SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DIGITAL BIOMETICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
DIGITAL BIOMETRICS, INC.
5600 ROWLAND ROAD
MINNETONKA, MN 55343-4315
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MARCH 16, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Digital Biometrics, Inc., a Delaware corporation (the "Company"), will be held
at the Lutheran Brotherhood Auditorium, 625 Fourth Avenue South, Minneapolis,
Minnesota, on Tuesday, March 16, 1999, at 3:30 p.m. Minneapolis time, and at any
adjournment or postponement thereof, for the following purposes, as more fully
described in the accompanying Proxy Statement:
1. To elect four directors, each to serve until the next
Annual Meeting of Stockholders and until their
successors are duly elected and qualified;
2. To consider and vote upon the amendment to the Company's
Certificate of Incorporation which provides for the
issuance of up to 5,000,000 shares of preferred stock.
3. To consider and vote upon the amendment to the Digital
Biometrics, Inc. Retirement Plan to increase the number
of shares authorized for issuance thereunder by 300,000
shares; and
4. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The transfer books of the Company will not be closed for the Annual
Meeting. Only stockholders of record at the close of business on February 5,
1999 are entitled to receive notice of, and to vote at, the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James C. Granger
James C. Granger
President
Minnetonka, Minnesota
February 16, 1999
All stockholders are cordially invited and requested to attend the
Annual Meeting in person. Stockholders who are unable to attend in person are
requested to complete, date and sign the
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enclosed proxy exactly as your name appears thereon and promptly return it in
the envelope provided, which requires no postage if mailed in the United States.
Your proxy is being solicited by the Board of Directors of the Company. Your
attendance at the Annual Meeting, whether in person or by proxy, is important to
ensure a quorum. If you return your 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.
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<PAGE>
DIGITAL BIOMETRICS, INC.
5600 ROWLAND ROAD
MINNETONKA, MN 55343-4315
--------------------
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 16, 1999
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
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, on
Tuesday, March 16, 1999, at 3:30 p.m. Minneapolis time, and at any adjournment
or postponement thereof, for the purposes set forth in the accompanying Notice
of Meeting. The Notice of Annual Meeting, this Proxy Statement and the enclosed
proxy are first being mailed to stockholders on or about February 16, 1999.
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 their 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 of the Company's common stock 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. It is the
intention of the persons named as proxies in the accompanying form of proxy,
unless such authority is withheld, to vote in favor of: (a) the election of each
nominee identified below to the Company's Board of Directors; (b) the proposal
to amend the Company's Certificate of Incorporation to authorize the issuance of
up to 5 million shares of preferred stock and (c) the proposal to increase by
300,000 the number of shares of the Company's common stock reserved for issuance
under the Digital Biometrics, Inc. Retirement Plan. The abstention or failure to
vote shares present at the Annual Meeting and broker non-votes do not have the
effect of a vote "against" the proposals to amend the Company's Certificate of
Incorporation, to amend the Company's Retirement Plan, or for the election of
any nominee to the Board of Directors.
VOTING RIGHTS AND OUTSTANDING COMMON STOCK
Only holders of the common stock of the Company whose names appear
of record on the books of the Company at the close of business on February 5,
1999 (the "Record Date") are entitled
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to receive notice of, and to vote at, the Annual Meeting. On the Record Date,
the voting shares of the Company consisted of _______ shares of common stock,
each entitled to one vote per share.
The presence, in person or by proxy, of the holders 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.
Assuming the presence of a quorum, in all matters other than the
election of directors, stockholder approval requires the affirmative vote of a
majority of the shares of common stock represented and entitled to vote at the
Annual Meeting. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the Annual Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors oversees the management of the Company on
behalf of the stockholders. The Board reviews the Company's long-term strategic
plans and exercises direct decision-making authority in certain areas, such as
the selection and appointment of the Company's executive officers, as well as
the nature and amounts of their compensation. Three of the four proposed members
of the Board of Directors are not employed by the Company. Only nonemployee
directors serve as the Company's Audit Committee and Compensation and Personnel
Committee.
Effective January 26, 1999, the Board of Directors amended the Company's
Bylaws to permit the election of at least four, but not more than nine,
directors. Prior to such amendment, the Bylaws provided for the election of not
less than five, nor more than nine, members of the Board of Directors. The Board
has fixed the number of directors to serve from and after the Annual Meeting at
five.
As of the date this Proxy Statement was mailed to the Company's
stockholders, the Company has identified only four candidates to serve on the
Board of Directors. One of the Company's five current directors, Mr. Stephen
Slavin, recently decided against serving another term on the Board. The Company
is currently conducting a search for additional candidates to serve as the fifth
member of the Board. Since no information regarding the qualifications of
candidates can be provided to the Company's stockholders in connection with the
Annual Meeting, it is the intention of the Board to act immediately following
the meeting to appoint a fifth member of the Board, assuming that a suitable
candidate has been identified at that time. In the event that no such candidate
has been identified, the Board intends to exercise its discretion under the
Bylaws to reduce the number of directors to serve after the Annual Meeting to
four.
Stockholders do not have cumulative voting rights with respect to
the election of directors, and proxies cannot be voted for a greater number of
directors than the number of nominees named below. Each of the nominees listed
below has advised the Company of his willingness to continue service on the
Board of Directors. In the event that a nominee is unable or unwilling to serve,
the proxy may be voted in favor of the election of such person as the Proxies,
in their discretion, determine following a recommendation by the Nominating
Committee or, alternatively (subject to the provisions of the Company's Bylaws),
the Board may elect to reduce the number of directors serving on the Board to
eliminate the vacancy.
The Board of Directors held 10 meetings during the fiscal year ended
September 30, 1998. Each director attended 75 percent or more 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 year. See "Committees."
NOMINEES FOR ELECTION AS DIRECTOR
The following table sets forth certain information regarding
nominees for election as members of the Board of Directors. All of the directors
of the Company elected at the Annual
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Meeting will serve until the next Annual Meeting and until their successors are
duly elected and qualified. There are no family relationships between any
director or officer.
Name of Nominee Age Position
--------------- --- --------
James C. Granger(1) 52 President, Chief Executive Officer
and Director
C. McKenzie Lewis III(1)(2)(3) 52 Chairman and Director
George Latimer(2)(3) 63 Director
John E. Haugo(2)(3) 63 Director
(1) Member of Nominating Committee.
(2) Member of Compensation and Personnel Committee.
(3) Member of Audit Committee.
The following discussion sets forth the business experience and
background of the nominees for director, each of whom currently serves as a
director of the company.
James C. Granger. Mr. Granger became the Company's President and
Chief Executive Officer on January 1, 1997, and was appointed to the Board of
Directors of the Company effective January 27, 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. Mr. Lewis was elected Chairman of the
Company's Board of Directors on October 28, 1996 and has served as a director of
the Company since 1994. Between 1986 and 1996, Mr. Lewis served as Chief
Executive Officer and President and a director of Computer Network Technology
Corporation, a developer and manufacturer of high performance extended channel
networking systems. Mr. Lewis has over 26 years experience in the computer and
data communications industry. Mr. Lewis is currently President of Sherpa
Partners LLC and a General Partner in Minnesota Management Partners, L.P.
George Latimer. Mr. Latimer has served on the Company's Board of
Directors since 1990. He is a Distinguished Visiting Professor of Urban Studies
at Macalester College, St. Paul, Minnesota. From November 1995 through December
1997, Mr. Latimer served as Chief Executive Officer of the National Equity Fund,
a financing syndication for affordable housing in Chicago, Illinois. From July
1993 to November 1995, Mr. Latimer served as Director, Office of Special
Actions, U.S. 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 in St. Paul,
Minnesota. From 1976 to 1990, Mr. Latimer served as the Mayor of St. Paul,
Minnesota.
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John E. Haugo. Mr. Haugo has served on the Company's Board of
Directors since February 1998. Mr. Haugo has been Chief Executive Officer of
MedServe Link, Inc. since January 1998. Mr. Haugo has served as a director of
Global Maintech, Inc. since June 1997. Mr. Haugo served as Vice President and
General Manager of the Serving Software Group Business Unit of HBO and Company
from September 1994 to March 1997. From April 1986 until September 1994, prior
to its acquisition by HBO, Mr. Haugo was founder, Chairman and Chief Executive
Officer of Serving Software, Inc. a provider of health care scheduling and
resource management systems.
All shares represented by proxies will be voted FOR the election of
the foregoing nominees unless otherwise specified; provided, however, that if
any such nominee should withdraw or otherwise become unavailable for reasons not
presently known, such shares may be voted for another person in place of such
nominee in accordance with the best judgement of the persons named in the proxy.
COMMITTEES
The Board of Directors appoints committees to study and act on key
issues in greater detail then would be possible at full Board meetings. Each
Committee reviews the results of the meetings and other actions with the full
Board.
During fiscal year 1998, The Audit Committee was comprised of
Messrs. Latimer (Chairman), Haugo and Lewis, together with Mr. Slavin, who is
not standing for re-election to the Company's Board of Directors. The
responsibilities of the Audit Committee, in addition to such other duties as may
be 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 concerning the Company's
accounting systems and internal controls made by the independent auditors; and
(4) reviewing the scope and adequacy of internal accounting controls. The Audit
Committee held one meeting during fiscal year 1998.
During fiscal year 1998, the Compensation and Personnel Committee
was comprised of Messrs. Haugo (Chairman) and Messrs. Lewis, Latimer and Slavin.
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 and the grant of stock options thereunder. The Compensation and Personnel
Committee met six times during fiscal year 1998.
A Nominating Committee was established by the Board of Directors on
December 5, 1996. During fiscal year 1998, this Committee was comprised of
Messrs. Lewis (Chairman), Granger and Slavin. The Nominating Committee makes
recommendations regarding the composition of the Board of Directors and
nomination of individuals for election to the Board by the stockholders of the
Company. The Nominating Committee did not meet during fiscal year 1998.
DIRECTOR COMPENSATION
Employees of Digital Biometrics, Inc. receive no supplemental
compensation for serving on the Board of Directors. Except as described below,
outside directors of the Company served without monetary compensation in fiscal
1998.
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Pursuant to the Company's 1992 Restricted Stock Plan, each time a
non-employee director is elected or re-elected to the Board, he will be granted
the number of shares of restricted stock equal to $18,000 divided by the fair
market value of one share of common stock at the close of business on the day
prior to the date of grant. Restricted stock awards are granted on the date of
the annual stockholders' meeting at which the non-employee director is elected
or re-elected to the Board. Restricted stock awards were made to each of the
Company's outside directors who served in fiscal 1998 (John E. Haugo, C.
McKenzie Lewis III, George Latimer and Stephen M. Slavin).
Effective with his appointment to the Board in February 1998, the
Board awarded 3,000 shares of restricted common stock to Mr. Haugo. The market
value of the award on the date of grant was $3,939.
Grants of restricted shares of the Company's common stock typically
vest over a three-year period.
Pursuant to the terms and conditions of the Company's 1998 Stock
Option Plan, each time a non-employee director is elected or re-elected to the
Board of Directors he or she will be granted an option to purchase 15,000 shares
of the Company's common stock at an exercise price per share equal to 100
percent of the fair market value of the common stock on the date of such
election or re-election. Effective with their election or re-election to the
Board on April 8, 1998, a stock option grant to purchase 15,000 shares of the
Company's common stock at an exercise price of $1.625 was issued to each of the
Company's outside directors, John E. Haugo, C. McKenzie Lewis III, George
Latimer and Stephen M. Slavin. The options vest on April 7, 1999 and have a term
of five years.
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 1998 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND --------------------------- ------------------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS SECURITIES UNDERLYING OPTIONS COMPENSATION(6)
- ------------------------------------- -------- ------------ ----------- ------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
James C. Granger(1) 1998 $175,020 $17,500 250,000 $4,667
President and Chief 1997 131,265 32,816 250,000 -
Executive Officer 1996 - - - -
John J. Metil(2) 1998 138,750 14,000 100,000 3,563
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Executive Vice President, 1997 62,500 9,374 100,000 -
Chief Operating Officer and 1996 - - - -
Chief Financial Officer
Barry A. Fisher(3) 1998 106,667 11,000 75,000 2,377
Vice President of Sales, Marketing 1997 48,750 6,750 75,000 -
and Business Development 1996 - - - -
Roman A. Jamrogiewicz(4) 1998 128,000 10,000 50,000 2,663
Vice President of Engineering 1997 53,333 9,600 100,000 -
1996 - - - -
Michel R. Halbouty(5) 1998 109,167 11,000 75,000 -
Vice President of Operations 1997 37,500 6,750 75,000 -
1996 - - - -
</TABLE>
- ----------------------------------
(1) Mr. Granger has served as President and Chief Executive Officer of the
Company since January 1, 1997.
(2) Mr. Metil has served as Chief Operating Officer and Chief Financial
Officer of the Company since April 1, 1997 and as Executive Vice President
since November 1, 1998.
(3) Mr. Fisher has served as Vice President of Sales, Marketing and Business
Development since March 17, 1997.
(4) Mr. Jamrogiewicz has served as the Company's Vice President of Engineering
since April 25, 1997.
(5) Mr. Halbouty has served as Vice President of Operations of the Company
since May 1, 1997.
(6) Represents Company match, paid in shares of the Company's common stock, of
employee 401(k) contributions.
STOCK OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TO EXERCISE OR TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE 5% 10%
- ------------------------- ----------- ------------------ ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James C. Granger 250,000 26 $1.9063 05/21/08 $172,364 $436,805
John J. Metil 100,000 10 1.9063 05/21/08 68,946 174,722
Barry A. Fisher 75,000 8 1.9063 05/21/08 51,709 131,041
Roman A. Jamrogiewicz 50,000 5 1.9063 05/21/08 34,473 87,361
Michel R. Halbouty 75,000 8 1.9063 05/21/08 51,709 131,041
</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 percent of the shares
covered on each of the first three anniversaries of the grant date.
(2) Fair market value per share on the date of grant or the effective date,
whichever is less, in accordance with the terms of the 1990 Stock Option
Plan.
(3) The 5 percent and 10 percent 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 market price of the
Company's common stock price.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ---------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James C. Granger - - 83,333 416,667 - -
John J. Metil - - 33,333 166,667 - -
Barry A. Fisher - - 25,000 125,000 - -
Roman A. Jamrogiewicz - - 33,333 116,667 - -
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Michel R. Halbouty - - 25,000 125,000 - -
</TABLE>
- ---------------------------
(1) Market value of underlying securities at fiscal year end minus the
exercise price.
REPORT OF COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation and Personnel Committee (the "Compensation
Committee") is composed of the independent, outside directors whose names appear
following this report. The Compensation Committee considers how the achievement
of the Company's overall goals and objectives can be aided through the use of an
appropriate compensation program. The Compensation Committee's responsibilities
include determining the amount and type of compensation paid to the executive
officers of the Company, as well as administering the Company's common
stock-based benefit plans.
The Compensation Committee believes that the Company's annual cash
compensation package (base salary plus bonus opportunities) must be sufficient
to retain and attract highly qualified and experienced executives and management
personnel. The Compensation Committee also believes that stockholder value
depends, to a significant extent, on a close alignment between the financial
interests of the Company's stockholders and those of its employees, in
particular its executive officers. 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.
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BASE COMPENSATION
Annual base salaries of 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 compensation for similar positions at comparable
companies. Compensation for the Company's President and Chief Executive Officer
is determined by the Compensation Committee as discussed further below.
INCENTIVE COMPENSATION
The Company's Executive Compensation Plan (the "Plan"), amended most
recently in 1997, 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," "target"
and "maximum" for each. The Plan also permits the assignment of individual
management objectives to each participant. Target 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. Threshold and maximum amounts
are determined annually for revenue and profitability by the Compensation
Committee in connection with the Board of Directors' consideration of the annual
budget. Performance below the threshold objective results in no annual or
long-term incentive award. Performance between threshold and target and target
and maximum objectives result in incentive awards determined on a prorated
basis. There is no additional award payable under the Plan for performance above
the maximum objective. The Plan provides that the Compensation Committee may
elect to pay all or any portion of any incentive award in restricted shares of
the Company's common stock, vesting over a three-year period. Long-term
incentive awards consist of stock options grants under the Company's 1990 Stock
Option Plan and 1998 Stock Option Plan with vesting over a three-year period.
No awards were paid under the revenue and profitability components
of the Plan for fiscal 1998 as the Company's objectives were not achieved.
Stock option plans maintained by the Company were established to
provide employees, including executive officers, with an opportunity to
financially participate in the Company's long-term performance. Periodic grants
of stock options are considered at least annually for eligible employees.
Additional grants are sometimes authorized by the Compensation Committee in its
sole discretion. 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. Stock
options granted under the 1998 Stock Option Plan generally have a three-year
vesting schedule and expire seven years from the date of grant. The exercise
price of options granted under the 1990 Stock Option Plan and 1998 Stock Option
Plan are equal to the fair market value of the underlying stock on the date of
grant.
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CEO COMPENSATION
Mr. Granger's base salary, bonus opportunities and awards and stock
option awards are reviewed annually and determined by the Compensation
Committee. Mr. Granger's base salary, bonuses and stock option awards are, in
general, determined using the same criteria described above for other executive
officers. Mr. Granger is eligible to participate in the Company's 401(k)
retirement plan. The level of Mr. Granger's compensation reflects, among other
factors, the Compensation Committee's evaluation of his role in implementing
strategies to achieve the Company's goals and his duties and responsibilities
with the Company.
The Compensation Committee believes that the Company's compensation
programs for executive officers of the Company 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"), the deduction for corporate taxpayers with respect to the
compensation of executive officers is limited to specified amounts unless the
amount of such compensation is based upon performance objectives meeting certain
regulatory criteria or is otherwise excluded from the limitation. The
Compensation Committee believes that the Company's executive compensation
practices are sufficiently linked to performance to permit the full
deductibility of such compensation under Section 162(m).
January 26, 1999
The Compensation and Personnel Committee:
John E. Haugo, Chairman
George Latimer
C. McKenzie Lewis III
Stephen M. Slavin
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TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL ARRANGEMENTS
During fiscal 1997, the Board of Directors of the Company adopted a
change of control plan for the benefit of executive officers. Upon a change of
control of the Company, an executive officer will, upon termination of his
employment, be entitled to payment of an amount equal to such officer's base
salary immediately prior to the change of control, payable on or before the 30th
day following the termination of such officer's employment. An officer is not
entitled to such payment if he is offered employment following a change of
control by the successor to the Company or its business, provided such
employment is comparable to his employment with the Company and is at a base
salary level comparable to, or greater than, that paid by the Company. In the
event the employment of an officer is not terminated, or such officer is offered
employment by the successor and is employed, but such employment is terminated
within a period of one year following the change of control, the officer shall
be entitled to payment of an amount equal to his base salary, less compensation
actually paid during the period in which he was employed by the Company or a
successor entity subsequent to the change of control. The change of control
payment is limited to an amount not to exceed the safe harbor under Section 280G
of the Internal Revenue Code.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation at present authorizes the
issuance of 40,000,000 shares of common stock. For the reasons set forth below,
the Board of Directors believes the Company's Certificate of Incorporation
should be amended to authorize the issuance of up to 5,000,000 shares of
preferred stock, par value $.01 per share. The text of the proposed amendment is
set forth in Exhibit A to the Proxy Statement.
The proposed amendment authorizes the Company's Board of Directors,
without further action or approval by the stockholders, to authorize the
issuance of preferred stock from time to time in one or more class and/or
series, and to determine all relevant terms of each such class or series at the
time of issuance, including but not limited to the following: (a) the number of
shares constituting such class or series; (b) the dividend rights, if any; (c)
whether, and upon what terms, the shares of such class or series would be
redeemable; (d) whether, and upon what terms, the shares of such class or series
would be convertible into, or exchangeable for, other securities; (e) whether a
sinking fund would be provided for the redemption of such class or series and,
if so, the terms thereof; and (f) other preferences, powers, qualifications,
special or relative rights and privileges and limitations or restrictions of
such preferences or rights, if any. The proposed amendment provides that holders
of preferred stock may be entitled to up to one vote per preferred share upon
all matters presented to the stockholders and will vote together with the
holders of common stock as one class on all matters, except as otherwise
provided by the Certificate of Incorporation or required by law.
The Board of Directors believes that amending the Certificate of
Incorporation to permit the Board to issue shares of preferred stock will
provide the Company with much-needed flexibility to satisfy the Company's future
financing requirements. The Board is not currently considering the issuance of
preferred stock for any such financing purposes and has no present intention to
issue any class or series of preferred stock.
The Company could also issue shares of preferred stock for other corporate
purposes, such as to make acquisitions or structure mergers, although no
issuances for such purposes are contemplated at the present time. If the
proposed amendment is approved, the Board will be able to specify the precise
characteristics of the class or series of preferred stock to be issued,
depending upon current market conditions and the nature of specific
transactions.
Although the voting rights of any shares of preferred stock that are
issued will be limited to one vote per share as described above, the issuance of
preferred stock could be used to discourage attempts to acquire control of the
Company which the Board oppose. The Board of Directors represents that it will
not issue, without prior stockholder approval, any class or series of preferred
stock for any defensive or antitakeover purpose, or with features intended to
make any attempted acquisition of the Company more difficult or costly. No
preferred stock will be issued to any individual or group for the purpose of
creating a block of voting power to support management on a controversial issue.
Accordingly, the Board believes that the authorization of preferred stock, as
structured, is in the best interests of the stockholders of the Company since it
could not disproportionately affect the voting power of existing stockholders,
is consistent with sound corporate governance principles, and enhances the
ability of the Company to take advantage of financing alternatives and possible
acquisition transactions.
10
<PAGE>
All shares represented by proxies will be voted FOR the proposal to
amend the Company's Certificate of Incorporation to authorize the Board of
Directors to issue up to 5,000,000 shares of preferred stock unless otherwise
specified.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE
DIGITAL BIOMETRICS, INC. RETIREMENT PLAN
In February 1993, the Company's stockholders ratified the Digital
Biometrics, Inc. Retirement Plan (the "Retirement Plan") and the reservation for
issuance thereunder of 200,000 shares of the Company's common stock. In January
1999, the Board of Directors adopted a resolution, subject to stockholder
approval, to amend the Retirement Plan to increase from 200,000 to 500,000 the
number of shares of common stock reserved for issuance thereunder. The decision
to issue additional shares of common stock pursuant to the Retirement Plan will
be made by the Board of Directors in its discretion, as described below.
The purpose of the Retirement Plan is to provide an opportunity for
all employees of the Company, meeting defined eligibility requirements, to
participate in the Retirement Plan and accumulate retirement savings. There are
currently 60 eligible employees participating in the Retirement Plan. The
Retirement Plan is a profit-sharing and savings defined contribution plan
qualifying under Section 401(k) of the Internal Revenue Code. The Retirement
Plan allows employees to defer a portion of their annual compensation through
pre-tax contributions to the Retirement Plan. Annual employee contributions are
limited to maximums established by the Internal Revenue Code ($10,000 in 1998).
At the discretion of the Board of Directors, the Company may make
matching contributions up to an amount equal to 50 percent of the contributions
made by each employee, subject to a maximum contribution for each employee of
five percent of compensation. The Board also may make other discretionary
contributions to the Retirement Plan. Matching or other discretionary
contributions determined to be made by the Board of Directors may be made in
shares of the Company's common stock. In January 1999, the Company issued 67,828
shares of common stock pursuant to the Retirement Plan in connection with
employee contributions made during calendar 1998. The Board of Directors has
approved the issuance of an additional 20,069 shares in matching contributions
for 1998, subject to approval of the aforementioned amendment to the Retirement
Plan by the Company's stockholders.
All shares represented by proxies will be voted FOR the proposal to
amend the Company's Retirement Plan to increase the number of shares of common
stock issuable thereunder by 300,000 unless otherwise specified.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gordon L. Bramah is the Chairman of the Board of Directors of Bramah
Limited ("Bramah"), which is a significant stockholder of the Company. In
connection with early stage
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<PAGE>
investments made by Bramah in the Company, the Company granted Bramah an
exclusive license for the Company's technology in the United Kingdom. In October
1992, the exclusive license was reacquired by the Company in return for a
royalty arrangement whereby Bramah will be paid a 15 percent royalty on sale of
the first $1.0 million of the Company's products in the United Kingdom. On
September 30, 1998, the Company had accrued royalties of approximately $91,000
payable to Bramah on sales in the United Kingdom during fiscal 1997 and 1998.
SECURITY OWNERSHIP
The following table sets forth, as of December 31, 1998, the number
of shares of the Company's common stock beneficially owned by (i) each person
known to be the beneficial owner of five percent or more of the total issued and
outstanding shares of the Company's common stock, (ii) each director, (iii) each
of the Named Officers appearing in the Summary Compensation Table above and (iv)
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 the Company's issued and
outstanding common stock owned by the option or warrant holder but are not
deemed to be outstanding for the purpose of computing the percentage of the
Company's issued and outstanding common stock owned by any other person. Except
as otherwise indicated, each beneficial owner has sole voting and investment
power over the outstanding shares of which he has beneficial ownership.
Shares Beneficially Owned(1)
----------------------------
Name of Beneficial Owner/Group Number Percent
- ------------------------------ ------ -------
Perkins Capital Management Inc.
730 East Lake Street
Wayzata, Minnesota 55391 1,297,600 9.3%
Gordon L. Bramah
Littlemoore House
Eckington, Sheffield S31 9EF England 1,053,435 7.5%
Bramah Limited
Littlemoore House
Eckington, Sheffield S31 9EF England 1,052,935 7.5%
Stephen M. Slavin(2) 114,577 *
George Latimer(3) 39,626 *
C. McKenzie Lewis III(4) 68,655 *
John E. Haugo 14,076 *
James C. Granger(5) 184,458 1.3%
John J. Metil(6) 39,419 *
Barry A. Fisher(7) 29,327 *
Roman A. Jamrogiewicz(8) 36,983 *
Michel R. Halbouty(9) 25,000 *
All officers and directors as a group (9 persons) 552,121 3.7%
* Indicates an amount less than one percent.
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(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 Securities and Exchange 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 77,077 shares of common stock owned by Mr. Slavin and 37,500
shares of common stock that may be acquired subject to options.
(3) Includes 32,126 shares of common stock beneficially owned by Mr. Latimer
and an option for 7,500 shares of common stock.
(4) Includes 20,655 shares of common stock beneficially owned by Mr. Lewis and
an option and a warrant for the purchase of an aggregate of 48,000 shares
of common stock.
(5) Includes 17,791 shares of common stock beneficially owned by Mr. Granger
and options for the purchase of an aggregate of 166,667 shares of common
stock.
(6) Includes 6,086 shares of common stock owned by Mr. Metil and options for
the purchase of 33,333 shares of common stock.
(7) Includes 4,327 shares of common stock owned by Mr. Fisher and options for
the purchase of 25,000 shares of common stock.
(8) Includes 3,650 shares of common stock owned by Mr. Jamrogiewicz and
options for the purchase of 33,333 shares of common stock.
(9) Represents options to purchase 25,000 shares of common stock.
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 Company's common stock during the period from September 30,
1993 to September 30, 1998, with the Nasdaq Stock Market Index and Digital
Biometrics, Inc.'s primary competitor, Identix, Inc. The cumulative total
stockholder return assumes an initial investment of $100 on September 30, 1993.
[PLOT POINTS GRAPH]
INDEXED AS OF: 9/30/93
SOURCE: FACTSET RESEARCH SYSTEMS
Digital Biometrics, Inc. Identix Inc. Nasdaq
9/30/93 100 100 100
3/31/94 74.5763 151.2821 97.4672
9/30/94 49.1525 130.7692 100.198
3/31/95 58.4746 135.8974 107.1357
9/29/95 48.3051 533.3333 136.8075
3/29/96 22.8814 461.5385 144.3929
9/30/96 25.4237 394.8718 160.8485
3/31/97 13.9831 343.5897 160.1641
9/30/97 17.3729 469.2308 220.9929
3/31/98 10.5932 348.7179 240.6565
9/30/98 8.7924 246.1538 222.0614
The common stock of the Company 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 Company's common stock is traded under the symbol
DBII.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers and the holders of 10 percent or
more of the Company's stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of equity
securities of the Company. Based on the Company's review of copies of such
reports received by it, or written representations from reporting persons, the
Company believes that during fiscal year 1998 its directors and executive
officers filed all reports on a timely basis.
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<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder who desires to submit a proposal for action by the
stockholders at the next annual meeting must submit such proposal in writing to
C. McKenzie Lewis III, Chairman, Digital Biometrics, Inc., 5600 Rowland Road,
Minnetonka, Minnesota 55343-4315 by October 11, 1999. Due to the complexity of
the respective rights of the stockholders and the Company in this area, any
stockholder desiring to propose such an action is advised to consult with his or
her legal counsel with respect to such rights. It is suggested that any such
proposal be submitted by certified mail, return receipt requested.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934. The amendment to 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a stockholder proposal
which the stockholder has not sought to include in the Company's proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement, then the management proxies will be allowed to use
their discretionary voting authority when the proposal is raised that the
meeting, without any discussion of the matter in the proxy statement.
With respect to the Company's Annual Meeting of stockholders during
calendar 2000, if the Company is not provided notice of a stockholder proposal
which the stockholder has not previously sought to include in the Company's
proxy statement by December 26, 1999, the management proxies will be allowed to
use their discretionary authority as outlined above.
PROXY SOLICITATION
The cost of this solicitation of proxies will be paid by the
Company. The Company has retained D.F. King & Company, Incorporated to assist in
the solicitation of proxies, at an estimated cost of $5,000 plus reimbursement
of out-of-pocket expenses. Proxies will also be solicited 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 TO STOCKHOLDERS
A copy of the 1998 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 1998 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 1998
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
/s/ James C. Granger
James C. Granger
President
Minnetonka, Minnesota
February 16, 1999
14
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE
CERTIFICATE OF INCORPORATION OF
DIGITAL BIOMETRICS, INC.
Article Fourth of the Certificate of Incorporation (which is the only
portion of the Certificate of Incorporation affected by Proposal 2) shall be
deleted and replaced by the following:
FOURTH:
1. Authorized Shares.
The total number of shares of capital stock which this Corporation
is authorized to issue is forty-five million (45,000,000), of which forty
million (40,000,000) shares shall be common stock, $.01 par value ("Common
Stock"), and five million (5,000,000) shall be preferred stock, $.01 par value
("Preferred Stock").
2. Common Stock.
A. Each share of Common Stock shall have one vote.
B. 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
15
<PAGE>
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 or
involuntary.
3. Preferred Stock.
A. 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:
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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
16
<PAGE>
resolutions establishing such class or series or as are
determined in a manner specified in such resolution or
resolutions;
(vii) 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, 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;
(viii) are entitled to up to one vote per
share upon all matters presented to the stockholders and
will vote together with the holders of common stock as
one class on all matters, except as otherwise provided
by this Certificate of Incorporation or required by law
(ix) 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.
17
<PAGE>
EXHIBIT B
DIGITAL BIOMETRICS, INC.
RETIREMENT PLAN
SECTION 301. - EMPLOYER CONTRIBUTIONS
A. OBLIGATION TO CONTRIBUTE
The Employer shall make contributions to the Plan in accordance with
the contribution formulas specified in the Adoption Agreement, which are as
follows:
MATCHING CONTRIBUTIONS
Such amount, if any, equal to that percentage of each contributing
participant's elective deferral which the Employer, in its sole discretion,
determines from year to year.
QUALIFIED NONELECTIVE CONTRIBUTIONS
Allocation of Qualified Nonelective Contributions shall be made to
the individual accounts of participants who are not highly compensated
employees. Allocate of Qualified Nonelective Contributions to participants
entitled thereto shall be made in the ratio which each participant's
compensation for the plan year bears to the total compensation of all
participants for such plan year.
EMPLOYER PROFIT SHARING CONTRIBUTION AND ALLOCATION FORMULA
For each plan year the Employer may, in its sole discretion,
contribute to the Plan an amount to be determined from year to year. Employer
contributions made pursuant to this section and forfeitures shall be allocated
to the individual accounts of qualifying participants in the ratio that each
qualifying participant's compensation for the plan year bears to the total
compensation of all qualifying participants for the Plan year.
If this Plan is a profit sharing plan, the Employer shall in its
sole discretion, make contributions without regard to current or accumulated
earnings or profits.
B. ALLOCATION FORMULA AND THE RIGHT TO SHARE IN THE EMPLOYER
CONTRIBUTION
1.) General - The Employer Contribution for the Plan Year will be
allocated or contributed to the Individual Accounts of qualifying Participants
in accordance with the allocation or contribution formula specified In the
Adoption Agreement. The Employer Contribution for any Plan Year will be
allocated to each Participant's Individual Account as of the last day of that
Plan Year.
2.) Qualifying Participants - A Participant is a qualifying
Participant and is entitled to share in the Employer Contribution for any Plan
year if (1) he or she was a Participant on at least one day during the Plan
Year, (2) if this Plan is a nonstandardized plan, he or she completes a Year
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<PAGE>
of Vesting Service during the Plan Year and (3) where the Employer has selected
the "last day requirement" in the Adoption Agreement, he or she is an Employee
of the Employer on the last day of the Plan Year (except that this last
requirement (3) shall not apply if the Participant has died during the Plan Year
or incurred a Termination of Employment during the plan year after having
reached his Normal Retirement Age or having incurred a Disability).
Notwithstanding anything in this paragraph to the contrary, a Participant will
not be a qualifying Participant for a Plan Year if he or she incurs a
Termination of Employment during such Plan Year with not more than 500 Hours of
Service if he or she is not an Employee on the last day of the Plan Year. The
determination of whether a Participant is entitled to share in the Employer
Contribution shall be made as of the last day of each Plan Year.
3.) Special Rules for Integrated Plans - If the Employer has
selected the integrated contribution or allocation formula in the Adoption
Agreement, then the Maximum disparity rate shall be determined in accordance
with the following table.
MAXIMUM DISPARITY RATE
<TABLE>
<CAPTION>
NONSTANDARDIZED
MONEY TOP-HEAVY AND NONTOP-HEAVY
INTEGRATION LEVEL PURCHASE PROFIT SHARING PROFIT SHARING
- ----------------- -------- -------------- --------------
<S> <C> <C> <C>
Taxable Wage Base (TWB 5.7% 2.7% 5.7%
More than $0 but not more than X* 5.7% 2.7% 5.7%
More than X* of TWB but not more than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but not more than TWB 5.4% 2.4% 5.4%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*X means the greater of $10,000 or 20% TWB
C. ALLOCATION OF FORFEITURES
Forfeitures for a Plan Year which arise as a result of the
application of Section 6.01(D) shall be allocated as follows:
1.) Profit Sharing Plan - If this is a profit sharing
plan, Forfeitures shall be allocated in the manner provided in
Section 3.01(B) (for Employer Contributions to the Individual
Accounts of Participants who are entitled to share in the Employer
Contribution for such Plan Year.
19
<PAGE>
2.) Money Purchase Pension and Target Benefit Plan - If
this Plan is a money purchase or a target benefit plan, Forfeitures
shall be applied towards the reduction of Employer Contributions to
the Plan. However, if the Employer has indicated in the Adoption
Agreement that Forfeitures shall be allocated to the Individual
Accounts of Participants, then Forfeitures shall be allocated in the
manner provided in Section 3.01(B) (for Employer Contributions) to
the Individual Accounts of Participants who are entitled to share in
the Employer Contributions for such Plan Year.
D. TIMING OF EMPLOYER CONTRIBUTION
The Employer Contribution for each Plan Year shall be delivered to
the Trustee (or Custodian, if applicable) not later than the due date for filing
the Employer's income tax return for its fiscal year in which the Plan Year with
respect to which the Plan is a Top-Heavy Plan.
E. MINIMUM ALLOCATION FOR TOP-HEAVY PLANS
The contribution and allocation provisions of this Section 3.01(E)
shall apply for any Plan Year with respect to which this Plan is a Top-Heavy
Plan.
1.) Except as otherwise provided in (3) and (4) below, the Employer
Contributions and Forfeitures allocated on behalf of any Participant who is not
a Key employee shall not be less than the lesser of 3% of such Participant's
Compensation or (in the case where the Employer has no defined benefit plan
which designates this Plan to satisfy Section 401 of the Code) the largest
percentage of Employer Contributions and Forfeitures, as a percentage of the
first $200,000 (increased by any cost of living adjustments made by the
Secretary of Treasury or his delegate) of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that year. The minimum allocation
shall be made even though under other Plan provisions, the Participant would not
otherwise be entitled.
20
<PAGE>
DIGITAL BIOMETRICS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MARCH 16, 1999
The undersigned, a stockholder of Digital Biometrics, Inc. (the
"Company"), hereby appoints James C. Granger and John J. Metil, and each of
them as proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled to vote,
at the Annual Meeting of the Stockholders of Digital Biometrics, Inc. to be held
at the Lutheran Brotherhood Auditorium, 625 Fourth Avenue South, Minneapolis,
Minnesota, on Tuesday, March 16, 1999, at 3:30 P.M., and any adjournments or
postponements thereof, upon the matters set forth below, with all the powers
which the undersigned would possess if personally present:
1. ELECTION OF [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
DIRECTORS: (except as marked to to vote for all nominees
the contrary below) listed below
JAMES C. GRANGER, C. MCKENZIE LEWIS III, GEORGE LATIMER AND JOHN E. HAUGO
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF UP TO 5,000,000 SHARES OF PREFERRED STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF AMENDMENT TO DIGITAL BIOMETRICS, INC. RETIREMENT PLAN TO INCREASE
THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER BY 300,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Upon such other business as may properly come before the meeting and any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION, THE
PROPOSAL TO AMEND THE COMPANY'S RETIREMENT PLAN, AND
FOR ALL THE NOMINEES TO THE BOARD OF DIRECTORS.
(Continued, and TO BE DATED AND SIGNED on the reverse side)
<PAGE>
(continued from other side)
The undersigned hereby revokes all previous proxies relating to the
shares covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be
voted on the matters set forth on the reverse side of this form as directed by
the stockholder, but if no direction is made in the space provided, it will be
voted FOR the proposal to amend and restate the Company's Certificate of
Incorporation, the proposal to amend the Digital Biometrics, Inc. Retirement
Plan, and all nominees to the Board of Directors.
Dated ____________________________, 1999
_________________________________________
_________________________________________
(STOCKHOLDER MUST SIGN EXACTLY AS THE
NAME APPEARS AT LEFT. WHEN SIGNED AS A
CORPORATE OFFICER, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC.,
PLEASE GIVE FULL TITLE AS SUCH. BOTH
JOINT TENANTS MUST SIGN.)
