SCHEDULE 14A INFORMATION
(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:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
|_| Definitive Proxy Statement Commission Only (as permitted by
|_| Definitive Additional Materials Rule 14a-6(e)(2))
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
COMMISSION FILE NO. 0-18856
DIGITAL BIOMETRICS, INC.
(Name of Registrant as Specified in Its Charter)
AVRON L. GORDON, ESQ.
JEFFREY L. COTTER, ESQ.
BRIGGS AND MORGAN, P.A.
2400 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(612) 334-8400
(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:
DIGITAL BIOMETRICS, INC.
5600 ROWLAND ROAD
MINNETONKA, MN 55343-4315
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Digital Biometrics, Inc. will be held at the Lutheran Brotherhood Auditorium,
625 Fourth Avenue South, Minneapolis, Minnesota on Tuesday, March 18, 1997, at
3:30 p.m. for the following purposes:
1. To elect five directors, each to serve until the next Annual
Meeting of Stockholders and until their respective successors
shall be elected and qualified;
2. To adopt an Amended and Restated Certificate of Incorporation
of the Company to provide, among other things, for an increase
in the number of shares of Common Stock authorized from
20,000,000 to 50,000,000 and to authorize the issuance of up
to 5,000,000 shares of preferred stock;
3. To adopt an amendment to the Company's 1990 Stock Option Plan
to, among other things, increase the number of shares for
which options may be granted under such plan from 1,500,000 to
2,000,000 shares;
4. To ratify the appointment of KPMG Peat Marwick LLP,
independent certified public accountants, as auditors of the
Company for its fiscal year ending September 30, 1997; and
5. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or
any adjournment thereof.
The transfer books of the Company will not be closed for the Annual
Meeting. Stockholders of record at the close of business on January 15, 1997 are
entitled to receive notice of, and to vote at, the Annual Meeting.
All stockholders are cordially invited and requested to attend the
Annual Meeting in person. Stockholders who are unable to be present in person
are requested to execute and promptly return the accompanying Proxy in the
enclosed envelope. The Proxy is being solicited by the Board of Directors of the
Company. Your attendance at the meeting, whether in person or by Proxy, is
important to ensure a quorum. If you return the Proxy, you still may vote your
shares in person by giving written notice (by subsequent Proxy or otherwise) to
the Secretary of the Company at any time prior to your vote at the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
James C. Granger
President
Minnetonka, Minnesota
February __, 1997
DIGITAL BIOMETRICS, INC.
5600 ROWLAND ROAD
MINNETONKA, MN 55343-4315
-------------------
PROXY STATEMENT FOR
1997 ANNUAL MEETING OF
STOCKHOLDERS
------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors (the "Board of Directors" or the "Board")
of Digital Biometrics, Inc. (the "Company"), to be voted at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held at the Lutheran Brotherhood
Auditorium, 625 Fourth Avenue South, Minneapolis, Minnesota at 3:30 p.m. on
Tuesday, March 18, 1997, and at any adjournment thereof, for the purposes set
forth in the accompanying Notice of Meeting. The mailing of this Proxy Statement
and accompanying Proxy are first being mailed to stockholders on or about
February __, 1997.
The Board of Directors knows of no business which will be presented at
the Annual Meeting other than the matters referred to in the accompanying Notice
of Meeting. However, if any other matters are properly presented at the Annual
Meeting, it is intended that the persons named in the Proxy will vote on such
matters in accordance with his judgment. If the enclosed Proxy is executed and
returned, it nevertheless may be revoked at any time before it has been voted by
a later dated Proxy or a vote in person at the Annual Meeting. Shares
represented by properly executed Proxies received on behalf of the Company will
be voted at the Annual Meeting (unless revoked prior to their vote) in the
manner specified therein. If no instructions are specified in a signed Proxy
returned to the Company, the shares represented thereby will be voted (i) in
FAVOR of the election of the director nominees listed in the enclosed Proxy,
(ii) in FAVOR of the adoption of the Amended and Restated Certificate of
Incorporation, (iii) in FAVOR of the amendment to the Company's 1990 Stock
Option Plan, and (iv) in FAVOR of the ratification of the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company's 1997 fiscal year.
VOTING RIGHTS AND OUTSTANDING COMMON STOCK
Only holders of the common stock of the Company ("Common Stock") whose
names appear of record on the books of the Company at the close of business on
January 15, 1997, are entitled to receive notice of, and to vote at, the Annual
Meeting. On that record date, the only outstanding shares of capital stock of
the Company were shares of Common Stock, of which 11,096,067 shares were
outstanding. Each share of Common Stock is entitled to one vote on each matter
to be presented at the Annual Meeting.
The presence, in person or by Proxy, of at least a majority of the
total number of shares of Common Stock issued and outstanding and entitled to
vote is necessary to constitute a quorum for the transaction of business at the
Annual Meeting. All votes will be tabulated by the inspector of election for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes (other than in connection with the
election of directors). An abstention will be counted as a vote withheld on the
election of directors. Broker non-votes are not counted for any purpose in
determining whether a matter has been approved.
Assuming the presence of a quorum, directors must be elected by a
plurality of the shares of Common Stock represented and entitled to vote at the
Annual Meeting. The vote of a majority of the shares of Common Stock represented
and entitled to vote at the Annual Meeting is required for the passage of
Proposals 2 through 4.
I. PROPOSAL FOR
ELECTION OF DIRECTORS
The Board of Directors approved an amendment to the Company's Bylaws
which permits the election of up to nine directors. The Board of Directors
believes that the Company may benefit from the services of additional Board
members as such persons are identified in the future. The Board previously
established the number of directors at five, currently has five directors and
five nominees are presented below for election.
The Board of Directors held ten meetings during the Company's fiscal
year ended September 30, 1996. Each director attended at least 75% of the total
number of meetings of the Board and the total number of meetings held by all
committees of the Board on which he served during the fiscal year ended
September 30, 1996. See "- Committees."
NOMINEES FOR ELECTION AS DIRECTOR
The following table sets forth certain information regarding the
nominees for election as director of the Company. All of the directors of the
Company elected at the Annual Meeting will serve until the next annual meeting
of the Company's stockholders and until their respective successors shall be
elected and qualified.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME COMMITTEE
NAME TITLE AGE DIRECTOR ASSIGNMENTS
- ------------------------- -------------------------------------- ----- ----------- ------------
<S> <C> <C> <C> <C>
James C. Granger President, Chief Executive Officer and 50 1997
Director
C. McKenzie Lewis III Chairman and Member of Board of 50 1993 C,N
Directors
Jack A. Klingert Director 67 1987
George Latimer Director 61 1990 A, C, N
Stephen M. Slavin Director 56 1986 A
- ------------------------
A - Audit Committee C - Compensation and Personnel Committee N - Nominating Committee
</TABLE>
The following discussion describes the business experience and
background of the nominees. With the exception of Mr. Granger, each of the
nominees currently serves as a director of the Company.
JAMES C. GRANGER. Mr. Granger became the Company's President and Chief
Executive Officer in January 1997. Prior to joining the Company, Mr. Granger was
employed by ADC Telecommunications, Inc. as President of its Access Platforms
System between March 1995 and December 1996. Between 1989 and February 1995, Mr.
Granger was employed by Sprint/United Telephone, Orlando, Florida, in various
senior marketing and management positions. Prior to 1989, Mr. Granger was
employed by American Telephone & Telegraph in various management positions.
C. MCKENZIE LEWIS III. In October 1996, Mr. Lewis was elected Chairman
of the Company's Board of Directors. Between 1986 and 1996, Mr. Lewis served as
Chief Executive Officer and President and a director of Computer Network
Technology Corporation ("CNT"). CNT is a developer and manufacturer of high
performance extended channel networking systems. Mr. Lewis has over 25 years
experience in the computer and data communications industry. Mr. Lewis is
currently Managing General Partner in MMP Partners Limited Partnership, a
Minnesota limited partnership engaged primarily in making venture capital
investments.
JACK A. KLINGERT. Mr. Klingert served as the Company's Chairman from
1987 through October 1996, and has served as the Company's President and Chief
Executive Officer since 1987. Prior to joining the Company in April 1987, Mr.
Klingert, from 1964 to 1987, held a number of senior level management positions
with Control Data Corporation ("CDC") involving market development, regional
management, corporate administration and other management tasks. Mr. Klingert
was also a member of CDC's policy committee. While at CDC, Mr. Klingert was
extensively involved in identifying new markets and developing operations in
emerging international markets, including negotiating and concluding several
sizable contracts with foreign businesses and governments. From 1958 to 1964,
Mr. Klingert worked on various classified scientific and systems programming
projects in the Departments of Theoretical Physics and Computation at the
Lawrence Livermore National Laboratories, Livermore, California.
GEORGE LATIMER. Since November 1995, Mr. Latimer has been Chief
Executive Officer of the National Equity Fund, a syndicator of financing for
affordable housing in Chicago, Illinois, and a Distinguished Visiting Professor
of Urban Studies at Macalester College, Saint Paul, Minnesota. From July 1993 to
November 1995, Mr. Latimer was Director, Office of Special Actions, United
States Department of Housing and Urban Development ("HUD"). From February 1993
to July 1993, Mr. Latimer was employed as a consultant to HUD. From 1990 to
1993, Mr. Latimer was Dean of Hamline University School of Law, Saint Paul,
Minnesota. From 1976 to 1990, Mr. Latimer served as the Mayor of Saint Paul,
Minnesota. Mr. Latimer is a member of the Board of Directors of Piper Jaffray
Investment Trust and the Board of Directors of Payless Cashways, Inc.
STEPHEN M. SLAVIN. Mr. Slavin, for more than the past five years, has
been engaged in the private practice of law, as a partner of Foley & Lardner,
Chicago, Illinois since September 1, 1991 and of Coffield Ungaretti Harris &
Slavin, Chicago, Illinois, prior to that time.
DIRECTOR COMPENSATION
Directors who are not employees of the Company ("Non-Employee
Directors") receive grants of shares of restricted Common Stock of the Company
("Restricted Stock") pursuant to the Company's 1992 Restricted Stock Plan to
compensate them for their service as directors. Each time a Non-Employee
Director is elected or re-elected to the Board, he is granted the number of
shares of Restricted Stock equal to $18,000 divided by the fair market value of
one share of Common Stock on the close of business on the day prior to the date
of grant. The Restricted Stock is granted on the date of the annual
stockholders' meeting to each Non-Employee Director elected or re-elected at
such meeting. The Restricted Stock vests over a three-year period and is subject
to forfeiture if the director resigns prior to completion of a three-year
vesting period. During the fiscal year ended September 30, 1996, each
Non-Employee Director received an option grant under the Company's 1992
Restricted Stock Plan to purchase 4,364 shares of Common Stock.
Messrs. Slavin, Latimer and Mr. Jon H. Magnusson, a director of the
Company during fiscal year 1996, were compensated $250 by the Company for each
meeting of an independent committee of the Company's Board of Directors (the
"Independent Committee") that he attended. Mr. Lewis, who is also a member of
the Independent Committee, was compensated $19,000 for his efforts in
organizing, directing and managing the efforts of the Independent Committee. The
Independent Committee was created by the Board to consider, analyze, review and
study various strategic initiatives and plans available for implementation by
the Company and to make recommendations to the Board with respect to such plans
and initiatives.
Directors who are employees of the Company are not separately
compensated for their service as directors.
COMMITTEES
The Board of Directors of the Company currently has four Committees to
assist it in carrying out the duties of the Board.
During fiscal year 1996, the Audit Committee was comprised of Messrs.
Latimer (Chairman), Magnusson and Slavin. The responsibilities of the Audit
Committee, in addition to such other duties specified by the Board of Directors,
include the following: (1) recommending independent accountants to the Board of
Directors; (2) reviewing the timing, scope and results of the independent
auditors' examination and related fees; (3) reviewing periodic comments and
recommendations made by the independent auditors; and (4) reviewing the scope
and adequacy of internal accounting controls. Two meetings of the Audit
Committee were held during the fiscal year ended September 30, 1996.
During fiscal year 1996, the Compensation and Personnel Committee was
comprised of Messrs. Lewis (Chairman), Latimer, and Magnusson. The
responsibilities of the Compensation and Personnel Committee include making
recommendations to the Board of Directors with respect to compensation for
executive employees of the Company and overseeing the Company's stock option
plans. Three meetings of the Compensation and Personnel Committee were held
during the fiscal year ended September 30, 1996.
A Nominating Committee was appointed by the Board on December 5, 1996,
and was initially comprised of Messrs. Lewis (Chairman), Magnusson and Latimer.
The Nominating Committee makes recommendations regarding the composition of the
Board of Directors and nomination of individuals for election by the
stockholders of the Company. The Nominating Committee did not meet during fiscal
year 1996.
On March 25, 1996, the Board established the Independent Committee,
which was comprised of Messrs. Lewis, Latimer, Slavin and Magnusson, to
consider, analyze, review and study various strategic initiatives and plans
available for implementation by the Company and to make recommendations to the
Board with respect to such plans and initiatives. Ten meetings of the
Independent Committee were held during fiscal year 1996.
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Personnel Committee (the "Compensation Committee")
is composed of independent, outside directors whose names appear following this
report. The Compensation Committee's responsibilities include determining the
amount and type of compensation for the executive officers of the Company, as
well as administering the Company's Common Stock-based benefit plans.
The Compensation Committee's philosophy is to maximize corporate
performance. The Compensation Committee believes that stockholder value depends,
to a significant extent, on the establishment of a close alignment between the
financial interests of stockholders and those of the Company's employees, in
particular its executive officers. Compensation of the Company's executive
officers is therefore, in large part, based upon the performance of the Company
as measured by revenue and profitability objectives. Compensation of the
Company's executive officers includes three primary elements: base compensation,
annual incentives and long-term incentives in the form of stock options or
restricted stock.
BASE COMPENSATION
Annual base salaries for the Company's executive officers, other than
the Company's President and Chief Executive Officer are recommended by the
President, subject to approval by the Compensation Committee. Individual salary
recommendations may vary based upon the President's assessment of the value of
each executive's position in the Company, Company performance, the executive's
individual performance and comparative compensation for similar positions at
other companies as contained in summary survey data. Each executive officer has
executed an Employee Confidentiality Non-competition and Proprietary Rights
Agreement which contains provisions for the protection of the Company's
proprietary information, and assignment to the Company of any inventions
developed by the executive in connection with his employment and restrictions on
the executive's ability to subsequently perform services for a competitor of the
Company. The annual compensation for the President and Chief Executive Officer
is determined by the Compensation Committee as discussed below.
INCENTIVE COMPENSATION
Effective October 1, 1992, the Compensation Committee adopted an
Executive Compensation Plan ("the Plan") for executive officers of the Company.
The Plan is performance based and includes both annual and long-term incentive
components. Performance under each Plan component is measured against
predetermined revenue and profitability objectives with a "threshold" and "goal"
for each. The Plan also includes the ability to assign individual management
objectives. Threshold and goal amounts are based upon the annual budget for
revenue and profitability established by the Board of Directors as of the
beginning of each fiscal year. Performance below threshold results in no annual
or long-term incentive award. Financial results between threshold and goal are
linearly interpolated and performance at goal results in the maximum award.
There is no additional award payable under the Plan for performance above goal.
The Plan provides a basis by which, at the discretion of the Compensation
Committee, annual incentive awards to executives may be paid, all or partially,
through restricted stock awards under the Company's 1992 Restricted Stock Plan
with vesting over a three-year period. The long-term incentive awards to
executives consist of stock option awards under the Company's 1990 Stock Option
Plan with vesting over a three-year period.
Actual amounts paid under the Plan are based upon formula calculations
as defined in the Plan and for 1996 were paid to executives based upon
achievement of individual management objectives. No awards were paid under the
revenue and profitability components of the Plan as these objectives were not
achieved.
Stock option plans offered by the Company have been established to
provide all employees, including executive officers, with an opportunity to
share, together with stockholders of the Company, in the Company's long-term
performance. Periodic grants of stock options are considered at least annually
for eligible employees, with additional grants authorized in the sole discretion
of the Compensation Committee. Historically, discretionary awards have been made
in circumstances such as commencement of employment, initiation of employment
contracts, completion of significant product installations and execution of
significant agreements and/or following significant change in job responsibility
or title. Stock options granted under the 1990 Stock Option Plan generally have
a three-year vesting schedule and expire ten years from the date of grant. The
exercise price of options granted under the 1990 Stock Option Plan is equal to
the fair market value of the underlying stock on the date of grant.
CEO COMPENSATION AND TRANSITION AGREEMENT
Mr. Klingert's base salary is determined annually by the Compensation
Committee and was increased to $183,000 effective April 1, 1995. Incentive
compensation awards of restricted stock and stock options are determined by the
Compensation Committee and are based upon Company performance as defined in the
Plan. Mr. Klingert's performance measurement under the Plan was based on revenue
and profitability versus annual operating budget objectives as approved by the
Board of Directors at beginning of each fiscal year, as well as individual
objectives also established as of the beginning of each fiscal year. Similar
revenue and profitability objectives were established for the other executive
officers of Company. There were no adjustments to Mr. Klingert's salary for
fiscal 1996.
In October 1996, Mr. Klingert announced his resignation as chief
executive officer of the Company upon the appointment of his successor and
agreed to continue his employment for the period until a successor was appointed
(the "Transition Period"). A successor to Mr. Klingert was appointed effective
January 1, 1997. Pursuant to a transition agreement which the Company treats as
a financial transaction for the fiscal year ended September 30, 1996 (the
"Transition Agreement"), Mr. Klingert continued to be compensated by the Company
at his then current base salary for the remainder of the Transition Period,
after which he will be compensated by the Company at his then current base
salary for an additional 10 month period, during which he has agreed to provide
consulting services and advice to the Company up to 10 hours per week. In the
event that the Company requires Mr. Klingert's services beyond such amount, it
has agreed to pay him at the rate of $150.00 per hour. The Company has further
agreed to reimburse Mr. Klingert the cost of continuing his health insurance for
as long as he remains eligible for such coverage or until he reaches the age of
70, whichever is earlier. The Company has further agreed to forgive, as of
January 1, 2002, $179,550.00 of indebtedness of Mr. Klingert to the Company and
further agreed to a reduction of the number of shares of Common Stock pledged by
Mr. Klingert as collateral to secure payment of Mr. Klingert's indebtedness to
the Company, and agreed that, effective December 31, 1997, a Pledge Agreement
between Mr. Klingert and the Company would be terminated.
The Compensation Committee is confident that the Company's compensation
programs for Mr. Klingert and the other executive officers of the Company, which
provide clear and direct links between pay and performance, are aligned with the
long-term interests of the Company's stockholders.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), a tax deduction by corporate taxpayers, such as the Company, is
limited with respect to the compensation of certain executive officers unless
such compensation is based upon performance objectives meeting certain
regulatory criteria or is otherwise excluded from the limitation. Based upon the
Compensation Committee's commitment to link compensation with performance as
described in this report, the Compensation Committee currently intends to
qualify compensation paid to the Company's executive officers for deductibility
by the Company under Section 162(m).
February __, 1997
The Compensation and Personnel Committee
C. McKenzie Lewis III, CHAIRMAN
George Latimer
Jon H. Magnusson
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation paid by the Company for the last three fiscal years to its Chief
Executive Officer and other executive officers whose cash compensation exceeded
$100,000 in fiscal year 1996 (collectively, the "Named Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
---------------------------
AWARDS
ANNUAL ---------------------------
COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(2)(3) OPTIONS COMPENSATION(4)
- ------------------------------- ---- --------- -------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack A. Klingert(1) 1996 $ 188,035 $ - $ - $ - 4,618
1995 184,283 3,660 - 75,000 4,620
1994 174,541 10,380 131,423 11,000 4,498
Glenn M. Fishbine,
Senior Vice President - 1996 116,825 1,600 - 35,000 4,500
Technology 1995 110,553 5,650 - 45,000 4,253
1994 104,988 2,140 69,207 56,800 4,030
Donald E. Berg,
Vice President - 1996 110,057 7,910 - 35,000 4,618
Finance and Administration, 1995 104,278 7,985 - 45,000 4,620
Secretary and Treasurer 1994 98,972 8,080 82,128 6,400 4,498
Louis C. Petsolt,
Vice President - 1996 107,567 5,325 - - 4,618
Marketing and Sales 1995 101,937 5,325 - 45,000 4,620
1994 97,084 4,040 79,296 6,400 4,498
Paul J. Skrip,
Vice President - 1996 95,415 6,946 - - 4,618
Manufacturing Operations 1995 90,479 4,725 - - -
1994 25,695 - - 30,000 -
</TABLE>
- ---------------------------
(1) Mr. Klingert served as President and Chief Executive Officer of the
Company for fiscal 1996 and through December 31, 1996.
(2) The amounts in the table reflect the market value on the date of grant
of Restricted Stock awarded to the Named Officers. The number of
restricted shares held by the Named Officers and the market value of
such shares on September 30, 1996 were as follows: Mr. Klingert, 2,970
shares ($11,138); Mr. Fishbine, 1,564 shares ($5,865); Mr. Petsolt,
1,792 shares ($6,720); and Mr. Berg, 1,856 shares ($6,960). Vesting is
dependent on continued employment. The Company has paid no cash
dividends on its Common Stock. Restricted Stock awards would
participate in any future Common Stock dividends.
(3) Restricted Stock awards vest over a three-year period from the date of
grant.
(4) Represents Company match, in the form of Common Stock, of employee
401(k) contributions.
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following tables summarize stock option grants and option exercises
during fiscal year 1996 to or by the executive officers set forth below and
certain other information relative to such options.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(3)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE)(2) DATE 5%($) 10%($)
- ----------------- ------------- ---------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Glenn M. Fishbine 35,000 32% 5.50 06/24/06 121,062 306,795
Donald E. Berg 35,000 32% 5.50 06/24/06 121,062 306,795
</TABLE>
- --------------------------
(1) Subject to acceleration at the discretion of the Compensation Committee
or upon the death or disability of the optionee, each option becomes
cumulatively exercisable with respect to 33 1/3% of the shares covered
on each of the first three anniversaries of the grant date. Options
granted qualify as incentive stock options under Section 422(b) of the
Code.
(2) Fair market value per share on the date of grant, in accordance with
the 1990 Stock Option Plan.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(2)
ACQUIRED ON VALUE --------------------------------- ------------------------------
NAME EXERCISE (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ -------------- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack A. Klingert - - 154,000 50,000 $ - -
Glenn M. Fishbine - - 55,133 81,667 - -
Louis C. Petsolt - - 71,400 30,000 - -
Donald E. Berg - - 81,400 65,000 17,500 -
Paul J. Skrip - - 20,000 10,000 - -
</TABLE>
- -------------------------
(1) Market value of underlying securities on date of exercise minus the
exercise price.
(2) Market value of underlying securities at year-end minus the exercise
price for in-the-money options.
SECURITY OWNERSHIP
The following table sets forth as of January 15, 1997 the number of
shares of Common Stock owned by (i) each person known to be the beneficial owner
of 5% or more of the Common Stock, (ii) each director, nominee for director and
executive officer of the Company, and (iii) all officers and directors as a
group. Any shares reflected in the following table which are subject to an
option or a warrant are deemed to be outstanding for the purpose of computing
the percentage of Common Stock owned by the option or warrant holder if
exercisable within 60 days of the date of this Proxy Statement, but are not
deemed to be outstanding for the purpose of computing the percentage of Common
Stock owned by any other person. Except as otherwise indicated, each beneficial
owner sole voting and investment power over the outstanding shares of which he
has beneficial ownership. Unless otherwise noted, the address for the following
persons is 5600 Rowland Road, Suite 205, Minnetonka, Minnesota 55343-4315.
<TABLE>
<CAPTION>
Shares
Beneficially Owned(1)
-------------------------
Name of Beneficial Owner or Group Number Percent
- ----------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Gordon L. Bramah and Bramah Incorporated (2) .......................... 1,053,435 9.5%
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Jack A. Klingert (3)................................................... 284,557 2.5
Glenn M. Fishbine (4).................................................. 167,128 1.5
Jon H. Magnusson (5) .................................................. 101,829 *
Stephen M. Slavin (6) ................................................. 82,030 *
330 North Wabash Avenue
Chicago, Illinois 60611
Paul J. Skrip (7)...................................................... 22,125 *
George Latimer (8) .................................................... 17,079 *
547 West Jackson
Chicago, IL 60661
C. McKenzie Lewis III (9) ............................................. 17,679 *
James C. Granger....................................................... 4,000 *
All officers and directors as a group (8 persons) ..................... 696,427 6.1%
</TABLE>
- --------------------------
*Indicates an amount less than one percent.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Commission and accordingly, may include
securities owned by or for, among others, the spouse, children or
certain other relatives of such person as well as other securities as
to which the person has or shares voting or investment power or has the
right to acquire within 60 days. The same shares may be beneficially
owned by more than one person.
(2) Includes the shares of Common Stock owned by Bramah Incorporated.
Although Mr. Bramah may be deemed a beneficial owner of the shares
owned by Bramah Incorporated for purposes of the securities laws of the
United States, he otherwise disclaims beneficial ownership of such
shares.
(3) Includes 105,557 shares of Common Stock owned by Mr. Klingert and
179,000 shares of Common Stock that may be acquired pursuant to
options, exercisable at prices from $7.75 to $15.75 per share, all of
which are fully exercisable.
(4) Includes 45,328 shares of Common Stock owned by Mr. Fishbine and
121,800 shares of stock which Mr. Fishbine will be eligible to purchase
at prices from $7.75 to $14.75 per share, all of which are fully
exercisable.
(5) Includes 79,329 shares of Common Stock beneficially owned by Mr.
Magnusson and options for 22,500 shares of Common Stock, exercisable at
prices from $1.67 to $9.50 per share.
(6) Includes 44,530 shares of Common Stock owned by Mr. Slavin and 37,500
shares of Common Stock that may be acquired subject to options
exercisable at prices from $1.67 to $9.50 per share.
(7) Includes 2,125 shares of Common Stock owned by Mr. Skrip and 20,000
shares eligible to be purchased by Mr. Skrip at $5.875 per share
pursuant to stock options, all of which are fully exercisable.
(8) Includes 9,579 shares of Common Stock beneficially owned by Mr. Latimer
and an option for 7,500 shares of Common Stock, exercisable at a price
of $9.50 per share.
(9) Includes 9,579 shares of Common Stock beneficially owned by Mr. Lewis
and an option for 8,100 shares of Common Stock, exercisable at a price
of $3.125 per share.
There are no arrangements known to the Company which at a later date may
result in a change in control of the Company.
COMMON STOCK PERFORMANCE
The following graph compares cumulative total stockholder return on an
investment in the Common Stock during the period from December 7, 1990, the date
of the Company's initial public offering, to September 30, 1996, with The NASDAQ
Stock Market Index ("COMP") and the Company's primary competitor, Identix
Corporation ("IDX"). The cumulative total stockholder return assumes an initial
investment of $100 on December 7, 1990.
DIGITAL BIOMETRICS, INC.
Indexed Price Performance
December 7, 1990 to September 30, 1996
December 7, 1990 = 100
Indexed Price Performance
-------------------------
DATES DBII IDX COMP
----- ---- --- ----
DATES DBII IDX COMP
12/07/90 100.0 100.0 100.0
3/31/91 263.2 187.0 129.4
9/30/91 440.8 193.5 141.8
3/31/92 483.6 193.5 162.5
9/30/92 379.6 148.3 157.0
3/31/93 581.6 83.8 185.7
9/30/93 722.4 125.8 205.3
3/31/94 538.7 190.3 200.1
9/30/94 355.1 164.5 205.7
3/31/95 422.4 170.9 220.0
9/30/95 349.0 670.8 280.9
3/31/96 168.4 599.8 297.8
9/30/96 183.7 496.6 330.2
The Common Stock has been traded on the Nasdaq National Market since
April 25, 1993, and was traded on the Nasdaq SmallCap Market prior to that time.
The Common Stock is traded under the symbol DBII.
CERTAIN TRANSACTIONS
Bramah Incorporated has provided substantial financial assistance to
the Company. From the Company's inception in 1985 through completion of a 1989
private offering, Bramah Incorporated provided substantially all of the funds
utilized by the Company for product development and working capital. In
connection with its financial assistance, Bramah Incorporated was granted stock
purchase warrants for the purchase of 157,500 shares of Common Stock at an
exercise price of $2.00 per share and an exclusive license in the United Kingdom
for the Company's technology. These warrants were exercised by Bramah
Incorporated on November 29, 1995.
During fiscal year 1996, legal services were provided to the Company by
Foley & Lardner, Chicago, Illinois. Mr Slavin is a partner of such firm.
II. PROPOSAL TO
ADOPT AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The General Corporation Law of the State of Delaware ("Delaware Law")
permits a corporation to restate and integrate in a single certificate the
provisions of its certificate of incorporation as previously amended, including
any further amendments adopted at the same time with the restated certificate.
On December 17, 1996, the Board of Directors adopted the proposed Amended and
Restated Certificate of Incorporation of the Company ("Restated Certificate")
described below, subject to approval by the Company's stockholders.
The Company's Certificate of Incorporation was originally filed with
the Secretary of State of the State of Delaware on December 19, 1986, and has
been amended several times since then (collectively, the "Present Certificate").
Also, Delaware Law has been amended over time generally allowing for greater
flexibility in management of Delaware companies and in certain respects making
provisions of the Present Certificate duplicative or redundant of powers and
rights granted in the Delaware Law.
The principal differences between the proposed Restated Certificate and
the Present Certificate are summarized below. Such summary is not intended to be
complete and is subject to, and qualified in all respects by the text of the
Restated Certificate set forth as Exhibit A hereto.
INCREASE IN AUTHORIZED SHARES
Under the Present Certificate, the total number of shares of Common
Stock which the Company is authorized to issue is 20,000,000. Further, the
Present Certificate does not permit the Company to issue shares of preferred
stock. Article IV of the Restated Certificate increases the number of shares of
Common Stock which the Company is authorized to issue to 50,000,000 and
authorizes the issuance of up to 5,000,000 shares of preferred stock. The
stockholders of the Company do not have any preemptive right to purchase or
subscribe for any part of any new or additional issuance of the Company's
securities.
COMMON STOCK
The Restated Certificate provides that the Company is authorized to
issue up to 50,000,000 shares of Common Stock, each of which is entitled to one
vote. The Restated Certificate further provides for various rights to which the
holders of such stock are entitled.
As of January 15, 1997, there were 11,096,067 shares of Common Stock
outstanding and an aggregate of 328,679 shares of Common Stock were reserved for
issuance in connection with stock options granted under the Company's 1990 Stock
Option Plan, its 1992 Restricted Stock Plan and its Retirement Plan, and options
granted to certain executive officers. If the proposed amendment is approved,
the additional authorized shares that would be available for issuance may be
issued for any proper corporate purpose by the Board of Directors at any time
without further corporate approval (subject, however, to applicable statutes or
the rules of The Nasdaq Stock Market which require stockholder approval for the
issuance of shares in certain circumstances). Although the Company has no
intention or commitment to issue any additional shares of Common Stock as of the
date of this Proxy Statement, the Board of Directors believes it is desirable to
give the Company additional flexibility in considering such actions as stock
dividends, raising capital, acquisitions or other corporate purposes. The
authorization of such shares will enable the Company to act promptly and without
additional delay if appropriate circumstances arise which require the issuance
of such shares.
On May 2, 1996, pursuant to the recommendations of the Company's
Independent Committee, the Board adopted a shareholder rights plan (the "Rights
Plan"), and declared a dividend of one purchase right (a "Right") for each share
of Common Stock outstanding at the close of business on May 22, 1996 (the
"Record Date"). The Rights Plan is designed to enable the Company and its Board
of Directors to develop and preserve long-term value for its stockholders and to
protect stockholders in the event an attempt is made to acquire control of the
Company without an offer of fair value to all stockholders. The Rights will be
issued upon the terms and subject to the conditions set forth in a Rights
Agreement dated as of May 2, 1996 (the "Rights Agreement"), between the Company
and Norwest Bank Minnesota, National Association, as Rights Agent. Each Right
will entitle the registered holder to purchase from the Company after the
Distribution Date (as described below), a number of shares of Common Stock to be
determined under the Rights Agreement at an initial purchase price of $35 (the
"Purchase Price"), subject to adjustment. The Rights become exercisable on the
first day after the Distribution Date which is defined as the earlier of (i) 10
business days after a public announcement that a person or group of affiliated
or associated persons (not including the Company, any subsidiary of the Company,
any person holding shares of Common Stock acquired in a transaction approved in
advance in writing by a majority of the disinterested directors of the Board of
Directors of the Company, any employee benefit plan of the Company or its
subsidiaries or any entity holding shares of Common Stock for or pursuant to any
such plan, or any person who beneficially owns 7.5% or more of the shares of
Common Stock outstanding on the 20th day preceding the Record Date, to the
extent of such ownership), have acquired beneficial ownership of 15% or more of
the outstanding shares of Common Stock, or (ii) 10 business days after the
commencement of, or the first public announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in
beneficial ownership by a person or group (excluding the Company, any subsidiary
of the Company, any employee benefit plan of the Company or of its subsidiaries,
any entity holding shares of Common Stock for or pursuant to any such plan, and
any person holding shares of Common Stock acquired in a transaction approved in
advance in writing by a majority of the disinterested directors of the Board of
Directors of the Company) of 15% or more of the shares of Common Stock
outstanding. The Rights will expire on April 30, 2006 (the "Final Expiration
Date"), unless the Final Expiration Date is extended or unless the Rights are
earlier redeemed or exchanged by the Company. The Company does not currently
have a sufficient number of shares of Common Stock available for purchase by
holders of the Rights should the Rights become exercisable. Thus, the
authorization of additional shares will enable the Company to have shares of
Common Stock available for issuance under the Rights Plan, as well as for other
important corporate purposes.
Except as discussed above, there are no specific understandings,
arrangements or agreements with respect to any transactions that would require
the Company to issue any new shares of its Common Stock, other than proposed
stock option grants to employees and directors pursuant to the Company's 1990
Stock Option Plan.
PREFERRED STOCK
The Restated Certificate authorizes the Board to issue up to 5,000,000
shares of preferred stock. The Restated Certificate sets forth the rights which
may accrue to holders, if any, of shares of preferred stock. Such rights may
include (i) cumulative voting rights, (ii) a preference with respect to payments
of dividends by the Company or any distribution of the Company's assets, (iii)
the right to convert shares of preferred stock into shares of any other class or
series of capital stock of the Company, (iv) the right to exchange shares of
preferred stock for cash, stock or indebtedness of the Company, and (v)
preferential voting rights vis-a-vis holders of shares of the Company's Common
Stock.
As with the additional shares of Common Stock, the Company believes
that authorization of shares of preferred stock will provide the Company with
greater flexibility in arranging financing, stock dividends, effecting
acquisitions and for other corporate purposes. The authorization of shares of
preferred stock will enable the Company to act promptly and without additional
delay if appropriate circumstances arise which require the issuance of such
shares. The Company has no present intention to issue any shares of preferred
stock.
The Company believes that its currently authorized capital structure is
insufficient. As a result, failure on the part of the Company's stockholders to
adopt the Restated Certificate will preclude the Company from considering
additional financing arrangements, acquisitions or other business combinations
which require the issuance of equity securities or debt securities which are
convertible into shares of capital stock of the Company.
Although not intended as an anti-takeover device, issuing additional
shares could impede a non-negotiated acquisition of the Company by diluting the
ownership interests of a substantial stockholder, increasing the total amount of
consideration necessary for a person to obtain control of the Company or
increasing the voting power of friendly third parties. The Board could authorize
voting rights per share that are the same as or different than the voting rights
of the outstanding shares of Common Stock.
MISCELLANEOUS PROVISIONS
In addition to the above summary, the name and address of the
incorporator of the Company has been eliminated from the Restated Certificate.
This matter is specifically covered by Delaware law, and deletion of this
provision from the Restated Certificate does not result in any change to the
Company's corporate governance or business operations or the rights, powers and
privileges of the stockholders of the Company. The Restated Certificate also
makes certain article and section reference changes due to the elimination of
certain articles and sections in the Restated Certificate.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE PROPOSAL TO
ADOPT THE RESTATED CERTIFICATE.
III. PROPOSAL TO APPROVE THE AMENDMENTS TO THE
1990 STOCK OPTION PLAN
BACKGROUND AND SUMMARY OF PLAN
On April 28, 1989, the Board of Directors and stockholders of the
Company adopted the 1990 Stock Option Plan (the "1990 Plan") which provides for
the granting of stock options to designated employees and non-employees, to
purchase up to an aggregate of 1,500,000 shares of Common Stock. Options that
qualify as "incentive stock options" within the meaning of Section 422 of the
Code, and options that do not qualify as such "incentive stock options"
("non-qualified stock options") may be granted under the 1990 Plan.
The 1990 Plan permits a committee composed of disinterested persons to
award stock options and permits the grant of stock options for up to an
aggregate of 1,500,000 shares of Common Stock. The terms of option grants are as
approved by the Compensation Committee, subject to certain conditions. The
exercise price per share may not be less than the fair market value of a share
of the underlying Common Stock on the date the option is granted.
The 1990 Plan is administered by the Compensation Committee, which has
the authority (i) to interpret the plan document, (ii) to establish rules for
the 1990 Plan's administration, (iii) to determine all terms and conditions of
awards to be made under the 1990 Plan, subject to the limitation expressed
therein, and (iv) to amend or modify the terms of outstanding awards, including
accelerating the exercisability or vesting of an award or extending the term of
an award.
The Board of Directors may amend the 1990 Plan in such respects as is
deemed advisable. No such amendment will be effective without the approval of
the Company's stockholders if stockholder approval of the amendment is required
pursuant to Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
Section 422 of the Code or the rules of The Nasdaq Stock Market or any other
quotation system or stock exchange on which the shares of the Company's Common
Stock may be listed.
If there is any material change in the corporate structure or shares of
Common Stock, such as in connection with a merger or a consolidation, the
Compensation Committee (or the board of directors of any surviving corporation)
shall make appropriate adjustments in the aggregate number and kind of
securities to be awarded under the 1990 Plan and in the number of shares and
purchase price per share, if any, under any awards outstanding under the 1990
Plan. If all or any portion of an award terminates, expires or is canceled
unexercised or unvested, then the shares subject to such an award will
automatically become available for reissuance under the 1990 Plan.
No option granted under the 1990 Plan may be transferred by a
participant for any reason or by any means, except by will or by the laws of
descent and distribution. Options may not be granted under the 1990 Plan after
January 1, 2000.
PROPOSED PLAN AMENDMENTS
The Board has approved, subject to stockholder approval, an amendment
to the 1990 Plan which would increase the aggregate number of shares of the
Company's Common Stock available under the 1990 Plan to 2,000,000. The Board
believes that this amendment to Article III of the 1990 Plan will advance the
interests of the Company and its stockholders by increasing the proprietary
interests of employees and non-employee directors in the Company's long-term
success and more closely aligning the interests of employees and such directors
with the Company's stockholders.
The Board has eliminated, subject to approval by the stockholders, a
provision from Article V of the 1990 Plan which prohibits any employee of the
Company to be granted options to purchase more than 100,000 shares of Common
Stock during any fiscal year. In January 1997, the Company hired James C.
Granger as its President and Chief Executive Officer. Section 422 of the Code
does not limit to 100,000 shares in any fiscal year the number of shares which
may be granted pursuant to incentive stock options. The Company, in forming an
acceptable compensation package for Mr. Granger, proposes to issue to him
options to purchase an aggregate of 250,000 shares of Common Stock, of which
150,000 shares are subject to stockholder approval of the amendments to the 1990
Plan. The Company believes that elimination of the 100,000 share restriction
will provide it with greater flexibility in providing non-cash compensation to
selected key employees.
The Board also amended Article X of the 1990 Plan, subject to approval
by the stockholders, to provide that the Compensation Committee, in its sole
discretion, has the authority to extend the period during which non-qualified
stock options granted under the 1990 Plan may be exercised. It has been the
Compensation Committee's experience that recipients of non-qualified stock
options occasionally lack the resources to exercise the option granted to him or
her prior to the option expiration date. This amendment provides the
Compensation Committee with the flexibility to extend the expiration date of
such options. This amendment does not require that the Compensation Committee
make such an extension; it merely provides the Compensation Committee with the
authority to do so. The Compensation Committee believes that the amendment to
Article X will provide it with the flexibility to reward long-term employees and
officers of the Company by extending the period during which they may exercise
non-qualified stock options granted to them under the 1990 Plan.
Finally, the Board of Directors also amended Article XI of the 1990
Plan, subject to approval by the Company's stockholders, to revise the period
during which options granted under the 1990 Plan may be exercised. As amended,
options granted under the 1990 Plan shall terminate, except as otherwise
provided therein, in cases of death or disability, (i) within a period not
longer than three months after the Optionee ceases to be employed by the
Company, in the case of Incentive Stock Options, or (ii) within a period not
longer than three months, or such other period as the Compensation Committee
shall determine, in the case of Non-qualified Stock Options. Options granted
under the 1990 Plan may be exercised, if otherwise timely, within three months
(or such other period of time not exceeding 12 months as determined by the
Compensation Committee) from the date of termination of the Optionee's status as
an employee of the Company by reason of Optionee's disability. In the case of
the death of an Optionee, any unexercised option granted to him under the 1990
Plan may be exercised by the Optionee's estate, or the person designated in such
Optionee's last will and testament or his heirs-at-law; provided, however, that
such option must be exercised no later than one (1) year after the date of the
death of the Optionee; and provided further that the Optionee was entitled to
exercise such option on the date of his death. The three-month exercise period
set forth above is not required by Section 422 of the Code with respect to
non-qualified options.
The Compensation Committee believes that these proposed amendments to
the 1990 Plan will provide it with the flexibility to extend the exercise period
during which non-qualified stock options may be exercised.
On January 15, 1997, there were outstanding options under the 1990 Plan
to purchase 1,276,350 shares of Common Stock, of which 150,000 shares are
subject to stockholder approval of the amendments to the 1990 Plan. On January
15, 1997, the market value of the additional shares for which options may be
granted pursuant to the Plan was $148,125. A copy of the amended Plan is
attached to this Proxy Statement as Exhibit B with the amended language
underlined for ease of reference.
TAX INFORMATION
An optionee will not incur any federal income tax liability as a result
of the grant of an incentive stock option ("ISO") or a non-qualified stock
option. The same is true when any option becomes exercisable. Upon the exercise
of a non-qualified option, the optionee will generally recognize ordinary income
for federal income tax purposes in an amount equal to the difference between the
fair market value of the shares at the time of exercise and the exercise price.
The income recognized by the optionee will be subject to tax withholding by the
Company, and the Company will be entitled to a tax deduction in an amount equal
to the amount of ordinary income recognized by the optionee. Upon resale of such
shares by the optionee, any difference between the sale price and the fair
market value of the shares at the time the option was exercised will be treated
as capital gain or loss.
Generally, an optionee will not incur federal income tax liability as
the result of an exercise of an ISO. However, except in the case of death or
disability, if an ISO is exercised more than three months after an optionee's
termination of employment (a "disqualifying exercise"), the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise price. For
purposes of calculating an optionee's alternative minimum tax, if any, the
difference between the fair market value of the shares at the time the ISO is
exercised and the exercise price becomes an item of adjustment. When the shares
acquired upon exercise of an ISO are sold, the optionee will be taxed on the
difference between the sale price and the exercise price. If such a sale does
not occur within two years of the date the ISO was granted or within one year of
the date it was exercised, then the gain, if any, will be treated as long-term
gain. If such a sale occurs within either of the time periods specified in the
preceding sentence (a "disqualifying disposition"), then the portion of the
optionee's gain equal to the difference between the fair market value of the
stock on the date of exercise (or, if less, the selling price) and the exercise
price will be treated as ordinary compensation income, while the balance of any
gain would be treated as capital gain. The Company is generally not entitled to
a deduction as a result of the grant or exercise of an ISO. However, if the
optionee recognizes ordinary income as a result of a disqualifying exercise or
disposition, the Company is entitled to a deduction in an equivalent amount in
the taxable year of the Company in which the disqualifying event occurs.
The foregoing is only a summary of the general effect of U.S. federal
income taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan and the subsequent sale of shares. This
summary does not discuss the income tax laws of any state or foreign country in
which an optionee may reside.
NEW PLAN BENEFITS
The following table sets forth the benefits that have been awarded as
of January 15, 1997 under the 1990 Plan. The 1990 Plan is described above. There
are no other options currently contemplated other than those described below,
although the amount of awards granted to date are not necessarily indicative of
the amounts that will be awarded in the future.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1990 STOCK OPTION PLAN
- ------------------------------------------------------------------------------------------------
NUMBER OF
NAME AND POSITION DOLLAR VALUE($) SHARES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
James C. Granger President and Chief Executive 531,250(1) 250,000
Officer
C. McKenzie Lewis Chairman 125,000(2) 40,000
Executive Group.......... 531,250 250,000
Non-Executive
Director Group........... 125,000 40,000
Non-Executive
Officer Employee
Group.................... - -
</TABLE>
- -----------------------------
(1) Dollar value calculated based on December 31, 1996 closing price of
$2.125 per share. 150,000 shares purchasable pursuant to the exercise
of Mr. Granger's options are subject to stockholder approval of
amendments to the 1990 Plan.
(2) Dollar value calculated based on October 31, 1996 closing price of
$3.125 per share.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE AMENDMENT TO
THE 1990 PLAN.
IV. PROPOSAL TO
RATIFY APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP as
independent accountants to examine the financial statements of the Company for
the fiscal year ending September 30, 1997. Unless otherwise directed, proxies
received by the Board of Directors will be voted in favor of the ratification of
such appointment.
Although this appointment is not required to be submitted to a vote of
stockholders, the Board believes it appropriate as a matter of policy to request
that the stockholders ratify the appointment. If stockholder ratification is not
received, the Board will reconsider the appointment.
KPMG Peat Marwick LLP has served as auditors for the Company since
1989. A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting and will be provided an opportunity to make a statement if he or
she desires and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and provide the Company with copies of such reports. Based solely on its review
of the copies of such forms received by it, or written representations from
certain reporting persons that no Forms 5 were required for those persons, the
Company believes that, during the past fiscal year its officers, directors and
greater than 10% stockholders complied with applicable filing requirements.
PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder who desires to submit a proposal for inclusion in the
1998 Proxy Statement should submit the proposal in writing to C. McKenzie Lewis
III, Chairman, Digital Biometrics, Inc., 5600 Rowland Road, Minnetonka,
Minnesota 55343-4315. The Company must receive such a proposal by September 10,
1997 in order to consider it for inclusion in the 1998 Proxy Statement.
EXPENSES OF SOLICITATION
The cost of this solicitation of Proxies will be paid by the Company.
It is anticipated that the Proxies will be solicited only by mail, except that
solicitation personally or by telephone may also be made by the Company's
regular employees who will receive no additional compensation for their services
in connection with the solicitation. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials and the annual report to beneficial owners of stock held
by such persons. The Company will reimburse such parties for their expenses in
so doing.
ANNUAL REPORT
A copy of the 1996 Annual Report to Stockholders of the Company
accompanies this Proxy Statement. A copy of the Company's Annual Report on Form
10-K for fiscal year 1996 will be provided without charge upon written request
of any stockholder whose Proxy is being solicited by the Board of Directors. The
written request should be directed to Stockholder Relations, Digital Biometrics,
Inc., 5600 Rowland Road, Minnetonka, Minnesota 55343-4315. No part of the 1996
Annual Report to Stockholders is incorporated herein and no part thereof is to
be considered proxy soliciting material.
BY ORDER OF THE BOARD OF DIRECTORS
James C. Granger
President
Minnetonka, Minnesota
February ___, 1997
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DIGITAL BIOMETRICS, INC.
The following Amended and Restated Certificate of Incorporation shall
supersede and take the place of the existing Certificate of Incorporation and
all amendments thereto:
ARTICLE I. NAME
The name of this Corporation is Digital Biometrics, Inc.
ARTICLE II. REGISTERED OFFICE
The address of the registered office of this Corporation in the State
of Delaware is 1013 Centre Road in the City of Wilmington, County of New Castle,
and the name of this Corporation's registered agent at such office is the United
States Corporation Company.
ARTICLE III. PURPOSE
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of State of Delaware.
ARTICLE IV. AUTHORIZED SHARES
A. Authorized Shares.
The total number of shares of capital stock which this Corporation is
authorized to issue is fifty-five million (55,000,000), of which fifty million
(50,000,000) shares shall be common stock, no par value ("Common Stock"), and
five million (5,000,000) shall be preferred stock, no par value ("Preferred
Stock").
B. Common Stock.
1. Each share of Common Stock shall, subject to provisions
contained elsewhere herein, have one vote, and except as provided by
resolutions adopted by this Corporation's Board of Directors providing
for the issuance of any class or series of Preferred Stock, the
exclusive voting power for all purposes shall be vested in the holders
of Common Stock.
2. Subject to any preferential rights of holders of Preferred
Stock, holders of Common Stock shall be entitled to receive their pro
rata share, based upon the number of shares of Common Stock held by
them, of such dividends or other distributions as may be declared by
the Board of Directors from time to time, and of any distribution,
after the payment or provision for payment of debts and other
liabilities of this Corporation, of the assets of this Corporation upon
its liquidation, dissolution or winding up, whether voluntary of
involuntary.
C. Preferred Stock.
1. The Board of Directors is hereby authorized to provide, by
resolution or resolutions adopted by the Board, for the issuance of
Preferred Stock from time to time in one or more class and/or series,
to establish the designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, and number of shares of each such class or
series, as stated and expressed herein and in the resolution or
resolutions providing for the issue of such class and/or series adopted
by the Board of Directors as hereinafter provided. Without limiting the
generality of the foregoing, the Board is authorized to provide that
shares of a class or series of Preferred Stock:
a. are entitled to cumulative, partially cumulative
or noncumulative dividends or other distributions payable in
cash, capital stock or indebtedness of this Corporation or
other property, at such times and in such amounts as are set
forth in the resolution or resolutions establishing such class
or series or as are determined in a manner specified in such
resolution or resolutions;
b. are entitled to a preference with respect to
payment of dividends over one or more other class and/or
series of capital stock of this Corporation;
c. are entitled to a preference with respect to any
distribution of assets of this Corporation upon its
liquidation, dissolution or winding up over one or more other
class and/or series of capital stock of this Corporation in
such amount as is set forth in the resolution or resolutions
establishing such class or series or as is determined in a
manner specified in such resolution or resolutions;
d. are redeemable or exchangeable at the option of
this Corporation and/or on a mandatory basis for cash, capital
stock or indebtedness of this Corporation or other property,
at such times or upon the occurrence of such events, and at
such prices, as are set forth in the resolution or resolutions
establishing such class or series or as are determined in a
manner specified in such resolution or resolutions;
e. are entitled to the benefits of such sinking fund,
if any, as is required to be established by this Corporation
for the redemption and/or purchase of such shares by the
resolution or resolutions establishing such class or series;
f. are convertible at the option of the holders
thereof into shares of any other class or series of capital
stock of this Corporation, at such times or upon the
occurrence of such events, and upon such terms, as are set
forth in the resolution or resolutions establishing such class
or series or as are determined in a manner specified in such
resolution or resolutions;
g. are exchangeable at the option of the holders
thereof for cash, capital stock or indebtedness of this
Corporation or other property, at such times or upon the
occurrence of such events, and at such prices, as are set
forth in the resolution or resolutions establishing such class
or series or as are determined in a manner specified in such
resolution or resolutions;
h. are entitled to such voting rights, if any, as are
specified in the resolution or resolutions establishing such
class or series (including, without limiting the generality of
the foregoing, the right to elect one or more directors voting
alone as a single class or series or together with one or more
other classes and/or series of Preferred Stock, if so
specified by such resolution or resolutions) at all times or
upon the occurrence of specified events; and
i. are subject to restrictions on the issuance of
additional shares of Preferred Stock of such class or series
or of any other class or series, or on the reissuance of
shares of Preferred Stock of such class or series or of any
other class or series, or on increases or decreases in the
number of authorized shares of Preferred Stock of such class
or series or of any other class or series.
Without limiting the generality of the foregoing authorizations, any of
the rights and preferences of a class or series of Preferred Stock may be made
dependent upon facts ascertainable outside the resolution or resolutions
establishing such class or series, and may incorporate by reference some or all
of the terms of any agreements, contracts or other arrangements entered into by
this Corporation in connection with the issuance of such class or series. Unless
otherwise specified in the resolution or resolutions establishing a class or
series of Preferred Stock, holders of a class or series of Preferred Stock shall
not be entitled to cumulate their votes in any election of directors in which
they are entitled to vote and shall not be entitled to any preemptive rights to
acquire shares of any class or series of capital stock of this Corporation.
ARTICLE V.
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and its
directors and stockholders:
A. The number of directors of the Corporation shall be such as from
time to time shall be fixed by, or in the manner provided in, the bylaws.
B. Elections of directors need not be by ballot unless the by-laws so
provide.
C. The Board of Directors shall have power without the assent or vote
of the stockholders to make, alter, amend, change, add to or repeal the by-laws
of the Corporation.
ARTICLE VI.
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of his fiduciary
duty as a director; provided, that nothing herein shall be construed to
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for act
or omissions involving bad faith, 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 an improper personal
benefit.
EXHIBIT B
DIGITAL BIOMETRICS, INC.
1990 STOCK OPTION PLAN
AS AMENDED
ARTICLE I
PURPOSE
The purpose of this 1990 Stock Option Plan is to provide additional
incentive to certain Employees who are making and can continue to make
substantial contributions to the success of Digital Biometrics, Inc. ("DBI") by
providing them with an opportunity to acquire a proprietary interest in DBI
through the grant and exercise of Incentive Stock Options and Non-qualified
Stock Options to purchase shares of DBI common stock. It is the judgment of
DBI's Board of Directors that the acquisition of a proprietary interest in DBI
by certain Employees will increase their personal interest in its growth and
progress, thereby promoting the interests of DBI.
ARTICLE II
DEFINITIONS
The following words and terms, as used in the Plan, shall have the
respective meanings hereinafter set forth unless a different meaning is clearly
required by the context. Whenever appropriate, words used in the singular shall
be deemed to include the plural, and the masculine gender shall be deemed to
include the feminine gender.
2.1 BOARD. The Board of Directors of DBI.
2.2 CODE. The Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.3 COMMITTEE. The Compensation and Personnel Committee of the
Board.
2.4 COMMON STOCK. The common stock of DBI.
2.5 EMPLOYEE. Any individual employed by and receiving
compensation from DBI or related Company.
2.6 EXCHANGE ACT. The Securities Exchange Act of 1934, as now in
effect or hereafter amended.
2.7 INCENTIVE STOCK OPTIONS. Options designated by the Committee
as qualifying under Code Section 422.
2.8 NON-QUALIFIED STOCK OPTIONS. Options designated by the
Committee as not qualifying under Code Section 422.
2.9 OPTION. An option to purchase a specific number of shares of
Common Stock for a specific purchase price granted by the
Committee pursuant to the Plan.
2.10 OPTION PRICE. The purchase price per share of Common Stock
pursuant to any Option granted under the Plan.
2.11 OPTIONEE. An Employee who is granted an Option by the
Committee pursuant to the Plan.
2.12 PARENT. Any corporation that is, with respect to DBI, a
"parent corporation," whether now or hereafter existing, as
defined in Code Section 424(e).
2.13 PLAN. The Digital Biometrics, Inc. 1990 Stock Option Plan as
set forth herein, as may be amended from time to time
hereafter.
2.14 RELATED COMPANY. Any corporation that is, along with DBI, a
member of a parent-subsidiary controlled group of
corporations, as defined in Code Section 1563(a)(1).
2.15 STOCKHOLDERS. The present stockholders or future stockholders,
as the case may be, of DBI.
2.16 SUBSIDIARY. Any corporation that is, with respect to DBI, a
"subsidiary corporation," whether now or hereafter existing,
as defined in Code Section 424(f).
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 The total number of shares of Common Stock which are available for
the granting of Incentive Stock Options and Non-qualified Stock Options shall be
an aggregate of 2,000,000 shares, subject to adjustment as provided below. In
the event of a capital adjustment resulting from a stock dividend (other than a
stock dividend in lieu of an ordinary cash dividend), stock split,
reorganization, spin-off, split-up or consolidation, combination or exchange of
shares or the like, the number of shares of Common Stock subject to the Plan and
the number of shares under Option in outstanding option agreements shall be
adjusted in a manner consistent with such capital adjustment; provided, however,
that no such adjustment shall require DBI to issue any fractional shares and the
adjustment shall be limited accordingly. The price of any shares under Option
shall be adjusted so that there will be no change in the aggregate purchase
price payable upon exercise of any such Option. The determination of the
Committee as to any adjustment shall be final.
3.2 At all times during the term of this Plan, DBI shall reserve for
issuance and delivery such number of shares of Common Stock as will be
sufficient to satisfy the requirements hereof.
3.3 If an Option granted under the Plan shall terminate, expire or be
cancelled for any reason without having been exercised in full by the Optionee,
the unpurchased shares of the Common Stock subject to the Option shall become
available for the granting of Options to other eligible Employees.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Committee. The Committee
shall consist of not less than two members of the Board who are "disinterested
persons" as defined in Rule 16b-3 under the Exchange Act. A majority of the
members of the Committee shall constitute a quorum. All determinations of the
Committee shall be made by at least a majority of its members. Any decision or
determination reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made by a unanimous vote
at a meeting duly called and held.
4.2 In accordance with the provisions of the Plan, the Committee shall
select the Employees to whom options shall be granted, shall determine the
number of shares subject to each Option, the time at which the Option is to be
granted, the type of Option, the Option period, the Option price and the manner
in which the Option becomes exercisable, and shall establish such other
provisions of the option agreements as the Committee may deem necessary or
desirable; provided, however, that any Option granted to an Employee who is
subject to the provisions of Section 16 of the Exchange Act on the date of the
grant shall not become exercisable (except as otherwise contemplated by Article
XI hereof or as otherwise specifically set forth in the option agreement) until
at least six months elapse from the date of grant. More than one Option may be
granted to the same Employee.
4.3 The Committee may adopt such rules and regulations for carrying out
the Plan as it may deem proper and in the best interests of DBI. The
interpretation of any provision of the Plan by the Committee and any
determination on the matters referred to in this Article IV shall be final.
4.4 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan.
ARTICLE V
ELIGIBILITY
Each Employee who is considered to be a key administrative, managerial,
executive or technical employee, as determined in the sole discretion of the
Committee, shall be eligible to be granted Options under the Plan.
ARTICLE VI
OPTION PRICE; OPTION GRANT
6.1 The purchase price per share of Common Stock subject to an Option
shall be fixed by the Committee, but shall not be less than the fair market
value of the Common Stock on the date such Option is granted, as determined
pursuant to Section 6.3 below.
6.2 Notwithstanding Section 6.1 above, the purchase price per share of
Common Stock subject to any Incentive Stock Option issued to an Employee who
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of DBI or of a Parent or Subsidiary on the date
such Incentive Stock Option is granted shall be one-hundred-ten percent (110%)
of the fair market value of such Common Stock on the date such Incentive Stock
Option is granted, as determined pursuant to Section 6.3 below.
6.3 For purposes of the Plan, the fair market value of a share of
Common Stock subject to an Option on the date such Option is granted shall be:
(i) If there is a market for such Common Stock on a stock
exchange, in an over-the-counter market, or otherwise, the
mean between the highest and lowest quoted selling prices on
the date of grant.
(ii) If there are no sales on the date of grant but were sales on
dates within a reasonable period both before and after the
date of grant, the fair market value is determined by taking a
weighted average of the means between the highest and lowest
sales prices on the nearest date before and the nearest date
after the date of grant. The average is to be weighted
inversely by the respective numbers of trading days between
the selling dates and the date of grant.
(iii) Any other method which determines, in the Committee's
discretion, fair market value of an option on date of grant in
accordance with the requirements of Code Section 422(b)(4) and
422(c)(1).
ARTICLE VII
ANNUAL LIMITATION ON OPTION EXERCISE
The aggregate fair market value of the Common Stock (determined at the
time the Option is granted) with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any calendar year, under
all Incentive Stock Option Plans of DBI, or any Parent or Subsidiary, shall not
exceed $100,000.
ARTICLE VIII
LIMITATION ON GRANTING OF OPTIONS
Any Options granted pursuant to the Plan must be granted within ten
(10) years from the earlier of the date the Plan is adopted by the Board or
approved by the Stockholders.
ARTICLE IX
NON-TRANSFERABILITY OF OPTIONS
Options granted pursuant to the Plan shall be non-transferable and
non-assignable by the Optionee other than by will or the laws of descent and
distribution and can only be exercised by an Optionee during the Optionee's
lifetime, except as otherwise provided in Article XI below in the event of the
death of the Optionee prior to the exercise of an Option.
ARTICLE X
EXERCISE OF OPTIONS
Any Option granted pursuant to this Plan must be fully exercised, or
else it shall terminate, within ten (10) years from the date that the Option is
granted, or such shorter period as the Committee may specify in granting the
Option; provided that any Incentive Stock Option issued to an Employee who owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of DBI or a Parent or a Subsidiary on the date such
Option is granted must terminate within a maximum of five (5) years from the
date such Option is granted; and provided further that the Committee shall, in
its sole discretion, have the authority to extend the period during which a
Non-qualified Stock Option granted under the Plan may be exercised, subject to
the provisions elsewhere contained in this Article X.
ARTICLE XI
EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH
All rights of an Optionee to exercise Options under the Plan , except
as otherwise provided herein in cases of death or disability, shall terminate
(i) in the case of Incentive Stock Options, three (3) months after the Optionee
ceases to be employed by DBI or a Related Company, or (ii) in the case of
Non-qualified Stock Options, three (3) months after the Optionee ceases to be
employed by DBI or a Related Company, or such other period as the Committee
shall determine. Options granted under the Plan may be exercised, if otherwise
timely within three (3) months (or such other period of time not exceeding
twelve (12) months as determined by the Committee) from the date of termination
of the Optionee's status as an employee of the Company by reason of Optionee's
disability. In the case of the death of an Optionee, any unexercised Option
granted to him under the Plan may be exercised by the Optionee's estate, the
person designated in such Optionee's last will and testament or his
heirs-at-law; provided, however, that such Option must be exercised no later
than one (1) year after the date of the death of the Optionee; and provided
further that the Optionee was entitled to exercise such Option on the date of
his death. Notwithstanding anything to the contrary contained herein, an Option
may not be exercised after the date of its termination pursuant to Article X
above.
ARTICLE XII
METHOD OF EXERCISE OF OPTIONS
12.1 Options shall be exercised by delivering a written notice of
exercise to DBI. Each such notice shall state the number of shares of Common
Stock in respect to which the Option is being exercised and must be signed by
the Optionee, and in the event the Option is being exercised by any person other
than the Optionee, be accompanied by proof, satisfactory to counsel for DBI, of
the right of such person to exercise the Option under the terms of this Plan,
and must be accompanied by full payment of the purchase price for the number of
shares of Common Stock specified in such notice, together with all applicable
Federal, state and local taxes. Full payment of the purchase price and any
applicable taxes may be accomplished by (i) the payment of cash or its
equivalent; (ii) with the consent of the Committee (as set forth in the option
agreement or otherwise), by tendering previously acquired shares of Common Stock
(valued at their fair market value as of the date of exercise, as determined by
the Committee consistent with the method of valuation set forth in Section 6.3
above); or (iii) with the consent of the Committee (as set forth in the option
agreement or otherwise), by any combination of the means of payment set forth in
subparagraphs (i) and (ii). For purposes of this Section 12.1, the term
"previously acquired shares of Common Stock" shall only include Common Stock
owned by the Employee prior to the exercise of the Option for which payment is
being made and shall not include shares of Common Stock which are being acquired
pursuant to the exercise of said Option. No shares shall be issued until full
payment therefor has been made.
12.2 DBI may deduct and withhold from any cash otherwise payable to the
Optionee (whether payable as salary, bonus or other compensation) such amount as
may be required for the purpose of satisfying DBI's obligation to withhold
Federal, state or local taxes. Further, in the event the amount so withheld is
insufficient for such purpose, DBI may require that the Optionee pay to DBI upon
its demand or otherwise make arrangements satisfactory to DBI for payment of
such amount as may be requested by DBI in order to satisfy its obligation to
withhold any such taxes.
12.3 With the consent of the Committee (as set forth in the option
agreement or otherwise), an Optionee may be permitted to satisfy DBI's
withholding tax requirements by electing to have DBI withhold shares of Common
Stock otherwise issuable to the Optionee or to deliver to DBI shares of Common
Stock having a fair market value on the date income is recognized pursuant the
exercise of an Option equal to the amount required to be withheld. The election
shall be made in writing and shall be made according to such rules and in such
form as the Committee may determine.
12.4 An Option shall not be deemed to have been exercised unless all
the provisions of Sections 12.1 and 12.2 above shall have been complied with,
and for all purposes, the date of exercise of the Option shall be the date on
which notice of exercise is delivered to DBI. DBI shall make immediately
delivery of certificates for the shares of Common Stock subject to the Option;
provided, however, that if any law or regulation requires DBI to take any action
with respect to the shares of Common Stock specified in such notice before the
issuance thereof, then the date of delivery shall be extended for the period
necessary. No Optionee shall be, or be deemed to be, the holder of any Common
Stock subject to an Option unless and until certificates for the shares of such
Common Stock are issued to him.
12.5 DBI shall not be required, upon the exercise of any Option, to
issue or deliver any shares of Common Stock prior to completion of such
registration or other qualification of such Common Stock under any state or
federal law, rule or regulation as DBI shall determine to be necessary.
12.6 Common Stock shall not be issued or delivered by DBI upon the
exercise of any Option unless the exercise of such Option and the issuance of
Common Stock thereto shall comply, in the sole judgment of DBI, with all
relevant provisions of law, including without limitation the Securities Act of
1933, as amended, and rules and regulations promulgated thereunder. Without
limiting the generality of the foregoing, DBI, in its sole determination, may
require any Optionee to represent and warrant at the time of any exercise of an
Option that the Common Stock to be issued and delivered thereunder is being
purchased only for investment and without any present intention to sell or
distribute such common stock.
ARTICLE XIII
MERGER OR CONSOLIDATION
In the event of any merger or consolidation of DBI with another
corporation (other than a merger with a subsidiary in which merger DBI is the
continuing corporation and which does not result in any change of the
outstanding shares of Common Stock issuable upon the exercise of an Option
granted under the Plan), as a condition thereto, DBI and its Board shall (1)
cause the continuing corporation to assume any Options previously granted under
the Plan, (2) cause the continuing corporation to issue new options in
substitution therefore so that an Optionee shall have the right thereafter, by
exercising any such Option (or any new option substituted therefore), to
purchase the kind and amount of stock and other securities and property
receivable upon such merger or consolidation as if the Optionee had purchased
all of the Common Stock subject to the Option immediately prior to the date of
the contract closing of such merger or consolidation, (3) determine that the
Optionee shall have the right to exercise the Option as to all of the Optioned
Stock, including shares as to which the Option would not otherwise be
exercisable, (4) cause the continuing corporation to pay to each Optionee, for
each Option held by the Optionee, the difference between the Option Price per
share and the per share price paid to Stockholders pursuant to the merger or
consolidation, or (5) make such other arrangements with respect to outstanding
Options as the Board shall deem to be in the best interest of the Company,
provided that no such arrangements shall adversely affect the rights of
Optionees under the outstanding Options. For purposes of (1) and (2), the excess
of the aggregate fair market value of the Common Stock or other securities
subject to any Option previously granted under the Plan (or any new Option
substituted therefore) immediately after the merger or consolidation over the
aggregate purchases price of the Common Stock or securities subject thereto
shall not be more than the excess of the aggregate fair market value of all
shares of Common Stock subject to the Option immediately before such merger or
consolidation over the aggregate purchase price of such shares under the Option,
and after the merger or consolidation, the assumption of any Option previously
granted under the plan (or any new option substituted therefore) shall not give
the Optionee additional benefits which he or she did not have under the Option,
or deprive him of benefits which he or she had under the Option, immediately
prior to such merger or consolidation.
If the Board makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the Optionee that the Option shall be fully exercisable for a period of thirty
(30) days from the date of such notice, and the Option will terminate upon the
expiration of such period.
The Committee may also grant Options having terms and provisions which
vary from those specified in the Plan provided that any Options granted pursuant
to this Article are granted in substitution for, or in connection with the
assumption of, existing options granted by another corporation and assumed or
otherwise agreed to be provided for by DBI pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition or other
combination or reorganization to which DBI is a party.
ARTICLE XIV
AMENDMENT
14.1 DBI shall have the right at any time to amend the Plan by action
of its Board without obtaining the approval of the Stockholders of DBI. Any
amendment to the Plan shall be set forth in writing.
14.2 Notwithstanding anything to the contrary contained herein, the
Board shall not amend the Plan without obtaining the approval of the
Stockholders if such amendment.
(a) increases the number of shares of Common Stock that may be
granted as Options under the Plan (except for increases
pursuant to Section 3.1);
(b) materially modifies the eligibility requirements of Article V;
(c) permits the grant of Options with an Option Price that is less
than the fair market value of the shares of Common Stock
subject thereto (as determined pursuant to Article VI above);
(d) permits the exercise of Options without full payment for the
share of Common Stock as to which the Option is exercised at
the time of purchase; or
(e) is otherwise required by the rules or regulations promulgated
under the Exchange Act in order for the Plan to remain
qualified under Rule 16b-3 or any successor provisions under
the Exchange Act.
Any amendment of the Plan shall not, without the consent of the Optionee, impair
any rights or obligations under any Option previously granted to the Optionee.
ARTICLE XV
TERMINATION
DBI shall have the right at any time to terminate the Plan by action of
its Board without obtaining the approval of the stockholders, provided however,
that termination of the Plan shall not affect the rights of Optionees under
Options previously granted to them and all unexpired Options shall continue in
force and operation after termination of the Plan except as they may lapse or be
terminated by their terms and conditions.
ARTICLE XVI
NOTICE
Any notice to DBI required under this Plan shall be in writing and
shall be sent by registered mail, return receipt requested, to the following
address:
Digital Biometrics, Inc.
5600 Rowland Road
Minnetonka, MN 55343
Attention: President
ARTICLE XVII
EFFECTIVE DATE
The Plan shall be effective as of January 1, 1990.
DIGITAL BIOMETRICS, INC.
5600 ROWLAND ROAD
MINNETONKA, MINNESOTA 55343-4315
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Stockholders and the Proxy Statement, dated February __, 1997, hereby appoints
James C. Granger or C. McKenzie Lewis III as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all shares of common stock of
Biometrics, Inc. (the "Company") held of record by the undersigned on January
15, 1997, at the Annual Meeting of Stockholders to be held on March 18, 1997 at
3:30 p.m. at the Lutheran Brotherhood Auditorium, 625 Fourth Avenue South,
Minneapolis, Minnesota.
1. To elect five directors, each to serve until the next Annual Meeting of
Stockholders and until their respective successors shall be elected and
qualified.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below) listed below
JAMES C. GRANGER, C. MCKENZIE LEWIS III, JACK A. KLINGERT,
GEORGE LATIMER, STEPHEN M. SLAVIN
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below.
--------------------------------------------------------------------
2. To adopt an Amended and Restated Certificate of Incorporation of the
Company to provide, among other things, for an increase in the number
of shares of Common Stock authorized from 20,000,000 to 50,000,000 and
to authorize the issuance of up to 5,000,000 shares of preferred stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt an amendment to the Company's 1990 Stock Option Plan to, among
other things, increase the number of shares for which options may be
granted under such plan from 1,500,000 to 2,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, as auditors of the Company for its fiscal
year ending September 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the mee ing or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 THROUGH 4. ABSTENTIONS WILL BE COUNTED TOWARD THE
EXISTENCE OF A QUORUM.
Please sign exactly as name appears on this Proxy. When shares are held
by joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
Dated: __________________________ ________________________________________
________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
