at the Meeting and will have the same effect as negative votes
(other than the election of directors) whereas broker non-votes will not be
counted for purposes of determining whether a matter has been approved.

Assuming the presence of a quorum, the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting, present in person or by proxy, is required for the approval of each
matter submitted to the Meeting except the election of directors. In the
election of directors, the two nominees receiving the highest number of
affirmative votes will be elected.

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
other proposals, 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.

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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

General

Two Class I directors are to be elected at the Meeting to serve a three
year term expiring at the 2003 Annual Meeting of Shareholders and until their
successors have been elected and duly qualified. Unless instructed otherwise,
the proxy holders will vote the proxies received by them for the Company's
nominees Denis K. Berube and Charles E. Levine. In the event that any nominee
of the Company is unable or declines to serve as a director at the time of the
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. Messrs. Berube and Levine
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 Board recommends a vote "FOR" the proposed nominees to the Board.

Composition of the Board

Pursuant to the Company's Restated Certificate of Incorporation, the Board
has set the number of directors at six. 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.

The Class II directors (whose terms expire in 2001) are Charles J. Johnson
and Harriet Mouchly-Weiss. The Class III directors (whose terms expire in
2002) are Peter Nessen and Thomas J. Reilly. There are no family relationships
between any of the directors or executive officers of the Company.

The following sets forth the names of and certain information about the
persons nominated as directors 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."

Nominees for Class I Directors

Denis K. Berube, 57, 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 ("Lau"), where he has been employed
since 1990.

Charles E. Levine, 47, 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, after which he enjoyed a few months off before joining
Sprint PCS. 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.

Directors Whose Terms Expire at the 2001 Annual Meeting (Class II Directors)

Charles J. Johnson, 44, 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.
Finnegan, Hickey, Dinsmoor & Johnson, P.C. will continue to provide legal
services to the Company during 2000.

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Harriet Mouchly-Weiss, 57, 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 2002 Annual Meeting (Class III Directors)

Peter Nessen, 64, 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, 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. 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.

Meetings of the Board of Directors and Committees

The Company's Board of Directors held nine meetings during 1999, and each
director attended at least 75% 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 independent 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, receives reports on
compliance with laws, regulations and internal procedures, 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, Mr. Nessen, and Mr. Levine reviews and makes recommendations
regarding the Company's marketing strategy and plans. During 1999, the
Compensation Committee met three times, the Audit Committee met five times,
and the Marketing Committee met two times. The Company does not have a
nominating committee of the Board of Directors, and the Board of Directors
undertakes all nominating functions.

Compensation of Directors

For their service as directors in 1999, each director received an aggregate
$30,000 worth of Common Stock, but no additional cash or fees for attending
Board or committee meetings. This amount of directors' stock compensation has
been increased to $36,000 for 2000 service. In addition, the Company
reimburses directors for their out-of-pocket expenses incurred in connection
with any Board or committee meetings.

Directors also receive grants of nonqualified options under the Company's
1996 Director Stock Option Plan, as amended (the "Director Plan"). As of March
21, 2000, options to purchase an aggregate 201,616 shares have been issued
which enable each director to purchase 35,496 shares of Common Stock (except
for Mr. Levine, who, having joined the Board more recently, has options to
purchase 24,136 shares), subject to various vesting requirements. Vesting
occurs only if the option holder is serving on the Board on the vesting date.

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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.

PROPOSAL 2 -- AMENDMENT TO
1996 VIISAGE MANAGEMENT
STOCK OPTION PLAN

The 1996 Management Stock Option Plan (the "Management Plan") was adopted
by the Board of Directors on June 17, 1996, and ratified by Lau in its
capacity as sole shareholder of the Company prior to its initial public
offering, to provide selected officers and employees with an opportunity to
have an ownership interest in the Company and to attract, retain and motivate
such officers and employees. 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. 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"). On January 26, 2000, the
Board voted, subject to shareholder approval at this Meeting, to amend the
Management Plan to increase the number of shares reserved for issuance
thereunder from 2,057,100 shares to 2,807,100 shares to make additional shares
available for issuance under the Management Plan. As of March 21, 2000,
options to purchase a total of 1,839,155 shares of Common Stock were
outstanding with exercise prices between $0.93 and $12.50, and options for
217,945 shares remained available for issuance.

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 determines 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 Compensation
Committee of 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.

Option grants under the Option Plan with exercise prices equal to the fair
market value of the option shares on the grant date will not result in any
direct charge to the Company's reported earnings. However, the fair value of
those options is required to be disclosed in the notes to the Company's
financial statements, and the Company must also disclose, in footnotes to the
Company's financial statements, the pro-forma impact those options would have
upon the Company's reported earnings were the fair value of those options at
the time of grant treated as a compensation expense. In addition, the number
of outstanding options may be a factor in determining the Company's earnings
per share on a fully-diluted basis.

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Options granted under the Option Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
nonstatutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:

Incentive Options: No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made
the subject of a taxable disposition. For Federal tax purposes, dispositions
are divided into two categories: (i) qualifying and (ii) disqualifying. A
qualifying disposition occurs if the sale or other disposition is made after
the optionee has held the shares for more than two (2) years after the option
grant date and more than one (1) year after the exercise date. If either of
these two holding periods is not satisfied, then a disqualifying disposition
will result. Upon a qualifying disposition, the optionee will recognize long-
term capital gain in an amount equal to the excess of (i) the amount realized
upon the sale or other disposition of the purchased shares over (ii) the
exercise price paid for the shares. If there is a disqualifying disposition of
the shares, then the excess of (i) the fair market value of those shares on
the exercise date over (ii) the exercise price paid for the shares will be
taxable as ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be recognized as a capital gain or loss
by the optionee. If the optionee makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax
deduction, for the taxable year in which such disposition occurs, equal to the
excess of (i) the fair market value of such shares on the option exercise date
over (ii) the exercise price paid for the shares. If the optionee makes a
qualifying disposition, the Company will not be entitled to any income tax
deduction.

Nonstatutory Options: No taxable income is recognized by an optionee upon
the grant of a nonstatutory option. The optionee will, in general, recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income. The
Company will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
nonstatutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
optionee.

As of March 21, 2000, no stock options had been granted, and no shares of
Common Stock had been issued, on the basis of the share increase which are the
subject of this Proposal.

The affirmative vote of at least a majority of the outstanding shares of
Common Stock present in person or by proxy at the Annual Meeting and entitled
to vote is required for approval of the amendment to the Option Plan. Should
such stockholder approval not be obtained, then the 750,000 share increase to
the share reserve under the Option Plan will not occur, and no additional
options or stock issuances will be made on the basis of such increases. The
Option Plan will, however, continue in effect, and option grants may continue
to be made under the Option Plan until all the shares available for issuance
under the Option Plan has been issued pursuant to such option grants.

The Board recommends a vote "FOR" approval of Proposal 2.

PROPOSAL 3 -- AMENDMENT TO
1996 VIISAGE DIRECTOR STOCK OPTION PLAN

The 1996 Director Stock Option Plan (the "Director Plan") was adopted by
the Board of Directors on June 17, 1996, and ratified by Lau in its capacity
as sole shareholder of the Company prior to its initial public offering, to
provide directors with an opportunity to have an ownership interest in the
Company and further align the non-employee directors' interests with the long-
term interests of the shareholders. The Director Plan is administered by the
Board of Directors, and on January 26, 2000 the Board voted, subject to
shareholder

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approval at this Meeting, to amend the Director Plan to increase the number of
shares reserved for issuance thereunder from 201,616 shares to 326,616 shares
to make additional shares available for issuance under the Director Plan. In
addition, the expiration date of the Director Plan will be extended from
December 31, 2002 to December 31, 2005 unless terminated earlier in accordance
with the Plan. As of March 21, 2000, options to purchase a total of 201,616
shares of Common Stock were outstanding with exercise prices between $1.19 and
$12.50, and no options remained available for issuance.

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. 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. The Federal
tax consequences relating to the options issued under the Director Plan are
the same as those relating to the nonstatutory stock options described under
the Option Plan in Proposal 2.

See "Compensation of Directors" for further information about the Director
Plan.

The Board recommends a vote "FOR" approval of Proposal 3.

PROPOSAL 4 -- RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors has selected the accounting firm of BDO Seidman, LLP
as the Company's independent public accountants for the year ending December
31, 2000.

On November 3, 1999, the Company's audit committee approved the engagement
of BDO Seidman, LLP to replace Arthur Andersen, LLP as the Company's
independent public accountants. The Company's change in independent public
accountants was made at the request of its majority shareholder, Lau
Technologies. Lau had engaged BDO Seidman, LLP to act as its independent
public accountants and desired that a single firm audit Lau's consolidated
financial statements. There were not any disagreements with Arthur Andersen,
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.

Shareholder ratification of the selection of BDO Seidman is not required by
the Company's By-laws or otherwise. The Board of Directors, however, is
submitting the selection of BDO Seidman 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.

BDO Seidman 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.

The Board recommends a vote "FOR" the ratification of BDO Seidman LLP as
the Company's independent public accountants for the year ending December 31,
2000.

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SECURITY OWNERSHIP AND MANAGEMENT

The following table sets forth, as of March 21, 2000, the beneficial
ownership of Common Stock by all directors, named 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 filed with the
Securities and Exchange Commission, indicating holdings which are current
through March 21, 2000.

<TABLE>
<CAPTION>
Shares Beneficially
Name and Address(1) Owned(2) Percentage
------------------- ------------------- ----------
<S> <C> <C>
Joanna T. Lau(3)............................ 7,294,221 73.4%
Denis K. Berube(4)(6)....................... 7,294,221 73.4%
Lau Technologies(5)......................... 7,241,197 72.9%
Thomas J. Colatosti(6)(7)................... 246,311 2.5%
Iftikhar A. Ahmad (6)(8).................... 16,655 *
Charles J. Johnson(6)(9).................... 36,024 *
Harriet Mouchly-Weiss(6)(10)................ 43,939 *
Peter Nessen(6)(11)......................... 52,024 *
Thomas J. Reilly(6)(12)..................... 46,024 *
Charles E. Levine(6)(13).................... 41,664 *
All directors and named executive officers
as a group (8 persons)(14)................. 7,776,862 78.3%
</TABLE>
- --------
* Less than one percent of the 9,936,033 shares issued and outstanding as of
March 21, 2000.
(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 7,241,197 shares held as described below by Lau Technologies,
of which Ms. Lau owns approximately 56% of the outstanding capital stock,
1,000 shares owned directly by Ms. Lau, 16,330 shares issuable to Denis K.
Berube, the spouse of Ms. Lau, pursuant to stock options, and 35,694
shares owned by Mr. Berube. Ms. Lau disclaims beneficial ownership of the
16,330 issuable shares and the 35,694 shares owned by Mr. Berube.
(4) Consists of 7,241,197 shares described below held by Lau Technologies, of
which Mr. Berube's spouse owns approximately 56% of the outstanding
capital stock, 1,000 shares owned directly by Ms. Lau, 16,330 shares
issuable to Mr. Berube pursuant to stock options, and 35,694 shares owned
by Mr. Berube directly. 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) Consists of 809,524 shares issuable pursuant to a subordinated convertible
note, 569,091 shares issuable pursuant to two option agreements, and
5,862,582 shares owned by Lau Technologies directly.
(6) Includes shares of Common Stock issuable pursuant to vested stock options.
The total number of vested and non-vested shares issuable under options
granted to Messrs. Colatosti, Ahmad, each director (except Mr. Levine),
Mr. Levine, and all directors and executive officers as a group are
767,837, 127,100, 35,496, 24,136, and 1,096,553, respectively.
(7) Consists of 246,111 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.
(8) Consists of 11,666 shares issuable to Mr. Ahmad pursuant to stock options
and 4,989 shares owned by Mr. Ahmad directly.
(9) Consists of 16,330 shares issuable pursuant to stock options and 19,694
shares owned by Mr. Johnson directly.
(10) Consists of 16,330 shares issuable pursuant to stock options and 27,609
shares owned directly by Ms. Mouchly-Weiss.
(11) Consists of 16,330 shares issuable pursuant to stock options and 35,694
shares owned directly by Mr. Nessen.
(12) Consists of 16,330 shares issuable pursuant to stock options and 29,694
shares owned directly by Mr. Reilly.
(13) Consists of 4,970 shares issuable pursuant to stock options and 36,694
shares owned directly by Mr. Levine.
(14) Represents shares described in Notes 4 and 7-13.

7
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation paid
by the Company to the named executive officers for services rendered to the
Company for the last three fiscal years.

<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation(1) Awards
--------------------- ------------
Year Securities
Name and Principal Ended Underlying All Other
Position(1) 12/31 Salary Incentive(2) Options (#) Compensation(3)
------------------ ----- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Thomas J. Colatosti,.... 1999 $200,162 -- 717,837 $14,200
President and Chief 1998 $179,000 $15,000 717,837 $14,400
Executive Officer 1997 $172,600 $22,000 121,000 $14,000

Iftikhar A. Ahmad,...... 1999 $141,606 -- 77,100 $ 2,124
Vice President of
Engineering
</TABLE>
- --------
(1) Mr. Colatosti, who joined the Company on December 30, 1996 (and served as
Chief Operating Officer immediately prior to his promotion), became
President and Chief Executive Officer on November 3, 1998. Mr. Ahmad
joined the Company in November of 1996 (and served as the Director of
Engineering prior to his promotion), became Vice President of Engineering
in March of 1999.
(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 1999 401(k) plan match of $4,800 and $2,124 for Mr.
Colatosti and Mr. Ahmad, respectively. Mr. Colatosti also receives $8,400
auto allowance, and various insurance benefit payments. 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 contributions to the plan, subject to certain limits.
Participants are fully vested in their contributions and vest 20% per year
in employer contributions.

Stock Options Granted During 1999

The following table sets forth information concerning individual grants of
stock options made during 1999 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 1999.

<TABLE>
<CAPTION>
Potential
Realizable Value at
% of Assumed
Total Annual Rates of
Number of Options Stock Price
Securities Granted Appreciation for
Underlying to Exercise Option Term(2)
Options Employees Price -------------------
Name Granted(1) in Year ($/share) Expiration Date 5% 10%
---- ---------- --------- --------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas J. Colatosti..... -- -- -- -- -- --
Iftikhar A. Ahmad....... 35,000 24.5% $1.375 February 24, 2009 $30,266 $76,699
</TABLE>
- --------
(1) Options were granted under the 1996 Management Stock Option Plan, as
amended, the terms and conditions of which are described herein under the
section entitled "Proposal 2--Amendment to 1999 Viisage Management Stock
Option Plan". Total of options granted does not include Employee Stock
Purchase Plan options. Mr. Ahmad's shares vest over 36 months.
(2) The assumed rates are compounded annually for the full term of the
options.

8
<PAGE>

Stock Options Exercised During 1999

The following table sets forth information concerning stock option
exercises during 1999 and outstanding stock options held at the end of 1999 by
the Company's executive officers. No stock appreciation rights were exercised
or outstanding during 1999.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 12/31/99 at 12/31/99 ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable(1)
- ---- --------------- -------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Thomas J. Colatosti..... -- -- 121,771/596,066 $849,243/4,106,533
Iftikhar A. Ahmad....... -- -- 1,465/75,635 $ 7,475/465,203
</TABLE>
- --------
(1) Based on the $8.0625 closing price of the Company's Common Stock on
December 31, 1999 on the NASDAQ National Market System minus the
respective option exercise price.

Employment Agreements

Mr. Colatosti has an agreement with the Company that provides, among other
terms, that the Company will pay Mr. Colatosti six months of current salary if
Viisage terminates his employment, except for cause or if commensurate
employment is offered with an affiliate. Mr. Colatosti is also subject to non-
competition and non-solicitation provisions which generally survive one year
beyond Mr. Colatosti's termination.

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.

9
<PAGE>

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.

Options granted in 1999 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 an extended service
requirement. In determining the magnitude of the awards, the Committee
considers 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.

Compensation for 1999 generally reflects levels required to retain
executives. Following its annual review of compensation after the close of
1998, the Committee made adjustments in executive officers' salaries to
reflect competitive norms.

COMPENSATION COMMITTEE

Thomas J. Reilly, Chairman

Harriet Mouchly-Weiss

Peter Nessen

10
<PAGE>

STOCK 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, 1999. Shares of
the Company's Common Stock were initially offered on November 8, 1996 at $10.50
per share. The performance graph does not reflect any prediction of future
performance of the Company's stock.

[GRAPH APPEARS HERE]

Viisage Technology

Data for Performance Graph in Proxy
December 31, 1999

<TABLE>
<CAPTION>
Date Viisage Viisage - Change Nasdaq - Composite Nasdaq - Change Russell 2000 Russell 2000 - Change
- ---- ------- ---------------- ------------------ --------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
11/08/96 10.500 100 1,257.51 100 344.56 100
12/31/96 14.500 138 1,291.03 103 362.61 105
06/30/97 17.375 165 1,442.07 115 396.37 115
12/31/97 5.813 55 1,570.35 125 437.02 127
06/30/98 2.063 20 1,894.74 151 457.39 133
12/31/98 1.250 12 2,192.69 174 421.96 122
06/30/99 1.188 11 2,686.12 214 457.68 133
12/31/99 8.063 77 4,069.31 324 504.75 146
</TABLE>

11
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to its incorporation in Delaware on May 23, 1996 and 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. As of
March 21, 2000, Lau directly owns approximately 59% of the issued and
outstanding Viisage Common Stock.

Viisage and Lau have covenanted not to compete with each other until
November 5, 2006. The Company's obligation not to compete with Lau is limited
to the field of federal access control.

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 1999 was approximately $418,000.

The Company and Lau are parties to a Use and Occupancy Agreement for the
Company's use of certain office space for its corporate headquarters which
currently expires in February 2002. 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. The
1999 annual fee for facilities and services was approximately $217,000.

License Agreements

The Company has also entered into the following license agreements with
Lau:

. Amended and Restated License Agreement with Lau (the "License
Agreement"), dated August 20, 1996 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.

. License Agreement, dated February 23, 1998, pursuant to which the
Company granted Lau a nonexclusive, nontransferable right to utilize
certain of Viisage's proprietary technology to distribute Face-in-the-
Crowd products in Europe.

. License Agreement, dated March 31, 1999, pursuant to which the Company
granted Lau a nonexclusive, nontransferable right to utilize certain
proprietary technology to distribute Face-in-the-Crowd products for
United States airports and federal agencies.

. Supplemental License Agreement, dated as of June 15, 1999, between the
Company and Lau, pursuant to which the Company has granted Lau a limited
license to use any technology granted exclusively to Viisage under the
License Agreement to the extent reasonably required to enable Lau to
perform its obligations under: (i) an unconditional performance
guaranty, dated October 8, 1998, with Fleet Business Credit Corporation
(as successor to Sanwa Business Credit Corporation) ("FBCC"); (ii) a
contingent support agreement with FBCC, dated April 26, 1999; and (iii)
a contingent support agreement in favor of the Company's commercial bank
lender, State Street Corporation, dated May 7, 1999. Lau may also use
such technology to the extent reasonably required to enable Lau to
perform its obligations, if any, with respect to systems financed under
the Purchase Agreement between Lau and the Company described below.

. License Agreement, dated as of November 30, 1999, by and between the
Company and Lau, pursuant to which Lau has granted the Company an
exclusive (except for limited fields reserved by Lau),

12
<PAGE>

perpetual, worldwide license to use the U.S. patent 5,432,864 purchased
by Lau from Daozeng Lu and Simon Lu, and all improvements thereto, which
relates to a system for automatically verifying the identity of an
individual using identification parameters that are carried on an escort
memory such as an identification or credit card.

Additional Transactions

The Company issued subordinated debt and options to Lau, as set forth in
the section entitled "Security Ownership." 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 1999 were
approximately $500,000. In addition, Lau has provided Viisage with equipment
lease financing and has agreed, in certain circumstances, to guarantee certain
of our contract obligations in exchange for stock options and cash
compensation. In addition, Lau is a party to the following contracts,
agreements and other arrangements with the Company:

. $2,000,000.00 Subordinated Convertible Note, dated May 3, 1999, by and
between the Company and Lau (the "Convertible Note"), pursuant to which
Lau has an option to convert the principal and interest owing thereunder
in whole, but not in part, into that number of fully paid and non-
assessable shares of Company Common Stock that equals the quotient of
the fraction having as its numerator the sum of the unpaid principal
amount of the note plus the amount of any unpaid accrued interest under
the note and having as its denominator One Dollar and Twenty-Six Cents
($1.26). The Company has borrowed $1 million from Lau under the
Convertible Note to date. Pursuant to a Security Agreement dated May 3,
1999, by and between the Company and Lau, the Company granted Lau a
security interest in all of its assets to secure the obligations of the
Company to Lau under the Convertible Note.

. Purchase Agreement, dated as of June 15, 1999, by and between the
Company and Lau, pursuant to which Lau has agreed to provide lease
financing to the Company for its installation of a digital
identification system pursuant to a contract between the Company and the
State of Arkansas (the "Arkansas Contract"). Lau may agree to provide
lease financing under the Purchase Agreement for the installation by the
Company of other digital identification systems in the future.

. Bill of Sale and Assignment, dated as of June 18, 1999, by and between
the Company and Lau, pursuant to which the Company agreed to sell,
assign and transfer to Lau all right, title and interest of the Company
in and to the Arkansas Contract as collateral under the Purchase
Agreement described above.

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

Based solely on a review of reports provided to the Company for 1999
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.

SHAREHOLDER PROPOSALS

Shareholders may submit proposals on matters appropriate for shareholder
action at subsequent annual meetings of shareholders consistent with Rule 14a-
8 promulgated under the Securities Exchange Act of 1934, as amended. For such
proposals to be considered for inclusion in the Proxy Statement and Proxy
relating to the 2001 Annual Meeting of Shareholders, such proposals must be
received by the Company for inclusion in the Company's Proxy Statement and
proxy card relating to that meeting no later than December 8, 2000.

Pursuant to new amendments to Rule 14a-4(c) of the Exchange Act, if a
shareholder who intends to present a proposal at the 2001 Annual Meeting of
Shareholders does not notify the Company of such proposal on or prior to
February 22, 2001, then management proxies would be allowed to use their
discretionary voting authority

13
<PAGE>

to vote on the proposal when the proposal is raised at the Annual Meeting,
even though there is no discussion of the proposal in the 2001 Proxy
Statement.

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 which
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.