<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Identix Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1) 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> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
IDENTIX INCORPORATED
TO BE HELD ON OCTOBER 29, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Identix
Incorporated (the "Company") will be held on Thursday, October 29, 1998 at 2:00
p.m. at Four Points Sheraton Hotel, 1108 N. Mathilda Avenue, Sunnyvale,
California 94089, for the purpose of considering and acting upon the following
proposals:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve a change in the Company's state of incorporation from
California to Delaware through the merger of the Company into a newly
formed Delaware corporation that is a wholly owned subsidiary of the
Company.
3. To approve an amendment to the Identix Incorporated Equity Incentive
Plan to increase the number of shares of Identix common stock available
for issuance under that plan from 1,750,000 to 3,000,000 shares.
4. To approve the Identix Incorporated Employee Stock Purchase Plan and the
Identix Incorporated Foreign Subsidiary Employee Stock Purchase Plan.
5. To approve an amendment to the Identix Incorporated Nonemployee
Directors Stock Option Plan to increase the number of shares available
for issuance under that plan from 250,000 to 410,000 shares and to
approve the other amendments to that plan described in the accompanying
Proxy Statement.
6. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending June 30, 1999.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on September 1, 1998
are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any shareholder attending the
meeting may vote in person even if he or she returned a Proxy.
Sincerely,
JAMES P. SCULLION
Secretary
Sunnyvale, California
September 17, 1998
<PAGE> 3
IDENTIX INCORPORATED
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Identix Incorporated (the "Company") for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, October 29, 1998 at
2:00 p.m., local time, or at any adjournment thereof, for the purposes set forth
herein and in an accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at Four Points Sheraton Hotel, 1108 N. Mathilda
Avenue, Sunnyvale, California 94089. The Company's principal executive offices
are located at 510 North Pastoria Avenue, Sunnyvale, California 94086. The
Company's telephone number is (408) 731-2000.
These proxy solicitation materials were mailed on or about September 17,
1998 to all shareholders entitled to vote at the Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on September 1, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 25,298,444 shares of the Company's common stock were issued and
outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to the Secretary of the Company
a written notice of revocation or a duly executed proxy bearing a later date or
by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Except in the election of directors, each share of common stock has one
vote. Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held on the record
date, or distribute the shareholder's votes among the candidates at the
shareholder's discretion. However, no shareholder shall be entitled to cumulate
votes unless the candidate's name has been placed in nomination prior to the
voting and the shareholder or any other shareholder has given notice at the
Annual Meeting prior to the voting of the intention to cumulate the
shareholder's votes.
Abstentions and broker non-votes will be counted as present or represented
for purposes of establishing a quorum for proposals presented to the
shareholders and will have the same effect as negative votes.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners for
their expenses in forwarding solicitation materials to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees without additional compensation, personally or by
telephone or telegraph.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S
PROXY STATEMENT FOR THE 1999 ANNUAL MEETING
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting must be received by
the Company no later than May 20, 1999 in order to be eligible for inclusion in
the proxy statement and form of proxy relating to that meeting. If the
reincorporation proposal described in Proposal 2 is approved by the Company's
shareholders, the Delaware company will have an advanced notice bylaw provision
as described in Proposal 2.
1
<PAGE> 4
PROPOSAL 1. ELECTION OF DIRECTORS
GENERAL
A board of seven directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's seven nominees named below. In the event that any nominee
shall become unavailable, the proxy holders will vote the proxies at their
discretion for a substitute or additional nominee. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner in accordance with cumulative
voting as will assure the election of as many of the nominees listed below as
possible and, in such event, the specific nominees to be voted for will be
determined by the proxy holders. It is expected that all nominees will be able
and willing to serve as directors. The term of office of each person elected as
a director will continue until the next Annual Meeting of Shareholders or until
his successor has been elected and qualified.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors of the Company. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum but have no other legal effect under California law.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
--------------- --- -------------------- --------------
<S> <C> <C> <C>
Randall C. Fowler......... 59 Chairman, President, and Chief Executive 1982
Officer of the Company
Patrick H. Morton......... 58 President of Kokusai Semiconductor 1985
Equipment Corporation
Randall Hawks, Jr. ....... 46 President and Chief Executive Officer 1988
of WHEB Systems, Inc.
Fred U. Sutter............ 69 Retired President, Chairman and Chief 1988
Executive Officer of Ascom Holding, Ltd.
Larry J. Wells............ 54 General Partner of the Management Company 1992
for Sundance Venture Partners, L.P.
Charles W. Richion........ 62 Retired Vice President of Hewlett-Packard *
Company
James P. Scullion......... 42 Executive Vice President, Chief Financial *
Officer and Secretary of the Company
</TABLE>
- ---------------
* Not currently a member of the Company's Board of Directors.
Except as set forth below, each of the nominees has been engaged in the
principal occupation described above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Randall C. Fowler, Chairman of the Board, President, and Chief Executive
Officer of the Company, positions he has held since 1982, is also founder of the
Company.
Patrick H. Morton has been a director of the Company since 1985. Mr. Morton
is president of Kokusai Semiconductor Equipment Corporation. In addition, Mr.
Morton is Chairman of the Board of Directors and co-founder of QuadRep, Inc.,
manufacturers' representative company. He held the position of President of
QuadRep, Inc. from 1981 through 1990 and has been Chairman since 1991.
Randall Hawks, Jr. has been a director of the Company since 1988. Mr. Hawks
is currently President and Chief Executive Officer at WHEB Systems, Inc. From
1994 to 1995, Mr. Hawks was Executive Vice President of AT&T Paradyne, a
communications equipment subsidiary of AT&T. Prior to joining AT&T
2
<PAGE> 5
Paradyne, Mr. Hawks was Executive Vice President of the Company from 1989 to
November 1993 and was Vice President of Marketing from 1985 to 1989.
Fred U. Sutter has been a director of the Company since 1988. Until January
1996, Mr. Sutter was Chairman, Chief Executive Officer and President of Ascom
Holding Ltd., a United States subsidiary of Ascom Holding AG, the parent company
of a group of telecommunication companies and service automation providers. From
December 1993 to July 1995, Mr. Sutter was the Chief Executive Officer and
President of Ascom Holding AG. From January 1991 to August 1993, he was the
Deputy President of Ascom Holding AG. From January 1987 to December 1990, he was
President of Ascom Hasler AG. Ascom Hasler AG is a Swiss telecommunications
company and is a part of Ascom Holding AG.
Larry J. Wells has been a director of the Company since 1992. Since 1989,
Mr. Wells has been a general partner of Anderson and Wells Company, the
management company for Sundance Venture Partners, L.P. Prior to his affiliation
with Anderson and Wells Company, Mr. Wells held similar positions with Inco
Venture Capital from 1988 to 1989 and Citicorp Venture Capital from 1983 to
1987. Mr. Wells currently serves on the Board of Directors of Cellegy
Pharmaceuticals, Inc., a drug development company, Isonics Corporation, an
advanced materials and technology company, and Legacy Brands, Inc., a premium
food producer and distributor.
Charles W. Richion served as Vice President, Corporate Development, of the
Company from June 1997 to June 30, 1998. Since July 1, 1998 he has been engaged
as a consultant to the Company. Prior to joining the Company, Mr. Richion worked
at Hewlett-Packard Company from 1965 through 1996 serving in a variety of
functions. His most recent positions included Vice President and Director of
U.S. Sales operations and building the Global Partners program.
James P. Scullion has been Executive Vice President and Chief Financial
Officer of the Company since July 1996 and from 1990 to 1996, he was Vice
President, Finance and Chief Financial Officer of the Company. From 1986 to 1990
he was Vice President of Finance and Chief Financial Officer at DataTrak, Inc.,
a manufacturer of security access systems.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission ("SEC"). Such officers, directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended June 30, 1998, all Section 16(a) filing
requirements applicable to its officers, directors and 10% stockholders were
complied with.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during
fiscal year 1998.
The Board of Directors currently has two standing committees: the
Compensation Committee and the Audit Committee. The Compensation Committee
reviews and approves the Company's executive officer compensation policy and
administers the Company's employee stock option plans. The Compensation
Committee held one meeting during fiscal year 1998. Messrs. Wells, Morton and
Hawks are currently the members of the Compensation Committee. The Audit
Committee recommends engagement of the Company's independent auditors and is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its systems of internal controls. The Audit Committee held two
meetings during fiscal year 1998. Messrs. Wells, Morton and Hawks are currently
the members of the Audit Committee.
3
<PAGE> 6
The Board of Directors does not have a standing Nominating Committee nor
any committee performing such function.
During fiscal year 1998, no director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors and committees, if any, upon
which such director served, except Ed Zschau who attended two of the four Board
meetings.
DIRECTOR COMPENSATION
Each nonemployee director receives $1,000 for each board meeting attended
up to $4,000 annually. The Company also reimburses non-employee directors for
certain expenses incurred by them in connection with attendance of board
meetings. Directors who are employees of the Company receive no additional or
special remuneration for serving as directors.
Under the Company's Nonemployee Directors Stock Option Plan as currently in
effect ("Directors Plan"), each nonemployee director of the Company, upon such
director's first election to the Board, is entitled to receive an automatic
nondiscretionary grant of (i) a nonqualified stock option ("NQO") to purchase
10,000 shares of common stock if less than six months have elapsed since the
last annual meeting of shareholders or (ii) an NQO to purchase 5,000 shares of
common stock if more than six months have elapsed since the last annual meeting
of shareholders (in either case, "Initial Grant"). In addition, on the date of
the first meeting of the Board following the annual meeting of the shareholders
of the Company, each eligible director is entitled to receive an NQO to purchase
10,000 shares of common stock ("Annual Grant"). If the shareholders of the
Company approve the amendments to the Directors Plan described under Proposal 5
below, then the Initial Grant shall be for an NQO covering 20,000 shares of
common stock, or 10,000 shares if more than six months have elapsed since the
last annual meeting of shareholders, and the Annual Grant shall be for an NQO
covering 20,000 shares of common stock, in each case effective as of the date of
the Annual Meeting.
The exercise price of the NQOs granted under the Directors Plan is equal to
the fair market value of such shares on the date of grant. The NQOs become
exercisable with respect to one fourth of the number of shares covered by such
NQO for each three-month period which elapses after the date of grant, so that
such NQO will be fully exercisable on the first anniversary of the date such NQO
was granted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of July 31, 1998 by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares of common stock, (ii) by each of the Company's directors and each of the
Company's executive officers identified in the Summary Compensation Table and
(iii) by all directors and officers as a group. Except as otherwise indicated,
the Company believes that the beneficial owners of the
4
<PAGE> 7
securities listed below, based on information furnished by such owners, have
sole investment and voting power with respect to the common stock shown as being
beneficially owned by them.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF SHARES BENEFICIALLY
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS BENEFICIALLY OWNED OWNED(1)
--------------------------------------- ------------------ ---------------------
<S> <C> <C>
Ascom USA Inc............................................ 5,048,924(2) 19.97%
9 East Ninth Street, #1
New York, NY 10003
Randall C. Fowler........................................ 1,343,123(3) 5.25%
510 N. Pastoria Avenue
Sunnyvale, CA 94086
Larry J. Wells........................................... 5,086,424(4) 20.09%
Randall Hawks, Jr. ...................................... 102,500(5) *
Fred U. Sutter........................................... 86,700(6) *
Patrick H. Morton........................................ 85,660(7) *
Ed Zschau................................................ 27,500(8) *
Harrison N. Walther...................................... 344,353(9) 1.36%
James P. Scullion........................................ 207,081(10) *
Daniel F. Maase.......................................... 81,077(11) *
Charles W. Richion....................................... 75,000(12) *
All directors and officers as a group.................... 7,484,518(4)(13) 28.43%
12 persons)
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 25,282,177 shares of common
stock outstanding as of July 31, 1998. Shares of common stock subject to
outstanding options or warrants currently exercisable or exercisable within
60 days after July 31, 1998 are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants but are
not deemed outstanding for computing the percentage ownership of any other
person.
(2) All of the Ascom USA Inc. beneficially owned shares are held in a voting
trust for which Mr. Larry Wells, a member of the Board of Directors of the
Company, is serving as the trustee. The trustee of the voting trust votes
all the shares held in the voting trust.
(3) Includes 308,541 shares issuable upon exercise of options.
(4) Includes 5,048,924 shares held by Ascom USA Inc. in a voting trust for
which Mr. Wells is currently serving as voting trustee. Also includes
37,500 shares issuable upon exercise of options held by Mr. Wells.
(5) Includes 97,500 shares issuable upon exercise of options.
(6) Includes 40,000 shares issuable upon exercise of a warrant and 37,500
shares issuable upon exercise of options.
(7) Includes 37,500 shares issuable upon exercise of options.
(8) Includes 27,500 shares issuable upon exercise of options.
(9) Includes 76,458 shares issuable upon exercise of options.
(10) Includes 181,725 shares issuable upon exercise of options.
(11) Includes 81,077 shares issuable upon exercise of options.
(12) Includes 75,000 shares issuable upon exercise of options.
(13) Includes 5,048,924 shares held by Ascom USA Inc. in a voting trust for
which Mr. Wells is currently serving as voting trustee and 1,045,301 shares
issuable upon exercise of warrants and options.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The table set forth below provides certain summary information concerning
compensation paid to or accrued for the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
who served as executive officers at June 30, 1998 for fiscal years ended June
30, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION OTHER LONG TERM
----------------------- COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) ($) OPTIONS(#)(1)(2)
--------------------------- ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Randall C. Fowler............... 1998 225,000 16,700 -- 95,000
Chairman, President and 1997 200,000 2,933 9,600 50,000(3)
Chief Executive Officer 1996 168,000 -- -- 45,000
Harrison N. Walther............. 1998 187,681 173,432 26,551 85,000
President and Chief Executive 1997 171,167 120,049 -- 45,000(3)
Officer of ANADAC, Inc. 1996 146,910 110,448 -- 20,000
James P. Scullion............... 1998 190,000 11,400 8,000 95,000
Executive Vice President 1997 165,000 1,600 6,000 50,000(3)
and Chief Financial Officer 1996 126,000 -- -- 45,000
Daniel F. Maase................. 1998 130,000 35,050 -- 50,000
Vice President of Bio-Imaging 1997 126,000 15,000 -- 25,000(3)
Division 1996 126,000 5,000 -- 25,000
Charles W. Richion(4)........... 1998 245,192 -- -- 75,000
Vice President,
Corporate Development
</TABLE>
- ---------------
(1) All figures in this column reflect options to purchase the Company's common
stock.
(2) The Company repriced underwater stock options on April 28, 1998, which
constituted a cancellation of the underwater option and the grant of a new
option. If a stock option was granted earlier in fiscal year 1998 and then
cancelled and reissued in connection with the repricing on April 28, 1998,
the stock option is only counted once in the table under 1998.
(3) These stock options were cancelled in connection with the April 28, 1998
repricing and the reissued options are also included in the table under
1998.
(4) On June 30, 1998, Mr. Richion's employment with the Company terminated and
Mr. Richion became a consultant to the Company. Mr. Richion has been
nominated for election to the Company's Board of Directors. See Proposal 1.
6
<PAGE> 9
1998 OPTION GRANTS TABLE
The following table sets forth stock options granted to the executive
officers identified in the Summary Compensation Table during the fiscal year
1998 under the Company's Equity Incentive Plan. Since inception, the Company has
not granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL REALIZABLE VALUE AT
GRANTS % OF ASSUMED ANNUAL
TOTAL OPTIONS RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION
EMPLOYEES IN PRICE FOR OPTIONS(1)
OPTIONS FISCAL YEAR PER EXPIRATION -------------------
NAME GRANTED(2) 1998(3) SHARE(4) DATE 5% 10%
---- ---------- --------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Randall C. Fowler....... 20,000(5) 1% $ 9.8750 10/30/07 124,207 314,764
20,000(6) 1% $ 7.6250 10/30/07 90,066 225,081
50,000(6) 4% $ 7.6250 7/26/06 188,924 455,645
25,000 2% $ 7.6250 4/28/08 119,883 303,807
Harrison N. Walther..... 15,000(5) 1% $ 9.8750 10/30/07 93,155 236,073
20,000(6) 1% $ 7.6250 10/30/06 78,515 190,756
25,000(6) 2% $ 7.6250 7/26/06 94,462 227,823
15,000(6) 1% $ 7.6250 10/30/07 67,549 168,811
25,000 2% $ 7.6250 4/28/08 119,883 303,807
James P. Scullion....... 20,000(5) 1% $ 9.8750 10/30/07 124,207 314,764
20,000(6) 1% $ 7.6250 10/30/07 90,066 225,081
50,000(6) 4% $ 7.6250 7/26/06 188,924 455,645
25,000 2% $ 7.6250 4/28/08 119,883 303,807
Daniel F. Maase......... 10,000(5) 1% $ 9.8750 10/30/07 62,103 157,382
10,000(6) 1% $ 7.6250 10/30/07 45,033 112,541
25,000(6) 2% $ 7.6250 7/26/06 94,462 227,823
15,000 1% $ 7.6250 4/28/08 71,930 182,284
Charles W. Richion...... 15,000(5)(7) 1% $10.1250 7/24/07 95,513 242,050
10,000(5)(7) 1% $10.3750 9/23/07 65,248 165,351
25,000(5)(7) 2% $ 9.6875 1/29/08 152,310 385,985
25,000(6)(7) 2% $ 7.6250 1/29/08 116,293 292,701
10,000(6)(7) 1% $ 7.6250 9/23/07 44,434 110,726
25,000(6)(7) 2% $ 7.6250 2/6/07 101,991 249,681
15,000(6)(7) 1% $ 7.6250 7/24/07 65,182 161,656
</TABLE>
- ---------------
(1) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the option term. These values are calculated
based on the requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimated future stock price
appreciation.
(2) Unless otherwise noted, options vest ratably over twenty-four months from
the date of grant with acceleration of vesting of options if the Company
achieves certain financial goals set by the Compensation Committee. Options
that were repriced on April 28, 1998 continued with the same vesting
schedule as the original options.
(3) The percentage is based on the total number of options granted to employees
in fiscal year 1998. If a stock option was granted earlier in fiscal year
1998 and then cancelled and reissued in connection with the repricing on
April 28, 1998, the stock option is only counted once in determining the
number of options granted to employees in fiscal year 1998.
(4) Exercise price is the fair market value on the date of grant.
(5) This option was cancelled as part of the repricing on April 28, 1998.
(6) This option was issued as part of the repricing on April 28, 1998.
(7) Options vest over a period of less than twelve months.
7
<PAGE> 10
1998 OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth stock options exercised by the executive
officers identified in the Summary Compensation Table during fiscal year 1998,
and the number and value of all unexercised options at fiscal year end. The
value of "in-the-money" options refers to options having an exercise price,
which is less than the market price of the Company's common stock on June 30,
1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL YEAR
FISCAL YEAR END END(1)
SHARES --------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Randall C. Fowler........................ -- -- 301,667/38,333 756,150/0
Harrison N. Walther...................... 40,000 272,500 72,083/32,917 0/0
James P. Scullion........................ 12,966 81,369 174,851/38,333 269,872/0
Daniel F. Maase.......................... 43,366 311,510 76,076/32,292 154,676/0
Charles W. Richion....................... -- -- 75,000/0 0/0
</TABLE>
- ---------------
(1) Value realized is determined by multiplying the exercised shares by the
difference between the market close price on the date of exercise and the
stated exercise price.
The Company did not make any awards during the fiscal year ended June 30,
1998 to any of the executive officers named in the Summary Compensation Table
under any long-term incentive plan providing compensation intended for
performance to occur over a period longer than one fiscal year.
AGREEMENTS WITH EXECUTIVE OFFICER
As of June 30, 1998, Mr. Walther, a director of the Company and President
and Chief Executive Officer of ANADAC, was indebted to ANADAC in the amount of
$134,232 for premium payments made on his behalf for a split dollar life
insurance policy. Such indebtedness is represented by non-interest-bearing
notes, and will be paid with the proceeds from the policy or, in the event the
policy is canceled or terminated, with the policy's cash surrender value. ANADAC
will continue to make such premium payments as a loan to Mr. Walther in an
amount equal to approximately $11,900 per year. Mr. Walther is also indebted to
ANADAC in the principal amount of $16,854 for a loan made to Mr. Walther in July
1989. This loan bears interest at the rate of 7.5% per annum. Interest is
payable monthly and principal is payable upon demand.
REPORT OF THE BOARD OF DIRECTORS COMPENSATION COMMITTEE
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 (the "Exchange Act") that might incorporate this Proxy
Statement or future filings with the Securities and Exchange Commission, in
whole or in part, the following report and the Performance Graph which follows
shall not be deemed to be incorporated by reference into any such filing.
The Compensation Committee is responsible for establishing and
administering the policies, which govern both annual compensation and stock
ownership programs for the Chief Executive Officer and certain other executive
officers. Each year, salaries are determined and awards are made, if warranted,
under the Company's stock option plans.
The Compensation Committee annually evaluates the Company's corporate
performance, and its executive compensation and incentive programs compared with
the industry and with a broader group of
8
<PAGE> 11
similar size companies. In determining the Chief Executive Officer's
compensation for fiscal year 1998, the Compensation Committee considered the
compensation paid by the Company's direct competitors, a group of similar size
companies and the corporate performance for the Company for the fiscal year.
The Company's compensation programs are designed to reward executives for
long-term strategic management, to align the interests of the executive officers
with the interests of the Company's shareholders and to attract and retain
highly talented and productive executives, and are leveraged on the basis of
performance in terms of both cash compensation and incentive plans, paying more
with good performance and less when it is below standard.
The principal components of executive compensation are base salary,
performance bonuses and stock options.
Base salary is based on competitive factors and the historic salary
structure for various levels of responsibility within the Company. The
Compensation Committee annually evaluates the Company's corporate performance
and conducts surveys of companies in the industry and of a broader group of
similar size companies in order to determine whether the Company's executive
base salaries are in a competitive range.
Performance bonuses are linked directly to the profitability of the Company
and specific performance objectives. These bonuses in particular emphasize the
Compensation Committee's belief that, when the Company is successful, the
executives should be highly compensated, but that, conversely, if the Company is
not successful and is not profitable, no bonuses should be paid absent
extraordinary circumstances. With respect to each officer, a cash bonus is based
on a formula using Company profitability levels.
The principal equity component of executive compensation is the stock
option program. Stock options are generally granted when an executive joins the
Company and on an annual basis thereafter. Options are occasionally granted for
promotions or other special achievements. The initial option granted to the
executive vests over a period of five years. The purpose of the annual option
grant is to ensure that the executive always has options that vest in increments
in the future. This provides a method of retention and motivation for the senior
level executives of the Company and also aligns senior management's objectives
with the shareholders.
During fiscal 1998, the Chief Executive Officer and the other executive
officers received salary increases equivalent to the amount required to align
them with comparable executives in similar industries, as well as, incentive
stock options. Mr. Walther received performance bonuses pursuant to an incentive
bonus agreement. Mr. Fowler, Mr. Scullion and Mr. Maase received performance
bonuses during fiscal 1998.
During fiscal 1999, the Compensation Committee will continue to carefully
consider executive compensation in relation to the Company's performance
compared to that of industry performance levels.
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<PAGE> 12
TEN-YEAR OPTION REPRICINGS
The following table contains information about adjustments made by the
Company in the last ten fiscal years to the exercise prices of outstanding
options held by executive officers. All adjustments were done by cancellation of
the original options and the grant of a new option with an exercise price equal
to the fair market value of the common stock on the date of grant. The repricing
did not change the expiration date, vesting or other terms of the repriced
options. The options outstanding under the Company's 1994 Nonemployee Directors
Stock Option Plan were not repriced.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE OF EXERCISE NEW OPTION TERM
UNDERLYING STOCK AT PRICE EXERCISE REMAINING
OPTIONS TIME OF AT TIME OF PRICE AT DATE
NAME DATE REPRICED($) REPRICING($) REPRICING($) ($) OF REPRICING
---- ------- ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Randall C. Fowler.................. 4/28/98 50,000 7.625 11.1250 7.625 8 yrs, 89 days
Chairman, President and 4/28/98 20,000 7.625 9.8750 7.625 9 yrs, 185 days
Chief Executive Officer
Harrison N. Walther................ 4/28/98 20,000 7.625 7.8125 7.625 8 yrs, 185 days
President and 4/28/98 25,000 7.625 11.1250 7.625 8 yrs, 89 days
Chief Executive Officer of 4/28/98 15,000 7.625 9.8750 7.625 9 yrs, 185 days
ANADAC
James P. Scullion.................. 4/28/98 50,000 7.625 11.1250 7.625 8 yrs, 89 days
Executive Vice President 4/28/98 20,000 7.625 9.8750 7.625 9 yrs, 185 days
and Chief Financial Officer
Daniel F. Maase.................... 4/28/98 25,000 7.625 11.1250 7.625 8 yrs, 89 days
Vice President of 4/28/98 10,000 7.625 9.8750 7.625 9 yrs, 185 days
Bio-Imaging Division
Charles W. Richion................. 4/28/98 15,000 7.625 10.1250 7.625 9 yrs, 87 days
Vice President, 4/28/98 25,000 7.625 10.1250 7.625 8 yrs, 284 days
Corporate Development 4/28/98 10,000 7.625 10.3750 7.625 9 yrs, 148 days
4/28/98 25,000 7.625 9.6875 7.625 9 yrs, 306 days
Gary L. Cauble..................... 4/28/98 25,000 7.625 10.2500 7.625 7 yrs, 125 days
Vice President, 4/28/98 15,000 7.625 11.1250 7.625 8 yrs, 89 days
Manufacturing 4/28/98 10,000 7.625 9.8750 7.625 9 yrs, 185 days
Alan Schallop...................... 4/28/98 40,000 7.625 9.8750 7.625 9 yrs, 185 days
Vice President,
Worldwide Sales, Marketing and
Customer Support
</TABLE>
COMPENSATION COMMITTEE
Larry J. Wells
Patrick H. Morton
Randall Hawks, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Randall Hawks Jr., a member of the Compensation Committee of the Company's
Board of Directors during fiscal year 1998, formerly was Executive Vice
President of the Company from 1989 to November 1993 and was Vice President of
Marketing from 1985 to 1989.
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<PAGE> 13
IDENTIX STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
common stock of the Company from July 1, 1993 to June 30, 1998 with cumulative
total return on the Russell 2000 Index and a Peer Group (Printrak, Digital
Biometrics, Inc. and National Registry Inc.) over the same period (assuming the
investment of $100 in the Company's common stock and in the Index and the Peer
Group on July 1, 1993, and reinvestment of all dividends).
COMPARATIVE FIVE-YEAR TOTAL RETURNS
IDENTIX, PEER GROUP, RUSSELL 2000
(PERFORMANCE RESULTS THROUGH 6/30/98)
<TABLE>
<CAPTION>
PEER GROUP RUSSELL 2000
IDENTIX INC. INDEX INDEX
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 183.87 70.29 104.40
1995 325.81 67.83 125.36
1996 754.84 47.37 155.46
1997 574.19 24.01 180.84
1998 329.03 13.50 210.65
</TABLE>
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<PAGE> 14
CERTAIN TRANSACTIONS
At July 31, 1998, Ascom USA Inc. ("Ascom") owned approximately 20% of the
outstanding common stock of the Company. The Company granted Ascom registration
rights with respect to the common stock acquired from the Company and preemptive
rights to participate in any offering of certain securities of the Company.
Ascom's preemptive rights allow it to purchase a sufficient number of shares of
common stock to preserve its ownership interest in the Company at a purchase
price per share equal to the lower of (a) the weighted average price of the
shares sold in the dilutive event or (b) the average closing price of the common
stock for the 20 trading days immediately preceding the dilutive event. The
presence of Ascom's registration and preemptive rights may adversely affect the
terms on which the Company could obtain additional financing. On September 2,
1994, the Company entered into a Voting Trust Agreement (the "Agreement") with
Ascom whereby Ascom deposited all of its shares of the Company's common stock
held by Ascom (at July 31, 1998, 5,048,924) (the "Voting Stock") into a voting
trust. The trustee of the voting trust is on the Company's Board of Directors
and has voting control of the Voting Stock. The Voting Trust Agreement expires
in 2004. In consideration for Ascom entering into the Agreement, the Company
granted Ascom certain additional registration rights with respect to the Voting
Stock, modified certain contractual transfer restrictions with respect to the
Voting Stock, and granted Ascom price protections regarding certain sales of
Voting Stock.
Patrick H. Morton is a member of the Company's Board of Directors and
presently owns 38% of Integrated Manufacturing Solutions, Inc., ("IMS") a
manufacturer of integrated circuit boards, that provides manufacturing services
to the Company. IMS billed the Company approximately $2,437,000 and $427,000 in
fiscal 1998 and 1997, respectively. Amounts outstanding to IMS at June 30, 1998
were approximately $311,000. The Company did not do business with IMS prior to
fiscal 1997.
PROPOSAL 2. REINCORPORATION IN DELAWARE
INTRODUCTION
At the Annual Meeting, shareholders will be asked to approve a proposal to
change the state of incorporation of the Company from California to Delaware. In
the last two years, a number of major public corporations, including
Hewlett-Packard Company and 3Com Corporation, have obtained approval of their
shareholders to reincorporate from California to Delaware. The Board of
Directors believes that likewise it is in the best interests of the Company and
its shareholders to obtain the advantages offered by Delaware law.
The proposal regarding reincorporation and certain differences between
applicable California and Delaware laws are summarized below. The summary is not
complete. It is qualified in its entirety by reference to: (a) the Agreement of
Merger (the "Agreement") between the Company (sometimes referred to as the
"California Company") and a newly-formed Delaware corporation named "Identix
Incorporated" that is a wholly-owned subsidiary of the Company and that would
become the new public company after the reincorporation (the "Delaware
Company"); (b) the Certificate of Incorporation of the Delaware Company (the
"Delaware Certificate"); (c) the Bylaws of the Delaware Company (the "Delaware
Bylaws"); (d) the Articles of Incorporation of the California Company (the
"California Articles"); (e) the Bylaws of the California Company (the
"California Bylaws"); (f) the Delaware General Corporation Law and related case
law (the "Delaware Law") and (g) the California General Corporation Law and
related case law (the "California Law"). The Agreement, the Delaware Certificate
and the Delaware Bylaws are attached to this proxy statement as Appendices A, B
and C, respectively. The California Articles and the California Bylaws are
available for inspection at the principal office of the Company and will also be
sent to shareholders on request at a nominal charge to cover costs. Requests
should be directed to Identix Incorporated, 510 N. Pastoria Avenue, Sunnyvale,
California 94086, telephone (408) 731-2000.
If approved, the reincorporation will be accomplished by merging the
California Company into the Delaware Company (the "Merger"). After the Merger,
the Delaware Company will continue to operate the business of the Company under
the name Identix Incorporated. The reincorporation will not result in any change
in the business, management or personnel, fiscal year, financial condition or
location of the
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<PAGE> 15
headquarters or other facilities of the Company. The directors elected at the
Annual Meeting will become the directors of the Delaware Company. The Delaware
Company will continue all stock option plans of the California Company including
the plans described in Proposals 3 and 5. Each option to purchase shares of the
California Company's common stock under those plans will become an option to
purchase the same number of shares of the Delaware Company's common stock at the
same price and on the same terms and conditions as is presently the case. The
Delaware Company will also continue all other employee benefit arrangements of
the California Company without change. The Delaware Company will assume the
employee stock purchase plans described in Proposal 4 if those plans are
approved by the Company's shareholders.
When the Merger becomes effective, each outstanding share of the California
Company's common stock, no par value, will become one share of the Delaware
Company's common stock, $.01 par value per share. Each stock certificate
representing outstanding shares of the California Company's common stock will
then represent a like number of shares of the Delaware Company's common stock.
SHAREHOLDERS NEED NOT EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF THE DELAWARE COMPANY. However, shareholders may exchange their
certificates if they wish. The common stock of the Company is listed for trading
on the American Stock Exchange, and after the Merger the Delaware Company's
common stock will continue to be traded on the American Stock Exchange under the
same symbol ("IDX").
Under the California Law, shareholders have the right to exercise so-called
"dissenters' rights" in connection with certain mergers and to receive in cash
the appraised fair value of their shares. However, the California Law does not
grant dissenters' rights in connection with mergers such as the Merger.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
Well-Established Principles of Corporate Governance. As the Company plans
for the future, the Board of Directors and management believe it essential to be
able to draw upon well-established principles of corporate governance in making
legal and business decisions. The Delaware Law includes numerous judicial
precedents that address required and permitted conduct of corporations and their
boards of directors. The California Law includes far fewer such precedents. The
Company believes that shareholders will benefit from the well-established
principles of the Delaware Law.
Predictability, Flexibility and Responsiveness to Corporate Needs. Delaware
has adopted comprehensive and flexible corporate laws which are revised
regularly to meet changing business circumstances. The Delaware Legislature is
particularly sensitive to issues regarding corporate law and is especially
responsive to developments in modern corporate law. In addition, Delaware offers
a system of specialized chancery courts to deal quickly and efficiently with
corporate law questions. These courts have developed considerable expertise in
dealing with corporate issues as well as a substantial and influential body of
case law construing Delaware's corporate law. In addition, the Delaware
Secretary of State is particularly flexible, expert and responsible in its
administration of the filings required for mergers, acquisitions and other
corporate transactions. Delaware has become a preferred domicile for most major
American corporations and Delaware Law and administrative practices have become
comparatively well-known and widely understood. As a result of these factors, it
is anticipated that Delaware Law will provide greater efficiency, predictability
and flexibility in the Company's legal affairs than is presently available under
California Law.
Increased Ability to Attract and Retain Qualified Directors. The Company
seeks to continue to attract and retain the most capable individuals available
to serve as its directors and officers. The Delaware Law permits corporations to
limit the liability of directors and provide indemnification to its directors
and officers to a somewhat greater degree than has traditionally been the case
under California law. The Board of Directors thus believes that reincorporation
can be a factor in attracting quality individuals to the Board and management,
encouraging existing directors and officers to continue to serve in these
capacities and freeing those persons to make corporate decisions on the merits
rather than out of a desire to avoid personal liability. Although to date the
Company has not experienced difficulty in attracting and retaining qualified
directors and officers, personal liability is increasingly expressed as a
concern. One reason is that, in November 1996, California's voters were asked to
approve a law that could have expanded the liability and further limited the
13
<PAGE> 16
indemnification rights of directors and officers in connection with certain
lawsuits based on securities laws (Proposition 211). Although voters rejected
that proposal, it is possible that, in the future, California will enact laws
that adversely affect the ability of corporations incorporated in that state to
attract and retain quality directors and officers.
CERTAIN POSSIBLE DISADVANTAGES
Despite the belief of the Board of Directors that the proposed
reincorporation is in the best interests of the California Company and its
shareholders, it should be noted that some commentators criticize the Delaware
Law because it does not afford shareholders the same rights and protections as
are available in, for example, California. The next section of this proxy
statement discusses certain of those differences. In addition, the Delaware
Certificate and the Delaware Bylaws contain certain provisions that the
California Company could have adopted but has not adopted, which affect the
relative rights and powers of shareholders and management, and shareholders'
participation in corporate decision-making. These provisions are discussed in
the next section of this proxy statement.
CERTAIN DIFFERENCES BETWEEN THE CHARTER DOCUMENTS AND APPLICABLE LAWS
There are certain ways in which, by causing the Company to be governed by
the Delaware Law, the Delaware Certificate and the Delaware Bylaws,
reincorporation will alter the rights and powers of shareholders and management,
and reduce shareholder participation in certain corporate decisions. In
addition, the Delaware Company could implement additional changes in the future
that further alter the rights and powers of stockholders and management. Some of
those changes could be effected by amendments to the Delaware Certificate after
stockholder approval. Others could be effected by amendments to the Delaware
Bylaws without stockholder approval. To reflect the language difference found in
the respective statutes of the two states, the following discussion uses the
word "shareholder" with respect to California and "stockholder" with respect to
Delaware.
The following is a discussion of the principal changes that will be
effected by reincorporating from California to Delaware.
Shareholder Action by Written Consent. The Delaware Certificate provides
that stockholders may act only at an annual or special meeting of stockholders
and not by written consent. The California Law permits California corporations
to include a similar provision in its articles of incorporation. However, the
California Articles do not contain such a provision, and the California Bylaws
specifically provide for shareholders to act by written consent. The elimination
of the right of shareholders to act by written consent could make more difficult
or discourage attempts to acquire control of the Company or wage a proxy
contest.
Special Shareholder Meetings. The Delaware Bylaws provide that special
meetings of stockholders can be called only by the Board of Directors, the Chair
of the Board or the President of the Delaware Company. The Delaware Bylaws also
limit the business permitted to be conducted at special meetings of stockholders
to matters which the Board of Directors brings before those meetings. Under the
California Law and as set forth in the California Bylaws, a special meeting of
shareholders may be called by a corporation's board of directors, the Chairman
of the Board, its President or holders of stock entitled to cast not less than
ten percent of the votes at a meeting (five percent under certain
circumstances).
Cumulative Voting. Cumulative voting enables less than half the shares that
vote for directors to elect one or more (but not a majority of) directors. Under
non-cumulative voting, a majority of the shares that vote elects all the
directors. Both the Delaware Law and the California Law permit corporations like
the Company to eliminate (or not to grant) rights to elect directors by
cumulative voting. The California Bylaws provide for cumulative voting. Because
the Delaware Certificate does not grant stockholders the right to elect
directors by cumulative voting, stockholders will not have that right if the
Company reincorporates in Delaware.
Advance Notice Requirement for Shareholder Proposals and Director
Nominations. There is no specific statutory requirement under either California
or Delaware law with regard to advance notice of director nominations and
shareholder proposals. Without a bylaw restriction, director nominations and
shareholder
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<PAGE> 17
proposals may be made without advance notice at the annual meeting. However,
federal securities laws generally provide that shareholder proposals that the
proponent wishes to include in the Company's proxy materials must be received
not less than 120 days in advance of the date of the proxy statement released in
connection with the previous year's annual meeting.
The Delaware Bylaws provide that in order for director nominations or
shareholder proposals to be properly brought before the meeting, the shareholder
must have delivered timely notice to the Secretary of the Company. The
California Bylaws do not include such an advance notice requirement. To be
timely, under the Delaware Bylaws notice must be delivered not less than 120
days prior to the anniversary of the mailing date for the previous year's annual
meeting. If no annual meeting was held in the previous year or the date of the
annual meeting has been advanced by more than 30 days from the date contemplated
at the time of the previous year's proxy statement, the Delaware Bylaws provide
that notice must be given not later than the close of business on the tenth day
following the day on which the date of the annual meeting is publicly announced.
Business Combinations. The Delaware Law subjects to special stockholder
approval requirements certain transactions involving a corporation and
significant stockholders. The California Law also has provisions that address
certain transactions with significant shareholders and with certain other
parties as well.
Under Section 203 of the Delaware Law ("Section 203"), certain "business
combinations" with an "interested stockholder" are subject to a three-year
moratorium unless specified conditions are met. The three-year period begins
when the interested stockholder attains that status. With exceptions, an
interested stockholder is a person or group that "owns" at least 15 percent of
the corporation's outstanding voting stock or is affiliated with the corporation
and owned at least 15 percent of such stock at any time within three years. A
person is deemed to own shares, for this purpose, if that person beneficially
owns the shares, has a right to acquire them, has a right to vote them (subject
to exceptions) or is party to an agreement regarding their acquisition, holding,
voting or disposition with the person that beneficially owns them. "Business
combinations" include, among other transactions: (a) mergers with or caused by
the interested stockholder; (b) certain sales or other dispositions of assets to
the interested stockholder if the market value of the assets equals at least ten
percent of the total market value of the corporation's consolidated assets or
outstanding stock; (c) certain issuances of stock by the corporation to the
interested stockholder; and (d) certain loans, advances, guarantees, pledges and
other benefits extended to, or conferred upon, the interested stockholder.
The three-year moratorium does not apply if: (a) before the stockholder
became an interested stockholder, the board of directors approved the business
combination or the transaction that caused the person to become an interested
stockholder; (b) the interested stockholder owns 85 percent of the corporation's
voting stock after completion of the transaction that caused the stockholder to
become an interested stockholder (certain shares are excluded from this 85
percent calculation) or (c) at the time the person became an interested
stockholder or after that time, the board approved the business combination and
the combination is also approved by holders of 66 2/3 percent of the voting
stock not owned by the interested stockholder. Although a Delaware corporation
may elect not to be governed by Section 203, the Delaware Company does not
intend to make that election. Accordingly, Section 203 will apply to the
Delaware Company.
The Company believes that Section 203 may have the effect of encouraging
potential acquirers to negotiate with the Delaware Company's Board of Directors
instead of launching a hostile acquisition attempt. Section 203 also has the
effect of limiting the ability of potential acquirers to make a two-tiered bid
for a Delaware corporation in which all stockholders would not be treated
equally. Section 203 may deter potential unfriendly offers or other efforts to
obtain control of the Delaware Company that are not approved by its Board of
Directors. It could, therefore, deprive stockholders of opportunities to realize
a premium on their stock.
The California Law requires that holders of common stock receive common
stock in a merger of a California corporation with the holder of more than 50
percent but less than 90 percent of such common stock, unless all the
shareholders approve the merger or the California Department of Corporations
approves the merger after a hearing as to fairness. This provision may have the
effect of making a cash-out merger by a
15
<PAGE> 18
majority shareholder more difficult to accomplish and deterring a tender offer
that would precede such a merger.
The California Law also provides that, with exceptions, when a tender offer
or a proposal for a reorganization or sale of assets is made by an "interested
party" (in general, a controlling or managing party of the target corporation),
a fairness opinion regarding the consideration to be paid to shareholders must
be delivered to the shareholders. Furthermore, if a tender for shares or vote is
sought pursuant to an interested party's proposal and another party makes a
later proposal at least ten days before the date of acceptance of the interested
party's tender or proposal, the shareholders must be informed of the later offer
and be afforded a reasonable opportunity to withdraw any vote, consent, proxy or
tendered shares. The Delaware Law has no comparable provision.
Liability of Directors. The California Articles provide for the elimination
of personal monetary liability of directors to the fullest extent permitted by
the California Law. The Delaware Certificate provides for the elimination of
personal monetary liability of directors to the fullest extent permitted by the
Delaware Law.
The Delaware Law may permit somewhat broader elimination of such liability
than the California Law permits. The Delaware Law permits the elimination of
personal monetary liability of a director to the corporation or its stockholders
for breaches of the director's fiduciary duty, other than for: (a) breaches of
the director's duty of loyalty; (b) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (c) unlawful
dividends or stock repurchases and (d) transactions from which the director
derived an improper personal benefit. The California Law permits the elimination
of personal monetary liability of a director in actions brought by or in right
of the corporation for breaches of the director's duties to the corporation and
its shareholders, other than for (among other things): (a) acts or omissions
that involve intentional misconduct or a knowing or culpable violation of law;
(b) acts or omissions the director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good
faith; (c) transactions from which the director derived an improper personal
benefit; (d) acts or omissions that show a reckless disregard for the director's
duty to the corporation or its shareholders in circumstances in which the
director was aware, or should have been aware, in the ordinary course of
performing the director's duties, of a risk of serious injury to the corporation
or its shareholders; and (e) acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication of the director's duties to
the corporation or its shareholders.
Indemnification. California and Delaware both permit corporations to
indemnify their officers, directors, employees and other agents under certain
circumstances. While the indemnification provisions of the California Law and
the Delaware Law are similar, they differ in certain respects.
The California Law permits indemnification for expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with third party actions (i.e., actions not brought by the corporation or
derivatively on behalf of the corporation) if the person to be indemnified acted
in good faith and in a manner that person reasonably believed to be in the best
interests of the corporation and its shareholders, as determined by a majority
vote of a disinterested quorum of the directors, independent legal counsel (if a
quorum of independent directors is not obtainable), a majority vote of a quorum
of the shareholders (excluding shares owned by the indemnified party) or the
court handling the action. The Delaware Law permits such indemnification if the
person to be indemnified is determined to have acted in good faith and in a
manner that person reasonably believed to be in or not opposed to the best
interests of the corporation. The Delaware Law therefore appears to permit
indemnification even though the indemnified person is unable to demonstrate that
his or her conduct was reasonably believed to be in the best interests of the
corporation.
Both the California Law and the Delaware Law also permit indemnification
for expenses (but not judgments, fines, settlements or other amounts) actually
and reasonably incurred in actions brought directly by the corporation or
derivatively on the corporation's behalf. However, no such indemnification is
permitted if the person is adjudged liable to the corporation in the performance
of that person's duties to the corporation and its shareholders, unless and to
the extent a court determines that indemnification is appropriate.
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<PAGE> 19
The California Law further provides that the corporation cannot indemnify
amounts paid in settling or otherwise disposing of such an action without court
approval or for expenses incurred in defending such an action which is settled
or otherwise disposed of without court approval. The Delaware Law allows
indemnification of such amounts paid and expenses incurred in connection with
direct or derivative actions that are settled or otherwise disposed of without
court approval.
The California Law requires indemnification against expenses actually and
reasonably incurred in direct, derivative and third party actions when the
individual has successfully defended the action on the merits. The Delaware Law
requires such indemnification in connection with a successful defense on the
merits or otherwise. Accordingly, the Delaware Law requires indemnification
where the individual prevails for "technical" reasons such as the bar of an
applicable statute of limitations.
The California Law permits corporations to include in their articles of
incorporation a provision that extends the scope of indemnification through
agreements, bylaws or other corporate action beyond that specifically authorized
by statute. Similarly, the Delaware Law states that the indemnification provided
by statute is not exclusive of any other indemnification rights under any
by-law, agreement, vote of stockholders or disinterested directors, or
otherwise. This feature of the Delaware Law is potentially broader than the
California provision, because the California provision states that any such
"excess" indemnification cannot extend to conduct from which directors may not
be exonerated by a provision in the articles of incorporation. The Delaware
provision does not contain a similar requirement. Both the California Articles
and the California Bylaws, as well as the Delaware Certificate, provide for
"excess" indemnification.
There has never been, nor is there any pending or, to the Company's
knowledge, threatened litigation or other proceeding involving any of its
directors in which the rights of the Company or its shareholders would have been
or would be affected if the Company were already a Delaware corporation as set
forth in this reincorporation proposal. In considering the reincorporation
proposal, the Board recognized that the individual directors have a personal
interest in obtaining the benefits of the Delaware Law and that the expense to
the Company might be greater after reincorporation to the extent any director or
officer is indemnified in circumstances where indemnification would not be
available under the California Law. The Board believes, however, that the
overall effect of reincorporation is to provide a legal environment that
enhances the Company's ability to continue to attract and retain high quality
directors and officers.
Single Class of Directors. The California Company has a single class of
directors and the Delaware Company will have a single class of directors. That
means that shareholders vote to elect all the directors each year. By contrast,
under a "classified" or "staggered" board, directors are divided into classes
and shareholders vote for the members of only one class at each annual
shareholder meeting. One possible effect of a classified board is that dissident
shareholders cannot as easily or quickly acquire control of the board.
Classified boards are permitted under both the California Law and the Delaware
Law; however under the California Law if a board is divided into two classes the
authorized number of directors must be at least six, and if the board is divided
into three classes the authorized number of directors must be at least nine. The
Delaware Law has no similar requirement.
Removal of Directors. Under the California Law, any director or the entire
board may be removed, with or without cause, with the approval of a majority of
the outstanding shares entitled to vote. However, for corporations like the
California Company that permit cumulative voting, no director may be removed
(unless the entire board is removed) if the number of votes cast against removal
would be sufficient to elect the director under cumulative voting.
Under the Delaware Law, a director of a corporation that does not have a
classified board may be removed with or without cause by the holders of a
majority of the shares then entitled to vote at an election of directors,
subject to limitations for corporations that permit cumulative voting. A
director of a corporation that has a classified board can be removed only for
cause, unless its certificate of incorporation provides otherwise. As mentioned,
the Delaware Company will not have a classified board. The Delaware Bylaws
provide that directors may be removed, with or without cause, at an annual
meeting or a special meeting of stockholders called for that purpose. Therefore,
after reincorporation, stockholders of the Delaware Company will still be
entitled to remove directors without cause. However, minority stockholders who
in some cases could have
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<PAGE> 20
blocked removal will no longer have that ability, because the Delaware Company
will not have cumulative voting.
Filling Board Vacancies. Under the California Law, shareholders may fill
any vacancy on the board not otherwise filled by the board. Unless the articles
or bylaws provide otherwise, the board may fill any vacancy other than one
caused by removal of a director. A vacancy created by removal may be filled only
by the shareholders, unless the corporation's articles of incorporation or
bylaws also authorize the board to fill such vacancies. The California Bylaws do
not permit the Board to fill such vacancies. Under the Delaware Law, vacancies
and newly-created directorships may be filled by a majority of the directors
then in office or by the stockholders, unless otherwise provided in the
certificate of incorporation or bylaws. Neither the Delaware Certificate nor the
Delaware Bylaws restrict the ability of the Delaware Company's stockholders to
fill board vacancies.
Size of the Board. The California Articles establish a range of five
through nine authorized directors for the California Company and specify that
the exact number of directors will be fixed from time to time by a bylaw adopted
by the Board or the shareholders. The Board has fixed the number of directors
for the California Company at seven. The Delaware Bylaws also establish a range
of five through nine authorized directors, with the exact number to be
determined by board resolution. The Delaware Certificate provides that the exact
number of directors shall be fixed from time to time exclusively by the Board of
Directors. The initial fixed number of authorized directors for the Delaware
Company will also be seven.
Amendment of Certificate or Articles of Incorporation. Under both the
Delaware Law and the California Law, a corporation's certificate or articles of
incorporation may be amended only if the amendment is approved by the board and
by holders of a majority of its outstanding voting shares.
Amendment of Bylaws. The bylaws of a California corporation may be amended
by shareholders holding a majority of the outstanding voting shares or by the
board. However, if the number or range of directors is specified in the bylaws,
that provision can only be changed with shareholder approval. Shareholders of a
California corporation can adopt a bylaw limiting the power of the board to
amend the bylaws. Under the Delaware Law, the bylaws may be amended only by the
stockholders, unless the corporation's certificate of incorporation also confers
that power on the board. The Delaware Certificate authorizes the Delaware
Company's Board of Directors to amend the Delaware Bylaws. Accordingly, the
Board of the Delaware Company will have the ability to change the range of the
number of directors without stockholder approval. The Board of the California
Company does not have that ability.
Rights of Dissenting Shareholders. Under both the California Law and the
Delaware Law, a shareholder of a corporation that participates in certain major
transactions may receive cash equal to the fair value (Delaware) or fair market
value (California) of the shareholder's stock in lieu of the consideration the
shareholder would have received in the transaction, if the shareholder follows
certain procedures. The California Law and the Delaware Law differ with respect
to the circumstances under which such dissenters' rights are available. The
Delaware Law does not require dissenters' rights with respect to: (a) a sale of
assets; (b) a merger if the shares of the corporation are, for example, traded
on the American Stock Exchange as the Company's are or (c) a merger in which the
corporation survives and no vote of its stockholders is required to approve the
merger. The California Law affords dissenters' rights in certain sale-of-assets
transactions. In addition, the California exceptions for dissenters' rights in
mergers are somewhat different than Delaware's. Dissenters' rights are available
for certain (not all) mergers involving California corporations whose shares are
traded on the American Stock Exchange.
Dividends and Stock Repurchases. Both the California Law and the Delaware
Law impose limitations on a corporation's ability to pay dividends or make other
distributions to shareholders or redeem their stock. These laws are intended to
protect creditors. Under the California Law, such distributions generally are
limited either to retained earnings or to an amount that would leave the
corporation with tangible assets equal in value to at least 125 percent of its
liabilities and with current assets at least equal in value to its current
liabilities (or 125 percent of its current liabilities if the average pre-tax
and pre-interest earnings for the preceding two fiscal years were less than its
average interest expense for those years). In general, the Delaware
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<PAGE> 21
Law permits distributions and stock repurchases out of surplus or, in the case
of a dividend, if there is no surplus, out of net profits for the current and
preceding fiscal years.
Certain Loans. The California Law requires that any loan or guaranty by the
corporation to or for a director or officer must be approved by shareholders,
unless extended or granted under a plan approved by shareholders. Shareholders
may also approve a bylaw authorizing the corporation's board of directors to
approve loans or guaranties to or for officers (including officers who are also
directors), if the board determines that the loan or guaranty may reasonably be
expected to benefit the corporation. The California Bylaws contain such a
provision. Under the Delaware Law, a corporation may make loans to, guarantee
the obligations of or otherwise assist its officers or other employees
(including any officer or other employee who is also a director) when, in the
board's judgment, such action may reasonably be expected to benefit the
corporation.
Inspection of Shareholder List. Both the California Law and the Delaware
Law allow any shareholder to inspect the shareholder list for a purpose
reasonably related to the shareholder's interest as a shareholder. In addition,
the California Law grants an absolute right to inspect and copy the shareholder
list to holders of at least five percent of a corporation's voting shares and
holders of at least one percent of such shares who filed a "Schedule 14B" with
the Securities and Exchange Commission relating to the election of directors.
The Delaware Law does not provide an absolute right of inspection. Lack of
access to shareholder records, even though unrelated to a shareholder's interest
as a shareholder, could result in impairment of the shareholder's ability to
coordinate support for or opposition to proposals.
Shareholder Votes on Certain Transactions and Events. Both California and
Delaware law generally require that holders of at least a majority of the
outstanding voting shares of corporations that are merging approve the merger.
As set forth above, the Delaware Law contains a supermajority stockholder voting
requirement (66 2/3 percent of the voting stock not owned by the "interested
stockholder") for certain "business combinations" including mergers involving
"interested stockholders".
The Delaware Law does not require a vote by stockholders of a surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if: (a) the merger agreement does not amend the
corporation's existing certificate of incorporation; (b) each share of the
surviving corporation outstanding before the merger is unchanged in the merger;
and (c) the number of shares issued by the surviving corporation in the merger
does not exceed 20 percent of the shares outstanding immediately before the
merger. The California Law contains a similar exception from the shareholder
approval requirement for reorganizations where the shareholders immediately
before the reorganization will own equity securities immediately after the
reorganization constituting more than five-sixths of the voting power of the
surviving or acquiring corporation. Both the California Law and the Delaware Law
also require that a sale of all or substantially all of the corporation's assets
be approved by a majority of the corporation's voting shares, and the
supermajority stockholder voting requirement of Section 203 of the Delaware Law
applies to certain sales of assets by the Delaware Company to an "interested
stockholder".
With certain exceptions, the California Law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of outstanding shares. The Delaware Law generally
does not require class voting, except in certain transactions involving an
amendment to the certificate of incorporation that adversely affects a specific
class of shares.
Interested Director Transactions. Under the California Law, contracts and
other transactions in which one or more of a corporation's directors have a
material financial interest are not void or voidable because of that interest if
certain conditions are met. Under the Delaware Law, contracts and other
transactions in which one or more of a corporation's directors or officers have
a financial interest are not void or voidable because of that interest if
certain conditions are met. With exceptions, those conditions are similar under
California and Delaware law. Under both laws: (a) either the shareholders or the
board must approve any such contract or transaction after disclosure of the
material facts and, in the case of board approval, the contract or transaction
must also be "just and reasonable" (in California) or "fair" (in Delaware) to
the corporation or (b) the contract or transaction must have been just and
reasonable or fair as to the corporation at the time it was approved. In the
latter case, the California Law places the burden of proof on the interested
director. Under
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<PAGE> 22
the California Law, if shareholder approval is sought, the interested director
is not entitled to vote the director's shares with respect to the contract or
transaction. Also under the California Law, if board approval is sought, the
contract or transaction must be approved by a majority vote of a quorum of the
directors without counting the vote of the interested directors. However,
interested directors may be counted for purposes of establishing a quorum. Under
the Delaware Law, if board approval is sought, the contract or transaction must
be approved by a majority of the disinterested directors even if less than a
majority of a quorum. The Company is not aware of any plans to propose any
transaction involving directors of the Company.
Voting by Ballot. The California Law provides that the election of
directors may proceed in the manner set forth in a corporation's bylaws. The
California Bylaws provide for the election of directors by voice vote or by
ballot, unless before the voting begins for the election of directors a
shareholder demands voting by ballot, in which case such vote shall be by
ballot. Under the Delaware Law, the right to vote by ballot may be restricted if
so provided in the certificate of incorporation. The Delaware Certificate
provides that election of directors need not be by written ballot unless the
bylaws so provide. The Delaware Bylaws do not require election of directors to
be by ballot. Stockholders of the Delaware Company will therefore not be
entitled to demand election by written ballot. It may be more difficult for a
stockholder to contest the outcome of a vote that has not been conducted by
written ballot.
Shareholder Derivative Suits. The California Law provides that a
shareholder bringing a derivative action on behalf of a corporation need not
have been a shareholder at the time of the transaction to which the action
relates if certain tests are met. In general, under the Delaware Law a
shareholder may only bring a derivative action if the shareholder was such at
the time of the transaction. The California Law also provides that the
corporation or defendant in a derivative suit may seek a court order requiring
that the plaintiff shareholder furnish a bond for security. The Delaware Law
does not have such a feature.
Dissolution. Under the California Law, holders of shares having 50 percent
or more of the corporation's total voting power may authorize a corporation's
dissolution without board approval. That right may not be modified by the
articles of incorporation. Under the Delaware Law, unless the board approves the
dissolution, the dissolution must be approved by holders of shares having 100
percent of the corporation's voting power.
Application of California Law After Reincorporation. Under Section 2115 of
the California Law, certain foreign corporations (i.e., corporations not
organized under California law) are placed in a special category if they have
characteristics of ownership and operation which indicate that they have
significant contacts with California. So long as a Delaware or other foreign
corporation is in this special category, and it does not qualify for one of the
statutory exemptions, it is subject to a number of key provisions of the
California Law applicable to corporations incorporated in California. Among the
more important provisions are those relating to the election and removal of
directors, cumulative voting, prohibition of classified boards of directors,
standards of liability and indemnification of directors, distributions,
dividends and repurchases of shares, shareholder meetings, approval of certain
corporate transactions, dissenters' and appraisal rights and inspection of
corporate records.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on a major national securities exchange such as the American Stock
Exchange. After the proposed reincorporation, the common stock of the Delaware
Company will be traded on the American Stock Exchange and, accordingly, the
Delaware Company will be exempt from Section 2115.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Company has received an opinion of counsel that, for federal income tax
purposes, no gain or loss will be recognized by shareholders as a result of the
reincorporation. In addition, counsel has opined that each holder of the
California Company's shares should have the same basis in the stock of the
Delaware Company received in the reincorporation as that holder had in that
holder's shares of the California Company just before the reincorporation.
Moreover, such person's holding period with respect to that stock of the
Delaware Company should include the period during which the holder held the
corresponding shares of the California Company, assuming the latter were held as
capital assets at the time of the reincorporation. Shareholders
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<PAGE> 23
should consult their own tax advisors as to any effect of the reincorporation on
them under state, local or foreign income tax laws.
The Company has also received an opinion of counsel that the Company will
not recognize any gain or loss for federal income tax purposes as a result of
the reincorporation, and that the Delaware Company will succeed, without
adjustment, to the federal income tax attributes of the California Company.
PROPOSAL
APPROVAL OF THE PROPOSED REINCORPORATION BY SHAREHOLDERS WILL CONSTITUTE
APPROVAL OF THE AGREEMENT, THE MERGER, THE DELAWARE CERTIFICATE, THE DELAWARE
BYLAWS AND THE ASSUMPTION BY THE DELAWARE COMPANY OF THE CALIFORNIA COMPANY'S
EMPLOYEE BENEFIT PLANS AND STOCK OPTION AND PURCHASE PLANS.
In accordance with California Law, the affirmative vote of a majority of
the outstanding shares of common stock is required for approval of the
reincorporation proposal. The Company expects to complete the Merger promptly if
and after shareholders grant that approval.
BOARD RECOMMENDATION
The Board recommends a vote "FOR" approval of the reincorporation proposal.
PROPOSAL 3. APPROVAL OF AMENDMENT TO THE IDENTIX INCORPORATED EQUITY INCENTIVE
PLAN
DESCRIPTION OF THE PROPOSAL
The Board has approved, subject to shareholder approval, an amendment to
the Identix Incorporated Equity Incentive Plan (the "Incentive Plan") to
increase the number of shares available for issuance under the Incentive Plan by
1,250,000 shares to a total of 3,000,000 shares. Currently, the Incentive Plan
provides that a total of 1,750,000 shares of common stock may be issued
thereunder. As of July 31, 1998, there were 49,800 shares that were currently
unreserved and available for option grants under the Incentive Plan. The Company
believes the proposed increase in the number of shares available for grant is
necessary in order to ensure that there will be a sufficient reserve of shares
to permit the grant of further options to existing and new employees of and
consultants to the Company.
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The following table shows the number of shares covered by options awarded
to the executive officers and the identified groups under the Incentive Plan in
fiscal 1998. All options were granted at fair market value as of the date of
grant.
<TABLE>
<CAPTION>
NUMBER
NUMBER AND POSITION OF SHARES (1)
------------------- -------------
<S> <C>
Randall C. Fowler........................................... 95,000
Chairman, President and Chief Executive Officer
Harrison N. Walther......................................... 85,000
President and Chief Executive Officer of ANADAC, Inc.
James P. Scullion........................................... 95,000
Executive Vice President and Chief Financial Officer
Daniel F. Maase............................................. 50,000
Vice President of Bio-Imaging Division
Charles W. Richion.......................................... 75,000
Vice President, Corporate Development
All executive officers as a group........................... 495,000
All directors who are not executive officers as a group..... -0-
All employees and consultants (other than executive
officers) as a group...................................... 777,333
</TABLE>
- ---------------
(1) The Company repriced underwater stock options on April 28, 1998, which
constituted a cancellation of the underwater option and the grant of a new
option. If a stock option was granted earlier in fiscal year 1998 and then
cancelled and reissued in connection with the repricing on April 28, 1998,
the stock option is only counted once in this table.
DESCRIPTION OF THE INCENTIVE PLAN
The Incentive Plan is intended to strengthen the Company by providing
selected eligible key employees of, and consultants to, the Company an
opportunity to participate in the Company's future by offering them an
opportunity to acquire stock in the Company so as to retain, attract and
motivate them. Administration of the Incentive Plan may either be by the Board
or a Committee of the Board (in either case, the "Committee"). The Committee may
select key employees, including executive officers, or consultants to receive
awards under the Incentive Plan and has broad discretion to determine the amount
and type of awards and terms and conditions of the awards. However, the
Committee may not grant, in any one fiscal year, awards covering more than
200,000 shares of common stock to any executive officer whose compensation is
required to be disclosed under Item 402 of Regulation S-K. Individual grants
will generally be based on a person's present and potential contribution to the
Company. As of June 30, 1998, the Company had approximately 398 employees and
consultants eligible to participate in the Incentive Plan. Since the grant of
awards is based upon a determination made by the Committee after a consideration
of various factors, the Company currently cannot determine the nature and amount
of any awards that will be granted in the future to any eligible individual or
group of individuals.
Awards may be granted in the form of incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), NQOs (each ISO or NQO, an "Option," and collectively,
"Options"), restricted stock ("Restricted Stock"), stock purchase rights ("Stock
Purchase Rights") or performance shares ("Performance Shares"). Any award may be
granted either alone or in addition to other awards granted under the Incentive
Plan. The Committee may condition the grant of the award upon the attainment of
specified Company, group or division performance goals or other criteria, which
need not be the same for all participants. No award may be granted under the
Incentive Plan on or after July 5, 2005, but outstanding awards may extend
beyond that date.
Options. Options granted under the Incentive Plan may be ISOs or NQOs. The
exercise price of ISOs may not be less than the fair market value of the shares
subject to the Option on the date of grant. The
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exercise price of NQOs must be at least 85 percent of the fair market value of
the shares subject to the Option on the date of grant. The term of any ISO
granted under the plan may not exceed ten years and the term of any NQO may not
exceed fifteen years. Certain other limitations are also applicable to ISOs in
order to take advantage of the favorable tax treatment that may be available for
ISOs.
Restricted Stock. Restricted Stock awards consist of non-transferable
shares of common stock of the Company. The Committee may provide for the lapse
of the transfer restrictions over a period of not more than ten years or may
accelerate or waive such restrictions, in whole or in part, based on service,
performance or other criteria determined by the Committee.
Stock Purchase Rights. Stock Purchase Rights consist of a grant to purchase
common stock at a purchase price of not less than 85 percent of the fair market
value of the common stock on the grant date. Stock Purchase Rights are generally
exercisable for a period of up to 30 days after the grant date.
Performance Shares. Performance Shares are shares of common stock issuable
upon the attainment of performance criteria. At the time of a grant, the
Committee will determine the number of shares of common stock to be awarded at
the end of the performance period if and to the extent that the specified
performance targets are met. The consideration payable by a participant with
respect to a Performance Share award will be determined by the Committee but may
not exceed 50 percent of the fair market value of the common stock on the date
of grant. The Committee will determine the performance period, the performance
objectives to be used in granting the awards and the extent to which awards have
been earned. Performance periods may overlap, and participants may be awarded
Performance Shares having different performance criteria. Performance Share
awards may be payable in cash or stock, at the discretion of the Committee, and
may bear interest or earn dividends.
The consideration payable for, upon exercise of, or for tax payable in
connection with, an award may be paid in cash, by promissory note of the
participant or by delivery of other property, including securities of the
Company, as authorized by the Committee. The Company generally will not receive
any consideration upon the grant of any awards, although the Incentive Plan
provides that consideration may be payable with respect to the grant of
Performance Shares. Awards generally may be exercised at any time within three
months after a participant's employment by, or consulting relationship with, the
Company terminates (but, only to the extent exercisable or payable at the time
of termination). If termination is due to the participant's death, retirement or
disability, the award may be exercised for two years thereafter. Shares issued
under an award may be subject to a right of repurchase by the Company. No award
shall be assignable or otherwise transferable by a participant other than by
will or by the laws of descent and distribution.
The Committee may adjust the performance goals and measurements applicable
to awards. The Committee also may waive in whole or in part any or all
restrictions, conditions, vesting or forfeiture with respect to any award
granted under the Incentive Plan.
The Board may amend, alter or discontinue the Incentive Plan or any award
at any time, except that the consent of a participant is required if the
participant's rights under an outstanding award would be impaired. In addition,
to the extent required for the Incentive Plan to satisfy the conditions of Rule
16b-3 under the Exchange Act or, with respect to provisions solely as they
relate to ISOs, to the extent required for the Incentive Plan to comply with
Section 422 of the Code, the shareholders of the Company must approve any
amendment, alteration or discontinuance of the Incentive Plan that would (i)
increase the total number of shares reserved under the Incentive Plan, (ii)
change the minimum price terms for Option exercise, (iii) change the class of
employees and consultants eligible to participate in the Incentive Plan, (iv)
extend the maximum option exercise period, or (v) materially increase the
benefits accruing to participants under the Incentive Plan.
The Incentive Plan constitutes an unfunded plan for incentive and deferred
compensation. The Committee may authorize the creation of trusts or arrangements
to meet the obligations under the Incentive Plan to deliver stock or make
payments.
In the event of a "change in control" of the Company, as defined in the
Incentive Plan, the Board may, subject to certain limitations, accelerate the
vesting provisions of awards or may cash out the awards. A
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"change in control" is defined to include the acquisition of 20 percent or more
of the voting power of the Company's outstanding stock, a proxy solicitation for
one or more directors without support of the then current Board, a dissolution
or liquidation of the Company and certain asset sales, mergers or
reorganizations or other changes in ownership of the Company's assets or stock.
The Board has passed a resolution accelerating the vesting of stock options for
certain changes of control.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON
EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE APPLICABLE RULES
ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY STATEMENT DESCRIBES FEDERAL
INCOME TAX CONSEQUENCES OF GENERAL APPLICABILITY, BUT DOES NOT PURPORT TO
DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN PARTICIPANT OR FOREIGN,
STATE OR LOCAL INCOME TAX CONSEQUENCES, WHICH MAY DIFFER FROM THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS
Awards; Exercise. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company (including directors who are also employees). The
recipient of an Option (the "Optionee") does not recognize taxable income upon
either the grant or exercise of an ISO. However, the excess of the fair market
value of the shares purchased upon exercise over the Option exercise price (the
"Option Spread") is includable in the Optionee's "alternative minimum taxable
income" ("AMTI") for purposes of the alternative minimum tax ("AMT"). The Option
Spread is generally measured on the date of exercise and is includable in AMTI
in the year of exercise. Special rules regarding the time of AMTI inclusion may
apply for shares subject to a repurchase right or other "substantial risk of
forfeiture" (including, in the case of each person subject to the reporting
requirements of Section 16 of the Exchange Act, certain limitations on resale of
shares imposed under Section 16(b) of the Exchange Act).
Sale of Option Shares. If an Optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the shares
other than to the Company should be taxable as long term capital gain. Under
these circumstances, the Company would not be entitled to a tax deduction at the
time the ISO was exercised or at the time the stock was sold. If an Optionee
were to dispose of stock acquired pursuant to an ISO before the end of the
required holding periods (a "Disqualifying Disposition"), the amount by which
the market value of the stock at the time the ISO was exercised exceeded the
exercise price (or, if less, the amount of gain realized on the sale) would be
taxable as ordinary income, and the Company would be entitled to a corresponding
tax deduction. Such income is subject to information reporting requirements and
may become subject to withholding. Gain from a Disqualifying Disposition in
excess of the amount required to be recognized as ordinary income is capital
gain. Optionees are required to notify the Company immediately prior to making a
Disqualifying Disposition. If stock is sold to the Company rather than to a
third party, the sale may not produce capital gain or loss but will constitute a
redemption of such shares, which could be taxable as a dividend unless the
redemption is "not essentially equivalent to a dividend" within the meaning of
the Code.
Exercise With Stock. If an Optionee pays for ISO shares with shares of the
Company acquired under an ISO or a qualified employee stock purchase plan
("statutory option stock"), the tender of shares is a Disqualifying Disposition
of the statutory option stock if the above described (or other applicable)
holding periods respecting those shares have not been satisfied. If the holding
periods with respect to the statutory option stock are satisfied, or the shares
were not acquired under a statutory stock option of the Company, then any
appreciation in value of the surrendered shares is not taxable upon surrender.
Special basis and holding period rules apply where previously-owned stock is
used to exercise an ISO.
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<PAGE> 27
Withholding Taxes. The present position of the Internal Revenue Service
("IRS") appears to be that income and employment withholding taxes are not
imposed upon the exercise of an ISO or the sale of ISO shares, including a
Disqualifying Disposition. The IRS is studying this position and may change it
at any time, possibly with retroactive effect.
NONQUALIFIED STOCK OPTIONS
Award; Exercise. An Optionee is not taxable upon the award of a NQO.
Federal income tax consequences upon exercise will depend upon whether the
shares thereby acquired are subject to a "substantial risk of forfeiture." If
the shares are not subject to a substantial risk of forfeiture, or if they are
so restricted and the Optionee files an election under Section 83(b) of the Code
(a "Section 83(b) Election") with respect to the shares, the Optionee will have
ordinary income at the time of exercise measured by the Option Spread on the
exercise date. The Optionee's tax basis in the shares will be the share's fair
market value on the date of exercise, and the holding period for purposes of
determining whether capital gain or loss upon sale is long- or short-term also
will begin on that date.
The amount of ordinary income taxable to an Optionee who was an employee at
the time of grant constitutes "supplemental wages" subject to withholding of
income and employment taxes by the Company, and the Company receives a
corresponding income tax deduction.
Sale of Option Shares. Upon sale, other than to the Company, of shares
acquired under a NQO, an Optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the Optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. If stock is sold to the
Company rather than to a third party, the sale may not produce capital gain or
loss but will constitute a redemption of such shares, which could be taxable as
a dividend unless the redemption is "not essentially equivalent to a dividend"
within the meaning of the Code.
Exercise with Stock. If an Optionee tenders common stock (other than
statutory option stock -- see above) to pay all or part of the exercise price of
a NQO, the Optionee will not have a taxable gain or deductible loss on the
surrendered shares. Instead, shares acquired upon exercise that are equal in
value to the fair market value of the shares surrendered in payment are treated
as if they had been substituted for the surrendered shares, taking as their
basis and holding period the basis and holding period that the Optionee had in
the surrendered shares. The additional shares are treated as newly acquired with
a zero basis.
If the surrendered shares are statutory option stock as described above
under "Incentive Stock Options", with respect to which the applicable holding
period requirements for favorable income tax treatment have not expired, then
the newly acquired shares substituted for the statutory option shares should
remain subject to the federal income tax rules governing the surrendered shares,
but the surrender should not constitute a Disqualifying Disposition of the
surrendered stock.
RESTRICTED STOCK
Upon receipt of Restricted Stock, a recipient generally has taxable income
in the amount of the excess of the then fair market value of the common stock
over any consideration paid for the common stock (the "spread"). However, if the
common stock is subject to a "substantial risk of forfeiture" (described under
"Incentive Stock Options," above) and the recipient does not make a Section
83(b) Election, the recipient will have taxable income upon lapse of the risk of
forfeiture, rather than at receipt, in an amount equal to the spread on the date
of lapse. The taxable income constitutes supplemental wages subject to income
and employment tax withholding, and the Company receives a corresponding income
tax deduction. Supplemental wages are subject to federal income tax withholding
at a rate of 28 percent. The consequences upon sale or disposition of Restricted
Stock generally are the same as for common stock acquired under a NQO (see
above).
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PERFORMANCE SHARES
Depending on the exact terms of an award of Performance Shares, the Award
could be treated for tax purposes in the same manner as a Restricted Stock
Award, i.e., as transfer of property subject to restrictions, or as a transfer
which takes place only when the terms of the award are satisfied.
STOCK PURCHASE RIGHTS
The tax treatment of Stock Purchase Rights is identical to that of NQOs, as
described above.
SPECIAL FEDERAL INCOME TAX CONSIDERATION DUE TO SHORT SWING PROFIT RULE
The potential liability of a person subject to Section 16 of the Exchange
Act to repay short-swing profits from the resale of shares acquired under a
Company plan constitutes a "substantial risk of forfeiture" within the meaning
of the above-described rules, which is treated as lapsing at such time as the
potential liability under Section 16 lapses. Persons subject to Section 16 who
would be required by Section 16 to repay profits from the immediate resale of
stock acquired under a Company plan should consider whether to file a Section
83(b) Election at the time they acquire stock under a Company plan in order to
avoid deferral of the date that they are deemed to acquire shares for federal
income tax purposes.
PROPOSAL
Shareholders are being asked to approve the amendment to the Incentive
Plan. The affirmative vote of the holders of a majority of the outstanding
shares of the common stock of the Company represented and voting at the Annual
Meeting is required to adopt the amendment to the Incentive Plan.
BOARD RECOMMENDATION
The Board recommends a vote "FOR" approval of the proposal.
PROPOSAL 4. APPROVAL OF EMPLOYEE STOCK PURCHASE PLANS
BACKGROUND
The Board has approved, subject to shareholder approval, the Identix
Incorporated Employee Stock Purchase Plan and the Identix Incorporated Foreign
Subsidiary Stock Purchase Plan (the "Employee Stock Purchase Plans"), covering
an aggregate of 500,000 shares issuable under the two plans. Management expects
these shares to be sufficient for all stock purchases under these plans for
approximately two years. No shares have been issued to date under these plans.
The Employee Stock Purchase Plans permit United States employees and employees
of certain domestic and foreign subsidiaries to purchase the Company's common
stock at a discounted price. These plans are designed to encourage and assist a
broad spectrum of employees of the Company and participating subsidiaries to
acquire an equity interest in the Company through the purchase of common stock.
They are also intended to provide to United States employees participating in
the plan the tax benefits available under Section 421 of the Internal Revenue
Code.
DESCRIPTION OF PLANS
All employees, including executive officers and directors who are
employees, customarily employed more than 20 hours per week and more than five
months per year by the Company or a participating subsidiary are eligible to
participate in these plans as of the first quarterly enrollment date following
employment. However, employees who hold, directly or through options, five
percent or more of the stock of the Company are not eligible to participate.
Participants may elect to make contributions up to a maximum of 15% of base
earnings. Following shareholder approval of the Employee Stock Purchase Plans,
the first enrollment date shall be January 4, 1999. Thereafter, enrollment dates
will be on the first business day of July and January. On June 30, 1999 and
thereafter on the last trading date of each December and June, the Company
applies the funds then in each participant's account to the purchase of shares.
The cost of each share purchased is 85% of
26
<PAGE> 29
the lower of the closing prices for common stock on: (i) the first trading day
in the enrollment period in which the purchase is made; and (ii) the purchase
date. The length of the enrollment period may not exceed a maximum of 24 months.
The Board has limited the maximum number of shares that may be purchased by a
participant during any enrollment period, and no participant's right to acquire
shares may accrue at a rate exceeding $25,000 of fair market value of common
stock (determined as of the first trading day in an enrollment period) in any
calendar year.
The Board of Directors may administer these plans or the Board may delegate
its authority to a committee of directors (the "Administrator") and may delegate
routine matters to management. The Board of Directors may amend or terminate
these plans at any time and may provide for an adjustment in the purchase price
and the number and kind of securities available under the plan in the event of a
reorganization, recapitalization, stock split, or other similar event. However,
amendments that would increase the number of shares reserved for purchase, or
would otherwise require shareholder approval in order to comply with certain
federal securities regulations, require stockholder approval. Shares available
under these plans may be either outstanding shares repurchased by the Company or
newly issued shares.
Approximately 398 employees of the Company are eligible to participate in
the Employee Stock Purchase Plans. Since the number of shares purchased under
the Employee Stock Purchase Plans by an employee and the purchase price thereof
are determined by the level of voluntary contribution by such employee and the
market price of the shares in effect from time to time, the Company currently
cannot determine the number of shares that may be purchased in the future by any
eligible individual or group of individuals or the purchase price thereof.
FEDERAL INCOME TAX CONSEQUENCES
In general, participants who are citizens or residents of the United States
("U.S. Participants") will not have taxable income or loss under these plans
until they sell or otherwise dispose of shares acquired under these plans (or
die holding such shares). If the shares are held, as of the date of sale or
disposition, for longer than both: (i) two years after the beginning of the
enrollment period during which the shares were purchased; and (ii) one year
following purchase, a U.S. Participant will have taxable ordinary income equal
to 15% of the fair market value of the shares on the first day of the enrollment
period (but not in excess of the gain on the sale). Any additional gain from the
sale will be long-term capital gain. The Company is not entitled to an income
tax deduction if the holding periods are satisfied.
If the shares are disposed of before the expiration of both of the
foregoing holding periods (a "disqualifying disposition"), a U.S. Participant
will have taxable ordinary income equal to the excess of the fair market value
of the shares on the purchase date over the purchase price. In addition, the
U.S. Participant will have taxable capital gain (or loss) measured by the
difference between the sale price and the
U.S. Participant's purchase price plus the amount of ordinary income recognized,
which gain (or loss) will be long-term if the shares have been held as of the
date of sale for more than one year. The Company is entitled to an income tax
deduction equal to the amount of ordinary income recognized by a U.S.
Participant in a disqualifying disposition.
Special rules apply to U.S. Participants who are directors or officers. The
consequences to non-U.S. Participants are governed by foreign laws, which
typically do not offer the same tax advantages as United States law.
PROPOSAL
At the annual meeting, the Company's stockholders will be asked to approve
both Employee Stock Purchase Plans. Approval of the Employee Stock Purchase
Plans requires the affirmative vote of a majority of the votes cast at a duly
held shareholders meeting at which a quorum of the voting power is represented.
27
<PAGE> 30
RECOMMENDATION
The Board recommends a vote "FOR" approval of the proposal.
PROPOSAL 5. APPROVAL OF AMENDMENTS TO THE IDENTIX INCORPORATED
NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
DESCRIPTION OF THE PROPOSAL
The Board has approved, subject to shareholder approval, the following
amendments to the Identix Incorporated Nonemployee Directors Stock Option Plan
(the "Directors Plan"): (i) an amendment to increase the total number of shares
reserved for issuance under the Directors Plan by 160,000 from 250,000 to
410,000; and (ii) amendments to increase the number of shares covered by an
option grant made to a nonemployee director upon initial election to the Board
from 10,000 to 20,000 shares (or from 5,000 to 10,000 in case more than six
months have elapsed since the date of the last annual shareholders meeting at
the time of such election) and to increase the number of shares covered by the
annual option grant made to a nonemployee director from 10,000 to 20,000 shares.
The new grant levels described in the preceding sentence, if approved by the
shareholders of the Company, will be effective as of the date of the Annual
Meeting.
Currently, the Directors Plan provides that a total of 250,000 shares of
common stock may be issued thereunder upon exercise of NQOs granted under the
Directors Plan. As of July 31, 1998, there were 40,000 shares that were
currently unreserved and available for grant under the Directors Plan. The
Company believes that the proposed increase in the number of shares available
for grant is necessary to ensure that there will be a sufficient reserve of
shares to permit the grant of further options to nonemployee directors for the
next two years. The Company believes that the increase in the number of shares
covered by option grants under the Directors Plan is necessary in order to
continue to attract, motivate and retain high caliber Board members.
The following table shows the number of number of shares covered by options
granted to the identified groups under the Directors Plan in fiscal year 1998.
All options were granted at fair market value as of the date of grant.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C>
All executive officers as a group........................... 0
All directors who are not executive officers as a group..... 50,000
All employees (other than executive officers) as a group.... 0
</TABLE>
DESCRIPTION OF THE DIRECTORS PLAN
Only nonemployee directors of the Company are eligible to participate in
the Directors Plan. The Directors Plan is designed to work automatically.
However, to the extent administration is necessary, it is provided by the Board
or the Board may delegate its authority to a committee of the Board. Option
grants to nonemployee directors are made on a formula basis and not on a
discretionary basis. The Directors Plan provided for grant to each director who
was not, and had not been in the preceding twelve months, an officer or an
employee of the Company an NQO to purchase 20,000 shares of common stock on the
date of initial adoption of the Directors Plan in 1995. The Directors Plan, as
currently in effect, further provides that when a person who is not, and has not
been in the preceding twelve months, an officer or an employee of the Company is
elected or appointed a member of the Board, the Company will grant that person
on the effective date of such election or appointment (i) an NQO to purchase
10,000 shares of common stock if less than six months have elapsed since the
last annual meeting of shareholders or (ii) an NQO to purchase 5,000 shares of
common stock if at least six months have elapsed since the last annual meeting
of shareholders (in either case, an "Initial Grant"). The Directors Plan, as
currently in effect, further provides that on the first meeting of the Board
immediately following the annual meeting of shareholders of the Company (even if
held on the same day as the meeting of shareholders), commencing with the annual
meeting of shareholders held in 1996, the Company will grant to each nonemployee
director then in office an NQO to purchase an additional
28
<PAGE> 31
10,000 shares of common stock (an "Annual Grant"). If the amendments to the
Directors Plan proposed hereby are approved by the Company's shareholders,
effective on the date of the Annual Meeting, the Initial Grant level shall be
increased from 10,000 to 20,000 shares (or from 5,000 to 10,000 if more than six
months have elapsed since the last annual meeting of shareholders) and the
Annual Grant level shall be increased from 10,000 to 20,000 shares.
All NQOs granted under the Directors Plan have an exercise price equal to
the fair market value of such shares on the date of grant and become exercisable
with respect to one fourth of the number of shares covered by such Option for
each three month period which elapses after the date of grant, so that such
Option will be fully exercisable on the first anniversary of the date such
Option was granted. The Company currently has five nonemployee directors who are
eligible to participate in the Directors Plan, four of whom have been nominated
for election at the Annual Meeting.
The consideration payable in connection with any option (including any
related taxes) may be paid by promissory note of the nonemployee director or by
delivery of shares of common stock of the Company. Options granted under the
Directors Plan have a term of ten years. Options generally terminate three
months after a nonemployee director ceases to be, for any reason, a director of
the Company, but if a nonemployee director ceases to be a director due to death,
disability or retirement, the Option may be exercised for two years after the
termination.
The Board may amend, alter, or discontinue the Directors Plan or any Option
at any time, except that the consent of a participant is required if the
participant's existing rights under an outstanding Option would be impaired. In
addition, to the extent required under applicable tax and securities laws and
regulations, the shareholders of the Company must approve any amendment,
alteration, or discontinuance of the Directors Plan that would increase the
total number of shares reserved under the Directors Plan and in certain other
circumstances as the Board may deem advisable to comply with such laws and
regulations. In addition, the provisions of the Directors Plan governing who is
granted Options, the number of shares covered by each Option, the exercise
price, and the period of exercisability and the timing of Option grants may not
be amended more than once every six months, other than for changes to comport
with the Code or the Employee Retirement Income Security Act of 1974.
In the event of a "change in control" of the Company, as defined in the
Directors Plan, the vesting of Options will automatically accelerate. A "change
in control" is defined to include the acquisition of 20% or more of the voting
power of the Company's outstanding stock, a proxy solicitation for one or more
directors without support of the then-current Board, and certain mergers or
reorganizations or other changes in ownership of the Company's assets or stock.
Under the Incentive Plan, nonemployee directors are not eligible to receive
Options. The Company believes it important that directors have meaningful equity
ownership in the Company and believes a way to provide the appropriate level of
ownership is through a formula plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of NQOs granted under the Directors
Plan are the same as NQOs granted under the Incentive Plan. See "Proposal 3.
Approval of Amendment to Identix Incorporated Equity Incentive Plan -- Federal
Income Tax Consequences -- Nonqualified Stock Options."
PROPOSAL
Shareholders are being asked to approve the amendments to the Directors
Plan described above. The affirmative vote of the holders of a majority of the
outstanding shares of common stock of the Company represented and voting at the
Annual Meeting is required for approval of the amendments to the Directors Plan.
BOARD RECOMMENDATION
The Board recommends a vote "FOR" approval of the proposal.
29
<PAGE> 32
PROPOSAL 6. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP,
independent accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 1999, and recommends that
shareholders vote "FOR" ratification of such appointment. It is anticipated that
a representative of PricewaterhouseCoopers LLP will be present at the Annual
Meeting with the opportunity to make a statement and to respond to appropriate
questions.
PROPOSAL 7. OTHER MATTERS
Management knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
Company that the persons named in the enclosed form of proxy vote the shares
they represent as Management may recommend.
Dated: September 17, 1998
THE BOARD OF DIRECTORS
30
<PAGE> 33
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
IDENTIX INCORPORATION,
A CALIFORNIA CORPORATION
AND
IDENTIX INCORPORATED,
A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of
, 1998 between Identix Incorporated, a California corporation
("Identix California"), and Identix Incorporated, a Delaware corporation
("Identix Delaware"), a wholly owned subsidiary of Identix California.
BACKGROUND
A. Identix California is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and, on the date of
this Agreement, has authority to issue 52,000,000 shares consisting of
50,000,000 shares of Common Stock, no par value, and 2,000,000 shares of
Preferred Stock, no par value, of which [ ] shares of Common Stock
and no shares of Preferred Stock are issued and outstanding.
B. Identix Delaware is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and, on the date of
this Agreement, has authority to issue 52,000,000 shares, consisting of
50,000,000 shares of Common Stock, $0.01 par value, and 2,000,000 shares of
Preferred Stock, $0.01 par value, of which one share of Common Stock is issued
and outstanding and owned by Identix California and no shares of Preferred Stock
are issued and outstanding.
C. The Board of Directors of each of Identix California and Identix
Delaware have determined that it is advisable and in the best interests of each
of such corporations that Identix California merge into Identix Delaware upon
the terms and subject to the conditions set forth in this Agreement, for the
purpose of effecting the reincorporation of Identix California in the State of
Delaware and have, by resolutions duly adopted, approved this Agreement and
directed that it be submitted to a vote of their respective stockholders and
executed by the undersigned officers.
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
When used in this Agreement (and in any Exhibit in which such terms are not
otherwise defined) the following terms shall have the following meanings:
"California Common Stock" shall mean shares of Common Stock, no par value,
of Identix California.
"California Preferred Stock" shall mean shares of Preferred Stock, no par
value, of Identix California.
"Certificate of Merger" shall mean the Certificate of Merger of Identix
California into Identix Delaware to be filed with the Secretary of State of the
State of Delaware in substantially the form attached hereto as Exhibit 2.1.
"Delaware Common Stock" shall mean shares of Common Stock, $0.01 par value,
of Identix Delaware.
"Delaware Preferred Stock" shall mean shares of Preferred Stock, $0.01 par
value, of Identix Delaware.
A-1
<PAGE> 34
"Effective Time" shall mean the time when the Certificate of Merger is
filed with the Secretary of State of the State of Delaware and the Merger
becomes effective.
"Merger" shall mean the merger of Identix California into Identix Delaware.
"Shareholders' Meeting" shall mean the annual meeting of shareholders of
Identix California to be held on October 29, 1998 to approve and adopt this
Agreement, among other things.
"Surviving Corporation" shall mean Identix Delaware from and after the
Effective Time.
ARTICLE II
MERGER
2.1 Merger. At the Effective Time, the Merger shall become effective under
Section 252 of the Delaware General Corporation Law and Section 1108(d) of the
California General Corporation Law, and Identix California shall merge into
Identix Delaware, the separate existence of Identix California shall cease and
Identix Delaware shall continue in existence as the surviving corporation under
the Delaware General Corporation Law.
2.2 Filings. On or prior to the Effective Time, Identix California and
Identix Delaware shall cause:
(a) an executed counterpart of the Certificate of Merger to be filed
with the Secretary of State of California; and
(b) the Certificate of Merger to be filed with the Secretary of State
of Delaware.
2.3 Effects of the Merger. At the Effective Time:
(a) the separate existence of Identix California shall cease and
Identix California shall be merged into Identix Delaware;
(b) the Certificate of Incorporation of Identix Delaware shall
continue as the Certificate of Incorporation of the Surviving Corporation;
(c) the Bylaws of Identix Delaware shall continue as the Bylaws of the
Surviving Corporation;
(d) each officer and director of Identix California in office
immediately prior to the Effective Time shall serve in the same capacity as
an officer or director of the surviving Corporation immediately after the
Effective Time;
(e) each share of California Common Stock outstanding immediately
prior to the Effective Time shall be converted into one share of Delaware
Common Stock pursuant to Article III;
(f) without further transfer, act, or deed, the separate existence of
Identix California shall cease and the Surviving Corporation shall possess
all the rights, privileges, powers and franchises, and shall be subject to
all the restrictions, disabilities and duties, of Identix California; and
all property, real, personal and mixed, and all debts due to Identix
California on whatever account, as well as stock subscriptions and all
other things belonging to Identix California shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest of Identix California shall be
thereafter as effectually the property of the Surviving Corporation as they
were of Identix California, and the title to any real estate vested by deed
or otherwise in Identix California shall not revert or be in any way
impaired by reason of the Merger; and all rights of creditors of Identix
California and all liens upon any property of Identix California shall be
preserved unimpaired and all debts, liabilities and duties of Identix
California shall attach to the Surviving Corporation and may be enforced
against it to the same extent as if such debts, liabilities and duties had
been incurred or contracted by it.
2.4 Further Assurances. Identix California agrees that if, at any time
after the Effective Time, the Surviving Corporation shall consider or be advised
that any further deeds, assignments or assurances are necessary or desirable to
vest, perfect or confirm in the Surviving Corporation title to any property or
rights of
A-2
<PAGE> 35
Identix California, the Surviving Corporation and its officers and directors may
execute and deliver all such deeds, assignments and assurances and do all other
things necessary or desirable to vest, perfect or confirm title to such property
or rights in the Surviving Corporation and otherwise to carry out the purposes
of this Agreement, in the name of Identix California or otherwise.
ARTICLE III
CONVERSION OF STOCK
3.1 Conversion of Stock. At the Effective Time, the stock of Identix
California shall be converted into stock of Identix Delaware, as follows:
(a) each share of California Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of Delaware Common Stock; and
(b) each share of Delaware Common Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and retired and
no stock shall be issued in the Merger in respect thereof.
3.2 Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective Time
represented shares of California Common Stock shall be deemed for all purposes
to evidence ownership of, and to represent, shares of Delaware Common Stock into
which the shares of California Common Stock formerly represented by such
certificates have been converted as provided in this Agreement. The registered
owner on the books and records of Identix Delaware or its transfer agent of any
outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to Identix Delaware or its
transfer agents, have and be entitled to exercise any voting and other rights
with respect to, and to receive any dividends and other distributions upon, the
shares of Delaware Common Stock evidenced by such outstanding certificate as
provided above.
3.3 Stock Options. Each right or option to purchase shares of California
Common Stock granted under the Identix Incorporated Equity Incentive Plan, the
Identix Incorporated 1992 Employee Stock Option Plan, the Identix Incorporated
Nonemployee Directors Stock Option Plan, the Identix Incorporated 1983 Incentive
Stock Option Plan, the ANADAC, Inc. 1984 Incentive Stock Option Plan, the
Identix Incorporated Employee Stock Purchase Plan and the Identix Incorporated
Foreign Subsidiary Stock Purchase Plan (collectively, the "Plans") which is
outstanding immediately prior to the Effective Time, shall by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become an option to purchase the same number of shares of Delaware
Common Stock at the same option price per share, and upon the same terms and
subject to the same conditions as in effect at the Effective Time. The same
number of shares of Delaware Common Stock shall be reserved for purposes of said
Plans as is equal to the number of shares of California Common Stock so reserved
as of the Effective Time. As of the Effective Time, Identix Delaware hereby
assumes the Plans and all obligations of Identix California under the Plans
including the outstanding options or awards or portions thereof granted pursuant
to the Plans.
3.4 Validity of Delaware Common Stock. All shares of Delaware Common Stock
into which California Common Stock are to be converted pursuant to the Merger
shall not be subject to any statutory or contractual preemptive rights, shall be
validly issued, fully paid and nonassessable and shall be issued in full
satisfaction of all rights pertaining to such California Common Stock.
3.5 Rights of Former Holders. From and after the Effective Time, no holder
of certificates which evidenced California Common Stock immediately prior to the
Effective Time shall have any rights with respect to the shares formerly
evidenced by those certificates, other than to receive the shares of Delaware
Common Stock into which such California Common Stock shall have been converted
pursuant to the Merger.
A-3
<PAGE> 36
ARTICLE IV
GENERAL
4.1 Consents. Each of Identix California and Identix Delaware shall use
its best efforts to obtain the consent and approval of each person (other than
shareholders of Identix California in their capacities as such) whose consent or
approval shall be required in order to permit consummation of the Merger.
4.2 Governmental Authorizations. Each of Identix California and Identix
Delaware shall cooperate in filing any necessary reports or other documents with
any federal, state, local or foreign authorities having jurisdiction with
respect to the Merger.
4.3 Waiver and Amendment. This Agreement may be amended by action of the
Board of Directors of each of Identix California and Identix Delaware without
action by the stockholders of the parties, except that (a) any amendment to
Section 3.1, (b) any amendment changing the terms, rights, powers or preferences
of the Delaware Common Stock, or (c) any amendment altering any terms of this
Agreement if such alteration would adversely affect the holders of California
Common Stock or Delaware Common Stock must be approved by a majority of the
voting power of the outstanding California Common Stock.
4.4 Termination. This Agreement may be terminated and the Merger and other
transactions provided for by this Agreement abandoned at any time prior to the
Effective Time, whether before or after adoption and approval of this Agreement
at the Shareholders' Meeting, by action of the Board of Directors of Identix
California if the Board determines that the consummation of the transactions
contemplated by this Agreement would not, for any reason, be in the best
interests of Identix California and its shareholders.
4.5 Entire Agreement. This Agreement (including any exhibits), contains
the entire agreement among the parties with respect to the Merger and supersedes
all prior and concurrent arrangements, letters of intent or understandings
relating to the Merger.
4.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which when taken
together shall constitute one and the same agreement. This Agreement shall
become effective when one or more counterparts has been signed by each of the
parties and delivered to each of the other parties.
4.7 Headings. The article, section and paragraph headings in this
Agreement have been inserted for identification and reference and shall not by
themselves determine the meaning or interpretation of any provision of this
Agreement.
4.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and, so far as applicable, the
merger provisions of the California General Corporation Law.
A-4
<PAGE> 37
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
IDENTIX INCORPORATED,
a California corporation
By:
Title:
By:
Title:
IDENTIX INCORPORATED,
a Delaware corporation
By:
Title:
By:
Title:
A-5
<PAGE> 38
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
IDENTIX INCORPORATED
The undersigned, for purposes of incorporating and organizing a corporation
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
FIRST. The name of the corporation is Identix Incorporated.
SECOND. The name of its registered office in the State of Delaware is
National Corporate Research, Ltd. The address of its registered agent in the
State of Delaware is 9 E. Loockerman Street, City of Dover, County of Kent,
Delaware 19901.
THIRD. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
the corporation shall have authority to issue is 52,000,000 shares, comprised of
50,000,000 shares of Common Stock with a par value of $.01 per share (the
"Common Stock") and 2,000,000 shares of Preferred Stock with a par value of $.01
per share (the "Preferred Stock"). A description of the respective classes of
stock and a statement of the designations, preferences, voting powers (if any),
relative, participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
A. PREFERRED STOCK
1. In General. The Preferred Stock may be issued in one or more series at
such time or times and for such consideration as the board of directors may
determine. Each series shall be designated so as to distinguish the shares of
that series from the shares of all other series and classes. Except as may be
expressly provided in this Certificate of Incorporation, including any
certificate of designation for a series of Preferred Stock, different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purpose of voting by classes.
2. Certificates of Designation. The board of directors is authorized,
subject to any limitations prescribed by law, to provide for the issuance of the
shares of Preferred Stock in one or more series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized share of Preferred Stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the certificate or certificates establishing the series of
Preferred Stock.
B. COMMON STOCK
1. Relative Rights of Preferred Stock and Common Stock. Except as otherwise
required by this Certificate of Incorporation, all powers, preferences and
rights and qualifications, limitations, or restrictions of the Common Stock are
subject to those that may be fixed with respect to any shares of the Preferred
Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate
of Incorporation, including any certificate of designation for a series of
Preferred Stock, each holder of Common Stock shall have one vote in respect of
each share of stock held of record by that holder on the books of the
corporation for the election of directors and on all matters submitted to a vote
of stockholders of the corporation.
B-1
<PAGE> 39
3. Dividends. Subject to any preferential rights of the Preferred Stock,
the holders of shares of Common Stock shall be entitled to receive, when and if
declared by the board of directors, out of the assets of the corporation which
by law are available therefor, dividends payable in cash, in property or in
shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
liquidation or winding up of the affairs of the corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of the Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Certificate of Incorporation, including any
certificate of designation for a series of Preferred Stock, to receive all of
the remaining assets of the corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them.
FIFTH. The corporation is to have perpetual existence.
SIXTH. Any action required or permitted to be taken by the stockholders of
the corporation must be effected at an annual or special meeting of stockholders
of the corporation and may not be effected by any consent in writing of the
stockholders. Special meetings of stockholders of the corporation may be called
only by the corporation's Board of Directors, its Chair of the Board of
Directors or its President. Business transacted at special meetings shall be
confined to the purpose or purposes stated in the notice of meeting.
SEVENTH.
A. In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation.
B. Elections of directors need not be by written ballot unless the by-laws
of the corporation so provide.
C. The books of the corporation may be kept at such place within or without
the State of Delaware as the by-laws of the corporation may provide or as may be
designated from time to time by the board of directors of the corporation.
EIGHTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as that court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as a consequence of
such compromise or arrangement, the compromise or arrangement and the
reorganization shall, if sanctioned by the court to which the application has
been made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
NINTH. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability: (a) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) under Section 174 of the Delaware General Corporation Law;
or (d) for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this paragraph
shall not adversely affect any right or protection of a director of the
corporation existing at the time of the repeal or modification.
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TENTH.
A. RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
or she or a person of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving at the request of
the corporation as a director or officer, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than that law permitted the
corporation to provide before the amendment) against all expenses, liabilities
and losses including, without limitation, attorneys' fees, judgments, fines,
ERISA excise taxes and penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith. Such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators. However, the corporation shall indemnify any such
person seeking indemnity in connection with an action, suit or proceeding (or
part thereof) initiated by that person only if that action, suit or proceeding
(or part thereof) was authorized by the board of directors of the corporation.
The rights set forth in this Article TENTH shall be contract rights and shall
include the right to be paid expenses incurred in defending any such proceeding
in advance of its final disposition. However, the payment of such expenses
incurred by a director or officer of the corporation in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be so indemnified.
B. RIGHT OF CLAIMANT TO BRING SUIT
If a claim under Paragraph A of this Article TENTH is not paid in full by
the corporation within 90 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim. If successful in whole or
in part, the claimant shall be entitled to be paid the expense of prosecuting
that claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any, has
been tendered to this corporation) that the claimant has not met the standards
of conduct which make it permissible under the Delaware General Corporation Law
for the corporation to indemnify the claimant for the amount claimed. However,
the burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors, independent legal
counsel or its stockholders) to have made a determination before the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its board of directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
C. NON EXCLUSIVITY OF RIGHTS
The rights conferred on any person by Paragraphs A and B of this Article
TENTH shall not be exclusive of any other rights which such person may have or
hereafter may acquire under any statute, provision of the Certificate of
Incorporation, by law, agreement, vote of stockholders or of disinterested
directors, or otherwise.
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D. EXPENSES AS A WITNESS
To the extent that any director, officer, employee, or agent of the
corporation is by reason of such position, or a position with another entity at
the request of the corporation, a witness in any action, suit or proceeding, he
or she shall be indemnified and held harmless against all costs and expenses
actually and reasonably incurred by him or her on his or her behalf in
connection therewith.
E. INDEMNITY AGREEMENTS
The corporation may enter into agreements with any director, officer,
employee or agent of the corporation or any person who serves at the request of
the corporation as a director, officer, employee, or agent of another
corporation or other enterprise, providing for indemnification to the fullest
extent permissible under the Delaware General Corporation Law and the
corporation's Certificate of Incorporation.
F. EFFECT OF REPEAL OR MODIFICATION
Any repeal or modification of this Article TENTH shall not adversely affect
any right of indemnification or advancement of expenses of a director or
officer, employee or agent of the corporation existing at the time of such
repeal or modification with respect to any action or omission occurring before
the repeal or modification.
G. SEPARABILITY
Each and every paragraph, sentence, term and provision of this Article
TENTH is separate and distinct. If any paragraph, sentence, term or provision is
held to be invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of any other
such paragraph, sentence, term or provision. To the extent required in order to
make any such paragraph, sentence, term or provision of this Article TENTH valid
or enforceable, the corporation shall, and the indemnitee or potential
indemnitee may, request a court of competent jurisdiction to modify the
paragraph, sentence, term or provision in order to preserve its validity and
provide the broadest possible indemnification permitted by applicable law.
H. INSURANCE
The corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss of the type referred to in this Article TENTH,
whether or not the corporation would have the power to indemnify such person
against such expense, liability or loss under applicable law.
I. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The corporation may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification, and to the advancement of
expenses to any employee or agent of the corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.
ELEVENTH. The corporation reserves the right to amend or repeal any
provision of this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon any stockholders by this
Certificate of Incorporation are granted subject to this reservation.
TWELFTH. The powers of the incorporator are to terminate upon the filing of
this Certificate of Incorporation with the Secretary of the State of Delaware.
The name and mailing address of the person who is to serve as the initial
director of the corporation until the first annual meeting of stockholders of
the corporation, or until his successor is elected and qualified is: James P.
Scullion, Identix Incorporated, 510 North Pastoria Avenue, Sunnyvale, CA 94086
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed on this day of
, 1998.
--------------------------------------
James P. Scullion, Incorporator
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APPENDIX C
BYLAWS OF
IDENTIX INCORPORATED
OFFICES
1. Registered Office. The registered office of the corporation shall be in
the City of Dover, County of Kent, State of Delaware.
2. Other Offices. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
STOCKHOLDERS
3. Annual Meeting. Unless the board of directors or the President of the
corporation selects a different time or date, the annual meeting of stockholders
shall be held at 2:00 p.m. on the last Thursday of the fourth calendar month
following the end of the corporation's fiscal year. The annual meeting shall be
for the purpose of electing a board of directors and transacting such other
business as may properly be brought before the meeting.
4. Special Meeting. Special meetings of stockholders may be called at any
time by the board of directors, the Chairman of the Board or the President of
the corporation.
5. Place. Meetings of stockholders shall be held at the principal executive
office of the corporation or at any other place, within or without California,
which is designated by the board of directors or the President.
6. Notice.
(a) Annual and Special Meetings. A written notice of each meeting of
stockholders shall be given not more than 60 days and, except as provided below,
not less than ten days before the meeting to each stockholder entitled to vote
at the meeting. The notice shall state the place, date and hour of the meeting
and, if directors are to be elected at the meeting, the names of the nominees
intended to be presented by management for election. The notice shall also state
(i) in the case of an annual meeting, those matters which the board of directors
intends to present for action by the stockholders, and (ii) in the case of a
special meeting, the general nature of the business to be transacted and that no
other business may be transacted. Notice shall be delivered personally, by mail
or other means addressed to the stockholder at the address of such stockholder
appearing on the books of the corporation, the address given by the stockholder
to the corporation for the purpose of notice or as otherwise provided by law.
(b) Adjourned Meetings. Notice of an adjourned meeting need not be given if
(i) the meeting is adjourned for 30 days or less, (ii) the time and place of the
adjourned meeting are announced at the meeting at which the adjournment is taken
and (iii) no new record date is fixed for the adjourned meeting. Otherwise,
notice of the adjourned meeting shall be given as in the case of an original
meeting.
7. Record Date. The board of directors may fix in advance a record date for
the determination of the stockholders entitled to notice of any meeting, to
vote, to receive any dividend or other distribution or allotment of rights or to
exercise any rights. The record date shall be not more than 60 nor less than ten
days prior to the date of the meeting nor more than 60 days prior to such other
action. If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the business day next preceding the day on which notice is
given, or, if notice is waived, the close of business on the business day next
preceding the day on which the meeting is held. Except as otherwise provided by
law, when a record date is fixed, as provided herein, only stockholders on the
record date are entitled to notice and to vote, to receive the dividend,
distribution or allotment of rights or to exercise rights, as the case may be,
notwithstanding any transfer of shares on the books of the corporation occurring
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after the record date. Except as otherwise provided by law, the corporation
shall be entitled to treat the holder of record of any shares as the holder in
fact of such shares and shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, whether or
not the corporation shall have express or other notice of such claim or
interest. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date.
8. Quorum. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
9. Required Vote. When a quorum is present at any meeting, except with
respect to the election of directors, the vote of the holders of a majority of
the stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which by express provision of statute or of the certificate of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
10. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting. Unless otherwise provided in the certificate of incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted on after three years from
its date, unless the proxy provides for a longer period.
11. Notice of Stockholder Business. At an annual or special meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) properly brought before
the meeting by or at the direction of the Board of Directors, or (c) properly
brought before an annual meeting by a stockholder and if, and only if, the
notice of a special meeting provides for business to be brought before the
meeting by stockholders, properly brought before the special meeting by a
stockholder. For business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal offices of the corporation
no later than (i) in the case of an annual meeting, ninety (90) days before the
anticipated date of the next annual meeting, under the assumption that the next
annual meeting will occur on the same calendar day as the day of the most recent
annual meeting, and (ii) in the case of a special meeting, ten (10) days prior
to date of such meeting. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual or special
meeting (1) a brief description of the business desired to be brought before the
annual or special meeting and the reasons for conducting such business at the
annual or special meeting, (2) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (3) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (4) any material interest of the stockholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at an annual or special meeting except in accordance with the
procedures set forth in this Section 11. The chairman of an annual or special
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the
provisions of this Section 11, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
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12. Lost Stock Certificates. The corporation may cause a new stock
certificate to be issued in place of any certificate previously issued by the
corporation alleged to have been lost, stolen or destroyed. The corporation may,
at its discretion and as a condition precedent to such issuance, require the
owner of such certificate to deliver an affidavit stating that such certificate
was lost, stolen or destroyed or to give the corporation a bond or other
security sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction or the issuance of a new certificate.
BOARD OF DIRECTORS
13. Number. The number of directors who shall constitute the whole board
not be less than five nor more than nine. The exact number of directors shall be
determined from time to time by resolution of the board of directors.
14. Powers. The business of the corporation shall be managed by or under
the direction of its board of directors, which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
15. Election. Except as provided in Section 16, the directors shall be
elected at the annual meeting of the stockholders by a plurality vote. Each
director elected shall hold office until his or her successor is elected and
qualified. Directors need not be stockholders.
16. Term of Office and Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, though less than a quorum, or by a
sole remaining director; whenever the holders of any class or classes of stock
or series thereof are entitled, pursuant to the certificate of incorporation, to
elect one or more directors, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series then in office, or by a sole remaining
director so elected. The directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.
17. Removal. Unless otherwise restricted by the certificate of
incorporation, bylaws or statute, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
18. Resignation. Any director may resign by giving notice to the board of
directors, the Chairman of the Board, the President or the Secretary. The
resignation of a director shall be effective when given unless the director
specifies a later time. The resignation shall be effective regardless of whether
it is accepted by the corporation.
19. Compensation. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
20. Committees. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board many
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Any committee, to the extent provided in the resolution of the board of
directors, shall have and may exercise all the powers and authority of the board
of directors in the management of the business and affairs of
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the corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no committee shall have the power or
authority of the board of directors in reference to:
(a) amending the certificate of incorporation (except to the extent
provided in resolutions of the board of directors and permitted by the
General Corporation Law of the State of Delaware);
(b) adopting an agreement of merger or consolidation;
(c) recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets; or
(d) recommending to the stockholders a dissolution of the corporation
or a revocation of a dissolution.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
21. Time and Place of Meetings and Telephone Meetings. Unless the board of
directors determines otherwise, the board shall hold a regular meeting during
each quarter of the corporation's fiscal year. One such meeting shall take place
immediately following the annual meeting of stockholders. All meetings of
directors shall be held at the principal executive office of the corporation or
at such other place, within or without the State of Delaware, as shall be
designated in the notice of the meeting or in a resolution of the board of
directors. Directors may participate in a meeting through use of conference
telephone or similar communications equipment, provided that all members
participating in the meeting can hear each other.
22. Call. Meetings of the board of directors, whether regular or special,
may be called by the Chairman of the Board, the President, the Secretary, any
Vice President or any two directors.
23. Notice. Regular meetings of the board of directors may be held without
notice if the time of such meetings has been fixed by the board and publicized
among all directors. Special meetings shall be held upon four days' notice by
mail or 48 hours' notice delivered personally or by telephone or telegraph, and
regular meetings shall be held upon similar notice if notice is required for
such meetings. Neither a notice nor a waiver of notice must specify the purpose
of any regular or special meeting. Notice of the time and place of holding an
adjourned meeting need not be given to absent directors if the time and place of
the adjourned meeting is announced at the meeting at which the adjournment is
taken, but if a meeting is adjourned for more than 24 hours, notice of the
adjourned meeting shall be given prior to the time of such meeting to the
directors who were not present at the time of the adjournment.
24. Meeting Without Regular Call and Notice. The transactions of any
meeting of the board of directors, however called and noticed or wherever held,
are as valid as though had at a meeting duly held after regular call and notice
if a quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice. For such purposes, a
director shall not be considered present at a meeting if, although in attendance
at the meeting, the director protests the lack of notice prior to the meeting or
at its commencement.
25. Action Without Meeting. Any action required or permitted to be taken
by the board of directors may be taken without a meeting, if all of the members
of the board individually or collectively consent in writing to such action.
26. Quorum and Required Vote. At all meetings of the board a majority of
the total number of authorized directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
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27. Committee Meetings. The principles set forth in Sections 21 through 26
of these bylaws shall apply to committees of the board of directors and to
actions taken by such committees.
OFFICERS
28. Titles and Relation to board of directors. The officers of the
corporation shall include a Chairman of the Board or a President or both, a
Secretary and a Treasurer. The board of directors may also choose one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers or other officers.
Any number of offices may be held by the same person. All officers shall perform
their duties and exercise their powers subject to the direction of the board of
directors.
29. Election, Term of Office and Vacancies. At its regular meeting after
each annual meeting of stockholders, the board of directors shall choose the
officers of the corporation. The board may choose additional officers or fill
vacant offices at any other time. No officer must be a member of the board of
directors except the Chairman of the Board. The officers shall hold office until
their successors are chosen, except that the board of directors may remove any
officer at any time.
30. Resignation. Any officer may resign at any time upon notice to the
corporation without prejudice to the rights, if any, of the corporation under
any contract to which the officer is a party. The resignation of an officer
shall be effective when given unless the officer specifies a later time. The
resignation shall be effective regardless of whether it is accepted by the
corporation.
31. Chairman of the Board; President. If the board of directors elects a
Chairman of the Board, such officer shall preside over all meetings of the board
of directors and of stockholders. If there be no Chairman of the Board, the
President shall perform such duties. The board of directors shall designate
either the Chairman of the Board or the President as the chief executive officer
and may prescribe the duties and powers of the chief executive officer. If there
is no Chairman of the Board, the President shall be the chief executive officer.
32. Secretary. Unless otherwise determined by the board of directors or
the chief executive officer, the Secretary shall have the following powers and
duties:
(a) Record of Corporate Proceedings. The Secretary shall attend all
meetings of stockholders and the board of directors and its committees and
shall record all votes and the minutes of such meetings in a book to be
kept at the principal executive office of the corporation or at such other
place as the board may determine. The Secretary shall keep at the
corporation's principal executive office, if in California, or at its
principal business office in California if the principal executive office
is not in California, the original or a copy of these bylaws, as amended.
(b) Record of Shares. Unless a transfer agent is appointed by the
board of directors to keep a share register, the Secretary shall keep a
share register at the principal executive office of the corporation showing
the names of the stockholders and their addresses, the number and class of
shares held by each, the number and date of certificates issued and the
number and date of cancellation of each certificate surrendered for
cancellation.
(c) Notices. The Secretary shall give such notices as may be required
by law or these bylaws.
33. Treasurer. Unless the board of directors designates another chief
financial officer, the Treasurer shall be the chief financial officer of the
corporation. Unless otherwise determined by the board of directors or the chief
executive officer, the Treasurer shall have custody of the corporate funds and
securities, shall keep adequate and correct accounts of the corporation's
properties and business transactions, shall disburse such funds of the
corporation as may be ordered by the board or the chief executive officer
(taking proper vouchers for such disbursements), and shall render to the chief
executive officer and the board, at regular meetings of the board or whenever
the board may require, an account of all transactions and the financial
condition of the corporation.
34. Other Officers. The other officers of the corporation, if any, shall
exercise such powers and perform such duties as the board of directors or the
chief executive officer shall prescribe.
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35. Salaries. The board of directors shall fix the salary of the chief
executive officer and may fix the salaries of other employees of the
corporation, including the other officers. If the board does not fix the
salaries of the other officers, the chief executive officer shall fix such
salaries.
AMENDMENT OF
BYLAWS
36. Bylaws may be adopted, amended or repealed by the affirmative vote of
a majority of the outstanding shares entitled to vote or by the board of
directors.
C-6
<PAGE> 48
PROXY
For The Shares Of
IDENTIX INCORPORATED
A California Corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Common Stock of Identix Incorporated (the
"Company") hereby revokes all previous proxies, acknowledges receipt of the
notice of the shareholders' meeting to be held on October 29, 1998, and appoints
Randall C. Fowler and James P. Scullion, and each of them, as proxy of the
undersigned with power of substitution and revocation, to vote and otherwise
represent all the shares of the undersigned at said meeting and any adjournment
or postponement thereof with the same effect as if the undersigned were present
and voting the shares. The shares represented by this proxy shall be voted as
specified on the reverse side. If no choice is indicated, the shares will be
voted FOR all proposals.
(Continued on other side)
FOLD AND DETACH HERE
<PAGE> 49
<TABLE>
<CAPTION>
FOR WITHHOLD
all nominees listed AUTHORITY
(except as noted to to vote for the
the contrary) nominees listed
------------------- ---------------
<S> <C> <C>
1. TO ELECT DIRECTORS
Nominees: Randall G. Fowler, Randall Hawks, Jr.,
Patrick H. Morton, Charles W. Richion, James P.
Scullion, Fred. U. Sutter, Larry J. Wells
(INSTRUCTION: To withhold authority to vote for
any nominee, write the nominee's name in the
space provided below.)
================================================
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------- ------- -------
<S> <C> <C> <C>
2. To approve a change in the Company's state of
incorporation from California to Delaware through the
merger of the Company into a newly formed Delaware
corporation that is a wholly owned subsidiary of the
Company. ------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
3. To approve an amendment to the Identix Incorporated
Equity Incentive Plan to increase the number of
shares of Identix common stock available for issuance
under that plan from 1,750,000 to 3,000,000 shares. ------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
4. To approve the Identix Incorporated Employee Stock
Purchase Plan and the Identix Incorporated Foreign
Subsidiary Employee Stock Purchase Plan. ------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
5. To approve an amendment to the Identix Incorporated
Nonemployee Directors Stock Option Plan to increase
the number of shares available for issuance under
that plan from 250,000 to 410,000 shares and to
approve the amendments to that plan described in the
Company's Proxy Statement. ------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
6. To ratify the appointment of PRICEWATERHOUSECOOPERS
LLP as independent accountants of the Company for the
fiscal year ending June 30, 1999. ------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
7. To transact such other business as may properly come
before the meeting or any adjournment thereof.
------- ------- -------
FOR AGAINST ABSTAIN
------- ------- -------
</TABLE>
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO MARK,
SIGN, DATE, AND PROMPTLY RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
Date and sign exactly as name(s) appear(s) on this proxy. If signing for
estates, trusts, corporations, or other entities, title or capacity should be
stated. If shares are held jointly, each holder should sign.
Signature Date
----------------------------------------------------- ----------
Signature Date
----------------------------------------------------- ----------
FOLD AND DETACH HERE
