SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SECURE COMPUTING CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14A.
[ ] 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:
[Secure Logo]
SECURE COMPUTING CORPORATION
2675 LONG LAKE ROAD
ROSEVILLE, MINNESOTA 55113
(612) 628-2700
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held at the Minneapolis Marquette Hotel, Seventh Street and Marquette
Avenue, Minneapolis, Minnesota, at 3:30 p.m., Central Daylight Time, on
Wednesday, May 14, 1997.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
We hope that you will be able to attend the meeting in person and we
look forward to seeing you. Please mark, date and sign the enclosed proxy and
return it in the accompanying envelope as quickly as possible, even if you plan
to attend the Annual Meeting. You may revoke the proxy and vote in person at
that time if you so desire.
Sincerely,
/s/ Jeffrey H. Waxman
Jeffrey H. Waxman
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
April 11, 1997
SECURE COMPUTING CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 1997
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The Annual Meeting of Stockholders of Secure Computing Corporation will
be held at the Minneapolis Marquette Hotel, Seventh Street and Marquette Avenue,
Minneapolis, Minnesota, at 3:30 p.m., Central Daylight Time, on Wednesday, May
14, 1997 for the following purposes:
1. To elect four directors for terms of one and three years.
2. To approve the Secure Computing Corporation Amended and
Restated 1995 Omnibus Stock Plan, as amended, which includes
reserving additional shares of Common Stock for future awards
and increasing from 250,000 to 750,000 the maximum number of
shares covered by options, or stock appreciation rights, that
may be awarded to an employee in any fiscal year.
3. To approve the Secure Computing Corporation Employee Stock
Purchase Plan, as amended, to reserve additional shares of
Common Stock for future purchases.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31, 1997.
5. To transact such other business as may properly be brought
before the meeting.
The Board of Directors has fixed March 21, 1997 as the record date for
the meeting, and only stockholders of record at the close of business on that
date are entitled to receive notice of and vote at the meeting.
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. EVEN IF YOU
OWN ONLY A FEW SHARES, AND WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE-PAID REPLY ENVELOPE AS QUICKLY AS POSSIBLE. YOU MAY REVOKE
YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE, AND RETURNING YOUR PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE THE
PROXY.
By Order of the Board of Directors,
/s/ James E. Nicholson
James E. Nicholson
SECRETARY
Roseville, Minnesota
April 11, 1997
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PROXY STATEMENT
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GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors of
Secure Computing Corporation, a Delaware corporation (the "Company" or
"Secure"), for use in connection with the Annual Meeting of Stockholders to be
held on Wednesday, May 14, 1997 at the Minneapolis Marquette Hotel, Seventh
Street and Marquette Avenue, Minneapolis, Minnesota, at 3:30 p.m., Central
Daylight Time, and at any adjournments thereof. Only stockholders of record at
the close of business on March 21, 1997 will be entitled to vote at such meeting
or adjournment. Proxies in the accompanying form which are properly signed, duly
returned to the Company and not revoked will be voted in the manner specified. A
stockholder executing a proxy retains the right to revoke it at any time before
it is exercised by notice in writing to the Secretary of the Company of
termination of the proxy's authority or a properly signed and duly returned
proxy bearing a later date.
The address of the principal executive office of the Company is 2675
Long Lake Road, Roseville, Minnesota 55113 and the telephone number is (612)
628-2700. The mailing of this Proxy Statement and the Board of Directors' form
of proxy to stockholders will commence on or about April 11, 1997.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by the use of the mails, certain directors,
officers and employees of the Company may solicit proxies by telephone, telegram
or personal contact, and have requested brokerage firms and custodians, nominees
and other record holders to forward soliciting materials to the beneficial
owners of stock of the Company and will reimburse them for their reasonable
out-of-pocket expenses in so forwarding such materials.
The Common Stock and Series A Preferred Stock of the Company, each par
value $.01 per share, are the only authorized and issued voting securities of
the Company. At the close of business on March 21, 1997 there were 15,377,074
shares of Common Stock issued and outstanding, which number includes (i)
4,127,520 Exchangeable Shares that have the same voting and other rights as the
Common Stock and are immediately exchangeable for shares of Common Stock and
(ii) securities that are immediately convertible into 10,908 Exchangeable
Shares. With the exception of the securities that are immediately convertible
into 10,908 Exchangeable Shares, each of the remaining shares of Common Stock
and Exchangeable Shares is entitled to one vote. Montreal Trust Company of
Canada holds the one outstanding share of Series A Preferred Stock as trustee
under a voting trust for the benefit of holders of Exchangeable Shares issued in
connection with the Company's acquisition of Border Network Technologies Inc. in
August 1996. Each holder of Exchangeable Shares (other than the Company and its
affiliates) will receive a proxy on which it can give Montreal Trust voting
instructions for a number of Series A Preferred Stock votes equal to the number
of Exchangeable Shares owned by that holder. Montreal Trust will only cast votes
for which it receives instructions. Except as otherwise required by law, the
Series A Preferred Stock votes with the Common Stock as one class. Holders of
Common Stock and Series A Preferred Stock are not entitled to cumulate their
votes for the election of directors.
With the exception of the election of directors, the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock present
in person or represented by proxy at the meeting and entitled to vote is
required for approval of each proposal presented in this Proxy Statement. A
plurality of the votes of outstanding shares of Common Stock present in person
or represented by proxy at the meeting and entitled to vote on the election of
directors is required for the election of directors. Abstentions, proxies
withholding authority and broker non-votes will be counted as present for
purposes of determining the existence of a quorum at the meeting. However,
shares of Common Stock of a stockholder who either abstains or withholds
authority to vote for each of the proposals or the election of directors will be
counted as a vote against approval of a proposal and will have no effect on the
election of directors. Broker non-votes will not be counted for or against
approval of a proposal and will have no effect on the election of directors.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock, including Exchangeable Shares, of the
Company as of March 21, 1997 (unless otherwise noted below) by each director of
the Company, by each executive officer of the Company named in the Summary
Compensation Table herein, by all directors and current executive officers as a
group, and by each stockholder who is known by the Company to own beneficially
more than five percent of the Company's outstanding Common Stock, including
Exchangeable Shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERS BENEFICIAL OWNERSHIP(1) OUTSTANDING SHARES
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<S> <C> <C>
Directors and executive officers:
Betsy S. Atkins 1,800(2) *
Kermit M. Beseke 221,032(3) 1.4%
8040 Demontreville Road
Lake Elmo, Minnesota 55402
James Boyle 5,000(4) *
Robert Forbes 19,532(5) *
Robert J. Frankenberg 1,458(6) *
Timothy H. Hanson 21,875(7) *
Ervin F. Kamm, Jr. 29,375(8) *
Glenn G. Mackintosh 800,234(9)(10) 5.2%
Timothy P. McGurran 0(11) --
Stephen M. Puricelli 23,125(12)(13) *
Eric P. Rundquist 110,497(14) *
Dennis J. Shaughnessy 21,875(15)(16) *
Jeffrey H. Waxman 0(17) --
All directors and current executive officers 1,034,771(18) 6.6%
as a group (14 persons)
Other beneficial owners:
Computer Solutions Group 1,543,522(9)(10) 10.0%
c/o Glenn Mackintosh
20 Toronto Street, Suite 406
Toronto, Ontario
Canada M5C 2B8
Corporate Venture Partners 1,465,017(13) 9.5%
Suite 261
171 East State Street
Ithaca, New York 14850
Grotech Capital Group 1,784,396(16) 11.6%
9690 Deereco Road
Timonium, Maryland 21093
Clifford W. Swenson 1,690,633(19) 11.0%
701 North First Street
San Jose, California 95110
Working Ventures Canadian Fund, Inc. 795,067(20) 5.2%
250 Bloor Street East
Toronto, Ontario M4W1EB
</TABLE>
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*Less than one percent
(1) Unless otherwise indicated in the footnotes to this table, the listed
beneficial owner has sole voting power and investment power with respect
to such shares of Common Stock.
(2) Excludes 365 shares of Common Stock covered by options granted April 4,
1997, the date on which Ms. Atkins became a director of the Company,
which are exercisable within 60 days of the record date.
(3) Mr. Beseke held the office of President and Chief Executive Officer, and
was Chairman of the Board of Directors until his resignation effective
January 2, 1997.
(4) Includes 5,000 shares of Common Stock covered by options which are
exercisable within 60 days of the record date, but excludes 60,000 shares
subject to an option that vests upon the Company's Common Stock reaching
and maintaining certain target prices for a period of 20 consecutive
business days, the vesting date of which is unascertainable.
(5) Includes 19,531 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(6) Includes 1,458 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(7) Includes 21,875 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(8) Includes 29,375 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(9) Includes 56,250 shares of Common Stock covered by options issued to Mr.
Mackintosh which are exercisable within 60 days of the record date, but
excludes 60,000 shares subject to an option that vests upon the Company's
Common Stock reaching and maintaining certain target prices for a period
of 20 consecutive business days, the vesting date of which is
unascertainable.
(10) Glenn G. Mackintosh, a director of the Company, is a control person of
1158585 Ontario, Inc. and of Computer Solutions Group. Computer Solutions
Group owns 47,272 Exchangeable Shares and owns a majority of the common
shares of 1158585 Ontario, Inc. which owns 1,440,000 Exchangeable Shares.
Mr. Mackintosh disclaims beneficial ownership of 50% of the shares of
Common Stock owned by both 1158585 Ontario, Inc. and Computer Solutions
Group.
(11) Excludes 60,000 shares subject to an option that vests upon the Company's
Common Stock reaching and maintaining certain target prices for a period
of 20 consecutive business days, the vesting date of which is
unascertainable.
(12) Includes 14,375 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(13) Stephen M. Puricelli, a director of the Company, is a general partner of
Costine Associates, L.P., the Corporate General Partner of Corporate
Venture Partners. Mr. Puricelli disclaims beneficial ownership of shares
of Common Stock owned by Corporate Venture Partners except for his
proportional interest therein.
(14) Includes 13,844 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(15) Includes 21,875 shares of Common Stock covered by options which are
exercisable within 60 days of the record date.
(16) Dennis J. Shaughnessy, a director of the Company, is a Managing Director
of Grotech Capital Group. Mr. Shaughnessy disclaims beneficial ownership
of shares of Common Stock owned by Grotech Capital Group except for his
proportional interest therein.
(17) Excludes 300,000 shares subject to an option that vests upon the
Company's Common Stock reaching and maintaining certain target prices for
a period of twenty consecutive business days, the vesting date of which
is unascertainable and excludes 4,000 shares purchased on April 1, 1997
by Mr. Waxman on the open market.
(18) Includes 183,583 shares of Common Stock covered by options which are
immediately exercisable or are exercisable within 60 days of the record
date but excludes 600,000 shares subject to options that vest upon the
Company's Common Stock reaching and maintaining certain target prices for
a period of 20 consecutive business days, the vesting dates of which are
unascertainable.
(19) Includes 1,660,908 shares of Common Stock owned by Swenson Ventures, Inc.
as to which Mr. Swenson controls voting power.
(20) Includes a like number of Exchangeable Shares which are immediately
convertible at the option of the holder into shares of Secure Common
Stock and includes the right to acquire 6,250 shares of Common Stock.
ELECTION OF DIRECTORS
The business of the Company is managed by or under the direction of a
Board of Directors with the number of directors fixed from time to time by the
Board of Directors. The Board is divided into three classes, and directors of
each class are elected for a term of three years. Each class consists of at
least one director. The Board of Directors has fixed at four the number of
directors to be elected to the Board at the 1997 Annual Meeting of Stockholders
and has nominated the four persons named below for election as directors, to
serve for the terms indicated. Proxies solicited by the Board of Directors will,
unless otherwise directed, be voted to elect the four nominees named below.
Each of the nominees named below is a current director of the Company
and each has indicated a willingness to serve as a director for the term
indicated. In case any nominee is not a candidate for any reason, the proxies
named in the enclosed form of proxy may vote for a substitute nominee in their
discretion.
Following is certain information regarding the nominees for the office
of director and the directors continuing in office:
DIRECTOR NOMINEES:
TERM EXPIRING IN 1998
BETSY S. ATKINS, AGE 43
Ms. Atkins has been a director of the Company since April 1997. Ms.
Atkins has been a consultant and private investor since August 1993. From
January 1990 to August 1993, she served as President, Chief Executive Officer
and a Director of Nellson Candies, a producer of specialized foods. Ms. Atkins
is a director of Ascend Communications Corporation, a supplier of computer
network and telecommunications equipment, and several privately held companies.
TERM EXPIRING IN 2000
JEFFREY H. WAXMAN, AGE 50
Mr. Waxman has been Chairman of the Board since January 1997 and Chief
Executive Officer and a director of the Company since November 1996. From June
1995 through August 1996, Mr. Waxman was the Executive Vice President and
General Manager of the Application Group of Novell Inc., a network software
provider. From November 1992 through June 1995, Mr. Waxman was the President and
Chief Executive Officer of ServiceSoft Corporation, a software developer. From
November 1991 through January 1992, Mr. Waxman was President and Chief Executive
Officer of Uniplex, Inc., a software developer. Mr. Waxman currently serves on
the Board of Directors of as Cable-Sat Systems, Inc. which does business as
Compressent.
DENNIS J. SHAUGHNESSY, AGE 49
Mr. Shaughnessy has been a director of the Company since March 1993.
Since 1989, Mr. Shaughnessy has been a Managing Director of the Grotech Capital
Group of Baltimore, Maryland, a venture capital fund. Mr. Shaughnessy also is a
director of TESSCO Technologies, Inc. and Forensic Technologies, Inc.
ROBERT J. FRANKENBERG, AGE 49
Mr. Frankenberg has been a director of the Company since December 1996.
Mr. Frankenberg is a private investor. From April 1994 to August 1996, he was
President, Chief Executive Officer and a director of Novell, Inc., a network
software provider. Mr. Frankenberg was also Chairman of the Board of Novell,
Inc. from August 1994 to August 1996. From April 1991 to April 1994, he was Vice
President and General Manager of Personal Information Products Group at Hewlett
Packard Company, a leading manufacturer of computing, communications and
measurement products and services. He is a director of America Online, Inc.,
Electroglas, Inc., Wall Data, Inc., Daw Technologies, Inc. and Caere Corp.
DIRECTORS CONTINUING IN OFFICE AFTER ANNUAL MEETING
TERM EXPIRING IN 1998
STEPHEN M. PURICELLI, AGE 44
Mr. Puricelli has been a director of the Company since February 1990.
Mr. Puricelli has been a General Partner of Costine Associates, L.P., which is
the corporate general partner of Corporate Venture Partners, since its inception
in April 1988. Corporate Venture Partners is a venture capital fund
headquartered in Ithaca, New York. He is currently a director of several small
businesses.
TERM EXPIRING IN 1999
GLENN G. MACKINTOSH, AGE 34
Mr. Mackintosh has been Vice President and General Manager of the
Firewall Division and a director since August 1996. He has resigned as Vice
President and General Manager of the Firewall Division effective April 30, 1997.
He was a co-founder of Secure Computing Canada Ltd., formerly known as Border
Network Technologies Inc., in January 1994 where he was Executive Vice-President
from February 1996 to August 1996 and Vice-President of Technology from January
1994 to February 1996. Prior to co-founding Border Network Technologies Inc.,
Mr. Mackintosh served as Senior Network Specialist at the University of Toronto
from 1991 to 1992 and then as Supervisor of External Networks and Facilities
Management Group from June 1992 to August 1994.
ERIC P. RUNDQUIST, AGE 49
Mr. Rundquist has been a director since August 1996 and prior to its
acquisition by the Company was a director of Enigma Logic, Inc. from 1994 to
August 1996. In 1991, Mr. Rundquist founded and since that time has been
President and Chief Executive Officer of Eric Thomas, Inc., a firm that assists
medium to large corporations in managing their federal and state income, sales
and property tax matters. From 1990 to 1991, Mr. Rundquist was Director of Taxes
at the San Jose, California office of BDO Seidman, LLP an international
accounting firm.
None of the directors is related to any other director or to any
executive officer of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met nineteen times during 1996. All incumbent
directors attended at least 75% of the meetings of the Board and of the
committees on which they served held during the periods for which they served as
a director. The Company currently has an Audit Committee, a Compensation
Committee and a Nominating Committee. In addition, for a period of three months
in 1996, the Company had an Executive Committee. Following is a description of
the functions performed by each of the Committees:
AUDIT COMMITTEE
The Company's Audit Committee presently consists of Messrs. Rundquist
(Chairman), Puricelli and Shaughnessy. The Audit Committee makes recommendations
concerning the selection and appointment of independent auditors, reviews the
scope and findings of the completed audit, and reviews the adequacy and
effectiveness of the Company's accounting policies and system of internal
accounting controls. The Audit Committee met three times during 1996.
COMPENSATION COMMITTEE
The Company's Compensation Committee presently consists of Messrs.
Puricelli (Chairman) and Shaughnessy and Ms. Atkins. The Compensation Committee
annually reviews and acts upon the Chief Executive Officer's compensation
package and sets compensation policy for the other employees of the Company, as
well as acting upon management recommendations concerning employee stock
options, bonuses and other compensation and benefit plans. The Compensation
Committee also administers the Secure Computing Corporation Amended and Restated
1995 Omnibus Stock Plan discussed below and the Secure Computing Corporation
Employee Stock Purchase Plan. The Compensation Committee met nineteen times
during 1996.
NOMINATING COMMITTEE
The Nominating Committee presently consists of Messrs. Puricelli
(Chairman), Shaughnessy and Waxman. The Company's Nominating Committee advises
and makes recommendations to the Board on all matters concerning the selection
of candidates as nominees for election as directors. The Nominating Committee
met five times during 1996.
The Nominating Committee will consider persons recommended by
stockholders in selecting nominees for election to the Board of Directors.
Stockholders who wish to suggest qualified candidates should write to: Secure
Computing Corporation, 2675 Long Lake Road, Roseville, Minnesota 55113,
Attention: Chairman, Nominating Committee. All recommendations should state in
detail the qualification of such persons for consideration by the Nominating
Committee and should be accompanied by an indication of the person's willingness
to serve.
EXECUTIVE COMMITTEE
The Board of Directors formed the Executive Committee on September 23,
1996 and delegated to it the ability to exercise all the powers and authority of
the Board in the management of the business and affairs of the Company between
meetings of the Board. The Executive Committee dissolved in November 1996 after
Mr. Waxman was hired as Chief Executive Officer. Members of the Committee
included Messrs. Kamm (Chairman), Beseke, Puricelli, Forbes, and Rundquist.
DIRECTOR COMPENSATION
Effective May 1996, members of the Board of Directors who are not
employees of the Company and who beneficially own not more than 5% of the
outstanding shares of Secure Common Stock receive $1,000 for each meeting of the
Board (or any committee thereof) attended (a minimum of $10,000 per year);
provided, however, a meeting of the board (or any committee) that is held
concurrently with another meeting is considered to be only one meeting. In
addition, each non-employee director of the Company immediately following an
Annual Meeting of Stockholders is granted, by virtue of serving as a
non-employee director of the Company, an option to purchase 4,375 shares of
Common Stock of the Company at an exercise price equal to the fair market value
of the Common Stock on the date of grant and with an expiration date ten years
from the date of grant. These stock options become fully exercisable on the date
of the Annual Meeting of Stockholders next following the grant of the option.
Non-employee directors of the Company who are elected between Annual Meetings of
Stockholders of the Company receive an option upon terms that are similar to
those awarded at an Annual Meeting, except that the number of shares covered by
such option is pro-rated to reflect the number of months that have expired from
the date of the prior Annual Meeting.
During 1996, the Compensation Committee of the Board of Directors
granted options to purchase 4,375 shares of Common Stock of the Company, which
shares after the February 13, 1997 repricing have a per share exercise price of
$6.125, for one year of service as a director to each of the then current
outside directors of the Company. Incumbent outside directors Messrs. Rundquist,
Frankenberg and Forbes received pro rata grants of options to purchase 3,281
shares, 1,458 shares and 3,281 shares, respectively. These options also have an
exercise price of $6.125 as a result of the February 13, 1997 repricing. In
addition, in consideration for their service on the Executive Committee, the
Board granted an option to purchase 25,000 shares of Common Stock of the Company
to Mr. Kamm and an option to purchase 10,000 shares of Common Stock of the
Company to each of Messrs. Puricelli, Forbes and Rundquist. All options granted
to non-employee directors currently have an exercise price of $6.125 per share
as a result of the repricing described herein. See "Executive Compensation --
Report of the Compensation Committee -- Repricings of Stock Options".
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for establishing compensation policy and administering the
compensation programs of the Company's Chief Executive Officer. The Committee is
comprised of three non-employee directors. The Committee meets periodically to
review executive compensation, the design of compensation programs, stock option
programs, and individual salary and awards for the Chief Executive Officer. The
purpose of this report is to inform stockholders of the Company's compensation
policies and the rationale for the compensation paid to the Company's current
and former Chief Executive Officer and other executive officers in 1996.
COMPENSATION PHILOSOPHY
The Company's compensation program is designed to motivate and reward
executives responsible for attaining the financial and strategic objectives
essential to the Company's long-term success and continued growth in stockholder
value. The compensation program has been designed to provide a competitive level
of total compensation and offers incentive opportunities directly linked to the
Company's performance and stockholder return. The Committee believes it is in
the best interests of the stockholders to reward executives when the Company's
performance objectives are achieved and to provide significantly less
compensation when these objectives are not met. Therefore, a significant portion
of executive compensation is comprised of "at risk" incentives.
Key objectives of the compensation program are to:
* Provide a strong, direct link between the Company's financial and strategic
goals and executive compensation.
* Align the financial interest of executives with those of its stockholders
through equity-based plans.
* Motivate executives to achieve operating goals through an emphasis on
performance-based compensation.
* Provide competitive total compensation that recognizes individual
performance and that can attract and retain high caliber key executives
critical to the long-term success of the Company.
To maintain a competitive level of total executive compensation, the
Committee periodically evaluates the compensation packages of competitor
companies. This analysis provides the Committee with competitive data on the mix
of compensation elements and overall compensation levels.
The Company participates each year in the Annual Radford Benchmark Salary
Survey sponsored by Alexander & Alexander Consulting Group. This survey includes
data from 429 high technology companies located outside of the San Francisco Bay
area which are used for comparison. The Committee's intent is to target total
compensation for executives at an average for competitor companies and to exceed
average compensation when performance goals are exceeded.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The key components of the Company's executive officer compensation
program are base salary, annual incentive bonus and long-term incentives. These
elements are described below. In determining compensation, the Committee
considers all elements of an executive's compensation package.
BASE SALARY. The Committee annually reviews the base salary of the Chief
Executive Officer. In determining appropriate salary levels, the Committee
considers individual performance, level of responsibility, scope and complexity
of the position, and internal equity and salary levels for comparable positions
at the peer companies. In determining the base salary increase for the Chief
Executive Officer, the Committee also considers strategic planning, team
building and operating results. The Chief Executive Officer, in consultation
with the Committee, annually reviews the base salary of the other executive
officers based on the same criteria.
ANNUAL INCENTIVE BONUS. The purpose of the Company's annual incentive
bonus is to provide a direct financial incentive in the form of an annual cash
bonus to the executive officers and key managers who achieve performance goals
established by the Committee. The Committee determines the annual incentive
bonus of the Chief Executive Officer and the Chief Executive Officer, in
consultation with the Committee, determines the annual incentive bonus of the
other executive officers.
Executives are eligible for target awards under the annual incentive
program with maximum payouts ranging from 15% to 75% of base salary, with 75%
possible in the case of the Chief Executive Officer only. The size of the target
award is determined by the executive's position and competitive data for similar
positions at the peer companies. The Company sets high goals and, therefore, the
resulting awards decrease or increase substantially if actual employee
performance in achieving the Company's goals fails to meet or exceeds target
levels. For 1996, performance was assessed against target measures of team
building, strategic planning and financing goals. For 1996, Mr. Waxman received
an incentive bonus award of $34,600, approximately 85% of his target bonus of
75% of base salary, and Mr. Beseke did not receive an incentive bonus award.
Incentive bonus awards to other executive officers in 1996 were from 5% to 22%
of their current base salaries.
STOCK OPTIONS. Long-term performance incentives are provided to
executives through the Company's Amended and Restated 1995 Omnibus Stock Plan
(the "Omnibus Stock Plan"). The Omnibus Stock Plan is administered by the
Committee, which is authorized to award stock options to employees of the
Company, non-employee directors of the Company and certain advisors and
consultants to the Company. At least annually, the Committee considers whether
awards will be made to executive officers under the Omnibus Stock Plan. Such
awards are based on the scope and complexity of the position, competitive
compensation data and the maintenance of the Company's stock at a target share
price. The Committee has broad discretion to select the optionees and to
establish the terms and conditions for the grant, vesting and exercise of each
option. Although the Committee's practice has been to grant incentive stock
options to employees vesting over three years, recently the Company has begun to
grant options one third of which vest if the Company's Common Stock reaches a
price by the first anniversary of the date of grant which is $10.00 greater than
its fair market value on the date of grant and maintains such price for a period
of twenty consecutive business days, one third of which vest if the Company's
Common Stock reaches a price by the second anniversary of the date of grant
which is $20.00 greater than its fair market value on the date of grant and
maintains such price for a period of twenty consecutive business days, and the
final one third of which vest if the Company's Common Stock reaches a price by
the third anniversary of the date of grant which is $30.00 greater than its fair
market value on the date of grant and maintains such price for a period of
twenty consecutive business days. Options granted to executives vest immediately
upon the occurrence of an "Event" as defined in the Omnibus Stock Plan, attached
hereto as Exhibit 1.
In 1996, the Committee granted to Mr. Waxman two non-statutory stock
options to purchase an aggregate of 750,000 shares of the Company's Common
Stock, 500,000 of which are subject to approval of amendments to the Omnibus
Stock Plan that would (i) increase the number of shares of Common Stock of the
Company subject to the Omnibus Stock Plan and (ii) increase the maximum number
of shares of the Company's Common Stock that may be awarded to any one employee
in any fiscal year from 250,000 to 750,000. The purchase price per share for
both options after repricing is $6.125, as a result of the repricing described
below. An option for 450,000 shares vests over three years at a rate of 150,000
shares per year on, as a result of the February 13, 1997 repricing, each of
February 13, 1997, 1998 and 1999 (of which 66,666, 66,667 and 66,667 shares
vesting on February 13, 1997, 1998 and 1988, respectively, are conditional upon
stockholder approval of the amendments to the Omnibus Stock Plan referred to
above). A second option for 300,000 shares vests upon the occurrence of the
following events: (1) if, on or before February 13, 1997, the closing price of a
share of the Company's Common Stock is $16.125 or more and maintains or exceeds
such price for a period of 20 consecutive business days, then the option shall
vest as to 100,000 shares; (2) if, on or before February 13, 1998, the closing
price of a share of the Company's Common Stock is $26.125 or more and maintains
or exceeds such price for a period of 20 consecutive business days, then the
option shall vest as to 100,000 shares; and (3) if, on or before February 13,
1999, the closing price of a share of the Company's Common Stock is $36.125 or
more and maintains or exceeds such price for a period of 20 consecutive business
days, then the option shall vest as to 100,000 shares. To the extent that any
such event does not occur within the applicable time periods set forth above,
then such option shall immediately terminate with respect to the applicable
number of shares which have not vested. Mr. Waxman's option vests immediately
upon the occurrence of an Event. The per share price targets are subject to
appropriate adjustments for stock splits and other changes in the capitalization
of Secure, as set forth in the Omnibus Stock Plan.
In 1996, the Committee did not grant to Mr. Beseke any options to
purchase shares of Common Stock of the Company.
PROFIT SHARING AND RETIREMENT PLAN. The Secure Computing Corporation
Profit Sharing and Retirement Plan (the "Retirement Plan") was made effective as
of February 1, 1994. The Retirement Plan is intended to be a qualified
retirement plan under Section 401 of the Internal Revenue Code of 1986, as
amended, so that contributions by employees or by the Company to the Retirement
Plan, and income earned thereon, are not taxable to employees until withdrawn
from the Retirement Plan (except for contributions under the 401(k) component,
which are subject to Social Security withholding); and so that contributions by
the Company, if any, will be deductible when made. The purpose of the Retirement
Plan is to enable eligible employees, including executive officers, to save for
retirement and to provide incentives to increase corporate financial performance
by establishing a direct link between profit sharing contributions to employees
and corporate financial performance. It may also provide certain benefits in the
event of death, disability, or other termination of employment. The Retirement
Plan is for the exclusive benefit of eligible employees and their beneficiaries.
There are two components to the Retirement Plan, a 401(k) - type component and a
Company profit sharing component.
Under the 401(k) component, employees may contribute up to 12% of their
annual compensation, subject to a federally imposed annual maximum which is
currently $9,500. The Company may provide additional matching contributions of
up to $250 per person per year under this component. The plan trustee, at the
direction of each participant, invests funds in any of six investment options.
In 1996, the Company did not contribute to Mr. Waxman's account and contributed
$250 to Mr. Beseke's account under this component of the Retirement Plan.
The Retirement Plan also provides a profit sharing component, which
covers substantially all employees of the Company, including the executive
officers. Contributions under this component are limited to the Company's
discretionary annual contribution, which is based on the financial performance
of the Company. The Company can make contributions of up to 5% of the employee's
annual salary. During the first five years of employment, contributions vest
based on an employee's years of service. Thereafter, contributions vest
immediately. In 1996, the Company did not contribute to Mr. Waxman's account and
contributed $4,500 to Mr. Beseke's account under this component of the
Retirement Plan.
EMPLOYEE STOCK PURCHASE PLAN. The Secure Computing Corporation Employee
Stock Purchase Plan (the "Purchase Plan") was approved by the Company's
stockholders at the 1996 Annual Meeting and became effective July 1, 1996. The
purpose of the Purchase Plan is to provide eligible employees with an
opportunity to acquire a proprietary interest in the Company through the
purchase of its Common Stock and, thus, to develop a stronger incentive to work
for the continued success of the Company. The Purchase Plan is an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Purchase Plan is administered by the Committee.
Any employee of the Company or, subject to approval by the Board of
Directors, a parent or subsidiary corporation of the Company is eligible to
participate in the Purchase Plan for any Purchase Period (as defined below) so
long as, on the first day of such Purchase Period, the employee has completed at
least six months of continuous service and is customarily employed at least 20
hours per week. "Purchase Period" means each quarter of the Company's fiscal
year.
Any eligible employee may elect to become a participant in the Purchase
Plan by authorizing payroll deductions of a specified whole percentage from 1%
to 10% of the employee's gross cash compensation. The Company currently has
approximately 330 employees who are eligible to participate in the Purchase
Plan. Amounts withheld under the Purchase Plan will be held by the Company as
part of its general assets until the end of the Purchase Period and will be used
to purchase Common Stock of the Company as of the last day of the Purchase
Period at a price equal to 85% of the lesser of the fair market value of a share
of Common Stock on either the first or last day of the Purchase Period. All
amounts so withheld will be used to purchase the number of shares of Common
Stock (including fractional shares) that can be purchased with such amount,
unless the participant has properly notified the Company that he or she elects
to purchase a lesser number of shares of Common Stock or to receive the entire
amount in cash. If purchases by all participants would exceed the number of
shares of Common Stock available for purchase under the Purchase Plan, each
participant will be allocated a ratable portion of such available shares of
Common Stock. Any amount not used to purchase shares of Common Stock will be
refunded to the participant in cash.
Shares of Common Stock acquired by each participant will be held in a
general account maintained for the benefit of all participants. Certificates for
the number of whole shares of Common Stock purchased by a participant will be
issued and delivered to him or her only upon the request of such participant or
his or her representative.
No more than $25,000 in fair market value (determined on the first day
of the respective Purchase Periods) of shares of Common Stock may be purchased
under the Purchase Plan and all other employee stock purchase plans, if any, of
the Company and any parent or subsidiary corporation of the Company by any
participant in each calendar year.
OTHER. Pursuant to the terms of his employment agreement, Mr. Waxman is
entitled to receive a monthly car allowance of up to $1,000, relocation
expenses, and temporary living quarters in the general vicinity of the Company's
headquarters. In 1996, Mr. Waxman received car allowance payments of $2,000 and
did not receive any relocation expenses. Under his employment agreement with the
Company, Mr. Beseke was entitled to receive a term life insurance policy in the
amount of $540,000, with the premiums for such policy to be paid by the Company.
In 1996, the amount of such premium was $1,585.
REPRICINGS OF STOCK OPTIONS
Historically, the policy of the Committee has been to set the exercise
price of the stock options at the fair market value of the underlying stock on
the date of grant. Accordingly, the stock options provide value only when the
price of the Company's stock increases above the price on the date of grant.
On January 23, 1997, the Committee approved the repricing of substitute
stock options of an exercise price of $8.00 per share, the fair market value on
the date of repricing to all holders of options with exercise prices in excess
of $8.00 per share. The Committee's action was in response to the decline in the
market price of the Company's stock during the preceding months, which had
effectively eliminated the incentive value of options with significantly higher
exercise prices. The Committee's decision was based on a number of factors,
including the fear of losing skilled, mobile executives. The Committee
determined that substitute options were necessary to provide incentives for
valued employees of the Company to remain with the Company over an extended
period of time.
On February 13, 1997, the fair market value of the Company's common
stock had declined to $6.125. Since all conditions of the January 23, 1997
repricing of options had not been satisfied, the Committee declared the January
23, 1997 repricing of options to be null and void, and approved the repricing at
$6.125 per share of all stock options with an exercise price in excess of $6.125
per share. The termination date of the repriced options was changed to a date
ten years from the date of grant. The grant of new options to non-director
employees and outside directors is conditioned upon the termination of each old
option held by such employee or outside director. The vesting schedule for the
new options issued to non-director employees and the new option for 450,000
shares issued to Mr. Waxman were reset so that the new options were completely
unvested on the date of grant, regardless of any vesting that occurred under the
old options, and will vest at the rate of one third of the shares covered by the
new option on each of February 13, 1998, 1999, and 2000. The vesting schedule
for the repriced options to outside directors remains the same as the vesting
schedule for the unvested old outside director options. The vesting schedules
for Mr. Waxman's option for 300,000 shares and for similar options granted to
other executives were revised so that the triggering stock prices and dates are
$16,125 on February 13, 1998, $26.125 on February 13, 1999, and $36.125 on
February 13, 2000. All other terms of the repriced options remain the same as
the old options. A total of 1,545,175 options, with exercise prices ranging from
$6.84 to $30.00 per share, were repriced.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Stephen M. Puricelli, a director of the Company, is the Chairman of the
Compensation Committee of the Board of Directors. Mr. Puricelli also is a
general partner of Costine Associates, L.P., which is the General Partner of
Corporate Venture Partners, L.P. ("CVP"), which owns approximately 9.5% of the
Common Stock of the Company. Dennis J. Shaughnessy, a director of the Company,
is a member of the Compensation Committee of the Board of Directors. Mr.
Shaughnessy also is the Managing Director of Grotech Capital Group ("Grotech"),
which owns approximately 11.6% of the Common Stock of the Company. See "Certain
Transactions".
COMPENSATION COMMITTEE
Stephen M. Puricelli, Chairman
Dennis J. Shaughnessy
Betsy S. Atkins
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table contains information
concerning annual and long-term compensation for the Company's last two fiscal
years provided to the two individuals who served the Company as Chief Executive
Officer during 1996 and the other three executive officers of the Company
(collectively, the "Named Executive Officers") who received remuneration
exceeding $100,000 for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ----------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS/SARS(#) SATION(2)
- ------------------------------- ---------- ---------- ------------ ----------------- ---------
<S> <C> <C> <C> <C> <C>
Jeffrey H. Waxman, Chief 1996 $50,000 $34,600 750,000 $--
Executive Officer, Director
Kermit M. Beseke(3) 1996 180,000 -- -- 6,335(4)
1995 178,269 103,502 31,250 8,505(5)
Timothy P. McGurran, Vice 1996 72,193 27,500(6) 100,000 2,437(7)
President of Operations,
Chief Financial Officer
James Boyle, Vice President 1996 93,510 10,500 44,375 3,600(7)
of the Government Division 1995 24,998 -- -- --
Glenn G. Mackintosh, Vice 1996 91,241 29,159(9) 96,250 2,190(10)
President and General Manager 1995 47,450 14,052 -- --
of the Firewall Division(8)
</TABLE>
- -------------------------------
(1) Unless otherwise indicated, all amounts reflect compensation earned as
annual incentive bonus. Such compensation is actually paid to the
recipient in the year following the year earned. See "Executive
Compensation -- Report of the Compensation Committee".
(2) Unless otherwise indicated, all Other Compensation reported represents
contributions made under the Company's Profit Sharing and Retirement
Plan. In each of 1994 and 1995, the Company made matching contributions
of $250 under the 401(k) component of the Profit Sharing and Retirement
Plan to each Named Executive Officer's Account. Such contributions are
actually made to the recipient's account in February of the following
year. See "Executive Compensation -- Report of the Compensation
Committee".
(3) Mr. Beseke became President, Chief Executive Officer, and a Director in
February 1992 and Chairman in November 1996 and held office as an
officer, employee and a Director of the Company until January 2, 1997.
(4) Represents payment by the Company of the annual premium of $1,459 for a
term life insurance policy in addition to contributions under the
Company's Profit Sharing and Retirement Plan.
(5) Represents payment by the Company of the annual premium of $1,340 for a
term life insurance policy in addition to contributions under the
Company's Profit Sharing and Retirement Plan.
(6) Represents a $20,000 signing bonus in addition to compensation earned as
an annual incentive bonus.
(7) Represents contributions under the Company's Profit Sharing and
Retirement Plan.
(8) Mr. Mackintosh resigned as Vice President and General Manager of the
Firewall Division and as an employee of the Company effective April 30,
1997.
(9) Represents a $24,159 bonus pursuant to a contract in addition to
compensation earned as an annual incentive bonus.
(10) Represents amounts accrued to be paid to Mr. Mackintosh under a profit
sharing and retirement plan to be established for the benefit of Canadian
employees.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes option grants made during the year ended
December 31, 1996 to the executive officers named in the Summary Compensation
Table. The table does not reflect the repricing of stock options described in
"Executive Compensation -- Report of the Compensation Committee -- Repricings of
Stock Options".
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES OR BASE TERMS(1)
GRANTED IN FISCAL PRICE EXPIRATION ------------------------------
NAME (#)(2) YEAR ($/Sh) DATE 5%($) 10%($)
- -------------------------- --------- --------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Waxman 450,000 18.8% $9.75 11/04/06 $2,759,738 $6,993,675
300,000 12.5 9.75 11/04/06(3) 1,839,825(3) 4,662,450(3)
Kermit M. Beseke -- -- -- -- -- --
Timothy P. McGurran 13,351 0.6 24.75 5/9/06 207,845 526,717
11,649 0.5 25.75 5/12/06 188,676 478,139
15,000 0.6 30.25 5/28/06 285,409 723,278
60,000 2.5 13.50 8/28/06 509,490 1,291,140
James Boyle 9,375 0.4 24.75 4/26/06 145,948 369,858
35,000 1.5 13.50 8/28/06 297,203 753,165
Glenn G. Mackintosh 56,250 2.3 3.66 2/21/06 129,495 328,165
25,000 1.0 27.00 5/23/06 424,575 1,075,950
15,000 0.6 27.00 5/29/06 254,745 645,570
</TABLE>
- ------------------------
(1) The potential realizable value is based on a 10-year term of each option
at the time of grant. Assumed stock price appreciation of 5% and 10% is
mandated by rules of the Securities and Exchange Commission and is not
intended to forecast actual future financial performance or possible
future appreciation. The potential realizable value is calculated by
assuming that the deemed fair value of the Company's Common Stock for
financial statement presentation purposes on the date of grant
appreciates at the indicated rate for the entire term of the option and
that the option is exercised at the exercise price and sold on the last
day of its term at the appreciated price.
(2) Options granted pursuant to the Omnibus Stock Plan at an exercise price
equal to the fair market value as determined by the Board of Directors on
the date of grant. Unless otherwise indicated, each option becomes
exercisable with respect to one-third of the shares of Common Stock
covered thereby on each of the first through third anniversaries of the
date of grant, commencing on the first anniversary of such date. Each
option has a maximum term of 10 years, subject to earlier termination in
the event of the optionee's cessation of service with the Company.
(3) Option vests in 100,000 share increments on November 4, 1996, 1997 and
1998, dependent upon the Company's Common Stock achieving on or before
these dates (and maintaining for twenty consecutive business days
thereafter) a closing per share price of $19.75, $29.75 and $39.75,
respectively. To the extent that the Company's Common Stock does not
achieve such prices within the applicable time periods, then such option
shall immediately terminate with respect to the applicable number of
shares which have not vested. The option expires on November 4, 2006. The
terms of this option are described more fully in "Executive Compensation
-- Report of the Compensation Committee".
AGGREGATE OPTION
EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The purpose of the following table is to report exercises of stock
options by the Named Executive Officers during 1996 and the value of their
unexercised stock options as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED VALUE --------------- ---------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Waxman -- -- -- 750,000 -- --
Kermit M. Beseke 6,875 $151,104(2) 62,625 31,125 $447,733 $125,486
Timothy P. McGurran -- -- -- 100,000 -- --
James Boyle -- -- 1,875 48,125 4,284 8,569
Glenn G. Mackintosh -- -- 56,250 40,000 307,406 --
</TABLE>
- ------------------------
(1) Value is based on a share price of $9.125, which was the last reported
sale price for a share of Common Stock on the NASDAQ National Market
System on December 31, 1996, minus the exercise price, and does not
reflect the repricing of stock options described in "Executive
Compensation -- Report of the Compensation Committee -- Repricings of
Stock Options".
(2) Mr. Beseke exercised options to purchase 6,875 shares of Common Stock on
March 20, 1996. The exercise price of 5,675 shares was $0.20 per share
and of 1,250 shares was $0.592 per share. The exercise prices were the
fair value of a share of Common Stock on the date of grant, as determined
by the Board of Directors. Value Realized is based on the attributed fair
market value of a share of Common Stock on the date of exercise, which
was $22.25 on March 20, 1996.
EMPLOYMENT CONTRACTS; SEVERANCE, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of the Named Executive
Officers.
JEFFREY H. WAXMAN. Mr. Waxman entered into a two-year employment
agreement with the Company effective November 4, 1996 to serve as the Company's
President and Chief Executive Officer. The agreement remains in effect until
November 4, 1998, unless terminated by Mr. Waxman upon 30-days written notice,
subject to the Company's right to terminate the agreement immediately at any
time for cause. The agreement shall renew for successive one-year terms unless
either party gives written notice to the other of non-renewal within 30 days
prior to scheduled renewal. In addition, the Company may terminate the agreement
at any time, or not renew the agreement, for any reason, if the Company pays to
Mr. Waxman as severance pay an amount equal to one year's base salary (or if
greater than one year, base salary for the remainder of the period from the date
of termination to November 4, 1998). Mr. Waxman's annual base salary is
$325,000, and he is eligible to receive an annual cash performance bonus of up
to 75% of base salary. Both Mr. Waxman's base salary and the bonus percentage
are subject to review by the Compensation Committee which may make adjustments
upward, but not downward. Mr. Waxman also is entitled to all rights and benefits
for which Mr. Waxman is eligible under any deferred bonus, pension, group
insurance, profit sharing or other Company benefits which may be in force from
time to time.
The agreement also provides Mr. Waxman with a monthly car allowance of
up to $1,000, paid separately and not subject to withholding taxes to the extent
permitted by law. In consideration for Mr. Waxman's agreement to relocate his
residence to the general vicinity of the Company's corporate headquarters, the
Company will pay for any of his direct relocation expenses, including the cost
of moving household goods and closing costs for the sale of his present home and
the purchase of a new home, such as real estate brokers' commissions, together
with an additional amount of cash sufficient to pay any personal income taxes
payable as a result of the Company's payment of direct relocation expenses.
Until Mr. Waxman relocates, the Company will provide him with a furnished
apartment, or suitable living quarters, in the general vicinity of the Company's
corporate headquarters.
Pursuant to the agreement, Mr. Waxman was granted a non-statutory
option to purchase 450,000 shares of the Company's Common Stock and an
additional nonstatutory stock option to purchase up to an additional 300,000
shares of Secure Common Stock upon the occurrence of certain events described
below. The option for 300,000 shares and 200,000 shares covered by the option
for 450,000 shares are subject to stockholder approval of amendments to the
Omnibus Stock Plan, as set forth under "Proposal to Approve the Amended and
Restated 1995 Omnibus Stock Plan, as Amended". The purchase price per share for
both options is $6.125, as a result of the repricing described in "Executive
Compensation -- Report of the Compensation Committee -- Repricings of Stock
Options".
As a result of the repricing described in "Executive Compensation --
Report of the Compensation Committee -- Repricings of Stock Options" herein, the
option for 450,000 shares vests over three years at a rate of one-third or
150,000 shares per year on each of February 13, 1997, 1998 and 1999 (of which
66,666, 66,667 and 66,667 shares vesting on February 13, 1997, 1998 and 1988,
respectively, are conditional upon stockholder approval of the amendment to the
Omnibus Stock Plan described in "Proposal to Approve the Amended and Restated
1995 Omnibus Stock Plan, as Amended" herein). Such option will also immediately
vest in full upon the declaration of an "Event" as set forth in the Omnibus
Stock Plan; provided, however, that such option shall continue to be conditioned
upon stockholder approval as noted above with respect to 200,000 shares if such
approval shall not have been obtained prior to the occurrence of such Event.
As a result of the repricing described in "Executive Compensation --
Report of the Compensation Committee -- Repricings of Stock Options" herein, the
option for 300,000 shares vests upon the occurrence of the following events: (1)
if, on or before February 13, 1998, the closing price of a share of Secure
Common Stock is $16.125 or more and maintains or exceeds such price for a period
of 20 consecutive business days, then the option shall vest as to 100,000 shares
of Secure Common Stock; (2) if, on or before February 13, 1999, the closing
price of a share of Secure Common Stock is $26.125 or more and maintains or
exceeds such price for a period of 20 consecutive business days, then the option
shall vest as to an additional 100,000 shares of Secure Common Stock; and (3)
if, on or before February 13, 2000, the closing price of a share of Secure
Common Stock is $36.125 or more and maintains or exceeds such price for a period
of 20 consecutive business days, then the option shall vest as to an additional
100,000 shares of Secure Common Stock. To the extent that any such event does
not occur within the applicable time periods set forth above, then such option
shall immediately terminate with respect to the applicable number of shares
which have not vested. The per share price targets are subject to appropriate
adjustments for stock splits and other changes in the capitalization of Secure,
as set forth in the Omnibus Stock Plan.
During the term of his employment and following the termination of his
employment if the Company exercises its option to have Mr. Waxman render
consulting services, Mr. Waxman is prohibited from competing with the Company
and any of its subsidiaries and he also is prohibited from soliciting employees
or customers of the Company or any of its subsidiaries for his own account or
the account of a third party.
KERMIT M. BESEKE. Until his resignation effective January 3, 1997, the
Company was a party to an employment agreement with Mr. Beseke, pursuant to
which Mr. Beseke had agreed to serve as the Company's Chief Executive Officer
until December 31, 1996, unless the agreement was terminated by Mr. Beseke upon
30-days written notice or by the Company for cause or Mr. Beseke's death. Mr.
Beseke's annual base salary was $180,000, and he also was eligible to receive
annual cash bonuses and stock option grants and other awards under the Omnibus
Stock Plan as determined by and at the discretion of the Compensation Committee.
Mr. Beseke was also entitled to all rights and benefits for which Mr. Beseke was
eligible under any deferred bonus, pension, group insurance, profit sharing or
other Company benefits which may be in force from time to time. Mr. Beseke's
spouse is the beneficiary of a term life insurance policy, on the life of Mr.
Beseke, for which the Company agreed to pay the annual premium. Mr. Beseke is
prohibited from soliciting employees or customers of the Company for Mr.
Beseke's own account or the account of a third party for 12 months after the
termination of Mr. Beseke's employment.
Mr. Beseke resigned as a director, officer and employee of the Company
effective January 2, 1997. Mr. Beseke received a severance payment of $180,000
and payment for accrued and earned, but unused, vacation.
TIMOTHY P. MCGURRAN. The Company and Mr. McGurran entered into a
three-year employment agreement on August 27, 1996, pursuant to which Mr.
McGurran serves as the Company's Vice President of Operations and Chief
Financial Officer. Mr. McGurran's annual base salary is $125,000, subject to
upward adjustment by the Board of Directors. Mr. McGurran is also eligible to
receive an annual bonus of up to 35% of his base salary if certain performance
goals established by the Board of Directors are met. Such percentage is subject
to upward adjustment by the Board of Directors. Either party may terminate the
agreement; however, if the Company terminates the agreement without cause, Mr.
McGurran will be entitled to an amount equal to twelve months of his base
salary. Upon termination of expiration of the agreement, the Company shall have
the option to retain Mr. McGurran as a consultant.
JAMES BOYLE. The Company and Mr. Boyle entered into a three-year
employment agreement on October 7, 1996, pursuant to which Mr. Boyle serves the
Company as Vice President of the Government Division. Mr. Boyle's annual base
salary is $120,000, subject to upward adjustment by the Board of Directors. Mr.
Boyle is also eligible to receive an annual bonus of up to 35% of his base
salary if certain performance goals established by the Board of Directors are
met. Such percentage is subject to upward adjustment by the Board of Directors.
Under the terms of the agreement, Mr. Boyle was granted options to purchase
35,000 shares of Common Stock under the Company's Omnibus Stock Plan vesting in
one-third increments on the first three anniversaries of the date of the
agreement at an exercise price of $13.50 per share. Such options were repriced
to an exercise price of $6.125 per share on February 13, 1997. Either party may
terminate the agreement; however, if the Company terminates the agreement
without cause, Mr. Boyle will be entitled to an amount equal to six months of
his base salary. Upon termination or expiration of the agreement, the Company
shall have the option to retain Mr. Boyle as a consultant.
GLENN G. MACKINTOSH. The Company and Mr. Mackintosh entered into a
three-year employment agreement on August 29, 1996, pursuant to which Mr.
Mackintosh serves the Company as Vice President and General Manager of the
Firewall Division. Mr. Mackintosh's annual base salary is $125,000 subject to
upward adjustment by the Board of Directors. Mr. Mackintosh is also eligible to
receive an annual bonus of up to 35% of his base salary if certain performance
goals established by the Board of Directors are met. Such percentage is subject
to upward adjustment by the Board of Directors. Under the terms of the
agreement, Mr. Mackintosh was granted options to purchase 40,000 shares of
Common Stock under the Omnibus Stock Plan vesting in one-third increments on the
first three anniversaries of the date of the agreement at an exercise price of
$27.00 per share. Such options were repriced to an exercise price of $6.125 per
share on February 13, 1997. Either party has the power to terminate the
agreement for any reason.
Mr. Mackintosh resigned as an officer and employee of the Company
effective April 30, 1997. The Company has agreed to pay Mr. Mackintosh a
severance payment of $41,667 and payment for accrued and earned, but unused,
vacation.
CERTAIN TRANSACTIONS
Stephen M. Puricelli is a director of the Company and is a general
partner of Costine Associates, L.P., which is the General Partner of Corporate
Venture Partners, L.P. ("CVP"), which owns approximately 9.5% of the Common
Stock of the Company. Dennis J. Shaughnessy is a director of the Company and is
the Managing Director of Grotech Capital Group ("Grotech"), which owns
approximately 11.6% of the Common Stock of the Company.
Pursuant to a Registration Rights Agreement between the Company,
Grotech and CVP dated July 14, 1989, as amended by an amendment dated December
13, 1989, the shares of Common Stock issued to CVP and Grotech upon the
conversion of the Preferred Stock issued pursuant to the exercise of warrants
are subject to certain registration rights. Pursuant to such registration
rights, Grotech and CVP and certain permitted transferees have rights to demand
registration under the federal securities laws of the shares of Common Stock. In
addition, in the event the Company proposes to register additional securities
under the federal securities laws, Grotech and CVP (or their permitted
transferees) will have rights, subject to certain exceptions and limitations, to
have the shares of Common Stock included in such registration statement. The
Company has agreed that, in the event of any registration of securities owned by
Grotech and CVP (or their permitted transferees) in accordance with the
provisions thereof, it will indemnify such persons, and certain related persons,
against liabilities incurred in connection with such registration, including
liabilities arising under the federal securities laws. The registration rights
are subject to certain limitations intended to prevent undue interference with
the Company's ability to distribute securities.
The Company conducts business with Midwest Systems, Inc. ("Midwest"),
which is a distributor of certain of the Company's products and is a computer
hardware vendor to the Company. In 1996, the Company received revenue of
$1,224,000 from sales to Midwest and purchased $435,000 of goods from Midwest.
The spouse of Kermit Beseke, former Chairman of the Board, President and Chief
Executive Officer of the Company, is a former Vice President of Midwest.
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors, executive officers and persons who own more than ten
percent of the Company's Common Stock to file initial reports of ownership of
the Company's Common Stock and changes in such ownership with the Securities and
Exchange Commission. To the Company's knowledge based solely on a review of
copies of forms submitted to the Company during and with respect to 1996 and on
written representations from the Company's directors and executive officers, all
required reports were filed on a timely basis during 1996, except for Forms 4
and 5 required to be filed by Donald Whitbeck, a former executive officer of the
Company, but which Forms 4 and 5 were not filed.
PERFORMANCE EVALUATION
The graph below compares total cumulative stockholders' return on the
Common Stock for the period from the close of the NASDAQ Stock Market - U.S.
Companies on the date of the Company's initial public offering of Common Stock
(November 17, 1995) to December 31, 1996, with the total cumulative return on
the CRSP Total Return Index for the NASDAQ Stock Market - U.S. Companies (the
"CRSP Index") and the CRSP Index for NASDAQ Computer and Data Processing Stocks
(the "Peer Index") over the same period. The index level for the graph and table
was set to 100 on November 17, 1995 for the Common Stock, the CRSP Index and the
Peer Index and assumes the reinvestment of all dividends.
<TABLE>
<CAPTION>
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CRSP Total Returns Index for: 11/17/95 12/31/95 6/30/96 12/31/96
- ----------------------------- -------- -------- ------- --------
<S> <C> <C> <C> <C>
Secure Computing Corporation 100.00 116.1 47.4 18.9
Nasdaq Stock Market (US Companies) 100.00 100.9 114.3 124.1
Nasdaq Computer and Data Processing 100.00 100.3 116.8 123.9
Stocks SIC 7370-7379 US & Foreign
Notes:
A. The lines represent annual index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the annual interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 11/17/95.
</TABLE>
PROPOSAL TO APPROVE THE AMENDED AND RESTATED
1995 OMNIBUS STOCK PLAN, AS AMENDED
PROPOSED AMENDMENTS REQUIRING STOCKHOLDER APPROVAL
Pursuant to its employment agreement with Mr. Waxman, the Company
agreed to propose to its stockholders at the Annual Meeting an amendment to the
Secure Computing Corporation Amended and Restated 1995 Omnibus Stock Plan (the
"Omnibus Stock Plan") increasing from 250,000 to 750,000 the maximum number of
shares covered by options to purchase, or stock appreciation rights in, the
Company's Common Stock that may be awarded to any one employee in any fiscal
year. The Company believes that the ability to grant a larger number of stock
options is necessary to enable it to compete successfully with other companies
to secure and retain valuable employees. The Board of Directors has approved
such an increase.
As described below, the Board of Directors, subject to stockholder
approval, also has approved an amendment to the Omnibus Stock Plan to increase
by 1,300,000 (from 3,944,131 to 5,244,131) the number of shares of Common Stock
available for issuance under the Omnibus Stock Plan. The purpose of this
amendment is to ensure that the Company has flexibility to meet its foreseeable
future needs for awards to be granted under the Omnibus Stock Plan and to cover
previously issued options that were granted subject to stockholder approval.
The Board of Directors has directed that the Omnibus Stock Plan, as
amended and restated, be submitted to the stockholders in its entirety for
approval. The Omnibus Stock Plan, as amended and restated, is attached hereto as
Exhibit 1.
As of March 21, 1997, an aggregate of 1,188,766 shares had been issued
under the Omnibus Stock Plan and options to purchase 2,310,319 shares were
outstanding under the Omnibus Stock Plan, leaving only 445,046 shares available
for stock option grants. In addition, the Committee has granted options to
purchase an aggregate of 1,040,000 shares, which options are subject to
stockholder approval of the proposed amendment to the Omnibus Stock Plan to
increase the number of shares available for issuance, including the following
options conditionally granted to executive officers of the Company: Mr. Waxman,
options to purchase 500,000 shares, Mr. McGurran, options to purchase 60,000
shares, Mr. Boyle, options to purchase 60,000 shares, Mr. Mackintosh, options to
purchase 60,000 shares, and each of six other officers, options to purchase
60,000 shares. In each case the exercise price of the shares has been repriced
to $6.125 per share. Stockholder approval of the proposed increase in the number
of shares under the Omnibus Stock Plan is also necessary to provide for
compensation of non-employee directors, who receive stock option awards for
their service. In addition, options granted for 500,000 shares to Mr. Waxman and
for 10,000 shares to Christine Hughes, Vice President of Marketing, are subject
to stockholder approval of the proposed amendment to the Omnibus Stock Plan to
increase from 250,000 to 750,000 the maximum number of shares covered by options
to purchase, or stock appreciation rights in, the Company's Common Stock that
may be awarded to an employee in any fiscal year. See "Election of Directors --
Director Compensation".
If stockholders approve the Omnibus Stock Plan, as amended and
restated, options to purchase an aggregate of 705,046 shares of Common Stock
would be available for future stock option grants under the Omnibus Stock Plan.
DESCRIPTION OF AMENDED AND RESTATED 1995 OMNIBUS STOCK PLAN
GENERAL
In September 1995, the Board of Directors of the Company adopted, and
the Company's stockholders approved, the Company's 1995 Omnibus Stock Plan. At
the 1996 Annual Meeting, the Company's stockholders voted to amend the 1995
Omnibus Stock Plan to increase the number of shares of Common Stock available
for issuance and to restate such plan in its entirety. The Amended and Restated
1995 Omnibus Stock Plan (the "Omnibus Stock Plan") was approved by the
stockholders in May 1996 and amended by the stockholders at a Special Meeting in
August 1996 to increase by 2,000,000 shares the number of shares of Common Stock
reserved for issuance under the Omnibus Stock Plan, and to enable the Board of
Directors, in the case of the Company's merger with or acquisition of another
corporation, maximum flexibility to grant the holders of options and other
awards in such other corporation options in the Omnibus Stock Plan.
As of March 21, 1997, an aggregate of 1,188,766 shares of Common Stock
had been issued under the Omnibus Stock Plan and options to purchase an
aggregate of 2,310,319 shares of Common Stock were outstanding under the Omnibus
Stock Plan, including options to purchase 1,040,000 shares that were granted
conditioned upon stockholder approval of the proposed amendments to the Omnibus
Stock Plan. On such date, an aggregate of 445,046 shares of Common Stock were
available for future grants of awards under the Omnibus Stock Plan. Options
outstanding at March 21, 1997 have per share exercise prices ranging from $.01
to $10.975, or a weighted average per share exercise price of $4.83, and expire
ten years from the date of grant of the option on dates ranging from March 2001
to February 2007 (unless exercised prior to that time). Approximately 375
employees are currently eligible to participate in the Omnibus Stock Plan.
PURPOSE
The purpose of the Omnibus Stock Plan is to motivate key personnel,
including non-employee directors, to produce a superior return to the
stockholders of the Company by offering such personnel an opportunity to realize
stock appreciation, by facilitating stock ownership, and by rewarding them for
achieving a high level of corporate financial performance. The Omnibus Stock
Plan is also intended to facilitate recruiting and retaining key personnel of
outstanding ability by providing an attractive capital accumulation opportunity.
ADMINISTRATION
The Omnibus Stock Plan is administered by a committee (the "Committee")
of two or more directors who are "non-employee directors" within the meaning of
Rule 16b-3 under the Exchange Act. The Compensation Committee of the Board of
Directors currently serves as the Committee that administers the Omnibus Stock
Plan, of which all three members are "non-employee directors" for purposes of
Exchange Act Rule 16b-3 and "outside directors" for purposes of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"). Subject to the
provisions of the Omnibus Stock Plan, the Committee has the exclusive power to
make awards under the Omnibus Stock Plan, to determine when and to whom awards
will be granted, and the form, amount and other terms and conditions of each
award. The Committee has the authority to interpret the Omnibus Stock Plan and
any award or agreement made under the Omnibus Stock Plan, to establish, amend,
waive and rescind any rules and regulations relating to the administration of
the Omnibus Stock Plan, to determine the terms and provisions of any agreements
entered into under the Omnibus Stock Plan (not inconsistent with the Omnibus
Stock Plan), and to make all other determinations necessary or advisable for the
administration of the Omnibus Stock Plan. The Committee may delegate all or part
of its responsibilities under the Omnibus Stock Plan to persons who are not
"non-employee directors" within the meaning of Exchange Act Rule 16b-3 for
purposes of determining and administering awards solely to employees who are not
then subject to the reporting requirements of Section 16 of the Exchange Act.
Notwithstanding the foregoing, the granting, terms, conditions and
eligibility requirements of Outside Director Options (as defined in the Omnibus
Stock Plan) are governed solely by the provisions of the Omnibus Stock Plan
pertaining thereto, and the Committee has no discretion with respect to the
granting of such awards or to alter or amend any terms, conditions or
eligibility requirements of such awards to outside directors. The provisions for
automatic stock option grants to outside directors are non-exclusive. Pursuant
to its authority under the Omnibus Stock Plan, the Committee canceled and
reissued all outstanding Outside Director Options with an exercise price per
share above $6.125 as part of the February 13, 1997 option repricing. This
action resulted in all the outstanding Outside Director Options having an
exercise price of $6.125 per share. See "Executive Compensation -- Report of the
Compensation Committee -- Repricings of Stock Options".
NUMBER OF SHARES AND ELIGIBILITY
The total number of shares of Company Common Stock available for
distribution under the Omnibus Stock Plan is presently 3,944,131 (5,244,131 as
the Omnibus Stock Plan is proposed to be amended), subject to adjustment for
future stock splits, stock dividends and similar changes in the capitalization
of the Company. No participant may presently receive, in any one calendar year,
any combination of options and stock appreciation rights relating to more than
250,000 (750,000 as the Omnibus Stock Plan is proposed to be amended) shares of
Common Stock in the aggregate under the Omnibus Stock Plan.
All employees of the Company and its affiliates are eligible to receive
awards under the Omnibus Stock Plan at the discretion of the Committee. Outside
directors will receive grants of non-statutory options as set forth under "Types
of Awards -- Outside Director Options". Awards other than incentive stock
options also may be awarded by the Committee to individuals who are not
employees or outside directors but who provide services to the Company or its
affiliates in the capacity of an independent contractor.
The Omnibus Stock Plan provides that all awards are to be evidenced by
written agreements containing the terms and conditions of the awards. Such
agreements are subject to amendment, including unilateral amendments by the
Company (with the approval of the Committee) unless such amendments are deemed
by the Committee to be materially adverse to the recipient and are not required
as a matter of law. Any shares of Common Stock subject to an award under the
Omnibus Stock Plan which are not used because the terms and conditions of the
award are not met may again be used for an award under the Omnibus Stock Plan.
However, shares of Common Stock with respect to which a stock appreciation right
has been exercised (in cash and/or in stock) may not again be awarded under the
Omnibus Stock Plan.
TYPES OF AWARDS
The types of awards that may be granted under the Omnibus Stock Plan
include incentive and non-statutory stock options, stock appreciation rights,
restricted stock, performance units and other stock-based awards (awards of, or
based on, stock other than options, stock appreciation rights, restricted stock
or performance units). Subject to certain restrictions applicable to outside
director options and incentive stock options, awards will be exercisable by the
recipients at such times as are determined by the Committee.
In addition to the general characteristics of all of the awards
described in this Proxy Statement, the basic characteristics of awards that may
be granted under the Omnibus Stock Plan are as follows:
INCENTIVE AND NON-STATUTORY STOCK OPTIONS. Options may be granted to
recipients at such exercise prices as the Committee may determine but not less
than 50% of their fair market value (as defined in the Omnibus Stock Plan) as of
the date the option is granted. Stock options may be granted and exercised at
such times as the Committee may determine, except that, unless applicable
federal tax laws are modified, (1) no incentive stock option may be granted at
less than fair market value, (2) no incentive stock options may be granted more
than ten years after the effective date of the Omnibus Stock Plan, (3) an
incentive stock option shall not be exercisable more than ten years after the
date of grant, and (4) the aggregate fair market value of the shares of the
Company's Common Stock with respect to which incentive stock options may first
become exercisable in any calendar year for any employee may not exceed $100,000
under the Omnibus Stock Plan or any other plan of the Company. Additional
restrictions apply to an incentive stock option granted to an individual who
beneficially owns more than ten percent of the combined voting power of all
classes of stock of the Company.
The purchase price payable upon exercise of options may be payable in
cash, or through a reduction of the number of shares of Common Stock delivered
to the participant upon exercise of the option or by delivering stock already
owned by the participant (where the fair market value of the shares of Common
Stock withheld or delivered on the date of exercise is equal to the option price
of the stock being purchased), or in a combination of cash and such stock,
unless otherwise provided in the applicable award agreement. To the extent
permitted by law, the participants may simultaneously exercise options and sell
the stock purchased upon such exercise pursuant to brokerage or similar
relationships and use the sale proceeds to pay the purchase price.
OUTSIDE DIRECTOR OPTIONS. Beginning with the 1996 Annual Meeting of
Stockholders, and for each subsequent Annual Meeting of Stockholders thereafter,
each outside director is granted an option to purchase 4,375 shares of Common
Stock at the conclusion of each such Annual Meeting at a price equal to the fair
market value of a share of Common Stock on the date of grant, such options to
vest on the date of the next Annual Meeting of Stockholders subsequent to the
grant. Each person who is elected to be an outside director between Annual
Meetings of Stockholders shall be granted a stock option on the date such person
is elected. The number of shares of Common Stock covered by such option shall be
pro-rated from 4,375 for the number of months which have expired from the most
recent Annual Meeting of Stockholders, such options to vest on the date of the
next Annual Meeting of Stockholders subsequent to the grant.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS. The value of a stock
appreciation right granted to a recipient is determined by the appreciation in
the Company's Common Stock, subject to any limitations upon the amount or
percentage of total appreciation that the Committee may determine at the time
the right is granted. The recipient receives all or a portion of the amount by
which the fair market value of a specified number of shares of Common Stock, as
of the date the stock appreciation right is exercised, exceeds a price specified
by the Committee at the time the right is granted. The price specified by the
Committee must be at least 100% of the fair market value of the specified number
of shares of Common Stock to which the right relates determined as of the date
the stock appreciation right is granted. A stock appreciation right may be
granted in connection with a previously or contemporaneously granted option, or
independent of any option. No stock appreciation right may be exercised less
than six months from the date it is granted unless the recipient dies or becomes
disabled.
Performance units entitle the recipient to payment in amounts
determined by the Committee based upon the achievement of specified performance
targets during a specified term. With respect to recipients who are "covered
employees" under Section 162(m) of the Code, such performance targets will
consist of one or any combination of two or more of revenue, revenue per
employee, earnings before income tax (profit before taxes), earnings before
interest and income tax, net earnings (profits after taxes), earnings per
employee, tangible, controllable or total asset turnover, earnings per share,
operating income, total stockholder return, market share, return on equity,
before- or after-tax return on net assets, distribution expense, inventory
turnover, or economic value added, and any such targets may relate to one or any
combination of two or more of corporate, group, unit, division, affiliate or
individual performance.
Payments with respect to stock appreciation rights and performance
shares of Common Stock may be paid in cash, shares of Common Stock or a
combination of cash and shares of Common Stock as determined by the Committee.
RESTRICTED STOCK AND OTHER STOCK-BASED AWARDS. The Company's Common
Stock granted to recipients may contain such restrictions as the Committee may
determine, including provisions requiring forfeiture and imposing restrictions
upon stock transfer. A participant with a restricted stock award shall have all
the other rights of a stockholder including, but not limited to, the right to
receive dividends and the right to vote. The Committee may also from time to
time grant awards of unrestricted stock or other stock-based awards such as
awards denominated in stock units, securities convertible into stock and phantom
securities.
TRANSFERABILITY
During the lifetime of a participant to whom an award is granted, only
such participant (or such participant's legal representative) may exercise an
option or stock appreciation right or receive payment with respect to
performance units or any other award. No award of restricted stock (prior to the
expiration of the restrictions), options, stock appreciation rights, performance
units or other stock-based award (other than an award of stock without
restrictions) may be sold, assigned, transferred, exchanged or otherwise
encumbered (other than pursuant to a qualified domestic relations order as
defined in the Code or Title I of ERISA or the rules thereunder); provided,
however, that any participant may transfer a non-statutory stock option granted
under the Omnibus Stock Plan to a member or members of his or her immediate
family or to one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners, if (i) the
agreement with respect to such options, which must be approved by the Committee,
expressly so provides either at the time of initial grant or by amendment to an
outstanding agreement and (ii) the participant does not receive any
consideration for the transfer. Notwithstanding the foregoing, an award may be
transferable to a successor in the event of a participant's death.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS
The Committee may accelerate vesting requirements, performance cycles
and the expiration of the applicable term or restrictions, and adjust
performance targets and payments, upon such terms and conditions as are set
forth in the participant's agreement, or otherwise in the Committee's
discretion, which may include, without limitation, acceleration resulting from a
change in control, fundamental change (as such term is defined in the Omnibus
Stock Plan), a recapitalization, a change in accounting practices of the
Company, a change in the participant's title or employment responsibilities, or
the participant's death, disability or retirement.
DURATION, ADJUSTMENTS, MODIFICATIONS, TERMINATION
The Omnibus Stock Plan will remain in effect until all stock subject to
it is distributed or all awards have expired or lapsed, whichever occurs later,
or the Omnibus Stock Plan is terminated as described below.
In the event of a fundamental change, recapitalization,
reclassification, stock dividend, stock split, stock combination or other
relevant change, the Committee has the discretion to adjust the number and type
of shares of Common Stock available for awards or the number and type of shares
of Common Stock and amount of cash subject to outstanding awards, the option
exercise price of outstanding options, and outstanding awards of performance
units and payments with regard thereto. Adjustments in performance targets and
payments on performance units are also permitted upon the occurrence of such
events as may be specified in the related agreements, which may include a change
in control.
The Omnibus Stock Plan also gives the Board the right to terminate,
suspend or modify the Omnibus Stock Plan, except that amendments to the Omnibus
Stock Plan are subject to stockholder approval if needed to comply with Exchange
Act Rule 16b-3, the incentive stock option provisions of the Code, their
successor provisions, or any other applicable law or regulation.
Under the Omnibus Stock Plan, the Committee may cancel outstanding
options and stock appreciation rights generally in exchange for cash payments to
the recipients upon the occurrence of a fundamental change.
SUMMARY OF FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the
Omnibus Stock Plan generally will result in the following tax events for United
States citizens under current United States federal income tax laws.
INCENTIVE STOCK OPTIONS
A recipient will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time an incentive stock option is
granted under the Omnibus Stock Plan. If certain statutory employment and
holding period conditions are satisfied before the recipient disposes of shares
of Common Stock acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option and the Company will
not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares of Common Stock after expiration of the statutory
holding periods, any gain or loss realized by a recipient will be a capital gain
or loss. The Company will not be entitled to a deduction with respect to a
disposition of the shares of Common Stock by a recipient after the expiration of
the statutory holding periods.
Except in the event of death, if shares of Common Stock acquired by a
recipient upon the exercise of an incentive stock option are disposed of by such
recipient before the expiration of the statutory holding periods (a
"disqualifying disposition"), such recipient will be considered to have realized
as compensation, taxable as ordinary income in the year of disposition, an
amount, not exceeding the gain realized on such disposition, equal to the
difference between the exercise price and the fair market value of the shares of
Common Stock on the date of exercise of the option. The Company will be entitled
to a deduction at the same time and in the same amount as the recipient is
deemed to have realized ordinary income. Any gain realized on the disposition in
excess of the amount treated as compensation or any loss realized on the
disposition will constitute capital gain or loss, respectively. If the recipient
pays the option price with shares of Common Stock that were originally acquired
pursuant to the exercise of an incentive stock option and the statutory holding
periods for such shares of Common Stock have not been met, the recipient will be
treated as having made a disqualifying disposition of such shares of Common
Stock, and the tax consequences of such disqualifying disposition will be as
described above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes, an incentive stock option will be treated as
if it were a non-statutory stock option, the tax consequences of which are
discussed below.
NON-STATUTORY STOCK OPTIONS
A recipient will realize no taxable income, and the Company will not be
entitled to any related deduction, at the time a non-statutory stock option is
granted under the Omnibus Stock Plan. At the time of exercise of a non-statutory
stock option, the recipient will realize ordinary income, and the Company will
be entitled to a deduction, equal to the excess of the fair market value of the
stock on the date of exercise over the option price. Upon disposition of the
shares of Common Stock, any additional gain or loss realized by the recipient
will be taxed as a capital gain or loss.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS
Generally (1) the recipient will not realize income upon the grant of a
stock appreciation right or performance unit award, (2) the recipient will
realize ordinary income, and the Company will be entitled to a corresponding
deduction, in the year that cash, shares of Common Stock or a combination of
cash and shares of Common Stock are delivered to the recipient upon exercise of
a stock appreciation right and (3) the amount of such ordinary income and
deduction will be the amount of cash received plus the fair market value of the
shares of Common Stock received on the date of issuance. The federal income tax
consequences of a disposition of unrestricted shares of Common Stock received by
the recipient upon exercise of a stock appreciation right or in payment of a
performance share award are the same as described below with respect to a
disposition of unrestricted shares of Common Stock.
RESTRICTED AND UNRESTRICTED STOCK
Unless the recipient files an election to be taxed under Section 83(b)
of the Code, (1) the recipient will not realize income upon the grant of
restricted stock, (2) the recipient will realize ordinary income, and the
Company will be entitled to a corresponding deduction, when the restrictions
have been removed or expire, and (3) the amount of such ordinary income and
deduction will be the fair market value of the restricted stock on the date the
restrictions are removed or expire. If the recipient files an election to be
taxed under Section 83(b) of the Code, the tax consequences to the recipient and
the Company will be determined as of the date of the grant of the restricted
stock rather than as of the date of the removal or expiration of the
restrictions.
With respect to awards of unrestricted stock, (1) the recipient will
realize ordinary income and the Company will be entitled to a corresponding
deduction upon the grant of the unrestricted stock, and (2) the amount of such
ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the recipient disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair market
value of such shares of Common Stock on the date the recipient realizes ordinary
income will be treated as a capital gain or loss.
WITHHOLDING
The Omnibus Stock Plan permits the Company to withhold from awards an
amount sufficient to cover any required withholding taxes. If permitted by the
Committee, in lieu of cash, a participant may elect to cover withholding
obligations through a reduction in the number of shares of Common Stock to be
delivered to such participant or by delivery of shares of Common Stock already
owned by the participant.
BOARD OF DIRECTORS' RECOMMENDATION
On January 24, 1997, the Board of Directors, subject to obtaining
stockholder approval, approved amendments to the Omnibus Stock Plan to increase
the total number of shares of Common Stock available for issuance under the
Omnibus Stock Plan from 3,944,131 to 5,264,131, and to increase the maximum
number of shares of the Company's Common Stock subject to options or stock
appreciation rights that may be awarded to any one employee in any fiscal year
from 250,000 to 750,000, and to restate the Omnibus Stock Plan in its entirety.
The Board directed that the Omnibus Stock Plan, as amended and restated, be
submitted in its entirety to the stockholders for approval. The text of the
proposed Omnibus Stock Plan is set forth in Exhibit 1 to this Proxy Statement.
The changes described above are the only substantive changes to the Omnibus
Stock Plan as described herein.
The submission of the entire Omnibus Stock Plan, as amended and
restated, for approval by the stockholders is necessary for the Company to
comply with the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended ("Section 162(m)"). Generally, Section 162(m) prohibits a
publicly traded corporation from deducting compensation in excess of $1 million
per taxable year paid to any person who, on the last day of the taxable year, is
the chief executive officer or one of the four most highly compensated executive
officers other than the chief executive officer. Under Section 162(m),
compensation that qualifies as "performance-based compensation" is not counted
for purposes of the $1 million limit. In addition to other requirements, Section
162(m) provides that to qualify for this exclusion, "performance-based
compensation must be paid pursuant to a compensation plan that has been approved
by the stockholders of a corporation. Currently, the Company does not pay
compensation to any person such that the compensation would be affected by the
requirements of Section 162(m). The Board of Directors, however, believes it to
be in the best interests of the long-term growth and performance of the Company
to maintain flexibility with respect to compensation, and, therefore, to comply
with Section 162(m).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SECURE
COMPUTING CORPORATION AMENDED AND RESTATED 1995 OMNIBUS STOCK PLAN, AS AMENDED,
DISCUSSED IN THIS PROXY STATEMENT.
PROPOSAL TO APPROVE THE SECURE COMPUTING CORPORATION
EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
PROPOSED AMENDMENT REQUIRING STOCKHOLDER APPROVAL
On April 4, 1997, the Board of Directors, subject to approval by the
stockholders, approved an amendment to the Employee Stock Purchase Plan (the
"Purchase Plan") to increase by 250,000 (from 150,000 to 400,000) the number of
shares available for distribution under the Purchase Plan. The purpose of this
amendment is to ensure that the Company has flexibility to make distributions
under the Purchase Plan in the future.
At April 1, 1997, an aggregate of 64,439 shares had been distributed
pursuant to the Purchase Plan. As of the same date, an aggregate of 85,561
shares were available for distribution under the Purchase Plan.
DESCRIPTION OF EMPLOYEE STOCK PURCHASE PLAN
PURPOSE
The Purchase Plan was approved by the Board of Directors on March 15,
1996, and by the stockholders on May 1, 1996. The purpose of the Purchase Plan
is to provide eligible employees with an opportunity to acquire a proprietary
interest in the Company through the purchase of its Common Stock and, thus, to
develop a stronger incentive to work for the continued success of the Company.
The Purchase Plan is an employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
ADMINISTRATION
The Purchase Plan is administered by a committee of the Board of
Directors (the "Committee"). The Compensation Committee of the Board of
Directors has been designated as the Committee to administer the Purchase Plan.
Subject to the provisions of the Purchase Plan, the Committee is authorized to
determine any questions arising in the administration, interpretation and
application of the Purchase Plan, and to make such uniform rules as may be
necessary to carry out its provisions.
ELIGIBILITY AND NUMBER OF SHARES
Up to 150,000 (400,000 as the Purchase Plan is proposed to be amended)
shares of Common Stock of the Company are currently available for distribution
under the Purchase Plan, subject to appropriate adjustments by the Committee in
the event of certain changes in the outstanding shares of Common Stock by reason
of stock dividends, stock splits, corporate separations, recapitalizations,
mergers, consolidations, combinations, exchanges of shares or similar
transactions. Shares of Common Stock delivered pursuant to the Purchase Plan may
be newly issued shares or treasury shares previously acquired by the Company.
Any employee of the Company or, subject to approval by the Board of
Directors, a parent or subsidiary corporation of the Company (including officers
and any directors who are also employees) is eligible to participate in the
Purchase Plan for any Purchase Period (as defined below) so long as, on the
first day of such Purchase Period, the employee has completed at least six
months of continuous service and is customarily employed at least 20 hours per
week. "Purchase Period" means each quarter of the Company's fiscal year.
Any eligible employee may elect to become a participant in the Purchase
Plan for any Purchase Period by filing an enrollment form in advance of the
Purchase Period to which it relates. The enrollment form will authorize payroll
deductions beginning with the first payday in such Purchase Period and
continuing until the employee modifies his or her authorization, withdraws from
the Purchase Plan or ceases to be eligible to participate.
No employee may participate in the Purchase Plan if such employee would
be deemed for purposes of the Code to own stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company.
The Company currently has approximately 330 employees who are eligible
to participate in the Purchase Plan.
PARTICIPATION
An eligible employee who elects to participate in the Purchase Plan
authorizes the Company to make payroll deductions of a specified whole
percentage from 1% to 10% of the employee's gross cash compensation as defined
in the Purchase Plan. A participant may, at any time during a Purchase Period,
direct the Company to increase or decrease the amount of deductions (within
those limits) or make no further deductions, as set forth in greater detail in
the Purchase Plan. A participant may also elect to withdraw from the Purchase
Plan at any time before the end of a Purchase Period. In the event of a
withdrawal, all future payroll deductions will cease and the amounts withheld
will be paid to the participant in cash within 15 days. Any participant who
stops payroll deductions may not thereafter resume payroll deductions for that
Purchase Period, and any participant who withdraws from the Purchase Plan will
not be eligible to reenter the Purchase Plan until the next succeeding Purchase
Period.
Amounts withheld under the Purchase Plan are held by the Company as
part of its general assets until the end of the Purchase Period and then applied
to the purchase of Common Stock of the Company as described below. No interest
is credited to a participant for amounts withheld.
PURCHASE OF STOCK
Amounts withheld for a participant in the Purchase Plan are used to
purchase Common Stock of the Company as of the last day of the Purchase Period
at a price equal to the 85% of the lesser of the Fair Market Value (as defined
in the Purchase Plan) of a share of Common Stock on either the first or last day
of the Purchase Period. All amounts so withheld are used to purchase the number
of shares of Common Stock (including fractional shares) that can be purchased
with such amount, unless the participant has properly notified the Company that
he or she elects to purchase a lesser number of shares of Common Stock or to
receive the entire amount in cash.
If purchases by all participants would exceed the number of shares of
Common Stock available for purchase under the Purchase Plan, each participant
will be allocated a ratable portion of such available shares of Common Stock.
Any amount not used to purchase shares of Common Stock will be refunded to the
participant in cash.
Shares of Common Stock acquired by each participant are held in a
general account maintained for the benefit of all participants. Certificates for
the number of whole shares of Common Stock purchased by a participant are issued
and delivered to him or her only upon the request of such participant or his or
her representative. No certificates for fractional shares are issued and
participants will instead receive cash representing any fractional shares.
Dividends with respect to a participant's shares of Common Stock held in the
general account will, at the election of the participant, either be paid to the
participant in cash or reinvested in additional shares of Common Stock of the
Company. If a participant fails to make such an election, all dividends with
respect to the participant's shares of Common Stock held in the general account
are automatically reinvested to purchase additional shares of Common Stock of
the Company. Each participant is entitled to vote all shares of Common Stock
held for the benefit of such participant in the general account.
No more than $25,000 in Fair Market Value (determined on the first day
of the respective Purchase Periods) of shares of Common Stock may be purchased
under the Purchase Plan and all other employee stock purchase plans, if any, of
the Company and any parent or subsidiary corporation of the Company by any
participant for each calendar year.
DEATH, DISABILITY, RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT
If the employment of a participant is terminated for any reason,
including death, disability or retirement, the amounts previously withheld are
applied to the purchase of shares of Common Stock as of the last day of the
Purchase Period in which the participant's employment terminated, unless the
participant has properly notified the Company prior to the last day of such
Purchase Period that he or she elects to receive a refund of all amounts
previously withheld.
RIGHTS NOT TRANSFERABLE
The rights of a participant under the Purchase Plan are exercisable
only by the participant during his or her lifetime. No right or interest of any
participant in the Purchase Plan may be sold, pledged, assigned or transferred
in any manner other than by will or the laws of descent and distribution.
AMENDMENT OR MODIFICATION
The Board of Directors may at any time amend the Purchase Plan in any
respect which shall not adversely affect the rights of participants pursuant to
shares of Common Stock previously acquired under the Purchase Plan, provided
that approval by the stockholders of the Company is required to (i) increase the
number of shares of Common Stock to be reserved under the Purchase Plan (except
for adjustments by reason of stock dividends, stock splits, corporate
separations, recapitalizations, mergers, consolidations, combinations, exchanges
of shares or similar transactions), (ii) decrease the minimum purchase price,
(iii) withdraw the administration of the Purchase Plan from the Committee, or
(iv) change the definition of employees eligible to participate in the Purchase
Plan.
TERMINATION
All rights of participants in any offering under the Purchase Plan will
terminate at the earlier of (i) the day that participants become entitled to
purchase a number of shares of Common Stock equal to or greater than the number
of shares of Common Stock remaining available for purchase or (ii) at any time,
at the discretion of the Board of Directors, after 30-days' notice has been
given to all participants. Upon termination of the Purchase Plan, shares of
Common Stock will be issued to participants in accordance with the terms of the
Purchase Plan, and cash, if any, previously withheld and not used to purchase
Common Stock will be refunded to the participants, as if the Purchase Plan were
terminated at the end of a Purchase Period.
FEDERAL TAX CONSIDERATIONS
Payroll deductions under the Purchase Plan are made after taxes.
Participants do not recognize any additional income as a result of participation
in the Purchase Plan until the disposal of shares of Common Stock acquired under
the Purchase Plan or the death of the participant. Participants who hold their
shares of Common Stock for more than 21 months after the end of the Purchase
Period or die while holding their shares of Common Stock recognize ordinary
income in the year of disposition or death equal to the lesser of (i) the excess
of the fair market value of the shares of Common Stock on the date of
disposition or death over the purchase price paid by the participant or (ii) the
excess of the fair market value of the shares of Common Stock on the first day
of the Purchase Period over the purchase price paid by the participant. If the
21-month holding period has been satisfied when the participant sells the shares
of Common Stock or if the participant dies while holding the shares of Common
Stock, the Company is not entitled to any deduction in connection with the
disposition of such shares by the participant.
Participants who dispose of their shares of Common Stock within 21
months after the shares of Common Stock were purchased are considered to have
realized ordinary income in the year of disposition in an amount equal to the
excess of the fair market value of the shares of Common Stock on the date they
were purchased by the participant over the purchase price paid by the
participant. If such dispositions occur, the Company generally is entitled to a
deduction at the same time and in the same amount as the participants who make
those dispositions are deemed to have realized ordinary income.
Participants have a basis in their shares of Common Stock equal to the
purchase price of their shares of Common Stock plus any amount that must be
treated as ordinary income at the time of disposition of the shares of Common
Stock, as explained above. Any additional gain or loss realized on the
disposition of shares of Common Stock acquired under the Purchase Plan is be
capital gain or loss.
BOARD OF DIRECTORS' RECOMMENDATION
On April 4, 1997, the Board of Directors approved the amendment to the
Purchase Plan described above subject to shareholder approval. The Purchase Plan
is a way to provide employees with a proprietary interest in the Company and an
incentive to work for the best interests of the Company and the Company's
shareholders. Therefore, the Board of Directors believes it is in the best
interests of the Company to increase the authorized shares under the Purchase
Plan by approving this amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SECURE
COMPUTING CORPORATION EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED, DISCUSSED IN
THIS PROXY STATEMENT.
RELATIONSHIP WITH AND APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has been the auditors for the Company
since the Company's inception in July 1989. The Board of Directors again has
selected Ernst & Young LLP to serve as the Company's independent auditors for
the year ending December 31, 1997, subject to ratification by the stockholders.
While it is not required to do so, the Board of Directors is submitting the
selection of that firm for ratification to ascertain the view of the
stockholders. If the selection is not ratified, the Board of Directors will
reconsider its selection. Proxies solicited by the Board of Directors will,
unless otherwise directed, be voted to ratify the appointment of Ernst & Young
LLP as independent auditors for the Company for the year ending December 31,
1997.
A representative of Ernst & Young LLP will be present at the Annual
Meeting of Stockholders and will be afforded an opportunity to make a statement
if such representative so desires and will be available to respond to
appropriate questions during the meeting.
ADDITIONAL MATTERS
The Annual Report of the Company for the year ended December 31, 1996,
including financial statements, is being mailed with this Proxy Statement.
Stockholder proposals intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
executive office no later than December 12, 1997 for inclusion in the Proxy
Statement for that meeting.
As of the date of this Proxy Statement, management knows of no matters
that will be presented for determination at the meeting other than those
referred to herein. If any other matters properly come before the Annual Meeting
calling for a vote of stockholders, it is intended that the shares of Common
Stock represented by the proxies solicited by the Board of Directors will be
voted by the persons named therein in accordance with their best judgment.
By Order of the Board of Directors,
/s/ James E. Nicholson
James E. Nicholson
SECRETARY
Dated: April 11, 1997
EXHIBIT 1
SECURE COMPUTING CORPORATION
AMENDED AND RESTATED
1995 OMNIBUS STOCK PLAN
1. AMENDMENT OF EXISTING PLANS; PURPOSE. This Secure Computing
Corporation Amended and Restated 1995 Omnibus Stock Plan (the "Plan") amends and
restates in their entirety the Secure Computing Corporation 1989 Incentive Stock
Option Plan and the Secure Computing Corporation 1994 Nonqualified Stock Option
Plan (the "Prior Plans"). The purpose of the Plan is to motivate key personnel,
including non-employee directors, to produce a superior return to the
stockholders of Secure Computing Corporation by offering such personnel an
opportunity to realize Stock appreciation, by facilitating Stock ownership and
by rewarding them for achieving a high level of corporate financial performance.
The Plan is also intended to facilitate recruiting and retaining key personnel
of outstanding ability by providing an attractive capital accumulation
opportunity.
2. DEFINITIONS AND RULES OF CONSTRUCTION. The capitalized terms used in
this Plan have the meanings, and certain rules of construction are, set forth in
the list of defined terms attached to this Plan as Exhibit A.
3. ADMINISTRATION.
3.1 AUTHORITY OF COMMITTEE. The Committee shall administer the
Plan. Solely for purposes of determining and administering Awards to
Employees who are not then subject to the reporting requirements of
Section 16 of the Exchange Act, the Committee may delegate all or any
portion of its authority under the Plan to persons who are not
Non-Employee Directors. The Committee shall have exclusive power to
make Awards, to determine when and to whom Awards will be granted, the
form of each Award, the amount of each Award, and any other terms or
conditions of each Award. Each Award shall be subject to an Agreement
authorized by the Committee. The Committee's interpretation of the Plan
and of any Awards made under the Plan shall be final and binding on all
persons with an interest therein. The Committee shall have the power to
establish regulations to administer the Plan and to change such
regulations.
3.2 AWARDS TO OUTSIDE DIRECTORS. Notwithstanding any contrary
provisions of the Plan, the granting, terms, conditions and eligibility
requirements of Awards granted to Outside Directors under Section 9.3
of the Plan are governed solely by the provisions of the Plan
pertaining thereto, and the Committee shall have no discretion with
respect to the granting of such Awards or to alter or amend any terms,
conditions or eligibility requirements of such Awards to Outside
Directors.
3.3 INDEMNIFICATION. To the full extent permitted by law, (i)
no member of the Committee or any person to whom the Committee
delegates authority under the Plan shall be liable for any action or
determination taken or made in good faith with respect to the Plan or
any Award made under the Plan, and (ii) the members of the Committee
and each person to whom the Committee delegates authority under the
Plan shall be entitled to indemnification by the Company with regard to
such actions and determinations.
4. SHARES AVAILABLE UNDER THE PLAN.
4.1 SHARES AVAILABLE. The number of Shares available for
distribution under the Plan shall not exceed 5,244,131 (subject to
adjustment pursuant to Section 17 hereof). Any Shares subject to the
terms and conditions of an Award under this Plan which are not used
because the terms and conditions of the Award are not met may again be
used for an Award under the Plan. However, Shares with respect to which
a Stock Appreciation Right has been exercised (in cash or in Stock) may
not again be awarded under this Plan.
4.2 CONDITIONAL ISSUANCES. If the Plan is amended at any time
subject to stockholder approval, then the Committee may, in accordance
with the terms and conditions of the Plan, grant Awards on a
conditional basis, subject to such approval by the stockholders of the
Company not later than the next annual meeting of the stockholders of
the Company following the date of such conditional grant. Any Award
granted on a conditional basis shall not be exercisable unless and
until the amendment to the Plan is approved by the stockholders of the
Company. If such an amendment is not approved by the stockholders at
the next annual meeting of stockholders of the Company following the
conditional grant, then the conditional grant shall be canceled.
5. ELIGIBILITY. Except as otherwise provided in Section 9.3 hereof, the
granting of Awards to Employees is solely at the discretion of the Committee.
6. GENERAL TERMS OF AWARDS.
6.1 AMOUNT OF AWARD. Each Agreement shall set forth the number
of Shares of Restricted Stock, other Stock or Performance Units subject
to such Agreement, or the number of Shares to which the Option subject
to such Agreement applies or with respect to which payment upon the
exercise of the Stock Appreciation Right subject to such Agreement is
to be determined, as the case may be. The Maximum Annual Employee Grant
shall not exceed 750,000 Shares (subject to adjustment pursuant to
Section 16 hereof).
6.2 TERM. Each Agreement, other than those relating solely to
Awards of Stock without restrictions, shall set forth the Term of the
Option, Stock Appreciation Right or Restricted Stock or the Performance
Cycle for the Performance Units, as the case may be. An Agreement may
permit acceleration of the commencement of the applicable Term upon
such terms and conditions as shall be set forth in the Agreement, which
may, but need not, include without limitation acceleration resulting
from the occurrence of an Event, Fundamental Change, or in the event of
the Participant's death or Retirement. Acceleration of the Performance
Cycle of Performance Units shall be subject to Section 12.2.
6.3 TRANSFERABILITY. During the lifetime of a Participant to
whom an Award is granted, only such Participant (or such Participant's
legal representative) may exercise an Option or Stock Appreciation
Right, or receive payment with respect to an Award of Performance
Units. No Award of Restricted Stock (prior to the expiration of the
restrictions), Options, Stock Appreciation Rights or Performance Units
may be sold, assigned, transferred, exchanged or otherwise encumbered
other than pursuant to a qualified domestic relations order as defined
in the Code or Title 1 of the Employee Retirement Income Security Act
("ERISA") or the rules thereunder, and any attempt to do so shall be of
no effect; provided, however, that any Participant may transfer a
Non-Statutory Stock Option granted under this Plan to a member or
members of his or her immediate family (i.e., his or her children,
grandchildren and spouse) or to one or more trusts for the benefit of
such family members or partnerships in which such family members are
the only partners, if (i) the Agreement with respect to such Options,
which must be approved by the Committee, expressly so provides either
at the time of initial grant or by amendment to an outstanding
Agreement and (ii) the Participant does not receive any consideration
for the transfer. Any Options held by any such transferee shall
continue to be subject to the same terms and conditions that were
applicable to such Options immediately prior to their transfer and may
be exercised by such transferee as and to the extent that such Option
has become exercisable and has not terminated in accordance with the
provisions of the Plan and the applicable Agreement. For purposes of
any provision of this Plan relating to notice to a Participant or to
vesting or termination of an Option upon the death, Total and Permanent
Disability or termination of employment of a Participant, the
references to "Participant" shall mean the original grantee of an
Option and not any transferee. Notwithstanding the immediately
preceding sentence, an Agreement may provide that the Award subject to
the Agreement shall be transferable to a Successor in the event of a
Participant's death.
6.4 TERMINATION OF EMPLOYMENT. For any Participant who is an
employee of the Company, no Option or Stock Appreciation Right may be
exercised by the Participant, all Restricted Stock held by the
Participant shall be forfeited and no payment with respect to
Performance Units for which the applicable Performance Cycle has not
been completed shall be made (i) upon the expiration of the three-month
period (or such other time period as the Committee may, in its sole
discretion, determine) following the date the Participant's employment
by the Company ceases, including cessation of employment because of
death, Retirement, or Total and Permanent Disability, or (ii) if
applicable, the date of breach by a Participant of any provision of the
Key Employment Agreement or of the Secure Computing Corporation
Employment Agreement by and between the Company and Participant, except
as, and to the extent, provided in Section 9.3 or in the Agreement
applicable to that Award or, such other date as the Committee may, in
its sole discretion, determine. An Award may be exercised by, or paid
to, the Successor of a Participant following the death of such
Participant to the extent, and during the period of time, if any,
provided in the applicable Agreement.
7. RESTRICTED STOCK AWARDS. An Award of Restricted Stock under the Plan
shall consist of Shares subject to restrictions on transfer and conditions of
forfeiture, which restrictions and conditions shall be included in the
applicable Agreement. Except as otherwise provided in the applicable Agreement,
each Stock certificate issued in respect to an Award of Restricted Stock shall
either be deposited with the Company or its designee, together with an
assignment separate from such certificate, in blank, signed by the Participant,
or bear such legends with respect to the restricted nature of the Restricted
Stock evidenced thereby as shall be provided for in the applicable Agreement.
The Agreement shall describe the terms and conditions by which the restrictions
upon awarded Restricted Stock shall lapse. Upon the lapse of the restrictions,
stock certificates free of restrictive legends, if any, relating to such
restrictions shall be issued to the Participant or his Successor. A Participant
with a Restricted Stock Award shall have all the other rights of a stockholder
including, but not limited to, the right to receive dividends and the right to
vote the Shares of Restricted Stock.
8. STOCK AWARDS. Awards of Stock without restrictions may be made.
9. STOCK OPTIONS.
9.1 TERMS OF ALL OPTIONS. An Option shall be granted pursuant
to an Agreement as either an Incentive Stock Option or a Non-Statutory
Stock Option. Only Non-Statutory Stock Options may be granted to
Employees who are not employees of the Company or an Affiliate. The
purchase price of each Share subject to an Option shall be determined
by the Committee and set forth in the Agreement, but shall not be less
than 50% of the Fair Market Value of a Share as of the date the Option
is granted. The purchase price of the Shares with respect to which an
Option is exercised shall be payable in full at the time of exercise,
provided that to the extent permitted by law, the Agreement may permit
some or all Participants to simultaneously exercise Options and sell
the Shares thereby acquired pursuant to a brokerage or similar
relationship and use the proceeds from such sale as payment of the
purchase price of such Shares. The purchase price may be payable in
cash, in Stock having a Fair Market Value as of the date the Option is
exercised equal to the purchase price of the Stock being purchased
pursuant to the Option, or a combination thereof, as determined by the
Committee and provided in the Agreement. Provided, however, that a
person exercising an Option shall not be permitted to pay any portion
of the purchase price with Stock if, in the opinion of the Committee,
payment in such manner could have adverse financial accounting
consequences for the Company. Each Option shall be exercisable in whole
or in part on the terms provided in the Agreement. In no event shall
any Option be exercisable at any time after its expiration date. When
an Option is no longer exercisable, it shall be deemed to have lapsed
or terminated.
9.2 INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the date
the Option is granted) of the Shares with respect to which Incentive
Stock Options held by an individual first become exercisable in any
calendar year (under this Plan and all other incentive stock option
plans of the Company and its Affiliates) shall not exceed $100,000 (or
such other limit as may be required by the Code) if such limitation is
necessary to qualify the Option as an Incentive Stock Option;
(ii) the purchase price of Shares covered by Incentive Stock
Options must not be less than 100% of the Fair Market Value of the
Shares on the date of grant;
(iii) an Incentive Stock Option shall not be exercisable more
than 10 years after the date of grant (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option; and
(iv) if the Participant owns, or is deemed under Section
424(d) of the Code to own, stock of the Company or of any Affiliate
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock therein at the time the Incentive Stock
Option is granted:
(a) the purchase price of the Shares covered by the
Incentive Stock Option must not be less than 110% of the Fair
Market Value of Shares on the date of grant; and
(b) the Term of the Incentive Stock Option must not
be greater than five years from the date of grant.
(v) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee determines
necessary to qualify such Option as an Incentive Stock Option.
9.3 OUTSIDE DIRECTOR OPTIONS.
(i) Beginning with the Annual Meeting of Stockholders to be
held during calendar year 1996 and for every Annual Meeting of
Stockholders thereafter during the term of this Plan, each person
serving as an Outside Director of the Company immediately following
such Annual Meeting shall be granted, by virtue of serving as an
Outside Director of the Company, a Non-Statutory Stock Option. The date
of such Annual Meeting shall be the date of grant for options granted
pursuant to this Section 9.3(i). The number of Shares covered by each
such option shall be 4,375 (subject to adjustment pursuant to Section
17 hereof). Each person who is elected to be an Outside Director
between Annual Meetings of Stockholders shall also be granted a
Non-Statutory Stock Option. The date such person is elected to be an
Outside Director of the Company (the "Date of Election") by the Board
shall be the date of grant for such option granted pursuant to this
subsection 9.3(i). The number of Shares covered by each such option
shall be 4,375 (subject to adjustment pursuant to Section 17 hereof)
multiplied by a fraction, the numerator of which shall be 12 minus the
number of whole 30-day months that have elapsed from the date of the
most recent Annual Meeting of Stockholders to the Date of Election of
such Outside Director, and the denominator of which shall be 12.
(ii) Director Options shall vest and become exercisable on the
date of the Annual Meeting next following the grant of Director
Options. Notwithstanding the foregoing, Director Options shall vest and
become immediately exercisable in full upon the occurrence of any Event
or upon the death of an Outside Director. Director Options shall expire
at the 10-year anniversary of the date of grant.
(iii) The purchase price of each Share subject to a Director
Option pursuant to this Section 9.3 shall be 100% of the Fair Market
Value of a Share as of the date of grant. Notwithstanding anything to
the contrary stated in this Plan, for purposes of this Section 9.3 and
the definition of Fair Market Value in Exhibit A attached hereto, each
Director Option shall be deemed conclusively to have been granted prior
to close of the applicable securities exchange or system on the date of
grant. An Outside Director may exercise a Director Option using as
payment any form of consideration provided for in Section 9.1 hereof,
which form of payment shall be within the sole discretion of the
Outside Director, notwithstanding anything stated in Section 9.1
hereof.
(iv) Director Options shall be evidenced by an agreement
signed on behalf of the Company by an officer thereof which only
incorporates by reference the terms of this Plan.
(v) Unless the Director Option shall have expired, in the
event of an Outside Director's death, the Director Option granted to
such Outside Director shall be transferable to the beneficiary, if any,
designated by the Outside Director in writing to the Company prior to
the Outside Director's death and such beneficiary shall succeed to the
rights of the Outside Director to the extent permitted by law. If no
such designation of a beneficiary has been made, the Outside Director's
legal representative shall succeed to the Director Option, which shall
be transferable by will or pursuant to the laws of descent and
distribution.
10. SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become Employees of the Company or a subsidiary of
the Company, or whose employer is about to become a subsidiary of the Company,
as the result of a merger or consolidation of the Company or a subsidiary of the
Company with another corporation, the acquisition by the Company or a subsidiary
of the Company of all or substantially all the assets of another corporation or
the acquisition by the Company or a subsidiary of the Company of at least 50% of
the issued and outstanding stock of another corporation. The terms and
conditions of the substitute Options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Board (or the Committee)
at the time of the grant may deem appropriate to conform, in whole or in part,
to the provisions of the stock options in substitution for which they are
granted, but with respect to stock options which are Incentive Stock Options, no
such variation shall be permitted which affects the status of any such
substitute Option as an "incentive stock option" under Section 422 of the Code.
11. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. Notwithstanding anything to the contrary stated in
the Plan, no Stock Appreciation Right shall be exercisable prior to six months
from the date of grant except in the event of the death or Total and Permanent
Disability of the Participant. No Stock Appreciation Right shall be exercisable
at any time after its expiration date. When a Stock Appreciation Right is no
longer exercisable, it shall be deemed to have lapsed or terminated. Upon
exercise of a Stock Appreciation Right, payment to the Participant (or to his
Successor) shall be made at such time or times as shall be provided in the
Agreement in the form of cash, Stock or a combination of cash and Stock as
determined by the Committee and provided in the Agreement. The Agreement may
provide for a limitation upon the amount or percentage of the total appreciation
on which payment (whether in cash and/or Stock) may be made in the event of the
exercise of a Stock Appreciation Right.
12. PERFORMANCE UNITS.
12.1 INITIAL AWARD. An Award of Performance Units under the
Plan shall entitle the Participant (or a Successor) to future payments
of cash, Stock or a combination of cash and Stock, as determined by the
Committee and provided in the Agreement, based upon the achievement of
pre-established performance targets. Such performance targets may, but
need not, include without limitation targets relating to one or more of
corporate, group, unit, Affiliate or individual performance. With
respect to those Employees who are "covered employees" within the
meaning of Section 162(m) of the Code and the regulations thereunder,
such performance targets shall consist of one or any combination of two
or more of revenue, revenue per employee, earnings before income tax
(profit before taxes), earnings before interest and income tax, net
earnings (profits after tax), earnings per employee, tangible,
controllable or total asset turnover, earnings per share, operating
income, total shareholder return, market share, return on equity,
before- or after-tax return on net assets, distribution expense,
inventory turnover, or economic value added, and any such targets may
relate to one or any combination of two or more of corporate, group,
unit, division, Affiliate or individual performance. The Agreement may
establish that a portion of a full or maximum amount of a Participant's
Award will be paid for performance which exceeds the minimum target but
falls below the maximum target applicable to such Award. The Agreement
shall also provide for the timing of such payment. Following the
conclusion or acceleration of each Performance Cycle, the Committee
shall determine the extent to which (i) performance targets have been
attained, (ii) any other terms and conditions with respect to an Award
relating to such Performance Cycle have been satisfied and (iii)
payment is due with respect to an Award of Performance Units.
12.2 ACCELERATION AND ADJUSTMENT. The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance
targets and payments with respect to some or all of the Performance
Units awarded to a Participant, upon such terms and conditions as shall
be set forth in the Agreement, upon the occurrence of certain events,
which may but need not include without limitation an Event, a
Fundamental Change, a recapitalization, a change in the accounting
practices of the Company, a change in the Participant's title or
employment responsibilities, the Participant's death or Retirement or,
with respect to payments in Stock with respect to Performance Units, a
reclassification, stock dividend, stock split or stock combination as
provided in Section 16.
13. EFFECTIVE DATE OF THE PLAN.
13.1 EFFECTIVE DATE. The Plan shall become effective as of
September 15, 1995, provided that the Plan is approved and ratified by
the affirmative vote of the holders of a majority of the outstanding
Shares of Stock present or represented and entitled to vote in person
or by proxy at a meeting of the stockholders of the Company no later
than October 31, 1995. The Plan shall govern all options issued and
outstanding under each of the Prior Plans for all purposes and shall
govern all Agreements respecting options issued and outstanding under
each of the Prior Plans for all purposes.
13.2 DURATION OF THE PLAN. The Plan shall remain in effect
until all Stock subject to it shall be distributed or until all Awards
have expired or lapsed, or the Plan is terminated pursuant to Section
15. No Award of an Incentive Stock Option shall be made more than 10
years after the Effective Date (or such other limit as may be required
by the Code) if such limitation is necessary to qualify the Option as
an Incentive Stock Option. The date and time of approval by the
Committee of the granting of an Award shall be considered the date and
time at which such Award is made or granted.
14. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan shall confer
upon any Participant the right to continue in the employment of the Company or
any Affiliate or affect any right which the Company or any Affiliate may have to
terminate the employment of the Participant with or without cause.
15. TAX WITHHOLDING. The Company shall have the right to withhold from
any cash payment under the Plan to a Participant or other person an amount
sufficient to cover any required withholding taxes. The Company shall have the
right to require a Participant or other person receiving Stock under the Plan to
pay the Company a cash amount sufficient to cover any required withholding
taxes. In lieu of all or any part of such a cash payment from a person receiving
Stock under the Plan, the Committee may permit the individual to elect to cover
all or any part of the required withholdings, and to cover any additional
withholdings up to the amount needed to cover the individual's full FICA and
Medicare, and federal, state and local income tax with respect to income arising
from payment of the Award, through a reduction of the number of Shares delivered
to him or a subsequent return to the Company of Shares held by the Participant
or other person, in each case valued in the same manner as used in computing the
withholding taxes under the applicable laws.
16. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may
at any time terminate, suspend or modify the Plan; provided, however, that
amendments are subject to approval of the stockholders of the Company if such
approval is necessary to maintain the Plan in compliance with the requirements
of Exchange Act Rule 16b-3, Code Section 422, their successor provisions or any
other applicable law or regulation. No termination, suspension, or modification
of the Plan will materially and adversely affect any right acquired by any
Participant (or his legal representative) or any Successor under an Award
granted before the date of termination, suspension, or modification, unless
otherwise agreed to by the Participant in the Agreement or otherwise or required
as a matter of law; but it will be conclusively presumed that any adjustment for
changes in capitalization provided for in Section 11.2 or Section 16 does not
adversely affect any right.
17. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate adjustments
in the aggregate number and type of Shares available for Awards under the Plan,
in the Maximum Annual Employee Grant, in the number and type of Shares subject
to Director Options thereafter issued and in the number and type of Shares and
amount of cash subject to Awards then outstanding, in the Option price as to any
outstanding Options and, subject to Section 12.2, in outstanding Performance
Units and payments with respect to outstanding Performance Units may be made by
the Committee in its sole discretion to give effect to adjustments made in the
number or type of Shares of the Company through a Fundamental Change (subject to
Section 18), recapitalization, reclassification, stock dividend, stock split,
stock combination or other relevant change, provided that fractional Shares
shall be rounded to the nearest whole share.
18. FUNDAMENTAL CHANGE. In the event of a proposed Fundamental Change,
the Committee may, but shall not be obligated to:
a. if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the protection
of the outstanding Options and Stock Appreciation Rights by the
substitution of options, stock appreciation rights and appropriate
voting common stock of the corporation surviving any merger or
consolidation or, if appropriate, the parent corporation of the Company
or such surviving corporation to be issuable upon the exercise of
Options or used to calculate payments upon the exercise of Stock
Appreciation Rights, in lieu of options, stock appreciation rights and
capital stock of the Company; or
b. at least 30 days prior to the occurrence of the Fundamental
Change, declare, and provide written notice to each holder of an Option
or Stock Appreciation Right of the declaration, that each outstanding
Option and Stock Appreciation Right, whether or not then exercisable,
shall be canceled at the time of, or immediately prior to the
occurrence of the Fundamental Change in exchange for payment to each
holder of an Option or Stock Appreciation Right, within ten days after
the Fundamental Change, of cash equal to (i) for each Share covered by
the canceled Option, the amount, if any, by which the Fair Market Value
(as hereinafter defined in this Section) per Share exceeds the exercise
price per Share covered by such Option or (ii) for each Stock
Appreciation Right, the price determined pursuant to Section 10, except
that Fair Market Value of the Shares as of the date of exercise of the
Stock Appreciation Right, as used in clause (i) of Section 10, shall be
deemed to mean Fair Market Value for each Share with respect to which
the Stock Appreciation Right is calculated determined in the manner
hereinafter referred to in this Section. At the time of the declaration
provided for in the immediately preceding sentence, each Stock
Appreciation Right that has been outstanding for at least six months
and each Option shall immediately become exercisable in full and each
person holding an Option or a Stock Appreciation Right shall have the
right, during the period preceding the time of cancellation of the
Option or Stock Appreciation Right, to exercise his Option as to all or
any part of the Shares covered thereby or his Stock Appreciation Right
in whole or in part, as the case may be. In the event of a declaration
pursuant to this Section 18(b), each outstanding Option and Stock
Appreciation Right granted pursuant to the Plan that shall not have
been exercised prior to the Fundamental Change shall be canceled at the
time of, or immediately prior to, the Fundamental Change, as provided
in the declaration. Notwithstanding the foregoing, no person holding an
Option or a Stock Appreciation Right shall be entitled to the payment
provided for in this Section 18(b) if such Option or Stock Appreciation
Right shall have expired pursuant to the Agreement. For purposes of
this Section only, "Fair Market Value" per Share shall mean the cash
plus the fair market value, as determined in good faith by the
Committee, of the non-cash consideration to be received per Share by
the stockholders of the Company upon the occurrence of the Fundamental
Change, notwithstanding anything to the contrary provided in the Plan.
19. UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under the Plan.
20. OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of the termination, indemnity or severance pay law of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate unless expressly so provided by such
other plan, contract or arrangement, or unless the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive cash compensation.
21. BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the
transfer of a Participant's Award at his death is permitted under an Agreement,
(i) a Participant's Award shall be transferable at his death to the beneficiary,
if any, designated on forms prescribed by and filed with the Committee and (ii)
upon the death of the Participant, such beneficiary shall succeed to the rights
of the Participant to the extent permitted by law. If no such designation of a
beneficiary has been made, the Participant's legal representative shall succeed
to the Awards which shall be transferable by will or pursuant to laws of descent
and distribution to the extent permitted under an Agreement.
22. GOVERNING LAW. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of Delaware and construed accordingly.
EXHIBIT A
SECURE COMPUTING CORPORATION
AMENDED AND RESTATED
1995 OMNIBUS STOCK PLAN
DEFINED TERMS AND RULES OF CONSTRUCTION
1. DEFINITIONS.
Set forth below are the meanings of certain terms used in this Plan.
a. "Affiliate" means any corporation that is a "parent
corporation" or "subsidiary corporation" of the Company, as those terms
are defined in Section 424(e) and (f) of the Code, or any successor
provision.
b. "Agreement" means a written contract entered into between
the Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form and not inconsistent with this Plan
as the Committee shall approve from time to time, together with all
amendments thereto, which amendments may be unilaterally made by the
Company (with the approval of the Committee) unless such amendments are
deemed by the Committee to be materially adverse to the Participant and
are not required as a matter of law.
c. "Award" means a grant made under this Plan (including
Awards made under the Prior Plans) in the form of Restricted Stock,
Options, Stock Appreciation Rights, Performance Units or Stock.
d. "Board" means the Board of Directors of the Company.
e. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
f. "Committee" means three or more Non-Employee Directors
designated by the Board to administer the Plan under Section 3.
g. "Company" means Secure Computing Corporation, a Delaware
corporation, or any successor to substantially all of its businesses.
h. "Director" means a director of the Company.
i. "Director Fees" means the annual retainer fees paid to a
Director.
j. "Director Option" means a Non-Statutory Stock Option
granted to an Outside Director under Section 9.3 hereof.
k. "Effective Date" means the date specified in Section 13.1
hereof.
l. "Employee" means any salaried employee, officer, director,
contractor or advisor to or representative of the Company or any
Affiliate thereof, whether or not such person is an employee of the
Company within the meaning of the Code; provided, however, that
salaried employees of the Company or its Affiliates within the meaning
of the Code (including any such employee who is also an officer or
director of the Company or any Affiliate thereof) shall be the only
persons eligible to receive Options intended to constitute Incentive
Stock Options. References in this Plan to "employment" and related
terms shall mean the providing of services in the capacity as director,
contractor or other advisor to or representative of the Company.
m. "Event" means any of the following; provided, however, that
no Event shall be deemed to have occurred unless and until a majority
of the directors constituting the Incumbent Board (as defined below)
shall have declared that an Event has occurred:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) of beneficial ownership (within the meaning
of Exchange Act Rule 13d-3) of 20% (except for acquisitions by
any individual, entity or group that, prior to the
effectiveness of this Plan, owns 20% or more of any class of
capital stock of the Company) or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of the
Board (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute
an Event:
(A) any acquisition of voting securities of
the Company directly from the Company,
(B) any acquisition of voting securities of
the Company by the Company or any of its wholly owned
Subsidiaries,
(C) any acquisition of voting securities of
the Company by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
of its Subsidiaries, or
(D) any acquisition by any corporation with
respect to which, immediately following such
acquisition, more than 60% of respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities immediately prior to such acquisition in
substantially the same proportions as was their
ownership, immediately prior to such acquisition, of
the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be;
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director of
the Board subsequent to the Effective Date whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered a
member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest which was (or, if threatened, would have been) subject
to Exchange Act Rule 14a-11;
(3) Approval by the stockholders of the Company of a
reorganization, merger, consolidation or statutory exchange of
Outstanding Company Voting Securities, unless immediately
following such reorganization, merger, consolidation or
exchange, all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger, consolidation or exchange beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such reorganization,
merger, consolidation or exchange in substantially the same
proportions as was their ownership, immediately prior to such
reorganization, merger, consolidation or exchange, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or
(4) Approval by the stockholders of the Company of
(i) a complete liquidation or dissolution of the Company or
(ii) the sale or other disposition of all or substantially all
of the assets of the Company, other than to a corporation with
respect to which, immediately following such sale or other
disposition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as was their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
Notwithstanding the above, an Event shall not be deemed to occur with
respect to a recipient of an Award if the acquisition of the 20% or
greater interest referred to in paragraph (1) is by a group, acting in
concert, that includes that recipient or if at least 40% of the then
outstanding common stock or combined voting power of the then
outstanding voting securities (or voting equity interests) of the
surviving corporation or of any corporation (or other entity) acquiring
all or substantially all of the assets of the Company shall be
beneficially owned, directly or indirectly, immediately after a
reorganization, merger, consolidation, statutory share exchange or sale
or other disposition of assets referred to in paragraphs (3) or (4) by
a group, acting in concert, that includes that recipient. Furthermore,
the merger of the Company with and into its wholly owned subsidiary,
SCC of Delaware, Inc., a Delaware corporation (to be renamed Secure
Computing Corporation) shall not be deemed to be an Event.
n. "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
o. "Fair Market Value" as of any date means, unless otherwise
expressly provided in the Plan:
(i) the closing price of a Share on the date
immediately preceding that date or, if no sale of Shares shall
have occurred on that date, on the next preceding day on which
a sale of Shares occurred,
(A) on the composite tape for New York Stock
Exchange listed shares, or
(B) if the Shares are not quoted on the
composite tape for New York Stock Exchange listed
shares, on the principal United States Securities
Exchange registered under the Exchange Act on which
the Shares are listed, or
(C) if the Shares are not listed on any such
exchange, on the Nasdaq National Market, or
(ii) if clause (i) is inapplicable, the mean between
the closing "bid" and the closing "asked" quotation of a Share
on the date immediately preceding that date, or, if no closing
bid or asked quotation is made on that date, on the next
preceding day on which a quotation is made, on the NASDAQ
System or any system then in use, or
(iii) if clauses (i) and (ii) are inapplicable, what
the Committee determines in good faith to be 100% of the fair
market value of a Share on that date.
However, if the applicable securities exchange or system has closed for
the day at the time the event occurs that triggers a determination of
Fair Market Value, whether the grant of an Award, the exercise of an
Option or Stock Appreciation Right or otherwise, all references in this
paragraph to the "date immediately preceding that date" shall be deemed
to be references to "that date". In the case of an Incentive Stock
Option, if such determination of Fair Market Value is not consistent
with the then current regulations of the Secretary of the Treasury,
Fair Market Value shall be determined in accordance with said
regulations. The determination of Fair Market Value shall be subject to
adjustment as provided in Section 17.
p. "Fundamental Change" shall mean a dissolution or
liquidation of the Company, a sale of substantially all of the assets
of the Company, a merger or consolidation of the Company with or into
any other corporation, regardless of whether the Company is the
surviving corporation, or a statutory share exchange involving capital
stock of the Company.
q. "Incentive Stock Option" means any Option designated as
such and granted in accordance with the requirements of Code Section
422 or any successor to said section.
r. "Maximum Annual Employee Grant" means the maximum number of
Shares subject to Options that may be awarded to any one Employee in
any fiscal year of the Company.
s. "Non-Employee Director" means a member of the Board who is
considered a non-employee director within the meaning of Exchange Act
Rule 16b-3(i) or any successor definition.
t. "Non-Statutory Stock Option" means an Option other than an
Incentive Stock Option.
u. "Option" means a right to purchase Stock, including both
Non-Statutory Stock Options and Incentive Stock Options.
v. "Outside Director" means a Director who is not an employee
of the Company or any Affiliate.
w. "Participant" means an Employee or an Outside Director to
whom an Award is made.
x. "Performance Cycle" means the period of time as specified
in an Agreement over which Performance Units are to be earned.
y. "Performance Units" means an Award made pursuant to Section
12.
z. "Plan" means this Secure Computing Corporation Amended and
Restated 1995 Omnibus Stock Plan, as amended from time to time.
aa. "Prior Plans" means the Secure Computing Corporation 1994
Nonqualified Stock Option Plan and the Secure Computing Corporation
1989 Incentive Stock Option Plan.
bb. "Restricted Stock" means Stock granted under Section 7
(but not including Stock granted under the Prior Plans) so long as such
Stock remains subject to such restrictions.
cc. "Retirement" as applied to a Participant, means (i) until
such time as the Company adopts an employee pension benefit plan (as
that term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974), termination of employment with the Company at
any time upon or after attaining age 65; (ii) after adoption by the
Company of an employee pension benefit plan, termination of employment
with the Company at a time when the Participant is eligible for normal
retirement under such a plan, as amended from time to time, or any
successor plan thereto.
dd. "Share" means a share of Stock.
ee. "Stock" means the common stock, $.01 par value per share
(as such par value may be adjusted from time to time), of the Company.
ff. "Stock Appreciation Right" means an Award granted under
Section 10.
gg. "Subsidiary" means a "subsidiary corporation", as that
term is defined in Code Section 424(f) or any successor provision.
hh. "Successor" means the legal representative of the estate
of a deceased Participant or the person or persons who may, by bequest
or inheritance, or pursuant to the terms of an Award or of forms
submitted by the Participant to the Committee pursuant to Section 21,
acquire the right to exercise an Option or Stock Appreciation Right or
to receive cash or Shares issuable in satisfaction of an Award in the
event of a Participant's death.
ii. "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions placed on Restricted Stock are in effect.
jj. "Total and Permanent Disability" as applied to a
Participant, means disability within the meaning of Section 22(e)(3) of
the Code or any successor provision.
2. GENDER AND NUMBER.
Except when otherwise indicated by context, reference to the masculine
gender shall include, when used, the feminine gender and any term used in the
singular shall also include the plural.
SECURE COMPUTING CORPORATION
2675 Long Lake Road
Roseville, Minnesota 55113
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey H. Waxman and Stephen M. Puricelli, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes such Proxies to represent and to vote, as designated below,
all the shares of Common Stock of Secure Computing Corporation held of record by
the undersigned on March 21, 1997, at the Annual Meeting of Stockholders to be
held on May 14, 1997, or any adjournment thereof.
PROXY
1. ELECTION OF DIRECTORS. Nominees to the Board of Directors are Jeffrey H.
Waxman, Dennis J. Shaughnessy and Robert J. Frankenberg, for a term to
expire in 2000; and Betsy S. Atkins, for a term to expire in 1998.
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) above
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.)
----------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE SECURE COMPUTING CORPORATION AMENDED AND RESTATED
1995 OMNIBUS STOCK PLAN, AS AMENDED
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE SECURE COMPUTING CORPORATION EMPLOYEE STOCK PURCHASE
PLAN, AS AMENDED
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP as independent auditors
of the Company for the 1997 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(PLEASE DATE AND SIGN THE REVERSE SIDE)
[LOGO]
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR
DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When 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 authorized person.
____________________________________
Signature
____________________________________
Signature if held jointly
Dated: _____________________________
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Appendix X
SECURE COMPUTING CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND SCOPE OF PLAN. The purpose of this Secure Computing
Corporation Employee Stock Purchase Plan (the "Plan") is to provide the
employees of Secure Computing Corporation (the "Company") with an opportunity to
acquire a proprietary interest in the Company through the purchase of its common
stock and, thus, to develop a stronger incentive to work for the continued
success of the Company. The Plan is intended to be an "employee stock purchase
plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986,
as amended, and shall be interpreted and administered in a manner consistent
with such intent.
2. DEFINITIONS.
2.1. The terms defined in this section are used (and
capitalized) elsewhere in this Plan:
(a) "AFFILIATE" means any corporation that is a "parent
corporation" or "subsidiary corporation" of the Company, as
defined in Sections 424(e) and 424(f) of the Code or any
successor provision, and whose participation in the Plan has
been approved by the Board of Directors.
(b) "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "COMMITTEE" means three or more Disinterested Persons
designated by the Board of Directors to administer the Plan
under Section 13.
(e) "COMMON STOCK" means the common stock, par value $.01 per
share (as such par value may be adjusted from time to time),
of the Company.
(f) "COMPANY" means Secure Computing Corporation.
(g) "COMPENSATION" means the gross cash compensation
(including wage, salary, commission, bonus, and overtime
earnings) paid by the Company or any Affiliate to a
Participant in accordance with the terms of employment, but
excluding any payments under the Company's Group Incentive
Plan (GIP).
(h) "DISINTERESTED PERSONS" means a member of the Board of
Directors who is considered a disinterested person within the
meaning of Exchange Act Rule 16b-3 or any successor
definition.
(i) "ELIGIBLE EMPLOYEE" means any employee of the Company or
an Affiliate who has been employed for at least six
consecutive months and whose customary employment is at least
20 hours per week; provided, however, that "Eligible Employee"
shall not include any person who would be deemed, for purposes
of Section 423(b)(3) of the Code, to own stock possessing 5%
or more of the total combined voting power or value of all
classes of stock of the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time.
(k) "FAIR MARKET VALUE" of a share of Common Stock as of any
date means, if the Company's Common Stock is listed on a
national securities exchange or traded in the national market
system, the mean between the high and low sale prices for such
Common Stock on such exchange or market on said date, or, if
no sale has been made on such exchange or market on said date,
on the last preceding day on which any sale shall have been
made. If such determination of Fair Market Value is not
consistent with the then current regulations of the Secretary
of the Treasury applicable to plans intended to qualify as an
"employee stock purchase plan" within the meaning of Section
423(b) of the Code, however, Fair Market Value shall be
determined in accordance with such regulations. The
determination of Fair Market Value shall be subject to
adjustment as provided in Section 14.
(l) "PARTICIPANT" means an Eligible Employee who has elected
to participate in the Plan in the manner set forth in Section
4.
(m) "PLAN" means this Secure Computing Corporation Employee
Stock Purchase Plan, as amended from time to time.
(n) "PURCHASE PERIOD" means each quarter of the Company's
fiscal year. The first Purchase Period will be the quarter
that starts July 1, 1996 and ends September 30, 1996.
(o) "RECORDKEEPING ACCOUNT" means the account maintained in
the books and records of the Company recording the amount
withheld from each Participant through payroll deductions made
under the Plan.
3. SCOPE OF THE PLAN. Shares of Common Stock may be sold by the Company
to Eligible Employees commencing July 1, 1996, as hereinafter provided, but not
more than 150,000 shares of Common Stock (subject to adjustment as provided in
Section 14) shall be sold to Eligible Employees pursuant to this Plan. All sales
of Common Stock pursuant to this Plan shall be subject to the same terms,
conditions, rights and privileges. The shares of Common Stock delivered by the
Company pursuant to this Plan may be acquired shares having the status of any
combination of authorized but unissued shares, newly issued shares, or treasury
shares.
4. ELIGIBILITY AND PARTICIPATION. To be eligible to participate in the
Plan for a given Purchase Period, an employee must be an Eligible Employee on
the first day of such Purchase Period. An Eligible Employee may elect to
participate in the Plan by filing an enrollment form with the Company before the
first day of such Purchase Period that authorizes regular payroll deductions
from Compensation beginning with the first payday in such Purchase Period and
continuing until the Eligible Employee withdraws from the Plan, modifies his or
her authorization, or ceases to be an Eligible Employee, as hereinafter
provided.
5. AMOUNT OF COMMON STOCK EACH ELIGIBLE EMPLOYEE MAY PURCHASE.
5.1. Subject to the provisions of this Plan, each Eligible
Employee shall be offered the right to purchase on the last day of the
Purchase Period the number of shares of Common Stock (including
fractional shares) that can be purchased at the price specified in
Section 5.2 with the entire credit balance in the Participant's
Recordkeeping Account; provided, however, that the Fair Market Value
(determined on the first day of any Purchase Period) of shares of
Common Stock that may be purchased by a Participant during such
Purchase Period shall not exceed the excess, if any, of (i) $25,000
over (ii) the Fair Market Value (determined on the first day of the
relevant Purchase Period) of shares of Common Stock previously acquired
by the Participant in any prior Purchase Period during such calendar
year. Notwithstanding the foregoing, no Eligible Employee shall be
granted an option to acquire shares of Common Stock under this Plan
which permits the Eligible Employee's rights to purchase shares of
Common Stock under this Plan and all employee stock purchase plans of
the Company and the Affiliates to accrue at a rate which exceeds
$25,000 of Fair Market Value (determined at the time such option is
granted) for each calendar year in which such option is outstanding at
any time. If the purchases by all Participants would otherwise cause
the aggregate number of shares of Common Stock to be sold under the
Plan to exceed the number specified in Section 3, however, each
Participant shall be allocated at a ratable portion of the maximum
number of shares of Common Stock which may be sold.
5.2. The purchase price of each share of Common Stock sold
pursuant to this Plan will be the lesser of (a) or (b) below:
(a) 85% of the Fair Market Value of such share on the
first day of the Purchase Period.
(b) 85% of the Fair Market Value of such share on the
last day of the Purchase Period.
6. METHOD OF PARTICIPATION.
6.1. The Company shall give notice to each Eligible Employee
of the opportunity to purchase shares of Common Stock pursuant to this
Plan and the terms and conditions for such offering. Such notice is
subject to revision by the Company at any time prior to the date of
purchase of such shares. The Company contemplates that for tax purposes
the first day of a Purchase Period will be the date of the offering of
such shares.
6.2. Each Eligible Employee who desires to participate in the
Plan for a Purchase Period shall signify his or her election to do so
by signing an election form developed by the Committee. An Eligible
Employee may elect to have any whole percent of Compensation withheld,
but not exceeding ten percent (10%) per pay period. An election to
participate in the Plan and to authorize payroll deductions as
described herein must be made before the first day of the Purchase
Period to which it relates and shall remain in effect unless and until
such Participant withdraws from the Plan, modifies his or her
authorization, or ceases to be an Eligible Employee, as hereinafter
provided.
6.3. Any Eligible Employee who does not make a timely election
as provided in Section 6.2, shall be deemed to have elected not to
participate in the Plan. Such election shall be irrevocable for such
Purchase Period.
7. RECORDKEEPING ACCOUNT.
7.1. The Company shall maintain a Recordkeeping Account for
each Participant. Payroll deductions pursuant to Section 6 will be
credited to such Recordkeeping Accounts on each payday.
7.2. No interest will be credited to a Participant's
Recordkeeping Account.
7.3. The Recordkeeping Account is established solely for
accounting purposes, and all amounts credited to the Recordkeeping
Account will remain part of the general assets of the Company.
7.4. A Participant may not make any separate cash payment into
the Recordkeeping Account.
8. RIGHT TO ADJUST PARTICIPATION OR TO WITHDRAW.
8.1. A Participant may, at any time during a Purchase Period,
direct the Company to make no further deductions from his or her
Compensation or to increase or decrease the percentage amount of such
deductions from future Compensation, subject to the limitation in
Section 6.2. Upon any such action, future payroll deductions with
respect to such Participant shall cease or shall be increased or
decreased in accordance with the Participant's direction.
8.2. Any Participant who stops payroll deductions may not
thereafter resume payroll deductions during such Purchase Period.
8.3. At any time before the end of a Purchase Period, any
Participant may withdraw from the Plan. In such event, all future
payroll deductions shall cease and the entire credit balance in the
Participant's Recordkeeping Account will be paid to the Participant,
without interest, in cash within 15 days. A Participant who withdraws
from the Plan will not be eligible to reenter the Plan until the next
succeeding Purchase Period.
8.4. Notification of a Participant's election to increase,
decrease, or terminate deductions, or to withdraw from the Plan, shall
be made by filing an appropriate form with the Company.
9. TERMINATION OF EMPLOYMENT. If the employment of a Participant is
terminated for any reason, including death, disability, or retirement, the
entire balance in the Participant's Recordkeeping Account will be applied to the
purchase of shares as provided in Section 10.1 as of the last day of the
Purchase Period in which the Participant's employment terminated; except that if
such Participant so requests prior to the last day of such Purchase Period, the
Company shall refund in cash within 15 days all amounts credited to his or her
Recordkeeping Account.
10. PURCHASE OF SHARES.
10.1. As of the last day of the Purchase Period, the entire
credit balance in each Participant's Recordkeeping Account will be used
to purchase shares (including fractional shares) of Common Stock
(subject to the limitations of Section 5) unless the Participant has
filed an appropriate form with the Company in advance of that date
(which either elects to purchase a specified number of shares which is
less than the number described above or elects to receive the entire
credit balance in cash). Any amount in a Participant's Recordkeeping
Account that is not used to purchase shares pursuant to this Section
10.1 will be refunded to the Participant.
10.2. Shares of Common Stock acquired by each Participant
shall be held in a general account maintained for the benefit of all
Participants.
10.3. Certificates for the number of whole shares of Common
Stock, determined as aforesaid, purchased by each Participant shall be
issued and delivered to him or her only upon the request of the
Participant or his or her representative. Any such request shall be
made by filing an appropriate form with the Company. No Certificates
for fractional shares will be issued. Instead, Participants will
receive a cash distribution representing any fractional shares.
10.4. Dividends with respect to a Participant's shares held in
the general account will, at the election of the Participant, either be
paid to the Participant in cash or reinvested in additional shares of
Common Stock. Any such election shall be made or changed by filing an
appropriate form with the Company. If a Participant fails to make such
an election, all dividends with respect to the Participant's shares
held in the general account will automatically be reinvested to
purchase additional shares of Common Stock.
10.5. Each Participant will be entitled to vote all shares
held for the benefit of such Participant in the general account.
11. RIGHTS AS A STOCKHOLDER. A Participant shall not be entitled to any
of the rights or privileges of a stockholder of the Company with respect to such
shares, including the right to receive any dividends which may be declared by
the Company, until (i) he or she actually has paid the purchase price for such
shares and (ii) either the shares have been credited to his or her account or
certificates have been issued to him or her, both as provided in Section 10.
12. RIGHTS NOT TRANSFERABLE. A Participant's rights under this Plan are
exercisable only by the Participant during his or her lifetime, and may not be
sold, pledged, assigned or transferred in any manner other than by will or the
laws of descent and distribution. Any attempt to sell, pledge, assign or
transfer the same shall be null and void and without effect. The amounts
credited to a Recordkeeping Account may not be assigned, transferred, pledged or
hypothecated in any way, and any attempted assignment, transfer, pledge,
hypothecation or other disposition of such amounts will be null and void and
without effect.
13. ADMINISTRATION OF THE PLAN. This Plan shall be administered by the
Committee, which is authorized to make such uniform rules as may be necessary to
carry out its provisions. The Committee shall determine any questions arising in
the administration, interpretation and application of this Plan, and all such
determinations shall be conclusive and binding on all parties.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Common Stock of the Company by reason of stock dividends,
split-ups, corporate separations, recapitalizations, mergers, consolidations,
combinations, exchanges of shares and the like, the aggregate number and class
of shares available under this Plan and the number, class and purchase price of
shares available but not yet purchased under this Plan, shall be adjusted
appropriately by the Committee.
15. REGISTRATION OF CERTIFICATES. Stock certificates will be registered
in the name of the Participant, or jointly in the name of the Participant and
another person, as the Participant may direct on an appropriate form filed with
the Company.
16. AMENDMENT OF PLAN. The Board of Directors may at any time amend
this Plan in any respect which shall not adversely affect the rights of
Participants pursuant to shares previously acquired under the Plan, except that,
without stockholder approval on the same basis as required by Section 19.1, no
amendment shall be made (i) to increase the number of shares to be reserved
under this Plan, (ii) to decrease the minimum purchase price, (iii) to withdraw
the administration of this Plan from the Committee, or (iv) to change the
definition of employees eligible to participate in the Plan.
17. EFFECTIVE DATE OF PLAN. This Plan shall consist of an offering
commencing July 1, 1996, and ending September 30, 1996, and continuing on a
quarterly basis thereafter. All rights of Participants in any offering hereunder
shall terminate at the earlier of (i) the day that Participants become entitled
to purchase a number of shares of Common Stock equal to or greater than the
number of shares remaining available for purchase or (ii) at any time, at the
discretion of the Board of Directors, after 30 days' notice has been given to
all Participants. Upon termination of this Plan, shares of Common Stock shall be
issued to Participants in accordance with Section 10, and cash, if any,
remaining in the Participants' Recordkeeping Accounts shall be refunded to them,
as if the Plan were terminated at the end of a Purchase Period.
18. GOVERNMENTAL REGULATIONS AND LISTING. All rights granted or to be
granted to Eligible Employees under this Plan are expressly subject to all
applicable laws and regulations and to the approval of all governmental
authorities required in connection with the authorization, issuance, sale or
transfer of the shares of Common Stock reserved for this Plan, including,
without limitation, there being a current registration statement of the Company
under the Securities Act of 1933, as amended, covering the shares of Common
Stock purchasable on the last day of the Purchase Period applicable to such
shares, and if such a registration statement shall not then be effective, the
term of such Purchase Period shall be extended until the first business day
after the effective date of such a registration statement, or post-effective
amendment thereto. If applicable, all such rights hereunder are also similarly
subject to effectiveness of an appropriate listing application to a national
securities exchange or a national market system, covering the shares of Common
Stock under the Plan upon official notice of issuance.
19. MISCELLANEOUS.
19.1. This Plan shall be submitted for approval by the
stockholders of the Company prior to July 1, 1996. If not so approved
prior to such date, this Plan shall terminate on July 1, 1996.
19.2. This Plan shall not be deemed to constitute a contract
of employment between the Company and any Participant, nor shall it
interfere with the right of the Company to terminate any Participant
and treat him or her without regard to the effect which such treatment
might have upon him or her under this Plan.
19.3. Wherever appropriate as used herein, the masculine
gender may be read as the feminine gender, the feminine gender may be
read as the masculine gender, the singular may be read as the plural
and the plural may be read as the singular.
19.4. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
Minnesota.
19.5. Delivery of shares of Common Stock or of cash pursuant
to the Plan shall be subject to any required withholding taxes. A
person entitled to receive shares of Common Stock may, as a condition
precedent to receiving such shares, be required to pay the Company a
cash amount equal to the amount of any required withholdings.
SECURE COMPUTING CORPORATION
ANNUAL MEETING
Marquette Hotel
7th Street & Marquette Avenue
Minneapolis, MN 55402
MAY 14, 1997
3:30 P.M.
